Exhibit 99.1
The DIRECTV Group Announces Fourth Quarter and Full Year 2006 Results
DIRECTV U.S. Fourth Quarter Financial Highlights
-- Increased Net Subscriber Additions 38% to 275,000 Driven by
the Largest Reduction in Churn in 3 Years to 1.57% and a 6%
Increase in Gross Subscriber Additions
-- Grew Revenues 12% to Over $3.8 Billion Fueled by a 6.8%
Increase in Average Monthly Revenue Per Subscriber (ARPU) to
$80.70
-- Generated Cash Flow Before Interest and Taxes of $343 Million
in the Fourth Quarter Increasing Full Year 2006 Results by 83%
to $1.42 Billion
EL SEGUNDO, Calif.--(BUSINESS WIRE)--Feb. 7, 2007--The DIRECTV
Group, Inc. (NYSE:DTV) today reported that fourth quarter revenues
increased 16% to $4.18 billion and operating profit before
depreciation and amortization(1) more than doubled to $915 million
compared to last year's fourth quarter. The DIRECTV Group reported
that fourth quarter 2006 operating profit and net income also more
than doubled to $595 million and $356 million, respectively, when
compared to the same period last year. Earnings per share were $0.29
compared with $0.09 in the same period last year. These financial
results include the effect of $408 million of equipment that DIRECTV
U.S. capitalized during the fourth quarter under its lease program,
which was introduced March 1, 2006.
"Fourth quarter results point to the continuing progress and
operating strength at DIRECTV U.S. highlighted by strong revenue and
cash flow growth. These results were driven by improved operating
metrics including subscriber growth, churn, ARPU and subscriber
acquisition costs, a reflection of the competitive strength of our
business. Gross subscriber additions of over 1 million in the quarter
were 6% higher than last year but more importantly, we attained an
even greater growth rate for higher-quality subscribers compared to
last year," said Chase Carey, president and CEO of The DIRECTV Group,
Inc. "The emphasis on adding higher-quality subscribers who purchase
significantly more advanced products and services helped drive our
monthly churn rate from 1.70% last year to 1.57% in the current
quarter, the biggest improvement in over 3 years. The higher gross
additions combined with the lower churn rate drove a 38% increase in
net subscriber additions to 275,000 in the quarter."
Carey continued, "DIRECTV U.S.' financial results were also strong
in the quarter highlighted by a 12% increase in revenues to $3.8
billion fueled by a 6.8% ARPU increase -- the highest growth rate in
over two years -- and continued strong subscriber growth. Operating
profit before depreciation and amortization nearly doubled to $876
million primarily due to the capitalization of set-top boxes under the
new lease program implemented in March 2006, the gross profit
generated from the higher revenues and to a smaller degree, the
reduction in subscriber acquisition costs or SAC to $626. Also
impacting the quarterly results were higher upgrade and retention
costs primarily due to the increased number of customers upgrading to
high definition and digital video recorder services, as well as
converting to our new MPEG-4 equipment. These high-value subscribers
generate the highest ARPU, lowest churn and greatest cash flow for
DIRECTV over the long term."
Carey added, "As we head into 2007, we have many reasons to be
excited. First, we will launch several new innovative programming
services over the coming months such as NASCAR HotPass(TM), the
Championship Gaming Series, and DIRECTV On Demand. But perhaps the
most important initiative will be the launch of up to 100 national HD
channels in the second half of this year following the successful
launch of a new satellite. With this added capacity, we expect to
offer significantly more HD channels than most of our competitors,
providing DIRECTV with a huge advantage in this rapidly growing
marketplace." Carey concluded, "We also expect stronger operational
performance in 2007 now that we have launched our new set-top boxes,
strengthened our sales channels and implemented several key changes to
our installation and customer service infrastructure that will drive
improved efficiencies and quality. As a result, we're looking for even
better results from DIRECTV U.S. in 2007."
THE DIRECTV GROUP'S OPERATIONAL REVIEW
Lease Program. On March 1, 2006, DIRECTV U.S. introduced a set-top
receiver lease program primarily to increase future profitability by
providing DIRECTV U.S. with the opportunity to retrieve and reuse
set-top receivers. 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. 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 acquisitions" and
"Cash paid for subscriber leased equipment - upgrade and retention."
The amount of cash DIRECTV U.S. paid during the quarter ended December
31, 2006 for leased set-top receivers totaled $408 million - $196
million for subscriber acquisitions and $212 million for upgrade and
retention. For the full year 2006, DIRECTV U.S. paid $1.07 billion -
$599 million for subscriber acquisitions and $473 million for upgrade
and retention.
The DIRECTV Group
Dollars in Millions except Earnings per Common Share
Three Months Twelve Months
Ended December 31, Ended December 31,
2006 2005 2006 2005
Revenues $ 4,183 $ 3,596 $14,756 $13,165
Operating Profit Before
Depreciation and
Amortization(1) 915 441 3,391 1,486
Operating Profit 595 219 2,357 633
Net Income 356 121 1,420 336
Diluted Earnings Per Common
Share ($) 0.29 0.09 1.12 0.24
Free Cash Flow(2) 300 195 1,186 283
Fourth Quarter Review
In the fourth quarter of 2006, The DIRECTV Group's revenues of
$4.18 billion increased 16% over the same period in the prior year
principally due to strong growth in average revenue per subscriber
(ARPU) and a larger subscriber base at DIRECTV U.S., as well as the
consolidation of Sky Brazil's financial results due to the completion
of the merger with DIRECTV Brazil on August 23, 2006.
