This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

DIRECTV Announces Third Quarter 2012 Results

Stocks in this article: DTV

DIRECTV (NASDAQ:DTV) is one of the world's leading providers of digital television entertainment services. Through its subsidiaries and affiliated companies in the United States, Brazil, Mexico and other countries in Latin America, DIRECTV provides digital television service to nearly 20 million customers in the United States and over 14.5 million customers in Latin America. DIRECTV sports and entertainment properties include three regional sports networks (Northwest, Rocky Mountain and Pittsburgh) as well as a 60 percent ownership interest in Game Show Network. For more information on DIRECTV, visit directv.com.

                           
DIRECTV
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Millions, Except Per Share Amounts)
(Unaudited)
 
Three Months Ended September 30, Nine Months Ended September 30,
2012       2011 2012       2011
Revenues       $ 7,416         $ 6,844             $ 21,686         $ 19,763  
 
Operating costs and expenses
Costs of revenues, exclusive of depreciation and amortization expense
Broadcast programming and other 3,288 2,926 9,249 8,212
Subscriber service expenses 566 500 1,592 1,415
Broadcast operations expenses 103 99 310 289
Selling, general and administrative expenses, exclusive of depreciation and amortization expense
Subscriber acquisition costs 944 962 2,549 2,524
Upgrade and retention costs 382 365 1,056 973
General and administrative expenses 447 408 1,332 1,154
Depreciation and amortization expense       618         554             1,811         1,781  
Total operating costs and expenses       6,348         5,814             17,899         16,348  
Operating profit 1,068 1,030 3,787 3,415
Interest income 17 9 40 25
Interest expense (204 ) (194 ) (622 ) (569 )
Other, net       39         (38 )           13         74  
Income before income taxes 920 807 3,218 2,945
Income tax expense       (348 )       (286 )           (1,189 )       (1,032 )
Net income 572 521 2,029 1,913
Less: Net income attributable to noncontrolling interest       (7 )       (5 )           (22 )       (22 )
Net income attributable to DIRECTV       $ 565         $ 516             $ 2,007         $ 1,891  
 
Basic earnings attributable to DIRECTV per common share $ 0.91 $ 0.70 $ 3.08 $ 2.48
 
Diluted earnings attributable to DIRECTV per common share $ 0.90 $ 0.70 $ 3.06 $ 2.47
 
Weighted average number of common shares outstanding (in millions):
Basic 624 732 651 762
Diluted 629 737 655 767
 
 

                       
DIRECTV
CONSOLIDATED BALANCE SHEETS
(Dollars in Millions)
(Unaudited)
 
ASSETS       September 30, 2012                   December 31, 2011
Current assets
Cash and cash equivalents $ 2,421 $ 873
Accounts receivable, net of allowances of $91 and $79 2,583 2,474
Inventories 377 280
Deferred income taxes 66 62
Prepaid expenses and other       383                     552  
Total current assets 5,830 4,241
Satellites, net 2,288 2,215
Property and equipment, net 5,706 5,223
Goodwill 4,066 4,097
Intangible assets, net 821 909
Investments and other assets       1,642                     1,738  
Total assets       $ 20,353                     $ 18,423  
 
LIABILITIES AND STOCKHOLDERS' DEFICIT                            
Current liabilities
Accounts payable and accrued liabilities $ 4,203 $ 4,210
Unearned subscriber revenues and deferred credits       674                     533  
Total current liabilities 4,877 4,743
Long-term debt 17,162 13,464
Deferred income taxes 1,672 1,771
Other liabilities and deferred credits 1,377 1,287
Commitments and contingencies
Redeemable noncontrolling interest 265 265
Stockholders' deficit       (5,000 )                   (3,107 )
Total liabilities and stockholders' deficit       $ 20,353                     $ 18,423  
 
 

                     

DIRECTV

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Millions)
(Unaudited)
 
