Exhibit 99.1
The DIRECTV Group Announces First Quarter 2006 Results; DIRECTV U.S. Increases
Revenues 14% to $3.2 Billion and Operating Profit before Depreciation and
Amortization More Than Doubles to $545 Million
EL SEGUNDO, Calif.--(BUSINESS WIRE)--May 4, 2006--
Results Bolstered by Improved Churn
of 1.45% and Strong ARPU Growth of 6%
The DIRECTV Group, Inc. (NYSE:DTV) today reported that first
quarter revenues increased 8% to $3.39 billion and operating profit
before depreciation and amortization(1) more than tripled to $605
million compared to last year's first quarter. The DIRECTV Group
reported first quarter 2006 operating profit of $392 million and net
income of $235 million, or $0.17 per share, compared with an operating
loss of $54 million and a net loss of $41 million, or $0.03 loss per
share, in the same period last year.
"DIRECTV U.S. had a strong first quarter highlighted by revenue
growth of 14% to $3.19 billion, operating profit before depreciation
and amortization more than doubling to $545 million and cash flow
before interest and taxes of $211 million," said Chase Carey,
president and CEO of The DIRECTV Group, Inc. "Similar to recent
quarters, this solid growth was driven by our large and growing
subscriber base, strong ARPU growth and higher operating margins due
mostly to the significant scale and operating leverage of our
business."
Carey continued, "In addition to the strong financial performance,
first quarter results also reflect the benefits gained from our
strategy to attain higher quality subscribers. DIRECTV's stricter
credit policies and revised dealer incentives implemented over the
past several quarters have impacted both our gross and net subscriber
growth. DIRECTV U.S. gross additions of 919,000 were down 19% compared
to last year but more importantly, the number of high-quality
subscribers added in the period actually increased more than 13% over
the prior year. The continued improvement in the quality of our
subscriber base contributed to the first year-over-year improvement in
churn in nearly two years as average monthly churn fell to 1.45% in
the quarter. The lower gross additions combined with the improved
churn rate resulted in net additions of 255,000 subscribers in the
quarter."
Carey concluded, "Looking ahead, the introduction of new high
definition programming will play an increasingly important role in
DIRECTV's competitive strength and future growth. Just two weeks ago,
we launched local HD channels in 8 new cities bringing our total
coverage to 20 markets representing about 40% of U.S. TV households.
We will continue launching new markets over the coming months and by
the end of the year, we expect to have HD local channels available to
approximately three-quarters of all households. And after the launch
of our two remaining HD satellites next year, we expect to have the
most comprehensive and compelling offering of HD programming for
nearly every home in America."
First Quarter Review
Customer Lease Program On March 1, 2006, DIRECTV U.S. introduced a
set-top receiver lease program primarily to increase future
profitability by providing DIRECTV with the opportunity to retrieve
and reuse set-top receivers from deactivated customers. Under this new
program, set-top receivers are capitalized and depreciated over their
estimated useful lives of three years. Prior to March 1, 2006, set-top
receivers provided to new and existing DIRECTV U.S. subscribers were
immediately expensed upon activation as a subscriber acquisition or
upgrade and retention cost. The lease program is expected to result in
a reduction in subscriber acquisition, upgrade and retention costs
which, over time, will be offset by increased depreciation expense
reported on the Consolidated Statements of Operations. The amount of
set-top receivers capitalized during the period is now reported in the
DIRECTV U.S. Consolidated Statements of Cash Flows under the captions
"Cash paid for subscriber leased equipment - subscriber acquisition"
and "Cash paid for subscriber leased equipment - upgrade and
retention". The amount of cash DIRECTV U.S. paid during the quarter
ended March 31, 2006 amounted to $46 million for leased set-top
receivers for subscriber acquisitions and $40 million for upgrade and
retention.
THE DIRECTV GROUP'S OPERATIONAL REVIEW
Three Months
Dollars in Millions except Income (Loss) Ended March 31,
-----------------------
per Common Share 2006 2005
- ---------------------------------------------------------------
Revenues $3,386 $3,148
- ---------------------------------------------------------------
Operating Profit Before
Depreciation and Amortization 605 158
- ---------------------------------------------------------------
Operating Profit (Loss) 392 (54)
- ---------------------------------------------------------------
Net Income (Loss) 235 (41)
- ---------------------------------------------------------------
Income (Loss) Per Common Share ($) 0.17 (0.03)
- ---------------------------------------------------------------
Free Cash Flow(2) 170 (202)
- ---------------------------------------------------------------
Operational Review. In the first quarter of 2006, The DIRECTV
Group's revenues of $3.39 billion increased 8% over the prior year
principally due to strong DIRECTV U.S. subscriber and average revenue
per subscriber (ARPU) growth. These changes were partially offset by
the exclusion of Hughes Network Systems (HNS) results in 2006 due to
its sale.