The more than doubling of operating profit before depreciation and
amortization to $915 million and operating profit to $595 million were
mostly related to the DIRECTV U.S. business due to the capitalization
of customer equipment under the lease program for both new and
existing subscribers and the increase in gross profit generated from
the higher revenues. These increases were partially offset by higher
upgrade and retention costs primarily related to an increase in the
number of existing subscribers upgrading to HD equipment, as well as
higher acquisition costs resulting from an increase in gross
subscriber additions. Also contributing to the increase was the
consolidation of the Sky Brazil results due to its merger. The change
in operating profit also reflects an increase in depreciation expense
related to the new set-top box lease program at DIRECTV U.S.
Net income increased to $356 million in the fourth quarter of 2006
primarily due to the changes in operating profit discussed above
partially offset by higher income tax expense in the most recent
quarter associated with the higher pre-tax income.
Full Year Review
The DIRECTV Group's revenues of $14.76 billion in 2006 increased
12% compared to 2005 driven principally by subscriber growth at
DIRECTV U.S. and DIRECTV Latin America, as well as continued solid
ARPU growth at DIRECTV U.S. and the consolidation of the Sky Brazil
financial results following the merger with DIRECTV Brazil in August
2006. These changes were partially offset by the exclusion of Hughes
Network Systems' (HNS) results in 2006 due to its sale.
In 2006, operating profit before depreciation and amortization
more than doubled to $3.39 billion and operating profit more than
tripled to $2.36 billion driven primarily by DIRECTV U.S. due to the
capitalization of $1.07 billion of customer equipment under the lease
program for both new and existing subscribers, the increase in gross
profit generated from higher revenues, and reduced subscriber
acquisition costs resulting from a decline in lower quality gross
subscriber additions. These were partially offset by higher upgrade
and retention spending primarily related to an increase in the number
of subscribers upgrading to HD equipment. Also impacting the
comparison was the positive result of the consolidation of the Sky
Brazil business after its merger and several non-cash gains at DIRECTV
Latin America including $61 million recorded in the third quarter of
2006 at the completion of the Sky Brazil merger, as well as $57
million recorded in the first quarter of 2006 and $70 million during
2005 related to the Sky Mexico transaction. In addition, HNS recorded
losses in the first quarter of 2005 primarily related to charges
associated with its sale. Operating profit was also negatively
impacted by an increase in depreciation expense primarily resulting
from the new set-top receiver leasing program at DIRECTV U.S.
Net income in 2006 increased to $1.42 billion primarily due to the
higher operating profit discussed above as well as a second quarter
2005 charge of $65 million related to the premium paid for the
redemption of senior notes and the write-off of a portion of deferred
debt issuance costs from debt refinancing. Partially offsetting these
improvements were higher 2006 income tax expense resulting from an
increase in pre-tax income and a $31 million credit in the second
quarter of 2005 related to the favorable settlement of a U.S. federal
income tax dispute associated with a previously divested business.
SEGMENT FINANCIAL REVIEW
DIRECTV U.S. Segment
Fourth Quarter Review
DIRECTV U.S. gross subscriber additions of 1,021,000 increased 6%
compared to the fourth quarter of 2005 primarily due to stronger sales
channels and an increase in the number of higher quality subscribers
attained in the quarter. The strategy of attaining higher quality
subscribers combined with the significant increase in subscribers with
HD and DVR services over the last year were the major contributors to
the reduction in monthly churn from 1.70% to 1.57% in the current
quarter. As a result of the higher gross additions and the lower
churn, DIRECTV U.S. increased its net subscriber additions by 38% to
275,000 in the quarter. The total number of DIRECTV U.S. subscribers
as of December 31, 2006 was 15.95 million, an increase of 5% over the
15.13 million subscribers reported on December 31, 2005.
DIRECTV U.S.
Dollars in Millions except ARPU
Three Months Twelve Months
Ended December 31, Ended December 31,
2006 2005 2006 2005
Revenue $ 3,829 $ 3,406 $ 13,744 $ 12,216
Average Monthly Revenue per
Subscriber (ARPU) ($) 80.70 75.53 73.74 69.61
Operating Profit Before
Depreciation and
Amortization(1) 876 442 3,221 1,500
Operating Profit 614 260 2,348 802
Cash Flow Before Interest and
Taxes(3) 343 240 1,419 776
Free Cash Flow(2) 152 156 545 536
Subscriber Data (in 000s
except Churn)
Gross Subscriber Additions 1,021 965 3,809 4,170
Average Monthly Subscriber
Churn 1.57% 1.70% 1.60% 1.70%
Net Subscriber Additions 275 200 820 1,193
Cumulative Subscribers 15,953 15,133 15,953 15,133
In the quarter, DIRECTV U.S. revenues increased 12% to $3.83
billion due to strong ARPU growth and the larger subscriber base. ARPU
of $80.70 increased 6.8% compared to last year principally due to
programming package price increases, higher NFL SUNDAY TICKET(TM)
revenues as well as higher lease, DVR, and HD fees.
