NON-GAAP FINANCIAL RECONCILIATION SCHEDULES
(Numbers may not add due to rounding)
The following table reconciles Operating Profit Before
Depreciation
and Amortization to Operating Profit (Loss).(a)
Three Months Six Months
Dollars in Millions Ended Ended
June 30, June 30,
------------------------------------- ------------- --------------
2005 2004
2005 2004
------------------------------------- -----
----- ----- ------
The DIRECTV Group
Operating Profit
(Loss) $312 $(28)
$257 $(125)
Plus: Depreciation
& Amortization
(D&A) 211 172
423 357
----- -----
----- ------
Operating Profit
Before D&A $523 $143
$681 $233
------------------------------------- =====
===== ===== ======
(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 June 30, 2005,
which is expected
to be filed with the SEC in August 2005.
Additional
DIRECTV U.S. non-GAAP financial reconciliation
schedules are
included with the DIRECTV Holdings LLC's stand-alone
financial
statements included in this earnings release.
The following tables reconcile Free Cash Flow to "Net
Cash Provided by
Operating Activities."
Dollars in Millions Six Months
Twelve Months
Ended June 30, Ended December 31,
2005 2004
----------------------------------------------------------------------
The DIRECTV Group
Free Cash Flow (103) $(795)
Plus: Expenditures
for property 206 476
Plus: Expenditures
for satellites 228 547
-----------------------------------
Net Cash Provided by
Operating
Activities 330 $229
-----------------------------------===================================
Dollars in Millions Three Months Six Months
Ended June 30, Ended June 30,
----------------------
-----------------
-----------------
2005 2004 2005 2004
----------------------
----- ----- ----- -----
DIRECTV U.S.
Free Cash Flow $127
$93 $151 $(74)
Plus: Expenditures
for property &
equipment 103 55 148 107
Plus: Expenditures
for satellites 95 101
196 173
----- ----- ----- -----
Net Cash Provided by
Operating
Activities $324 $248 $495 $206
----------------------
===== ===== ===== =====
DIRECTV is the nation's leading and fastest-growing digital
multichannel television service provider, with approximately 14.7 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 34 percent owned by News
Corporation. For more information visit www.directv.com
THE DIRECTV GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Millions)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
-------------------
-------------------
2005 2004 2005
2004
-------------------
-------------------
Revenues $3,187.9
$2,642.8 $6,335.8 $5,136.0
----------------------------------------------------------------------
Operating Costs and Expenses,
exclusive of
depreciation and
amortization expense
shown
separately below
Broadcast
programming and
other costs of
sale 1,238.9 1,131.2
2,583.8 2,245.3
Subscriber service
expenses 230.9 179.2
463.0 335.2
Subscriber
acquisition costs:
Third-party
customer
acquisitions 482.7 459.5
1,081.7 910.5
Direct customer
acquisitions 161.4 163.1
323.6 315.8
Upgrade and
retention costs 226.5 230.3
481.0 406.9
Broadcast operations
expenses 63.2 50.5
125.4 95.8
General and
administrative
expenses 285.5 285.8
599.8 593.9
(Gain) loss from
asset sales
and impairment
charges, net (23.9) -
(3.0) -
Depreciation and amortization
expense 211.1 171.5
423.1 357.1
----------------------------------------------------------------------
Total Operating Costs and
Expenses 2,876.3 2,671.1
6,078.4 5,260.5
----------------------------------------------------------------------
Operating Profit (Loss) 311.6
(28.3) 257.4 (124.5)
Interest income 31.0 4.7 53.1 10.4
Interest expense (60.2)
(20.6) (115.5) (43.9)
Reorganization (expense)
income - (1.8) - 43.4
Other, net (71.9)
5.3 (73.6) 396.9
----------------------------------------------------------------------
Income (Loss) From Continuing Operations
Before Income Taxes,
Minority
Interests and
Cumulative
Effect of
Accounting
Change 210.5 (40.7)
121.4 282.3
Income tax (expense) benefit (75.6) 20.1 (31.9)
(127.0)
Minority interests in net
(earnings) losses of
subsidiaries (4.7) 3.0
(0.7) 2.3
----------------------------------------------------------------------
Income (loss) from continuing
operations before
cumulative