The higher operating profit before depreciation and amortization
of $605 million and operating profit of $392 million were mostly
related to DIRECTV U.S. operations due to the increase in gross profit
generated from the higher revenues, reduced subscriber acquisition
costs resulting from lower gross subscriber additions, and the
capitalization of customer equipment under the lease program for both
new and existing subscribers beginning on March 1, 2006. These
improvements were partially offset by higher DIRECTV U.S. upgrade and
retention costs. Also impacting the comparison was a $57 million gain
recorded in the first quarter of 2006 reflecting the completion of
DIRECTV Latin America's Sky Mexico transactions and a loss in the
first quarter of 2005 at HNS primarily related to charges associated
with its sale.
Net income improved to $235 million in the first quarter of 2006
primarily due to the changes in operating profit discussed above,
higher interest income resulting from higher average cash and short
term investment balances, and $25 million recorded in "Other, net" in
the Consolidated Statements of Operations for the gain on the sale of
the remaining interest in HNS in January 2006 plus 50% of HNS' net
income up to the time of this sale under the equity method of
accounting. These changes were partially offset by higher income tax
expense resulting from the pre-tax income in 2006 compared to a loss
and associated tax benefit in 2005.
SEGMENT FINANCIAL REVIEW
DIRECTV U.S. Segment
Three Months
DIRECTV U.S. Ended March 31,
-------------------------
Dollars in millions except ARPU 2006 2005
- ---------------------------------------------------------------
Revenue $3,194 $2,801
- ---------------------------------------------------------------
Average Monthly Revenue per Subscriber
(ARPU) ($) 69.75 65.78
- ---------------------------------------------------------------
Operating Profit Before Depreciation
and Amortization 545 216
- ---------------------------------------------------------------
Operating Profit 362 38
- ---------------------------------------------------------------
Cash Flow Before Interest and Taxes(3) 211 63
- ---------------------------------------------------------------
Free Cash Flow(2) 48 24
- ---------------------------------------------------------------
Subscriber Data (in 000's except
Churn)
- ---------------------------------------------------------------
Gross Subscriber Additions 919 1,137
- ---------------------------------------------------------------
Average Monthly Subscriber Churn 1.45% 1.49%
- ---------------------------------------------------------------
Net Subscriber Additions 255 505
- ---------------------------------------------------------------
Cumulative Subscribers 15,388 14,445
- ---------------------------------------------------------------
DIRECTV U.S. gross subscriber additions of 919,000 decreased 19%
compared to the first quarter of 2005 primarily due to the
implementation of revised credit policies and dealer incentives
designed to improve the quality of new subscriber additions. As a
result of these changes, DIRECTV U.S. increased the number of
high-quality subscribers attained in the quarter by 13% compared to
last year and reduced its year-over-year monthly churn rate for the
first time in nearly two years. After accounting for average monthly
churn of 1.45% in the period, DIRECTV U.S. added 255,000 net
subscribers in the quarter. The total number of DIRECTV U.S.
subscribers increased 7% to 15.39 million as of March 31, 2006,
compared to 14.45 million subscribers as of March 31, 2005.
In the quarter, DIRECTV U.S. revenues increased 14% to $3.19
billion due to the larger subscriber base and higher ARPU. ARPU of
$69.75 increased 6.0% compared to last year principally due to
programming package price increases as well as higher mirroring,
lease, digital video recorder (DVR) and high-definition programming
fees.
The first quarter 2006 growth in operating profit before
depreciation and amortization to $545 million and operating profit to
$362 million were primarily due to the increase in gross profit
generated from the higher revenues, reduced subscriber acquisition
costs resulting from lower gross subscriber additions, as well as $87
million of customer equipment capitalized under the lease program.
These improvements were partially offset by higher upgrade and
retention expenses mostly due to an increase in the number of existing
customers upgrading to high-definition television and using the
movers' program.