The fourth quarter 2006 operating profit before depreciation and
amortization nearly doubled to $876 million and operating profit more
than doubled to $614 million due primarily to the capitalization of
customer equipment and the increase in gross profit generated from the
higher revenues. These changes were partially offset by higher upgrade
and retention costs mostly driven by an increase in the number of
existing subscribers upgrading to HD equipment, as well as higher
acquisition costs due to the increase in gross subscriber additions.
Full Year Review
DIRECTV U.S. gross subscriber additions of 3,809,000 declined 9%
compared to 2005 primarily due to the implementation of credit
policies and dealer incentives designed to improve the quality of new
subscriber additions. The strategy of attaining higher quality
subscribers combined with a significant increase in subscribers with
HD and DVR services were the major contributors to the reduction in
average monthly churn from 1.70% to 1.60% in 2006. DIRECTV U.S. added
820,000 net subscribers in 2006 bringing the total number of DIRECTV
U.S. subscribers to 15.95 million as of December 31, 2006.
For the full year, DIRECTV U.S. revenues increased 13% to $13.74
billion due to strong ARPU growth and the larger subscriber base. ARPU
of $73.74 increased 5.9% compared to last year principally due to
programming package price increases, higher lease fees, improved NFL
SUNDAY TICKET revenues and higher DVR and HD service fees.
Full year operating profit before depreciation and amortization
and operating profit more than doubled to $3.22 billion and $2.35
billion, respectively, due to the capitalization of customer
equipment, the increase in gross profit generated from the higher
revenues and reduced subscriber acquisition costs from the decline in
the number of lower quality subscriber additions. These changes were
partially offset by higher upgrade and retention costs primarily
driven by an increase in the number of existing subscribers upgrading
to HD equipment.
DIRECTV Latin America Segment
DIRECTV Latin America and Sky Consolidation. In August 2006, The
DIRECTV Group completed the last of a series of transactions with News
Corporation, Grupo Televisa, Globo and Liberty Media that strengthens
the operating and financial performance of DIRECTV Latin America by
combining the two platforms into a single platform in each of the
major territories served in the region. In 2006, The DIRECTV Group
paid News Corporation and Liberty Media approximately $373 million for
their equity stakes in Sky Mexico and received approximately $59
million from Televisa. The DIRECTV Group also received a net payment
of $97 million from News Corporation at the completion of the Sky
Brazil transaction. In January 2007, The DIRECTV Group purchased
Darlene's 14% ownership in DIRECTV Latin America, LLC, for $325
million in cash. As a result of these transactions, The DIRECTV Group
owns approximately 74% of the merged business in 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
DIRECTV Latin America, had approximately 1.43 million subscribers as
of December 31, 2006.
DIRECTV Latin America
Dollars in Millions
Three Months Twelve Months
Ended December 31, Ended December 31,
2006 2005 2006 2005
Revenue $ 354 $ 190 $ 1,013 $ 742
Operating Profit Before
Depreciation and
Amortization(1) 55 19 244 142
Operating Profit (Loss) (3) (21) 79 (19)
Net Subscriber Additions(4)
(000s) 77 39 249 149
Cumulative Subscribers(4) (000s) 2,711 1,593 2,711 1,593
Churn(4) 1.29% 1.76% 1.46% 1.67%
Fourth Quarter Review
In the fourth quarter of 2006, DIRECTV Latin America's net
subscriber additions nearly doubled to 77,000 primarily due to strong
growth at PanAmericana, particularly in Venezuela, Colombia, and Peru.
Also contributing to the net subscriber increase was a decline in
aggregate churn from 1.76% to 1.29% in the current quarter. The total
number of DIRECTV subscribers in Latin America as of December 31, 2006
increased 70% to 2.71 million compared to 1.59 million as of December
31, 2005. The increase was due to the 869,000 subscribers added as a
result of the merger with Sky Brazil, as well as the new subscribers
added throughout the region over the past year.
Revenues for DIRECTV Latin America increased 86% to $354 million
in the quarter primarily due to the consolidation of Sky Brazil's
operations and continued subscriber growth. The increase in DIRECTV
Latin America's fourth quarter 2006 operating profit before
depreciation and amortization to $55 million was primarily
attributable to the consolidation of the Sky Brazil business after its
merger and the gross profit generated from the higher revenues at
PanAmericana. This improvement was partially offset by a $12 million
non-cash gain recorded in 2005 for the sale of DIRECTV Latin America's
subscribers in Mexico. DIRECTV Latin America's operating loss improved
to a loss of $3 million due to the higher operating profit before
depreciation and amortization discussed above partially offset by
higher amortization expense resulting from the Sky Brazil transaction.
Full Year Review
In 2006, DIRECTV Latin America's net subscriber additions of
249,000 were 67% higher than in 2005 primarily due to strong growth
throughout PanAmericana and a decline in aggregate churn from 1.67% to
1.46% in the current year. Revenues for DIRECTV Latin America
increased 37% to $1.01 billion during the year primarily due to the
consolidation of Sky Brazil's operations and the subscriber growth
mentioned above, partially offset by lower revenue at DIRECTV Mexico
due to the sale of its subscribers in 2005.