effect of accounting
change 130.2 (17.6) 88.8 157.6
Income (loss) from
discontinued
operations, net
of taxes 31.3 4.3 31.3 (499.2)
----------------------------------------------------------------------
Income (loss) before
cumulative effect of
accounting
change 161.5 (13.3)
120.1 (341.6)
Cumulative effect of
accounting change,
net of
taxes - - - (310.5)
----------------------------------------------------------------------
Net Income (Loss) $161.5
$(13.3) $120.1 $(652.1)
======================================================================
Basic and Diluted Earnings
(Loss) Per Common
Share:
Income (loss) from continuing
operations before
cumulative
effect of accounting
change $0.10 $(0.01)
$0.07 $0.11
Income (loss) from
discontinued
operations, net
of taxes 0.02 - 0.02 (0.36)
Cumulative effect of
accounting change,
net of
taxes - - - (0.22)
----------------------------------------------------------------------
Net Income (Loss) $0.12
$(0.01) $0.09 $(0.47)
======================================================================
Weighted average number of common shares
outstanding (in
millions)
Basic 1,387.6 1,384.6
1,386.8 1,384.3
Diluted 1,393.5 1,384.6
1,392.8 1,391.0
======================================================================
THE DIRECTV GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in Millions)
(Unaudited)
June 30, December 31,
ASSETS 2005 2004
-------------------------------------- ----------------
--------------
Current Assets
Cash and cash equivalents $3,675.2
$2,307.4
Short-term investments 379.0 522.6
Accounts and notes receivable, net of
allowances of $133.7
and $121.7 856.4 918.6
Inventories 296.1 124.4
Prepaid expenses and other 372.6 377.0
Assets of business held for sale -
521.1
-------------------------------------- ----------------
--------------
Total Current Assets 5,579.3 4,771.1
Satellites, net 1,729.8 1,560.4
Property, net 1,115.2 1,135.1
Goodwill, net 3,045.3 3,044.1
Intangible Assets, net 2,051.8 2,227.1
Investments and Other Assets 1,595.6
1,586.6
-------------------------------------- ----------------
--------------
Total Assets $15,117.0 $14,324.4
====================================== ================
==============
LIABILITIES AND STOCKHOLDERS' EQUITY
-------------------------------------- ----------------
--------------
Current Liabilities
Accounts payable $1,312.7 $1,290.9
Unearned subscriber revenue and
deferred
credits
242.6 261.5
Short-term borrowings and current
portion of long-term
debt 5.7 19.8
Accrued liabilities and other 881.0
881.7
Liabilities of business held for sale - 240.6
-------------------------------------- ----------------
--------------
Total Current Liabilities 2,442.0 2,694.5
Long-Term Debt 3,411.7 2,409.5
Other Liabilities and Deferred Credits 1,551.7 1,665.4
Commitments and Contingencies
Minority Interests 48.0 47.9
Stockholders' Equity 7,663.6 7,507.1
-------------------------------------- ----------------
--------------
Total Liabilities and Stockholders'
Equity
$15,117.0 $14,324.4
====================================== ================
==============
THE DIRECTV GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Millions)
(Unaudited)
Six Months Ended June 30,
-------------------------------
2005 2004
----------------------------------------------------------------------
Cash Flows from Operating Activities
Income from continuing operations
before cumulative
effect of
accounting
change
$88.8 $157.6
Adjustments to reconcile income from
continuing
operations before
cumulative effect of
accounting change
to net cash provided
by
(used in) operating
activities
Depreciation and
amortization 423.1 357.1
Gain from asset
sales and impairment
charges, net (3.0) -
Equity losses from
unconsolidated
affiliates 8.4 -
Net (gain) loss
from sale of
investments 0.6 (396.5)
Loss on disposal
of assets 4.3 15.0
Stock-based
compensation expense
20.4 42.2
Write-off of debt
issuance costs 19.0 -
Deferred income
taxes and other 46.7 41.2
Change in other
operating assets and
liabilities
Accounts and
notes receivable
47.3 13.0
Inventories (171.7) (74.8)
Prepaid expenses
and other (3.6) 2.2
Accounts
payable
14.3 (392.0)
Accrued
liabilities
(29.2) 7.4
Unearned
subscriber revenue and