Nine Months Ended September 30,
        2012                 2011
Cash Flows From Operating Activities
Net income $ 2,029 $ 1,913
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense 1,811 1,781
Amortization of deferred revenues and deferred credits (54 ) (27 )
Share-based compensation expense 77 76
Equity in earnings from unconsolidated affiliates (107 ) (83 )
Net foreign currency transaction (gain) loss 32 46
Dividends received 28 97
Gain on sale of investments (11 ) (63 )
Deferred income taxes 41 179
Excess tax benefit from share-based compensation (30 ) (25 )
Other 76 32
Change in other operating assets and liabilities:
Accounts receivable 15 (104 )
Inventories (97 ) (66 )
Prepaid expenses and other 146 (140 )
Accounts payable and accrued liabilities (143 ) (126 )
Unearned subscriber revenue and deferred credits 139 74
Other, net       181                   47  
Net cash provided by operating activities       4,133                   3,611  
Cash Flows From Investing Activities
Cash paid for property and equipment (2,160 ) (2,160 )
Cash paid for satellites (231 ) (156 )
Investment in companies, net of cash acquired (4 ) (11 )
Proceeds from sale of investments 24 116
Other, net       25                   41  
Net cash used in investing activities       (2,346 )                 (2,170 )
Cash Flows From Financing Activities
Cash proceeds from debt issuance 5,190 3,990
Debt issuance costs (35 ) (30 )
Repayment of long-term debt (1,500 ) (1,000 )
Proceeds from borrowings under revolving credit facility 400
Repayment of borrowings under revolving credit facility (400 )
Repayment of short-term borrowings (39 )
Repayment of other long-term obligations (40 ) (171 )
Common shares repurchased and retired (3,828 ) (4,366 )
Stock options exercised 2
Taxes paid in lieu of shares issued for share-based compensation (58 ) (55 )
Excess tax benefit from share-based compensation       30                   25  
Net cash used in financing activities       (239 )                 (1,646 )
Net increase in cash and cash equivalents 1,548 (205 )
Cash and cash equivalents at beginning of the period       873                   1,502  
Cash and cash equivalents at end of the period       $ 2,421                   $ 1,297  
Supplemental Cash Flow Information
Cash paid for interest $ 710 $ 562
Cash paid for income taxes 881 853
 
 

                           
DIRECTV
SELECTED SEGMENT DATA
(Dollars in Millions)
(Unaudited)
 
Three Months Ended September 30, Nine Months Ended September 30,
        2012       2011           2012       2011
DIRECTV U.S.
Revenues $ 5,769 $ 5,421 $ 16,915 $ 15,843

Operating profit before depreciation and amortization (1)

1,251 1,153 4,246 3,962

Operating profit before depreciation and amortization margin (1)

21.7 % 21.3 % 25.1 % 25.0 %
Operating profit $ 876 $ 800 $ 3,130 $ 2,737
Operating profit margin 15.2 % 14.8 % 18.5 % 17.3 %
Depreciation and amortization       $ 375         $ 353             $ 1,116         $ 1,225  
 
SKY BRASIL
Revenues $ 868 $ 813 $ 2,587 $ 2,212

Operating profit before depreciation and amortization (1)

255 258 802 731

Operating profit before depreciation and amortization margin (1)

29.4 % 31.7 % 31.0 % 33.0 %
Operating profit $ 122 $ 136 $ 399 $ 403
Operating profit margin 14.1 % 16.7 % 15.4 % 18.2 %
Depreciation and amortization       $ 133         $ 122             $ 403         $ 328  
 
PANAMERICANA
Revenues $ 709 $ 543 $ 1,983 $ 1,512

Operating profit before depreciation and amortization (1)

200 176 566 510

Operating profit before depreciation and amortization margin (1)

28.2 % 32.4 % 28.5 % 33.7 %
Operating profit $ 99 $ 100 $ 295 $ 293
Operating profit margin 14.0 % 18.4 % 14.9 % 19.4 %
Depreciation and amortization       $ 101         $ 76             $ 271         $ 217  
 
SPORTS NETWORKS, ELIMINATIONS and OTHER
Revenues $ 70 $ 67 $ 201 $ 196

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

(20 ) (3 ) (16 ) (7 )
Operating profit (loss) (29 ) (6 ) (37 ) (18 )
Depreciation and amortization       9         3             21         11  
 