The increase in DIRECTV Latin America's 2006 operating profit
before depreciation and amortization to $244 million and operating
profit to $79 million was primarily attributable to several non-cash
gains at DIRECTV Latin America including $61 million recorded in the
third quarter of 2006 at the completion of the Sky Brazil merger and
$57 million recorded in the first quarter of 2006 related to the Sky
Mexico transaction. Also contributing to the increase was the
consolidation of the Sky Brazil business after its merger and the
gross profit generated by the higher revenues in PanAmericana. These
changes were partially offset by a $70 million non-cash gain in 2005
related to the Sky Mexico transaction.
Network Systems Segment
Three Months Twelve Months
Network Systems Segment Ended December 31, Ended December 31,
------------------ ------------------
Dollars in Millions 2006 2005 2006 2005
- -------------------------------- --------- -------- --------- --------
Revenue - - - $ 211
- -------------------------------- --------- -------- --------- --------
Operating Loss Before
Depreciation and
Amortization(1) - - - (61)
- -------------------------------- --------- -------- --------- --------
Operating Loss - - - (61)
- -------------------------------- --------- -------- --------- --------
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. As of the date of this
sale until 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, The DIRECTV Group recorded a gain of $14 million related to the
sale, and equity earnings of $11 million in "Other, net" in the
Consolidated Statements of Operations.
CONSOLIDATED BALANCE SHEET AND CASH FLOW
The DIRECTV Group
Dollars in Billions
December 31, December 31,
2006 2005
Cash, Cash Equivalents & Short-Term
Investments $ 2.67 $ 4.38
Total Debt 3.62 3.42
Net Debt/(Cash) 0.95 (0.96)
The DIRECTV Group's consolidated cash and short-term investment
balance of $2.67 billion declined by $1.71 billion in 2006 mostly due
to the implementation of a share repurchase program announced on
February 8, 2006. Through December 31, 2006, The DIRECTV Group had
repurchased and retired 184.1 million shares of DIRECTV Group common
stock for approximately $2.98 billion at an average price of $16.16
per share. Also impacting the cash balance through December 31, 2006,
were net payments of $217 million 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 $1.19
billion. Free cash flow was driven by cash flow from operations of
$3.16 billion partially offset by cash paid for satellites and
property and equipment of $1.98 billion. Total debt increased to $3.62
billion primarily due to the consolidation of $210 million of
outstanding debt at Sky Brazil upon its merger with DIRECTV Brazil. In
January, 2007, The DIRECTV Group repaid the $210 million of
outstanding debt at Sky Brazil and also purchased Darlene's interest
in DIRECTV Latin America for $325 million.
CONFERENCE CALL INFORMATION
A live webcast of The DIRECTV Group's fourth quarter 2006 earnings
call will be available on the company's website at www.directv.com.
The webcast will begin at 11:00 a.m. ET, today February 7, 2007 and
will be archived on our website at www.directv.com/investor.
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 GAAP. 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 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 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 then 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. 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, 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 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 as well as the
869,000 subscribers acquired in August 2006 from Sky Brazil.
DIRECTV Latin America churn also excludes DIRECTV Latin America's
subscriber activity in Mexico. DIRECTV Latin America cumulative
subscribers exclude subscribers of the Sky Mexico service but
include the consolidated Sky Brazil subscribers.
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.
The DIRECTV Group (NYSE:DTV) is a world-leading provider of
digital television entertainment services and is approximately 38
percent owned by News Corporation. Through its subsidiaries and
affiliated companies in the United States, Brazil, Mexico and other
countries in Latin America, The DIRECTV Group provides digital
television service to more than 16 million customers in the United
States, and more than 4 million customers in Latin America.
THE DIRECTV GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Millions, Except Per Share Amounts)
(Unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
------------------- ---------------------
2006 2005 2006 2005
------------------- ---------------------
Revenues $4,183.1 $3,595.5 $14,755.5 $13,164.5
- ----------------------------------------------------------------------
Operating Costs and
Expenses
Costs of revenues, exclusive
of depreciation and
amortization expense
Broadcast programming
and other 1,895.9 1,594.9 6,200.9 5,485.3
Subscriber service
expenses 293.9 267.8 1,111.3 981.9
Broadcast operations
expenses 77.7 63.3 285.6 254.1
Selling, general and
administrative expenses,
exclusive of depreciation
and amortization expense
Subscriber acquisition
costs 480.8 637.9 1,945.3 2,751.6
Upgrade and retention
costs 218.4 342.5 869.6 1,117.0
General and
administrative
expenses 301.0 260.5 1,069.3 1,133.9
Gain on disposition of
businesses and
impairment charges, net - (12.0) (117.7) (45.1)
Depreciation and
amortization expense 320.3 221.8 1,034.4 853.2
- ----------------------------------------------------------------------
Total Operating Costs and
Expenses 3,588.0 3,376.7 12,398.7 12,531.9
- ----------------------------------------------------------------------
Operating Profit 595.1 218.8 2,356.8 632.6
Interest income 37.8 52.4 145.7 150.3
Interest expense (67.2) (57.7) (245.7) (237.6)
Other, net 9.6 6.3 41.8 (65.0)
- ----------------------------------------------------------------------
Income From Continuing
Operations Before Income
Taxes and Minority
Interests 575.3 219.8 2,298.6 480.3
Income tax expense (219.7) (99.6) (865.5) (173.2)
Minority interests in net
(earnings) losses of
subsidiaries 0.4 1.0 (13.0) (2.5)