deferred credits (18.9) 41.3
Other
(116.1) 110.7
----------------------------------------------------------------------
Net Cash Provided by (Used in)
Operating
Activities 330.4 (75.6)
----------------------------------------------------------------------
Cash Flows from Investing Activities
Purchase of short-term and other
investments
(1,783.5) (1,809.2)
Sale of short-term investments 1,931.6
1,775.0
Expenditures for property (205.7) (204.5)
Expenditures for satellites (227.5)
(232.9)
Proceeds from sale of investments 113.1
510.5
Proceeds from sale of businesses 246.0
279.4
Other (0.3) 4.2
----------------------------------------------------------------------
Net Cash Provided by Investing
Activities
73.7 322.5
----------------------------------------------------------------------
Cash Flows from Financing Activities
Net (decrease) increase in short-term
borrowings
(3.2) 2.7
Long-term debt borrowings 3,003.3 0.6
Repayment of long-term debt (2,002.4)
(214.1)
Debt issuance costs
(4.7) (1.9)
Repayment of long-term obligations (44.6)
-
Stock options exercised 15.3 13.6
----------------------------------------------------------------------
Net Cash Provided by (Used in)
Financing
Activities
963.7 (199.1)
----------------------------------------------------------------------
Net increase in cash and cash
equivalents
1,367.8 47.8
Cash and cash equivalents at beginning
of the period 2,307.4 1,434.7
----------------------------------------------------------------------
Cash and cash equivalents at the end of
the period $3,675.2 $1,482.5
----------------------------------------------------------------------
Supplemental Cash Flow Information
Interest paid $116.6 $48.3
Income taxes paid 5.0 27.5
THE DIRECTV GROUP, INC.
SELECTED SEGMENT DATA
(Dollars in Millions)
(Unaudited)
Three Months Six Months
Ended June 30, Ended June 30,
------------------ ------------------
2005 2004 2005 2004
----------------------------------------------------------------------
DIRECTV U.S.
Revenues $2,960.5
$2,216.9 $5,761.3 $4,297.7
Operating Profit Before
Depreciation and
Amortization(1) 504.6 175.0
720.2 320.2
Operating Profit Before
Depreciation and
Amortization
Margin(1) 17.0%
7.9% 12.5% 7.5%
Operating Profit $ 333.2 $
63.3 $ 371.6 $ 84.7
Operating Profit Margin 11.3%
2.9% 6.4% 2.0%
Depreciation and Amortization $ 171.4 $
111.7 $ 348.6
$ 235.5
Capital Expenditures 197.7
155.7 343.9 279.2
----------------------------------------------------------------------
DIRECTV LATIN AMERICA
Revenues $
183.5 $ 167.4
$ 367.4 $
329.8
Operating Profit Before
Depreciation and
Amortization(1) 45.3 30.0 67.9 45.6
Operating Profit Before
Depreciation and
Amortization
Margin(1) 24.7% 17.9%
18.5% 13.8%
Operating Profit (Loss) $ 4.0 $
(15.7) $ (9.5) $ (47.0)
Operating Profit Margin 2.2%
N/A N/A N/A
Depreciation and Amortization 41.3 45.7 77.4 92.6
Capital Expenditures 24.6
18.3 41.6 37.2
----------------------------------------------------------------------
NETWORK SYSTEMS
Revenues $
45.2 $ 364.3 $ 211.4
$ 681.0
Operating Loss Before
Depreciation and
Amortization(1) (8.0) (21.4) (60.8) (17.9)
Operating Loss $ (8.0)
$ (37.3) $ (60.8) $ (51.5)
Depreciation and Amortization - 15.9 - 33.6
Capital Expenditures 3.9
24.3 18.1 62.9
----------------------------------------------------------------------
ELIMINATIONS and OTHER
Revenues $
(1.3) $ (105.8) $ (4.3) $
(172.5)
Operating Loss Before
Depreciation and
Amortization(1) (19.2) (40.4)
(46.8) (115.3)
Operating Loss (17.6)
(38.6) (43.9) (110.7)
Depreciation and Amortization (1.6) (1.8) (2.9)
(4.6)
Capital Expenditures 1.4
29.3 29.6 58.1
----------------------------------------------------------------------
TOTAL
Revenues $3,187.9
$2,642.8 $6,335.8 $5,136.0
Operating Profit Before
Depreciation and
Amortization(1) 522.7 143.2
680.5 232.6
Operating Profit Before
Depreciation and
Amortization
Margin(1) 16.4% 5.4%
10.7% 4.5%
Operating Profit (Loss) $ 311.6 $
(28.3) $ 257.4 $ (124.5)
Operating Profit Margin 9.8%
N/A 4.1% N/A
Depreciation and Amortization 211.1 171.5 423.1
357.1
Capital Expenditures 227.6
227.6 433.2 437.4
======================================================================
(1) See footnote 1 in the FOOTNOTES section above.