DIRECTV Latin America Segment
DIRECTV Latin America and Sky Consolidation. On October 11, 2004,
The DIRECTV Group announced a series of transactions with News
Corporation, Grupo Televisa, Globo and Liberty Media that are designed
to strengthen the operating and financial performance of DIRECTV Latin
America by combining the two Direct-To-Home platforms into a single
platform in each of the major territories served in the region.
In connection with these transactions, The DIRECTV Group paid News
Corporation and Liberty Media approximately $373 million in February
of 2006 for their equity stakes in Sky Mexico. In April, 2006, The
DIRECTV Group received $59 million related to the completion of the
Sky Mexico transaction. The DIRECTV Group expects to receive
approximately $97 million upon completion of the transaction in
Brazil, which is subject to regulatory approval.
In Mexico, DIRECTV Latin America completed the migration of
approximately 144,000 subscribers to the Sky Mexico platform and
ceased operations in 2005. In the first quarter of 2006, DIRECTV Latin
America recorded a non-cash gain of $57 million related to the
completion of its transaction with Sky Mexico. As of April 27, 2006,
The DIRECTV Group owned approximately 41% of Sky Mexico, which has
approximately 1.32 million subscribers.
Three Months
DIRECTV Latin America Ended March
31,
------------
Dollars in millions 2006 2005
- ----------------------------------------------------------------------
Revenue $193 $184
- ----------------------------------------------------------------------
Operating Profit Before Depreciation and Amortization 75 23
- ----------------------------------------------------------------------
Operating Profit (Loss) 44 (14)
- ----------------------------------------------------------------------
Net Subscriber Additions(4) (000's) 62 29
- ----------------------------------------------------------------------
Cumulative Subscribers(4) (000's) 1,655 1,570
- ----------------------------------------------------------------------
Operational Review. In the first quarter of 2006, DIRECTV Latin
America added 62,000 net subscribers principally due to strong
subscriber growth in Venezuela and Argentina. The total number of
DIRECTV subscribers in Latin America as of March 31, 2006 increased
5.4% to 1.66 million from 1.57 million as of March 31, 2005.
Revenues for DIRECTV Latin America increased 5% to $193 million in
the quarter primarily due to the larger subscriber base partially
offset by the absence of revenues in 2006 at DIRECTV Latin America's
Mexico operations due to its shutdown. The improvements in DIRECTV
Latin America's first quarter 2006 operating profit before
depreciation and amortization to $75 million and operating profit to
$44 million were primarily attributable to the $57 million gain
recorded at the completion of the Sky Mexico transaction.
Network Systems Segment
Three Months
Network Systems Segment Ended March 31,
----------------------
Dollars in millions 2006 2005
- --------------------------------------------------------
Revenue - $166
- --------------------------------------------------------
Operating Loss Before Depreciation
and Amortization - (53)
- --------------------------------------------------------
Operating Loss - (53)
- --------------------------------------------------------
On April 22, 2005, The DIRECTV Group completed the sale of a 50%
interest in HNS LLC, an entity that owns substantially all of the
assets of HNS, to SkyTerra Communications, Inc., an affiliate of
Apollo Management, L.P. As of the date of this sale through January
2006, The DIRECTV Group accounted for 50% of HNS' net income or loss
as an equity investment in "Other, net" in the Consolidated Statements
of Operations. In January 2006, The DIRECTV Group completed the sale
of the remaining 50% interest in HNS LLC to SkyTerra and received $110
million in cash. In the first quarter of 2006, a total of $25 million
was recorded in "Other, net" in the Consolidated Statements of
Operations for the gain on the sale of the remaining interest in HNS
as well as 50% of HNS' net income up to the time of this sale during
the first quarter of 2006 under the equity method of accounting.
CONSOLIDATED BALANCE SHEET AND CASH FLOW
The DIRECTV Group March 31, December 31,
----------------------------------
Dollars in billions 2006 2005
- -------------------------------------------------------------------
Cash, Cash Equivalents & Short
Term Investments $2.50 $4.38
- -------------------------------------------------------------------
Total Debt 3.41 3.42
- -------------------------------------------------------------------
Net Debt/(Cash) 0.92 (0.96)
- -------------------------------------------------------------------
The DIRECTV Group's consolidated cash and short term investment
balance of $2.50 billion declined by $1.89 billion in the quarter
mostly due to a share repurchase program announced on February 8,
2006. During the quarter, The DIRECTV Group repurchased and retired
116 million shares of DIRECTV common stock (including 100 million
shares of common stock purchased from General Motors employee pension
and benefit trusts) for approximately $1.8 billion at an average price
of $15.52 per share. Also impacting the quarter's cash was a $373
million payment related to the DIRECTV Latin America transactions,
$110 million received for the sale of the remaining interest in HNS,
as well as free cash flow in the period of $170 million. Free cash
flow was driven by cash flow from operations of $440 million partially
offset by cash paid for satellites and property and equipment of $270
million. Total debt remained essentially unchanged at $3.41 billion.