- ----------------------------------------------------------------------
Income from continuing
operations 356.0 121.2 1,420.1 304.6
Income from discontinued
operations, net of taxes - - - 31.3
- ----------------------------------------------------------------------
Net Income $ 356.0 $ 121.2 $ 1,420.1 $ 335.9
======================================================================
Basic Earnings Per Common
Share:
Income from continuing
operations $ 0.29 $ 0.09 $ 1.13 $ 0.22
Income from discontinued
operations, net of taxes - - - 0.02
- ----------------------------------------------------------------------
Basic Earnings Per Common
Share: $ 0.29 $ 0.09 $ 1.13 $ 0.24
======================================================================
Diluted Earnings Per
Common Share:
Income from continuing
operations $ 0.29 $ 0.09 $ 1.12 $ 0.22
Income from discontinued
operations, net of taxes - - - 0.02
- ----------------------------------------------------------------------
Diluted Earnings Per
Common Share: $ 0.29 $ 0.09 $ 1.12 $ 0.24
======================================================================
Weighted average number of
common shares outstanding
(in millions)
Basic 1,223.2 1,390.9 1,261.5 1,388.4
Diluted 1,231.9 1,397.0 1,269.9 1,394.8
======================================================================
THE DIRECTV GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in Millions)
(Unaudited)
December 31, December 31,
ASSETS 2006 2005
- ----------------------------------------------------------------------
Current Assets
Cash and cash equivalents $ 2,499.0 $ 3,701.3
Short-term investments 170.2 683.2
Accounts receivable, net of
allowances of $66.4 and $80.5 1,345.2 1,033.2
Inventories 147.9 283.1
Deferred income taxes 166.0 163.3
Prepaid expenses and other 227.3 232.3
- ----------------------------------------------------------------------
Total Current Assets 4,555.6 6,096.4
Satellites, net 2,008.4 1,875.5
Property and Equipment, net 2,444.8 1,199.2
Goodwill 3,515.0 3,045.3
Intangible Assets, net 1,810.6 1,878.0
Deferred Income Taxes - 492.4
Investments and Other Assets 806.7 1,043.4
- ----------------------------------------------------------------------
Total Assets $ 15,141.1 $ 15,630.2
======================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
- ----------------------------------------------------------------------
Current Liabilities
Accounts payable and accrued
liabilities $ 2,815.9 $ 2,541.8
Unearned subscriber revenue and
deferred credits 286.2 276.6
Short-term borrowings and current
portion of long-term debt 220.4 9.7
- ----------------------------------------------------------------------
Total Current Liabilities 3,322.5 2,828.1
Long-Term Debt 3,394.9 3,405.3
Other Liabilities and Deferred
Credits 1,680.7 1,407.6
Commitments and Contingencies
Minority Interests 62.2 49.2
Stockholders' Equity 6,680.8 7,940.0
- ----------------------------------------------------------------------
Total Liabilities and Stockholders'
Equity $ 15,141.1 $ 15,630.2
======================================================================
THE DIRECTV GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Millions)
(Unaudited)
Years Ended
December 31,
2006 2005
- ----------------------------------------------------------------------
Cash Flows From Operating Activities
Net Income $ 1,420.1 $ 335.9
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 1,034.4 853.2
Gain from discontinued operations,
net of taxes - (31.3)
Gain on disposition of businesses
and impairment charges, net (117.7) (45.1)
Net (gain) loss from sale of
investments (14.4) 0.6
Share-based compensation expense 39.4 40.6
Equity in earnings from
unconsolidated affiliates (26.6) (0.7)
Write-off of debt issuance costs - 19.0
Loss on disposal of fixed assets 19.7 2.5
Deferred income taxes and other 770.0 188.1
Change in other operating assets
and liabilities
Accounts receivable, net (282.8) (129.5)
Inventories 139.0 (158.7)
Prepaid expenses and other (11.7) (34.7)
Accounts payable and accrued
liabilities 158.3 312.1
Unearned subscriber revenue and
deferred credits 1.5 15.1
Other, net 32.8 (195.2)
- ----------------------------------------------------------------------
Net Cash Provided by Operating
Activities 3,162.0 1,171.9
- ----------------------------------------------------------------------
Cash Flows From Investing Activities
Purchase of short-term investments (2,516.5) (4,672.7)
Sale of short-term investments 3,028.6 4,512.1
Cash paid for property and equipment (1,753.8) (489.2)
Cash paid for satellites (222.3) (399.5)
Cash paid for acquired assets (4.0) (3.3)
Proceeds from sale of property 13.2 -
Investment in companies, net of cash
acquired (389.5) (1.1)
Proceeds from sale of investments 182.4 113.1
Proceeds from collection of notes
receivable 141.6 -
Proceeds from sale of businesses - 246.0
Other, net (15.9) (28.7)
- ----------------------------------------------------------------------
Net Cash Used in Investing Activities (1,536.2) (723.3)
- ----------------------------------------------------------------------
Cash Flows From Financing Activities
Cash proceeds from refinancing
transactions - 3,003.3
Repayment of long-term debt (7.5) (2,005.5)
Net decrease in short-term borrowings (1.9) (2.5)
Repayment of other long-term
obligations (100.2) (90.5)
Common shares repurchased and retired (2,977.1) -
Stock options exercised 257.1 45.2
Excess tax benefit from share-based
compensation 1.5 -
Debt issuance costs - (4.7)
- ----------------------------------------------------------------------
Net Cash (Used in) Provided by
Financing Activities (2,828.1) 945.3
- ----------------------------------------------------------------------
Net (decrease) increase in cash and
cash equivalents (1,202.3) 1,393.9
Cash and cash equivalents at beginning
of the year 3,701.3 2,307.4
- ----------------------------------------------------------------------
Cash and cash equivalents at the end
of the year $ 2,499.0 $ 3,701.3
- ----------------------------------------------------------------------
Supplemental Cash Flow Information
Cash paid for interest $ 242.8 $ 239.5
Cash paid for income taxes 30.3 13.2
THE DIRECTV GROUP, INC.