The Following Data
Reflect DIRECTV U.S.' Financial Statements and
Other Data as a Stand Alone Entity
DIRECTV HOLDINGS LLC
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Millions)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------------------
2005 2004 2005
2004
--------- ---------
-------------------
Revenues $2,960.5
$2,216.9 $5,761.3 $4,297.7
------------------------------ --------- ---------
-------------------
Operating Costs and Expenses,
exclusive of
depreciation and
amortization expense
shown
separately below
Programming and
other costs 1,137.7 856.5
2,287.3 1,704.6
Subscriber service
expenses 219.2 166.0
439.7 312.0
Subscriber
acquisition costs:
Third-party
customer
acquisitions
467.9 445.4 1,055.8
881.9
Direct customer
acquisitions
154.3 162.1 312.0
313.4
Upgrade and
retention costs 223.2 226.8
475.4 401.0
Broadcast
operations
expenses 35.3 35.2 70.7 65.2
General and
administrative
expenses 218.3 149.9
400.2 299.4
Depreciation and amortization
expense 171.4
111.7 348.6 235.5
------------------------------ --------- ---------
-------------------
Total Operating Costs and
Expenses 2,627.3 2,153.6
5,389.7 4,213.0
------------------------------ --------- ---------
-------------------
Operating Profit 333.2
63.3 371.6 84.7
Interest expense, net (54.2)
(46.0) (110.2) (93.4)
Other expense (65.2)
-- (65.6) --
------------------------------ --------- ---------
-------------------
Income (Loss) Before Income
Taxes and Cumulative
Effect
of Accounting
Change 213.8 17.3
195.8 (8.7)
Income tax (expense) benefit (82.0) (6.6) (75.1) 3.4
------------------------------ --------- ---------
-------------------
Income (loss) before
cumulative effect of
accounting
change 131.8 10.7
120.7 (5.3)
Cumulative effect of
accounting change,
net of
taxes -- -- -- (311.5)
------------------------------ --------- ---------
-------------------
Net Income (Loss) $131.8
$10.7 $120.7 $(316.8)
============================== ========= =========
===================
DIRECTV HOLDINGS LLC
CONSOLIDATED BALANCE SHEETS
(Dollars in Millions)
(Unaudited)
June 30, December 31,
ASSETS 2005 2004
----------------------------------------------------------------------
Current Assets
Cash and cash equivalents $814.0 $34.5
Accounts receivable, net of allowances
of $96.6 and
$86.4
815.1 885.0
Inventories, net 294.2 122.0
Prepaid expenses and other 241.8 289.8
----------------------------------------------------------------------
Total Current Assets 2,165.1 1,331.3
Satellites, net 1,764.8 1,597.4
Property, net 723.5 686.1
Goodwill 3,031.7 3,031.7
Intangible Assets, net 2,048.3 2,224.9
Other Assets 125.4 122.8
----------------------------------------------------------------------
Total Assets $9,858.8 $8,994.2
======================================================================
LIABILITIES AND OWNER'S EQUITY
----------------------------------------------------------------------
Current Liabilities
Accounts payable and accrued
liabilities
$1,851.3 $1,771.7
Unearned subscriber revenue and
deferred
credits
225.5 255.9
Current portion of long-term debt 2.8 10.2
----------------------------------------------------------------------
Total Current Liabilities 2,079.6 2,037.8
Long-Term Debt 3,410.5 3,276.6
Other Liabilities and Deferred Credits 1,065.7 1,128.6
Deferred Income Taxes 227.9 172.3
Commitments and Contingencies
Owner's Equity
Capital stock and additional paid-in
capital 4,034.2 3,458.7
Accumulated deficit (959.1) (1,079.8)
----------------------------------------------------------------------
Total Owner's Equity 3,075.1 2,378.9
----------------------------------------------------------------------
Total Liabilities and Owner's Equity $9,858.8 $8,994.2
======================================================================
DIRECTV HOLDINGS LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Millions)
(Unaudited)
Six Months Ended June 30,
2005 2004
----------------------------------------------------------------------
Cash Flows from Operating Activities
Income (Loss) Before Cumulative Effect
of Accounting
Change
$120.7 $(5.3)
Adjustments to
reconcile income
(loss) before
cumulative effect of
accounting change