CONFERENCE CALL INFORMATION
A live webcast of The DIRECTV Group's first quarter 2006 earnings
call will be available on the company's website at www.directv.com.
The webcast will begin at 2:00 p.m. ET, today May 4, 2006 and will be
archived on our website at www.directv.com.
FOOTNOTES
(1) Operating profit (loss) 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 accounting
principles generally accepted in the United States of America. Please
see each of The DIRECTV Group's and DIRECTV Holdings LLC's Annual
Reports on Form 10-K for the year ended December 31, 2005 for further
discussion of operating profit (loss) 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) 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 (used
in) 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. The DIRECTV Group and DIRECTV U.S. management use free cash
flow to evaluate the cash generated by DIRECTV U.S.' 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 and for additional
capital expenditures. The DIRECTV Group 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
DIRECTV U.S.' 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.
(3) Cash flow before interest and taxes, 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 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 (used in) operating activities" from the
Consolidated Statements of Cash Flows and then adding back net
interest paid and "Cash paid (refunded) 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. The DIRECTV Group and DIRECTV U.S. management use cash flow
before interest and taxes to evaluate the cash generated by DIRECTV
U.S.' current subscriber base, net of capital expenditures, interest,
and taxes, for the purpose of allocating resources to activities such
as adding new subscribers, retaining and upgrading existing
subscribers and for additional capital expenditures. The DIRECTV Group
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 DIRECTV U.S.' 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) DIRECTV Latin America net subscriber additions exclude DIRECTV
Latin America's subscriber activity in Mexico. DIRECTV Latin America
cumulative subscribers 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," "foresee," "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 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; ability to
obtain export licenses; competition; the outcome of legal proceedings;
ability to achieve cost reductions; ability to timely perform material
contracts; ability to renew programming contracts under favorable
terms; technological risk; limitations on access to distribution
channels; the success and timeliness of satellite launches; in-orbit
performance of satellites, including technical anomalies; loss of
uninsured satellites; theft of satellite programming signals; and our
ability to access capital to maintain our financial flexibility. We
urge you to consider these factors carefully in evaluating the
forward-looking statements.
DIRECTV is the nation's leading digital multichannel television
service provider with more than 15.4 million customers. DIRECTV and
the Cyclone Design logo are registered trademarks of DIRECTV Inc.
DIRECTV is a world-leading provider of digital multichannel television
entertainment. DIRECTV (NYSE: DTV) is approximately 37 percent owned
by News Corporation. For more information visit www.directv.com.
THE DIRECTV GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Millions, Except Per Share
Amounts)
(Unaudited)
Three Months Ended
March 31,
-------------------
2006 2005
-------------------
Revenues $3,385.6 $3,147.9
- ----------------------------------------------------------------------
Operating Costs and Expenses
Costs of revenues, exclusive of depreciation
and amortization expense
Broadcast programming and other 1,399.2 1,344.9
Subscriber service expenses 248.2 232.1
Broadcast operations expenses 70.9 62.2
Selling, general and administrative
expenses, exclusive of depreciation
and amortization expense
Subscriber acquisition costs 587.1 761.2
Upgrade and retention costs 295.1 254.5
General and administrative expenses 237.2 314.3
(Gain) loss from asset sales and impairment
charges, net (57.0) 20.9
Depreciation and amortization expense 212.8 212.0
- ----------------------------------------------------------------------
Total Operating Costs and Expenses 2,993.5 3,202.1
- ----------------------------------------------------------------------
Operating Profit (Loss) 392.1 (54.2)
Interest income 47.2 22.1
Interest expense (58.7) (55.3)
Other, net 21.6 (1.7)
- ----------------------------------------------------------------------
Income (Loss) Before Income Taxes and Minority
Interests 402.2 (89.1)
Income tax (expense) benefit (160.7) 43.7
Minority interests in net (earnings) losses of
subsidiaries (6.3) 4.0