SELECTED SEGMENT DATA
(Dollars in Millions)
(Unaudited)
Three Months Twelve Months
Ended December 31, Ended December 31,
------------------- ---------------------
2006 2005 2006 2005
- ----------------------------------------------------------------------
DIRECTV U.S.
Revenues $3,829.1 $3,406.4 $13,744.0 $12,216.1
Operating Profit Before
Depreciation and
Amortization(1) 876.0 442.2 3,220.7 1,500.2
Operating Profit Before
Depreciation and
Amortization Margin(1) 22.9% 13.0% 23.4% 12.3%
Operating Profit $ 613.6 $ 259.8 $ 2,347.7 $ 802.0
Operating Profit Margin 16.0% 7.6% 17.1% 6.6%
Depreciation and
Amortization $ 262.4 $ 182.4 $ 873.0 $ 698.2
Capital Expenditures(2)(3) 652.1 235.1 1,808.6 782.0
- ----------------------------------------------------------------------
DIRECTV LATIN AMERICA
Revenues $ 354.4 $ 189.5 $ 1,013.0 $ 742.1
Operating Profit Before
Depreciation and
Amortization(1) 55.1 19.4 243.8 141.5
Operating Profit Before
Depreciation and
Amortization Margin(1) 15.5% 10.2% 24.1% 19.1%
Operating Profit (Loss) $ (3.4) $ (21.2) $ 79.0 $ (18.7)
Operating Profit Margin N/A N/A 7.8% N/A
Depreciation and
Amortization $ 58.5 $ 40.6 $ 164.8 $ 160.2
Capital Expenditures(2) 56.4 21.6 178.6 90.4
- ----------------------------------------------------------------------
NETWORK SYSTEMS
Revenues $ - $ - $ - $ 211.4
Operating Loss Before
Depreciation and
Amortization(1) - - - (60.8)
Operating Loss - - - (60.8)
Depreciation and
Amortization - - - -
Capital Expenditures(2) - - - 18.1
- ----------------------------------------------------------------------
CORPORATE and OTHER
Revenues $ (0.4) $ (0.4) $ (1.5) $ (5.1)
Operating Loss Before
Depreciation and
Amortization(1) (15.7) (21.0) (73.3) (95.1)
Operating Loss (15.1) (19.8) (69.9) (89.9)
Depreciation and
Amortization (0.6) (1.2) (3.4) (5.2)
Capital Expenditures(2) 0.1 1.0 0.1 33.2
- ----------------------------------------------------------------------
TOTAL
Revenues $4,183.1 $3,595.5 $14,755.5 $13,164.5
Operating Profit Before
Depreciation and
Amortization(1) 915.4 440.6 3,391.2 1,485.8
Operating Profit Before
Depreciation and
Amortization Margin(1) 21.9% 12.3% 23.0% 11.3%
Operating Profit $ 595.1 $ 218.8 $ 2,356.8 $ 632.6
Operating Profit Margin 14.2% 6.1% 16.0% 4.8%
Depreciation and
Amortization $ 320.3 $ 221.8 $ 1,034.4 $ 853.2
Capital Expenditures(2) 708.6 257.7 1,987.3 923.7
(1) See footnote 1 above.