to net cash
provided by
operating activities
Depreciation and
amortization
expense
348.6 235.5
Equity losses
from unconsolidated
affiliates 0.7 --
Loss on sale or
disposal of
property -- 8.6
Stock-based
compensation expense
13.2 15.9
Amortization of
debt issuance
costs
3.9 4.5
Write-off of debt
issuance costs 19.0 --
Deferred income
taxes and other 55.3 (3.8)
Change in other
operating assets
and liabilities
Accounts
receivable, net 49.9
(39.5)
Inventories (172.2) (97.8)
Prepaid expenses
and other 48.3 (3.8)
Other
assets
(1.9) (30.4)
Accounts payable
and accrued
liabilities 91.6 (31.6)
Unearned
subscriber revenue and
deferred
credits
(30.4) 41.7
Other
liabilities and deferred
credits
(52.2) 111.6
----------------------------------------------------------------------
Net Cash Provided by Operating
Activities
494.5 205.6
----------------------------------------------------------------------
Cash Flows from Investing Activities
Expenditures for property and
equipment
(148.3) (106.5)
Expenditures for satellites (195.6)
(172.7)
Proceeds from sale of property --
3.3
----------------------------------------------------------------------
Net Cash Used in Investing Activities (343.9) (275.9)
----------------------------------------------------------------------
Cash Flows from Financing Activities
Cash proceeds from refinancing
transactions 3,003.3 --
Cash contribution from Parent 538.3 --
Repayment of debt (2,001.8) (213.2)
Repayment of borrowing from Parent (875.0)
--
Payments for long-term obligations (31.2)
--
Debt issuance costs (4.7) (1.9)
----------------------------------------------------------------------
Net Cash Provided by (Used in)
Financing
Activities
628.9 (215.1)
----------------------------------------------------------------------
Net increase (decrease) in cash and
cash
equivalents
779.5 (285.4)
Cash and cash equivalents at beginning
of the period 34.5 415.7
----------------------------------------------------------------------
Cash and cash equivalents at end of
the period
$814.0 $130.3
======================================================================
Supplemental Cash Flow Information
Interest paid $114.9 $93.8
Income taxes (refunded) paid (44.1) 0.5
DIRECTV HOLDINGS LLC
Non-GAAP Financial Reconciliation and Other Data
(Unaudited)
----------------------------------------------------------------------
Three Months Six Months
Ended Ended
June 30, June 30,
-----------------
-------------------
2005 2004 2005 2004
-----------------
-------------------
(Dollars in Millions)
Operating Profit $333.2
$63.3 $371.6 $84.7
Add back: Subscriber acquisition
costs:
Third-party
customer
acquisitions
467.9 445.4 1,055.8
881.9
Direct customer
acquisitions 154.3 162.1 312.0 313.4
Depreciation and
amortization
expense 171.4 111.7
348.6 235.5
--------- ------- ---------
---------
Subtotal 793.6
719.2 1,716.4 1,430.8
--------- ------- ---------
---------
Pre-SAC margin(1) $1,126.8
$782.5 $2,088.0 $1,515.5
========= ======= =========
=========
Pre-SAC margin as a percentage
of revenue(1) 38.1% 35.3%
36.2% 35.3%
----------------------------------------------------------------------
Other Data
----------------------------------------------------------------------
Three
Months Six Months
Ended Ended
June 30, June 30,
--------------- ---------------
2005 2004
2005 2004
--------------- ---------------
Average monthly revenue per
subscriber
(ARPU) $67.79 $65.01
$66.91 $64.31
Average monthly churn %(2) 1.69%
1.49% 1.59% 1.46%
Average subscriber acquisition
costs-per subscriber
(SAC) $646 $643
$651 $644
Total number of subscribers-platform
(000's)(2) 14,670 13,040
14,670 13,040
Capital expenditures (millions) $197.7 $155.7 $343.9
$279.2
----------------------------------------------------------------------
(1) 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
by adding amounts
under the captions "Subscriber acquisition
costs" and
"Depreciation and amortization expense" to "Operating
Profit."
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.
(2) The amounts presented for 2004 and 2005 include the
results from
the former NRTC
and Pegasus subscribers for all periods presented.