TOTAL
Revenues $ 7,416 $ 6,844 $ 21,686 $ 19,763

Operating profit before depreciation and amortization (1)

1,686 1,584 5,598 5,196

Operating profit before depreciation and amortization margin (1)

22.7 % 23.1 % 25.8 % 26.3 %
Operating profit $ 1,068 $ 1,030 $ 3,787 $ 3,415
Operating profit margin 14.4 % 15.0 % 17.5 % 17.3 %
Depreciation and amortization       $ 618         $ 554             $ 1,811         $ 1,781  
 

(1) See footnote 1 above

 
 

                           
DIRECTV HOLDINGS LLC (DIRECTV U.S.)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Millions)
(Unaudited)
 
Three Months Ended September 30, Nine Months Ended September 30,
2012       2011 2012       2011
Revenues       $ 5,769         $ 5,421             $ 16,915         $ 15,843  
 
Operating costs and expenses
Costs of revenues, exclusive of depreciation and amortization expense
Broadcast programming and other 2,685 2,411 7,549 6,818
Subscriber service expenses 390 375 1,096 1,081
Broadcast operations expenses 74 75 229 224
Selling, general and administrative expenses, exclusive of depreciation and amortization expense
Subscriber acquisition costs 757 793 2,017 2,101
Upgrade and retention costs 340 332 930 889
General and administrative expenses 272 282 848 768
Depreciation and amortization expense       375         353             1,116         1,225  
Total operating costs and expenses       4,893         4,621             13,785         13,106  
Operating profit 876 800 3,130 2,737
Interest income 1 1 1
Interest expense (189 ) (177 ) (577 ) (519 )
Other, net       17         6             (39 )       29  
Income before income taxes 705 629 2,515 2,248
Income tax expense       (266 )       (237 )           (936 )       (848 )
Net income       $ 439         $ 392             $ 1,579         $ 1,400  
 
 

                     
DIRECTV HOLDINGS LLC (DIRECTV U.S.)
CONSOLIDATED BALANCE SHEETS
(Dollars in Millions)
(Unaudited)
 
ASSETS       September 30, 2012                 December 31, 2011
Current assets
Cash and cash equivalents $ 692 $ 232
Accounts receivable, net of allowances of $56 and $51 2,111 2,126
Inventories 341 253
Prepaid expenses and other       178                   419  
Total current assets 3,322 3,030
Satellites, net 1,752 1,724
Property and equipment, net 3,185 3,084
Goodwill 3,177 3,177
Intangible assets, net 456 461
Other assets       266                   320  
Total assets       $ 12,158                   $ 11,796  
 
LIABILITIES AND OWNER's DEFICIT                          
Current liabilities
Accounts payable and accrued liabilities $ 3,028 $ 3,226
Unearned subscriber revenues and deferred credits       490                   377  
Total current liabilities 3,518 3,603
Long-term debt 17,162 13,464
Deferred income taxes 1,338 1,321
Other liabilities and deferred credits 336 239
Commitments and contingencies
Owner's deficit       (10,196 )                 (6,831 )
Total liabilities and owner's deficit       $ 12,158                   $ 11,796  
 
 

                     
DIRECTV HOLDINGS LLC (DIRECTV U.S.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Millions)
(Unaudited)
 