(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 Twelve Months Ended
December 31, December 31,
------------------- ---------------------
2006 2005 2006 2005
------------------- ---------------------
Revenues $3,829.1 $3,406.4 $13,744.0 $12,216.1
- ----------------------------------------------------------------------
Operating Costs and Expenses
Costs of revenues,
exclusive of depreciation
and amortization expense
Broadcast programming
and other 1,767.7 1,522.1 5,830.4 5,050.1
Subscriber service
expenses 279.5 255.3 1,057.1 935.4
Broadcast operations
expenses 46.9 35.7 179.3 145.8
Selling, general and
administrative expenses,
exclusive of depreciation
and amortization expense
Subscriber acquisition
costs 443.5 616.6 1,844.5 2,675.8
Upgrade and retention
costs 206.6 339.8 851.7 1,106.5
General and
administrative expenses 208.9 194.7 760.3 802.3
Depreciation and
amortization expense 262.4 182.4 873.0 698.2
- ----------------------------------------------------------------------
Total Operating Costs and
Expenses 3,215.5 3,146.6 11,396.3 11,414.1
- ----------------------------------------------------------------------
Operating Profit 613.6 259.8 2,347.7 802.0
Interest income 19.2 12.8 68.7 25.5
Interest expense (54.7) (52.1) (218.1) (227.4)
Other expense (1.0) (0.3) (2.9) (66.7)
- ----------------------------------------------------------------------
Income Before Income Taxes 577.1 220.2 2,195.4 533.4
Income tax expense (221.3) (87.9) (839.5) (208.1)
- ----------------------------------------------------------------------
Net Income $ 355.8 $ 132.3 $ 1,355.9 $ 325.3
======================================================================
DIRECTV HOLDINGS LLC
CONSOLIDATED BALANCE SHEETS
(Dollars in Millions)
(Unaudited)
December 31, December 31,
ASSETS 2006 2005
- ----------------------------------------------------------------------
Current Assets
Cash and cash equivalents $ 1,355.7 $ 1,164.8
Accounts receivable, net of
allowances of $58.7 and $75.0 1,267.2 995.9
Inventories 140.3 281.4
Deferred income taxes 5.4 148.1
Prepaid expenses and other 140.4 136.9
- ----------------------------------------------------------------------
Total Current Assets 2,909.0 2,727.1
Satellites, net 2,000.5 1,907.9
Property and Equipment, net 2,026.5 848.3
Goodwill 3,031.7 3,031.7
Intangible Assets, net 1,545.9 1,875.0
Other Assets 173.7 135.0
- ----------------------------------------------------------------------
Total Assets $ 11,687.3 $ 10,525.0
======================================================================
LIABILITIES AND OWNER'S EQUITY
- ----------------------------------------------------------------------
Current Liabilities
Accounts payable and accrued
liabilities $ 2,401.9 $ 2,362.9
Unearned subscriber revenue and
deferred credits 259.0 259.0
Current portion of long-term debt 10.4 7.8
- ----------------------------------------------------------------------
Total Current Liabilities 2,671.3 2,629.7
Long-Term Debt 3,394.9 3,405.3
Other Liabilities and Deferred
Credits 993.8 989.2
Deferred Income Taxes 239.8 204.4
Commitments and Contingencies
Owner's Equity 4,387.5 3,296.4
- ----------------------------------------------------------------------
Total Liabilities and Owner's Equity $ 11,687.3 $ 10,525.0
======================================================================
DIRECTV HOLDINGS LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Millions)
(Unaudited)
Years Ended
December 31,
2006 2005
- ----------------------------------------------------------------------
Cash Flows From Operating Activities
Net Income $ 1,355.9 $ 325.3
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization
expense 873.0 698.2
Share-based compensation expense 34.0 27.1
Equity in losses from
unconsolidated affiliates 2.9 -
Amortization of debt issuance
costs 4.9 6.2
Write-off of debt issuance costs - 19.0
Deferred income taxes and other 178.0 10.6
Change in other operating assets
and liabilities
Accounts receivable, net (271.3) (130.9)
Inventories 141.1 (159.4)
Prepaid expenses and other (35.1) 28.1
Other assets (26.5) (15.6)
Accounts payable and accrued
liabilities 19.1 575.9
Unearned subscriber revenue
and deferred credits - 3.1
Other liabilities and
deferred credits 66.4 (104.4)
- ----------------------------------------------------------------------
Net Cash Provided by Operating
Activities 2,342.4 1,283.2
- ----------------------------------------------------------------------
Cash Flows From Investing Activities
Cash paid for property and equipment (503.6) (380.5)
Cash paid for subscriber leased
equipment - subscriber acquisitions (598.6) -
Cash paid for subscriber leased
equipment - upgrade and retention (472.9) -
Cash paid for satellites (222.3) (366.6)
Cash paid for acquired assets (4.0) (3.3)
Proceeds from sale of property 12.4 0.5
Other 10.2 -
- ----------------------------------------------------------------------
Net Cash Used in Investing Activities (1,778.8) (749.9)
- ----------------------------------------------------------------------
Cash Flows From Financing Activities
Cash proceeds from refinancing
transactions - 3,003.3
Repayment of long-term debt (7.5) (2,001.8)
Repayment of borrowing from Parent - (875.0)
Repayment of other long-term
obligations (67.1) (63.1)
Cash dividend to Parent (300.0) -
Cash contribution from Parent - 538.3
Excess tax benefit from share-based
compensation 1.9 -
Debt issuance costs - (4.7)
- ----------------------------------------------------------------------
Net Cash (Used in) Provided by
Financing Activities (372.7) 597.0
- ----------------------------------------------------------------------
Net increase in cash and cash
equivalents 190.9 1,130.3
Cash and cash equivalents at
beginning of the year 1,164.8 34.5
- ----------------------------------------------------------------------
Cash and cash equivalents at end of
the year $ 1,355.7 $ 1,164.8
======================================================================
Supplemental Cash Flow Information
Cash paid for interest $ 215.1 $ 229.3
Cash paid for income taxes 728.0 36.1
Non-GAAP Financial Measure Reconciliation Schedules
(Unaudited)
- ----------------------------------------------------------------------
The DIRECTV Group
- ----------------------------------------------------------------------
Reconciliation of Operating Profit Before Depreciation and
Amortization to Operating Profit(a)
- ----------------------------------------------------------------------
Three Months Ended Twelve Months Ended
December 31, December 31,
------------------- -------------------
2006 2005 2006 2005
--------- --------- --------- ---------
(Dollars in (Dollars in
Millions) Millions)
Operating Profit Before
Depreciation and Amortization $ 915.4 $ 440.6 $3,391.2 $1,485.8
Subtract: Depreciation and
amortization expense 320.3 221.8 1,034.4 853.2
- ------------------------------ ------------------- -------------------
Operating Profit $ 595.1 $ 218.8 $2,356.8 $ 632.6
============================== =================== ===================
(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 Annual Report on Form 10-K for the year ended December
31, 2006. This Form 10-K is expected to be filed with the SEC in
February 2007.