- ----------------------------------------------------------------------
Net Income (Loss) $235.2 $(41.4)
======================================================================
Basic and Diluted Earnings (Loss) Per Common
Share: $0.17 $(0.03)
======================================================================
Weighted average number of common shares
outstanding (in millions)
Basic 1,347.0 1,386.0
Diluted 1,352.8 1,386.0
======================================================================
THE DIRECTV GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in Millions)
(Unaudited)
March 31, December 31,
ASSETS 2006 2005
- ----------------------------------------------------------------------
Current Assets
Cash and cash equivalents $2,126.4 $3,701.3
Short-term investments 368.8 683.2
Accounts receivable, net of allowances of $98.2
and $114.9 874.1 1,033.2
Inventories, net 310.7 283.1
Deferred income taxes 154.4 163.3
Prepaid expenses and other 313.4 232.3
- ----------------------------------------------------------------------
Total Current Assets 4,147.8 6,096.4
Satellites, net 1,862.6 1,875.5
Property and Equipment, net 1,307.3 1,199.2
Goodwill 3,045.3 3,045.3
Intangible Assets, net 1,811.2 1,878.0
Deferred Income Taxes 361.2 492.4
Investments and Other Assets 1,348.4 1,043.4
- ----------------------------------------------------------------------
Total Assets $13,883.8 $15,630.2
======================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
- ----------------------------------------------------------------------
Current Liabilities
Accounts payable and accrued liabilities $2,362.0 $2,541.8
Unearned subscriber revenue and deferred credits 279.8 276.6
Short-term borrowings and current portion of
long-term debt 11.7 9.7
- ----------------------------------------------------------------------
Total Current Liabilities 2,653.5 2,828.1
Long-Term Debt 3,402.7 3,405.3
Other Liabilities and Deferred Credits 1,367.5 1,407.6
Commitments and Contingencies
Minority Interests 55.5 49.2
Stockholders' Equity 6,404.6 7,940.0
- ----------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $13,883.8 $15,630.2
======================================================================
THE DIRECTV GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Millions)
(Unaudited)
Three Months Ended
March 31,
2006 2005
- ----------------------------------------------------------------------
Cash Flows from Operating Activities
Net Income (Loss) $235.2 $(41.4)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 212.8 212.0
(Gain) loss from asset sales and impairment
charges, net (57.0) 20.9
Net (gain) loss from sale of investments (14.4) 1.6
Loss on sale or disposal of fixed assets 6.6 0.2
Share-based compensation expense 11.2 10.9
Deferred income taxes and other 138.0 (47.2)
Change in other operating assets and
liabilities
Accounts receivable 165.2 47.5
Inventories (27.6) (142.5)
Prepaid expenses and other (30.9) (39.9)
Accounts payable and accrued
liabilities (188.7) 37.7
Unearned subscriber revenue and
deferred credits 3.2 (25.5)
Other (13.8) (30.5)
- ----------------------------------------------------------------------
Net Cash Provided by Operating Activities 439.8 3.8
- ----------------------------------------------------------------------
Cash Flows from Investing Activities
Purchase of short-term investments (1,163.4) (1,031.9)
Sale of short-term investments 1,477.5 1,557.8
Cash paid for investments (384.4) -
Proceeds from sale of investments 115.9 79.2
Cash paid for property and equipment (213.7) (73.2)
Cash paid for satellites (56.6) (132.4)
Other, net (12.3) (0.6)
- ----------------------------------------------------------------------
Net Cash Provided by (Used in) Investing Activities (237.0) 398.9
- ----------------------------------------------------------------------
Cash Flows from Financing Activities
Common shares repurchased and retired (1,779.3) -
Net increase (decrease) in short-term borrowings (0.6) 1.2
Excess tax benefit from share-based compensation 1.5 -
Repayment of long-term debt - (10.8)
Repayment of other long-term obligations (23.5) (22.9)
Stock options exercised 24.2 0.9
- ----------------------------------------------------------------------
Net Cash Used in Financing Activities (1,777.7) (31.6)
- ----------------------------------------------------------------------
Net increase (decrease) in cash and cash
equivalents (1,574.9) 371.1
Cash and cash equivalents at beginning of the
period 3,701.3 2,307.4
- ----------------------------------------------------------------------
Cash and cash equivalents at the end of the period $2,126.4 $2,678.5
- ----------------------------------------------------------------------
Supplemental Cash Flow Information
Cash paid for interest $60.9 $82.9
Cash paid for income taxes 1.9 2.7
THE DIRECTV GROUP, INC.