Nine Months Ended September 30,
        2012                 2011
Cash Flows From Operating Activities
Net income $ 1,579 $ 1,400
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense 1,116 1,225
Amortization of deferred revenues and deferred credits (54 ) (27 )
Share-based compensation expense 61 62
Deferred income taxes 86 281
Excess tax benefit from share-based compensation (25 ) (21 )
Other 21 (34 )
Change in other operating assets and liabilities:
Accounts receivable 92 (42 )
Inventories (88 ) (59 )
Prepaid expenses and other 242 (177 )
Accounts payable and accrued liabilities (251 ) (220 )
Unearned subscriber revenue and deferred credits 111 46
Other, net       70                   (10 )
Net cash provided by operating activities       2,960                   2,424  
Cash Flows From Investing Activities
Cash paid for property and equipment (377 ) (404 )
Cash paid for subscriber leased equipment - subscriber acquisitions (462 ) (546 )
Cash paid for subscriber leased equipment - upgrade and retention (209 ) (236 )
Cash paid for satellites (139 ) (83 )
Investment in companies, net of cash acquired (1 ) (11 )
Proceeds from sale of investments 24 55
Other, net       (1 )                 1  
Net cash used in investing activities       (1,165 )                 (1,224 )
Cash Flows From Financing Activities
Cash proceeds from debt issuance 5,190 3,990
Debt issuance costs (35 ) (30 )
Repayment of long-term debt (1,500 ) (1,000 )
Proceeds from borrowings under revolving credit facility 400
Repayment of borrowings under revolving credit facility (400 )
Repayment of other long-term obligations (15 ) (61 )
Cash dividend to Parent (5,000 ) (4,000 )
Excess tax benefit from share-based compensation       25                   21  
Net cash used in financing activities       (1,335 )                 (1,080 )
Net increase in cash and cash equivalents 460 120
Cash and cash equivalents at beginning of the period       232                   687  
Cash and cash equivalents at end of the period       $ 692                   $ 807  
Supplemental Cash Flow Information
Cash paid for interest $ 665 $ 512
Cash paid for income taxes 581 691
 
 

 
Non-GAAP Financial Measure Reconciliation Schedules
(Unaudited)
 
DIRECTV
Reconciliation of Operating Profit Before Depreciation and Amortization to Operating Profit*
      Three Months Ended September 30,           Nine Months Ended September 30,
2012       2011 2012       2011
Operating profit before depreciation and amortization $ 1,686 $ 1,584 $ 5,598 $ 5,196
Subtract: Depreciation and amortization 618   554   1,811   1,781
Operating profit $ 1,068   $ 1,030   $ 3,787   $ 3,415
 
* For a reconciliation of this non-GAAP financial measure for each of our segments, please see the Notes to the Consolidated Financial Statements which will be included in DIRECTV's Quarterly Report on Form 10-Q for the quarter ended September 30, 2012, which is expected to be filed with the SEC in November 2012.
 
 
DIRECTV
Reconciliation of Cash Flow Before Interest and Taxes 2 and Free Cash Flow 3 to

Net Cash Provided by Operating Activities

      Three Months Ended September 30,           Nine Months Ended September 30,
2012       2011 2012       2011
Cash Flow Before Interest and Taxes $ 957 $ 788 $ 3,293 $ 2,685
Adjustments:
Cash paid for interest (333 ) (252 ) (710 ) (562 )
Interest income 17 9 40 25
Income taxes paid       (322 )       (310 )           (881 )       (853 )
Subtotal - Free Cash Flow 319 235 1,742 1,295
Add Cash Paid For:
Property and equipment 743 864 2,160 2,160
Satellites 47   108   231   156  
Net Cash Provided by Operating Activities $ 1,109   $ 1,207   $ 4,133   $ 3,611  
 
 
DIRECTV Latin America
Reconciliation of Cash Flow Before Interest and Taxes 2 and Free Cash Flow 3 to

Net Cash Provided by Operating Activities

      Three Months Ended September 30,           Nine Months Ended September 30,
2012       2011 2012       2011
Cash Flow Before Interest and Taxes $ 81 $ 32 $ 238 $ 329
Adjustments:
Cash paid for interest (13 ) (14 ) (40 ) (42 )
Interest income 16 10 39 24
Income taxes paid       (69 )       (51 )           (242 )       (187 )
Subtotal - Free Cash Flow 15 (23 ) (5 ) 124
Add Cash Paid For:
Property and equipment 40 28 167 54
Subscriber leased equipment - subscriber acquisitions 195 248 619 609
Subscriber leased equipment - upgrade and retention 107 115 324 305
Satellites 22   74   86   74  
Net Cash Provided by Operating Activities $ 379   $ 442   $ 1,191   $ 1,166  
 