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 Twelve Months Ended
December 31, December 31,
------------------- -------------------
2006 2005 2006 2005
--------- --------- --------- ---------
(Dollars in (Dollars in
Millions) Millions)
Cash Flow before Interest and
Taxes $ 335.0 $ 203.4 $1,313.3 $ 385.6
Adjustments:
Cash paid for interest (62.7) (56.9) (242.8) (239.5)
Interest income 37.8 52.4 145.7 150.3
Income taxes paid (10.1) (3.5) (30.3) (13.2)
- ------------------------------ ------------------- -------------------
Subtotal - Free Cash Flow 300.0 195.4 1,185.9 283.2
Add Cash Paid For:
Property and equipment 637.8 151.9 1,753.8 489.2
Satellites 49.5 120.8 222.3 399.5
- ------------------------------ ------------------- -------------------
Net Cash Provided by Operating
Activities $ 987.3 $ 468.1 $3,162.0 $1,171.9
============================== =================== ===================
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 Twelve Months Ended
December 31, December 31,
------------------- -------------------
2006 2005 2006 2005
--------- --------- --------- ---------
(Dollars in (Dollars in
Millions) Millions)
Cash Flow before Interest and
Taxes $ 342.6 $ 240.4 $1,419.4 $ 776.0
Adjustments:
Cash paid for interest (50.2) (51.6) (215.1) (229.3)
Interest income 19.2 12.8 68.7 25.5
Income taxes paid (160.0) (46.0) (728.0) (36.1)
- ------------------------------ ------------------- -------------------
Subtotal - Free Cash Flow 151.6 155.6 545.0 536.1
Add Cash Paid For:
Property and equipment 173.7 130.3 503.6 380.5
Subscriber leased equipment
- subscriber acquisitions 195.7 - 598.6 -
Subscriber leased equipment
- upgrade and retention 211.9 - 472.9 -
Satellites 49.5 119.9 222.3 366.6
- ------------------------------ ------------------- -------------------
Net Cash Provided by Operating
Activities $ 782.4 $ 405.8 $2,342.4 $1,283.2
============================== =================== ===================
(2) and (3) - see footnotes above in this earnings release
DIRECTV HOLDINGS LLC
Non-GAAP Financial Measure Reconciliation and Other Data
(Unaudited)
- ----------------------------------------------------------------------
DIRECTV Holdings LLC
- ----------------------------------------------------------------------
Reconciliation of Pre-SAC Margin to Operating Profit
- ----------------------------------------------------------------------
Three Months Ended Twelve Months Ended
December 31, December 31,
------------------- -------------------
2006 2005 2006 2005
--------- --------- --------- ---------
(Dollars in Millions)
Operating Profit $ 613.6 $ 259.8 $2,347.7 $ 802.0
Adjustments:
Subscriber acquisition costs
(expensed) 443.5 616.6 1,844.5 2,675.8
Depreciation and
amortization expense 262.4 182.4 873.0 698.2
Cash paid for subscriber
leased equipment - upgrade
and retention (211.9) - (472.9) -
---------------------------------------
Pre-SAC margin(a) $1,107.6 $1,058.8 $4,592.3 $4,176.0
=======================================
Pre-SAC margin as a percentage
of revenue(a) 28.9% 31.1% 33.4% 34.2%
- ------------------------------ ---------------------------------------
SAC Calculation
- ----------------------------------------------------------------------
Three Months Ended Twelve Months Ended
December 31, December 31,
------------------ -------------------
2006 2005 2006 2005
--------- -------- --------- ---------
(Dollars in Millions, Except SAC
Amounts)
Subscriber acquisition costs
(expensed) $ 443.5 $ 616.6 $1,844.5 $2,675.8
Cash paid for subscriber leased
equipment - subscriber
acquisitions 195.7 - 598.6 -
--------------------------------------
Total acquisition costs $ 639.2 $ 616.6 $2,443.1 $2,675.8
======================================
Gross subscriber additions
(000s) 1,021 965 3,809 4,170
Average subscriber acquisition
costs-per subscriber (SAC) $ 626 $ 639 $ 641 $ 642
Other Data
- ----------------------------------------------------------------------
Three Months Twelve Months
Ended Ended
December 31, December 31,
----------------- ------------------
2006 2005 2006 2005
-------- -------- --------- --------
Average monthly revenue per
subscriber (ARPU) $ 80.70 $ 75.53 $ 73.74 $ 69.61
Average monthly churn % 1.57% 1.70% 1.60% 1.70%
Total number of subscribers-
platform (000s) 15,953 15,133 15,953 15,133
Capital expenditures (millions) $ 652.1 $ 235.1 $1,808.6 $ 782.0
- --------------------------------- ------------------------------------
(a) 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: The DIRECTV Group, Inc.
Media Contact: Darris Gringeri, 212-462-5136
or
Investor Relations: 212-462-5200