SELECTED SEGMENT DATA
(Dollars in Millions)
(Unaudited)
Three Months
Ended March 31,
------------------
2006 2005
---------------------------------------------------------------------
DIRECTV U.S.
Revenues $3,193.5 $2,800.8
Operating Profit Before Depreciation and
Amortization (1) 544.6 215.6
Operating Profit Before Depreciation and
Amortization Margin (1) 17.1% 7.7%
Operating Profit $ 362.4 $ 38.4
Operating Profit Margin 11.3% 1.4%
Depreciation and Amortization $ 182.2 $ 177.2
Capital Expenditures (2) (3) 219.9 146.2
---------------------------------------------------------------------
DIRECTV LATIN AMERICA
Revenues $ 192.5 $ 183.9
Operating Profit Before Depreciation and
Amortization (1) 75.1 22.6
Operating Profit Before Depreciation and
Amortization Margin (1) 39.0% 12.3%
Operating Profit (Loss) $ 43.5 $ (13.5)
Operating Profit Margin 22.6% N/A
Depreciation and Amortization $ 31.6 $ 36.1
Capital Expenditures (2) 29.1 17.0
---------------------------------------------------------------------
NETWORK SYSTEMS
Revenues $ - $ 166.2
Operating Loss Before Depreciation and
Amortization (1) - (52.8)
Operating Loss - (52.8)
Depreciation and Amortization - -
Capital Expenditures (2) - 14.2
---------------------------------------------------------------------
ELIMINATIONS and OTHER
Revenues $ (0.4) $ (3.0)
Operating Loss Before Depreciation and
Amortization (1) (14.8) (27.6)
Operating Loss (13.8) (26.3)
Depreciation and Amortization (1.0) (1.3)
Capital Expenditures (2) - 28.2
---------------------------------------------------------------------
TOTAL
Revenues $3,385.6 $3,147.9
Operating Profit Before Depreciation and
Amortization (1) 604.9 157.8
Operating Profit Before Depreciation and
Amortization Margin (1) 17.9% 5.0%
Operating Profit (Loss) $ 392.1 $ (54.2)
Operating Profit Margin 11.6% N/A
Depreciation and Amortization $ 212.8 $ 212.0
Capital Expenditures (2) 249.0 205.6
=====================================================================
(1) See footnote 1 on page 5.
(2) Capital expenditures include cash paid and amounts accrued during
the period for property, equipment and satellites.
(3) Beginning in March 2006, capital expenditures at DIRECTV U.S.
include the cost of set-top receivers capitalized under its lease
program.
DIRECTV HOLDINGS LLC
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Millions)
(Unaudited)
Three Months Ended
March 31,
-------------------
2006 2005
-------------------
Revenues $3,193.5 $2,800.8
- ----------------------------------------------------------------------
Operating Costs and Expenses
Cost of revenues, exclusive of depreciation
and amortization expense
Broadcast programming and other 1,331.5 1,149.6
Subscriber service expenses 236.7 220.5
Broadcast operations expenses 42.0 35.4
Selling, general and administrative expenses,
exclusive of depreciation
and amortization expense
Subscriber acquisition costs 567.6 745.6
Upgrade and retention costs 293.1 252.2
General and administrative expenses 178.0 181.9
Depreciation and amortization expense 182.2 177.2
- ----------------------------------------------------------------------
Total Operating Costs and Expenses 2,831.1 2,762.4
- ----------------------------------------------------------------------
Operating Profit 362.4 38.4
Interest expense, net (41.5) (56.0)
Other expense (0.6) (0.4)
- ----------------------------------------------------------------------
Income (Loss) Before Income Taxes 320.3 (18.0)
Income tax (expense) benefit (122.4) 6.9
- ----------------------------------------------------------------------
Net Income (Loss) $197.9 $(11.1)
======================================================================
DIRECTV HOLDINGS LLC
CONSOLIDATED BALANCE SHEETS
(Dollars in Millions)
(Unaudited)
March 31, December 31,
ASSETS 2006 2005
- ----------------------------------------------------------------------
Current Assets
Cash and cash equivalents $1,196.5 $1,164.8
Accounts receivable, net of allowances of $59.1
and $75.0 830.9 995.9
Inventories 307.4 281.4
Prepaid expenses and other 299.8 285.0
- ----------------------------------------------------------------------
Total Current Assets 2,634.6 2,727.1
Satellites, net 1,892.7 1,907.9
Property and Equipment, net 968.0 848.3
Goodwill 3,031.7 3,031.7
Intangible Assets, net 1,808.8 1,875.0
Other Assets 137.4 135.0
- ----------------------------------------------------------------------
Total Assets $10,473.2 $10,525.0
======================================================================
LIABILITIES AND OWNER'S EQUITY
- ----------------------------------------------------------------------
Current Liabilities
Accounts payable and accrued liabilities $2,092.8 $2,362.9
Unearned subscriber revenue and deferred credits 261.1 259.0
Current portion of long-term debt 10.3 7.8
- ----------------------------------------------------------------------
Total Current Liabilities 2,364.2 2,629.7
Long-Term Debt 3,402.7 3,405.3
Other Liabilities and Deferred Credits 967.5 989.2
Deferred Income Taxes 233.8 204.4
Commitments and Contingencies
Owner's Equity
Capital stock and additional paid-in capital 4,061.6 4,050.9
Accumulated deficit (556.6) (754.5)
- ----------------------------------------------------------------------
Total Owner's Equity 3,505.0 3,296.4
- ----------------------------------------------------------------------
Total Liabilities and Owner's Equity $10,473.2 $10,525.0
======================================================================
DIRECTV HOLDINGS LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Millions)
(Unaudited)
Three Months Ended
March 31,
2006 2005
- ----------------------------------------------------------------------
Cash Flows from Operating Activities
Net Income (Loss) $197.9 $(11.1)
Adjustments to reconcile net income (loss) to
net cash provided
by operating activities:
Depreciation and amortization expense 182.2 177.2
Share-based compensation expense 9.7 4.6
Amortization of debt issuance costs 1.2 2.3
Deferred income taxes and other 39.4 (6.6)
Change in other operating assets and
liabilities
Accounts receivable, net 165.8 45.2
Inventories (26.0) (143.7)
Prepaid expenses and other (24.2) 24.6
Other assets (4.5) 3.0
Accounts payable and accrued
liabilities (249.8) 103.6
Unearned subscriber revenue and
deferred credits 2.1 (26.1)
Other liabilities and deferred credits (4.5) (2.5)
- ----------------------------------------------------------------------
Net Cash Provided by Operating Activities 289.3 170.5
- ----------------------------------------------------------------------
Cash Flows from Investing Activities
Cash paid for property and equipment (97.8) (45.8)
Cash paid for satellites (56.6) (100.4)
Cash paid for subscriber leased equipment -
subscriber acquisitions (46.4) -
Cash paid for subscriber leased equipment - upgrade
and retention (40.4) -
Other (1.8) -
- ----------------------------------------------------------------------
Net Cash Used in Investing Activities (243.0) (146.2)
- ----------------------------------------------------------------------
Cash Flows from Financing Activities
Repayments of other long-term obligations (16.3) (16.3)
Repayment of debt - (10.2)
Excess tax benefit from share-based compensation 1.7 -
- ----------------------------------------------------------------------
Net Cash Used in Financing Activities (14.6) (26.5)
- ----------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 31.7 (2.2)
Cash and cash equivalents at beginning of the period 1,164.8 34.5
- ----------------------------------------------------------------------
Cash and cash equivalents at end of the period $1,196.5 $32.3
======================================================================
Supplemental Cash Flow Information
Cash paid for interest $58.0 $83.7
Cash paid (refunded) for income taxes 119.4 (44.1)
Non-GAAP Financial Reconciliation Schedules
(Unaudited)
- ----------------------------------------------------------------------
The DIRECTV Group
- ----------------------------------------------------------------------
Reconciliation of Operating Profit before Depreciation and
Amortization to Operating Profit(a)
- ----------------------------------------------------------------------
Three Months Ended
March 31,
----------------
2006 2005
------- --------
(Dollars in
Millions)
Operating Profit before Depreciation and
Amortization $604.9 $157.8
Subtract: Depreciation and amortization expense 212.8 212.0
- -------------------------------------------------------------------
Operating Profit (loss) $392.1 $(54.2)
===================================================================
- ----------------------------------------------------------------------
(a)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 The DIRECTV Group's Quarterly
Report on Form 10-Q for the quarter ended March 31, 2006. This Form
10-Q is expected to be filed with the SEC in May 2006.
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
The DIRECTV Group
- ----------------------------------------------------------------------
Reconciliation of Cash Flow before Interest and Taxes(3) and Free
Cash Flow(2) to
Net Cash Provided by Operating Activities
- ----------------------------------------------------------------------
Three Months Ended
March 31,
----------------
2006 2005
------- --------
(Dollars in Millions)
Cash Flow before Interest and Taxes $185.1 $(138.3)
Subtract:
Net interest paid 13.7 60.8
Income taxes paid 1.9 2.7
- -------------------------------------------------------------------
Subtotal - Free Cash Flow 169.5 (201.8)
Add Cash Paid For:
Property and equipment 213.7 73.2
Satellites 56.6 132.4
- -------------------------------------------------------------------
Net Cash Provided by Operating Activities $439.8 $3.8
===================================================================
- ----------------------------------------------------------------------
DIRECTV Holdings LLC
- ----------------------------------------------------------------------
Reconciliation of Cash Flow before Interest and Taxes(3) and
Free Cash Flow(2) to
Net Cash Provided by Operating Activities
- ----------------------------------------------------------------------
Three Months
Ended March 31,
----------------
2006 2005
------- --------
(Dollars in Millions)
Cash Flow before Interest and Taxes $211.1 $63.1
Subtract:
Net interest paid 43.6 82.9
Income taxes paid (refunded) 119.4 (44.1)
- -------------------------------------------------------------------
Subtotal - Free Cash Flow 48.1 24.3
Add Cash Paid For:
Property and equipment 97.8 45.8
Satellites 56.6 100.4
Subscriber leased equipment -
subscriber acquisitions 46.4 -
Subscriber leased equipment -
upgrade and retention 40.4 -
- -------------------------------------------------------------------
Net Cash Provided by Operating Activities $289.3 $170.5
===================================================================
- ----------------------------------------------------------------------
(2) and (3) -see footnotes on pages 5 and 6 of this earnings release
DIRECTV HOLDINGS LLC
Non-GAAP Financial Reconciliation and Other Data
(Unaudited)
- ----------------------------------------------------------------------
DIRECTV Holdings LLC
- ----------------------------------------------------------------------
Reconciliation of Pre-SAC Margin to Operating Profit
- ----------------------------------------------------------------------
Three Months Ended
March 31,
-----------------
2006 2005
--------- -------
(Dollars in Millions)
Operating Profit $362.4 $38.4
--------- -------
Add back:
Subscriber acquisition costs (expensed) 567.6 745.6
Depreciation and amortization expense 182.2 177.2
Subtract:
Cash paid for subscriber leased equipment
- upgrade and retention (40.4) -
--------- -------
709.4 922.8
--------- -------
Pre-SAC margin(b) $1,071.8 $961.2
========= =======
Pre-SAC margin as a percentage of revenue(b) 33.6% 34.3%
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
SAC Calculation
- ----------------------------------------------------------------------
Three Months Ended
March 31,
-----------------
2006 2005
--------- -------
(Dollars in Millions)
Subscriber acquisition costs (expensed) $567.6 $745.6
Cash paid for subscriber leased equipment -
subscriber acquisitions 46.4 -
-----------------
Total acquisition costs $614.0 $745.6
=================
Gross subscriber additions 919 1,137
Average subscriber acquisition costs-per subscriber
(SAC) $668 $656
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Other Data
- ----------------------------------------------------------------------
Three Months Ended
March 31,
-----------------
2006 2005
--------- -------
Average monthly revenue per subscriber (ARPU) $69.75 $65.78
Average monthly churn % 1.45% 1.49%
Average subscriber acquisition costs-per subscriber
(SAC) $668 $656
Total number of subscribers-platform (000's) 15,388 14,445
Capital expenditures (millions) $219.9 $146.2
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
(b) 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 other GAAP financial measures and
is not presented as an alternative measure of operating results, as
determined in accordance with GAAP. The DIRECTV Group 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.
The DIRECTV Group and DIRECTV U.S. believe this measure is useful
to investors, along with other GAAP measures (such as revenues,
operating profit and net income), to compare DIRECTV U.S.' operating
performance to other communications, entertainment and media
companies. The DIRECTV Group 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.
CONTACT: DIRECTV
Media Contact: Darris Gringeri (310) 964-4069
Investor Relations: (212) 462-5200