(2) and (3) - See footnotes above

               
DIRECTV HOLDINGS LLC (DIRECTV U.S.)
Non-GAAP Financial Measure Reconciliation and SAC Calculations

(Unaudited)

Reconciliation of Pre-SAC Margin * to Operating Profit

 

      Three Months Ended September 30, Nine Months Ended September 30,
2012       2011 2012 2011
Operating profit $ 876 $ 800 $ 3,130 $ 2,737
Adjustments:
Subscriber acquisition costs (expensed) 757 793 2,017 2,101
Depreciation and amortization 375 353 1,116 1,225
Cash paid for subscriber leased equipment - upgrade and retention (79 ) (91 ) (209 ) (236 )
Pre-SAC Margin $ 1,929   $ 1,855   $ 6,054   $ 5,827  
Pre-SAC Margin as a percentage of revenue 33.4 % 34.2 % 35.8 % 36.8 %
                                     
Reconciliation of Cash Flow Before Interest and Taxes 2 and Free Cash Flow 3 to

Net Cash Provided by Operating Activities

Three Months Ended September 30, Nine Months Ended September 30,
2012 2011 2012 2011
Cash Flow Before Interest and Taxes $ 861 $ 744 $ 3,018 $ 2,357
Adjustments:
Cash paid for interest (317 ) (235 ) (665 ) (512 )
Interest income 1 1 1
Income taxes paid       (270 )       (242 )           (581 )       (691 )
Subtotal - Free Cash Flow 275 267 1,773 1,155
Add Cash Paid For:
Property and equipment 137 159 377 404
Subscriber leased equipment - subscriber acquisitions 184 222 462 546
Subscriber leased equipment - upgrade and retention 79 91 209 236
Satellites 23   35   139   83  
Net Cash Provided by Operating Activities $ 698   $ 774   $ 2,960   $ 2,424  
 
(2) and (3) - See footnotes above
* Pre-SAC Margin, which is a financial measure that is not determined in accordance with accounting principles generally accepted in the United States of America, or GAAP, is calculated for DIRECTV U.S. by adding amounts under the captions “Subscriber acquisition costs” and “Depreciation and amortization expense” to “Operating Profit” from the Consolidated Statements of Operations and subtracting "Cash paid for subscriber leased equipment - upgrade and retention" from the Consolidated Statements of Cash Flows. This financial measure should be used in conjunction with GAAP financial measures and is not presented as an alternative measure of operating results, as determined in accordance with GAAP. DIRECTV management use Pre-SAC Margin to evaluate the profitability of DIRECTV U.S.' current subscriber base for the purpose of allocating resources to discretionary activities such as adding new subscribers, upgrading and retaining existing subscribers and for capital expenditures. To compensate for the exclusion of “Subscriber acquisition costs,” management also uses operating profit and operating profit before depreciation and amortization expense to measure profitability.
 
DIRECTV believes this measure is useful to investors, along with GAAP measures (such as revenues, operating profit and net income), to compare DIRECTV U.S.’ operating performance to other communications, entertainment and media companies. DIRECTV believes that investors also use current and projected Pre-SAC Margin to determine the ability of DIRECTV U.S.’ current and projected subscriber base to fund discretionary spending and to determine the financial returns for subscriber additions.
 
SAC Calculation
Three Months Ended September 30, Nine Months Ended September 30,
2012 2011 2012 2011
Subscriber acquisition costs (expensed) $ 757 $ 793 $ 2,017 $ 2,101
Cash paid for subscriber leased equipment - subscriber acquisitions 184   222   462   546  
Total acquisition costs $ 941   $ 1,015   $ 2,479   $ 2,647  
Gross subscriber additions (000's) 1,107 1,280 2,911 3,286
Average subscriber acquisition costs - per subscriber (SAC)       $ 850         $ 793             $ 852         $ 806  




8 of 9

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,614.81 +215.14 1.31%
S&P 500 1,941.28 +37.27 1.96%
NASDAQ 4,419.4780 +103.4040 2.40%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs