DIRECTV : Announces Third Quarter 2013 Results

DIRECTV Announces Third Quarter 2013 Results

DIRECTV Eclipses 37 Million Total Subscribers in the Quarter.

• DIRECTV U.S. attains net subscriber additions of 139,000 driven by the lowest third quarter churn in 6 years.
• Sky Brasil and PanAmericana add 260,000 net new customers in the quarter.
• DIRECTV Latin America and Sky Mexico surpass 17 million customers.

DIRECTV Revenues Grow 6% to $7.9 Billion.

• Revenue driven by DIRECTV U.S. ARPU growth of 6.2% along with strong DIRECTV Latin America subscriber growth over the last year.

DIRECTV OPBDA Increases 15% to $1.9 Billion.

• DIRECTV U.S. grows OPBDA 12% driven by strong top-line growth and disciplined cost management.
• DIRECTV Latin America increases OPBDA 23% from strong margins in Brazil due in part to the settlement of a fee dispute.

DIRECTV Repurchases $1.3 billion of Stock in the Third Quarter Bringing the Year-to-Date Total to $3.2 Billion Helping Drive Diluted EPS Growth of42% to $1.28 in the Third Quarter.

EL SEGUNDO, Calif.--(BUSINESS WIRE)-- DIRECTV (NASDAQ:DTV) today announced an increase in third quarter 2013 revenues of 6% to $7.88 billion, operating profit before depreciation and amortization1 (OPBDA) of 15% to $1.93 billion, operating profit of 15% to $1.23 billion, and earnings per share of 42% to $1.28 compared to last year's third quarter.

"DIRECTV's diversified portfolio of businesses across the Americas delivered another solid quarter of consolidated results highlighted by strong top-line growth and continued operational discipline across disparate geographies, macro-economic conditions and competitive environments," said Mike White, President and CEO of DIRECTV. "We continue to extend our position as the world's largest Pay TV service by leveraging the strength of our premier brands and our differentiated suite of products and services across the Americas to drive industry leading growth." White added, "At the same time, our commitment to profitably grow our businesses through disciplined expense management and productivity improvements was clearly a highlight as operating profit before depreciation and amortization margin expanded driving double digit OPBDA and cash flow growth in the quarter."

DIRECTV'S Operational Review
DIRECTV Consolidated		Three Months Ended September 30,								Nine Months Ended September 30,
Dollars in Millions except Earnings per Common Share		2013				2012				2013				2012
Revenues		$	7,880			$	7,416			$	23,160			$	21,686
Reported Operating Profit Before Depreciation and Amortization(1)		1,933				1,686				5,934				5,598
Reported OPBDA Margin(1)		24.5		%		22.7		%		25.6		%		25.8		%
Reported Operating Profit		1,225				1,068				3,817				3,787
Reported Operating Profit Margin		15.5		%		14.4		%		16.5		%		17.5		%
Reported Net Income Attributable to DIRECTV		699				565				2,049				2,007
Reported Diluted Earnings Per Common Share		$	1.28			$	0.90			$	3.65			$	3.06
Capital Expenditures and Cash Flow
Cash paid for property and equipment		218				178				563				546
Cash paid for subscriber leased equipment - subscriber acquisitions		418				379				1,190				1,081
Cash paid for subscriber leased equipment - upgrade and retention		255				186				718				533
Cash paid for satellites		82				47				276				231
Cash Flow Before Interest and Taxes(2)		1,085				957				3,371				3,293
Free Cash Flow(3)		372				319				1,608				1,742
Adjusted Financial Results
Adjusted Operating Profit Before Depreciation and Amortization(1)										6,100				5,598
Adjusted OPBDA Margin(1)										26.3		%		25.8		%
Adjusted Operating Profit										3,983				3,787
Adjusted Operating Profit Margin										17.2		%		17.5		%
Adjusted Net Income Attributable to DIRECTV										2,185				2,007
Adjusted Diluted Earnings Per Common Share										$	3.89			$	3.06

"Adjusted" financial results in the table above and year-to-date discussion below exclude a $166 million pre-tax charge ($136 million after-tax) associated with the revaluation of the net monetary assets of the company's subsidiary in Venezuela at the time of the bolivar's devaluation in February 2013.

Third Quarter Review

DIRECTV's third quarter revenues of $7.88 billion increased 6% principally due to higher ARPU at DIRECTV U.S. as well as subscriber growth at DIRECTV Latin America (DTVLA) and DIRECTV U.S. over the last twelve months. These increases were partially offset by lower ARPU at DTVLA primarily due to unfavorable changes in exchange rates.

In the third quarter, DTVLA settled a fee dispute and paid $92 million to Escritorio Central de Arrecadacao, or ECAD, the organization in Brazil responsible for collecting performance rights fees under Brazilian law. The settlement resulted in a pre-tax gain for the reversal of amounts previously expensed of $128 million. The gain is comprised of a reduction in "Broadcast Programming and Other" of $70 million, a reduction in "Interest Expense" of $37 million and $21 million in "Other, net" in the Consolidated Statements of Operations.

Third quarter 2013 OPBDA and operating profit increased 15% to $1.93 billion and $1.23 billion, respectively, while OPBDA and operating profit margin increased to 24.5% and 15.5%, respectively. The improvements in margin were primarily due to the $70 million ECAD settlement and improvements at DIRECTV U.S. and DTVLA driven by slightly lower subscriber acquisition costs, partially offset by higher programming costs at DIRECTV U.S. Operating profit margin was also impacted by higher depreciation and amortization mostly at DTVLA primarily related to higher leased equipment and infrastructure capital expenditures, as well as higher churn in Brazil.

Net income attributable to DIRECTV increased 24% to $699 million mainly from the higher operating profit but also due to lower interest expense as the impact from the ECAD settlement more than offset increased interest expense related to higher average debt balances. These gains were partially offset by higher tax expense associated with the higher pre-tax income. Diluted earnings per share grew 42% to $1.28 in the quarter due to the higher net income and share repurchases made over the last twelve months.

Cash flow before interest and taxes2 increased 13% to $1.09 billion and free cash flow3 increased 17% to $372 million compared to the third quarter of 2012 primarily due to the higher OPBDA and higher cash generated from working capital mostly due to the timing of receivables, payables and a reduction in inventory levels at DIRECTV U.S. These increases were partially offset by higher capital expenditures mostly related to increased cash paid for leased equipment at DIRECTV U.S. associated with higher penetration of advanced boxes to existing customers, as well as higher infrastructure and satellite capital expenditures at both DIRECTV U.S. and DTVLA. Free cash flow was also impacted by higher net interest due to the timing of payments and higher average debt balances, as well as a $92 million payment to settle the ECAD dispute. Also during the quarter but not included in free cash flow was cash paid for share repurchases of $1.26 billion, as well as $137 million in payments for spectrum at DTVLA and new patent licenses at DIRECTV U.S.

Year to Date Review

DIRECTV's revenues for the first nine months of 2013 of $23.16 billion increased 7% principally due to higher ARPU at DIRECTV U.S. as well as subscriber growth over the last year at DTVLA and DIRECTV U.S. These increases were partially offset by lower ARPU at DTVLA primarily due to unfavorable changes in exchange rates. Year to date adjusted OPBDA increased 9% to $6.10 billion and adjusted operating profit increased 5% to $3.98 billion compared with the same period of 2012. Adjusted OPBDA margin increased to 26.3% in the first nine months of 2013 as the ECAD settlement at DTVLA and lower subscriber acquisition costs at DIRECTV U.S were partially offset by higher programming costs at DIRECTV U.S. Adjusted operating profit margin was negatively impacted by higher depreciation and amortization at both DTVLA and DIRECTV U.S. primarily resulting from higher leased equipment and infrastructure capital expenditures. Reported OPBDA increased 6% to $5.93 billion and reported operating profit increased to $3.82 billion in the first nine months of 2013.

Adjusted net income attributable to DIRECTV increased 9% to $2.19 billion compared with the first nine months of 2012 primarily due to the higher adjusted operating profit. Also impacting the comparison was a $59 million non-cash pre-tax charge in 2013 due to the deconsolidation of DSN Northwest, as well as a $64 million pre-tax charge in 2012 for the loss on the early retirement of debt. In addition, adjusted diluted earnings per share improved 27% to $3.89 due to the higher net income, as well as share repurchases made over the last twelve months. Reported net income attributable to DIRECTV increased 2% to $2.05 billion while reported diluted earnings per share improved 19% to $3.65.

Cash flow before interest and taxes increased 2% to $3.37 billion compared to the first nine months of 2012 due to the higher OPBDA and increased cash generated from working capital mainly associated with a reduction in inventory levels at DIRECTV U.S. These increases were mostly offset by greater capital expenditures driven by increased cash paid for leased equipment related to higher penetration of advanced boxes to both new and existing customers at DIRECTV U.S., as well as increased infrastructure expenditures and higher leased equipment to new customers at DTVLA. Also in the period, free cash flow declined to $1.61 billion, as the higher cash flow before interest and taxes was more than offset by an increase in tax payments mostly related to the reversal of prior bonus depreciation deductions and the timing of tax payments, greater interest payments related to higher average debt balances, as well as a $92 million payment to settle the ECAD dispute.

Also during the first nine months of 2013 but not included in free cash flow was cash paid for share repurchases of $3.23 billion, $155 million in payments for spectrum at DTVLA and new patent licenses at DIRECTV U.S., cash received of $140 million for the sale of investments primarily for the partial sale of the Game Show Network equity investment, as well as two debt issuances by DIRECTV U.S. -- the first in January 2013 of $750 million principal amount of 1.750% senior notes due in 2018, and the second in May 2013 of €500 million (or about $650 million) aggregate principal amount of 2.750% senior notes due in 2023.

SEGMENT FINANCIAL REVIEW
DIRECTV U.S. Segment
DIRECTV U.S.		Three Months Ended September 30,								Nine Months Ended September 30,
Dollars in Millions except ARPU		2013				2012				2013				2012
Revenues		$	6,170			$	5,769			$	17,903			$	16,915
Average Monthly Revenue per Subscriber (ARPU) ($)		102.37				96.41				99.00				94.27
Operating Profit Before Depreciation and Amortization(1)		1,396				1,251				4,568				4,246
OPBDA Margin(1)		22.6		%		21.7		%		25.5		%		25.1		%
Operating Profit		987				876				3,343				3,130
Operating Profit Margin		16.0		%		15.2		%		18.7		%		18.5		%
Capital Expenditures and Cash Flow
Cash paid for property and equipment		155				137				420				377
Cash paid for subscriber leased equipment - subscriber acquisitions		190				184				515				462
Cash paid for subscriber leased equipment - upgrade and retention		162				79				392				209
Cash paid for satellites		46				23				154				139
Cash Flow Before Interest and Taxes(2)		1,060				861				3,179				3,018
Free Cash Flow(3)		404				275				1,662				1,773
Subscriber Data (in 000's except Churn)
Gross Subscriber Additions		1,109				1,107				2,841				2,911
Average Monthly Subscriber Churn		1.61		%		1.74		%		1.53		%		1.57		%
Net Subscriber Additions		139				67				76				96
Cumulative Subscribers		20,160				19,981				20,160				19,981

Third Quarter Review

In the quarter, DIRECTV U.S. revenues increased 7% to $6.17 billion compared with the third quarter of 2012 primarily due to strong ARPU growth along with a larger subscriber base. DIRECTV U.S. net subscriber additions increased in the quarter relative to the prior year period principally due to a lower average monthly churn rate of 1.61%. In the third quarter of 2012, churn was unfavorably impacted by a contract dispute with a large programmer that resulted in the removal of several channels for nine days. ARPU increased 6.2% to $102.37 mostly due to higher advanced receiver service fees, price increases on programming packages, higher fees for a new enhanced warranty program, as well as higher pay-per-view revenues. These improvements were partially offset by increased promotional offers to new and existing customers. DIRECTV U.S. ended the quarter with 20.16 million subscribers compared with 19.98 million subscribers reported for the quarter ended September 30, 2012.

Third quarter OPBDA increased 12% to $1.40 billion and operating profit was 13% higher at $987 million. OPBDA and operating profit margin increased to 22.6% and 16.0%, respectively in the third quarter, driven principally by the incremental margin generated by the higher revenues combined with relatively unchanged subscriber acquisition costs due mostly to the flat gross additions in the quarter compared to the year ago period. Also contributing to the margin improvement was relatively unchanged subscriber services and broadcast operations expenses mainly due to productivity improvements and disciplined cost management. These margin improvements were partially offset by higher programming costs mostly related to programming supplier rate increases.

DIRECTV Latin America

DIRECTV Latin America owns approximately 93% of Sky Brasil, 41% of Sky Mexico and 100% of PanAmericana, which covers most of the remaining countries in the region. Sky Brasil and PanAmericana ended the third quarter with 5.26 million and 6.08 million subscribers, respectively. Sky Mexico, whose results are accounted for as an equity method investment and therefore are not consolidated by DTVLA, had approximately 5.88 million subscribers as of September 30, 2013, bringing the total subscribers in the region to 17.22 million.

DIRECTV Latin America		Three Months Ended September 30,								Nine Months Ended September 30,
Dollars in Millions except ARPU		2013				2012				2013				2012
Revenues		$	1,662			$	1,577			$	5,076			$	4,570
Average Monthly Revenue per Subscriber (ARPU) ($)		49.42				55.97				51.68				57.83
Operating Profit Before Depreciation and Amortization(1)		558				455				1,393				1,368
OPBDA Margin(1)		33.6		%		28.9		%		27.4		%		29.9		%
Operating Profit		262				221				518				694
Operating Profit Margin		15.8		%		14.0		%		10.2		%		15.2		%
Capital Expenditures and Cash Flow
Cash paid for property and equipment		62				40				142				167
Cash paid for subscriber leased equipment - subscriber acquisitions		228				195				675				619
Cash paid for subscriber leased equipment - upgrade and retention		93				107				326				324
Cash paid for satellites		32				22				112				86
Cash Flow Before Interest and Taxes(2)		53				81				162				238
Free Cash Flow(3)		(40		)		15				(89		)		(5		)
Subscriber Data(4) (in 000's except Churn)
Gross Subscriber Additions		1,023				1,081				3,393				3,234
Average Monthly Total Subscriber Churn		2.27		%		1.91		%		2.43		%		1.84		%
Average Monthly Post-paid Subscriber Churn		1.93		%		1.54		%		2.18		%		1.51		%
Net Subscriber Additions		260				543				1,008				1,781
Cumulative Subscribers		11,337				9,666				11,337				9,666

Third Quarter Review

In the third quarter, DTVLA revenues increased 5% to $1.66 billion principally due to strong subscriber growth over the last year partially offset by an 11.7% decline in ARPU mostly driven by unfavorable changes in foreign exchange rates. Net additions of 260,000 were lower than the prior year due to a decline in gross additions and higher churn. Gross additions fell 5% to 1.02 million principally due to certain limitations on importing set-top boxes for new customers in Venezuela, as well as lower post-paid subscriber additions in Argentina and Brazil mostly associated with stricter credit and sales filters. These declines were partially offset by improved gross additions in Chile and Colombia. Total average monthly churn increased to 2.27% and average monthly post-paid churn increased to 1.93% mainly due to higher churn in Brazil primarily related to the effect of a higher mix of middle market subscribers along with more challenging economic and competitive conditions.

The decline in ARPU to $49.42 was mainly due to the devaluation in Venezuela and unfavorable changes in foreign exchange rates in Brazil and Argentina. Excluding the impact of changes in exchange rates, ARPU increased 3.7% in the quarter principally due to price increases and continued upgrades including advanced services, partially offset by the higher penetration of lower ARPU middle market subscribers.

Also in the third quarter, DTVLA OPBDA increased 23% to $558 million and OPBDA margin was higher at 33.6% while operating profit climbed 19% to $262 million and operating profit margin improved to 15.8%. Excluding the impact of the favorable ECAD settlement, OPBDA margin increased to 29.4% primarily driven by the higher revenue as well as lower subscriber acquisition and general and administrative expenses in Brazil. These improvements were partially offset by higher programming costs driven mainly by inflationary pressure in Venezuela as well as expenses related to special events, as well as increased customer service costs at PanAmericana. Excluding the impact of the favorable ECAD settlement, operating profit margin declined to 11.6% as the increase in OPBDA margin was more than offset by the impact of higher depreciation and amortization resulting from increased leased equipment and infrastructure capital expenditures, as well as the higher churn in Brazil.

CONTACT INFORMATION

Media Contact: Darris Gringeri [phone]. Investor Relations: [phone]

CONFERENCE CALL INFORMATION

A live webcast of DIRECTV's third quarter 2013 earnings call will be available on the company's website at www.directv.com/investor. The webcast will begin at 2:00 p.m. ET, today November 5, 2013. Access to the earnings call is also available in the United States by dialing [phone] and internationally by dialing [phone]. The conference ID number is 7239151. A replay of the call can be accessed by dialing [phone] in the U.S. and [phone] internationally. The replay pass code is 7239151. The replay will be available from 3:00 p.m. PT Tuesday, November 5 through 3:00 p.m. PT Tuesday, November 12 and will also be archived on our website at www.directv.com/investor.

FOOTNOTES

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

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

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

(4) DIRECTV Latin America subscriber data exclude subscribers of the Sky Mexico service. In addition, DTVLA gross and net additions exclude 7,000 video subscribers acquired during the three months ended September 30, 2012 as well as 1,000 and 14,000 video subscribers acquired during the nine months ended September 30, 2013 and September 30, 2012, respectively. DTVLA cumulative subscriber counts include these acquired customers.

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

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

DIRECTV (NASDAQ:DTV) is one of the world's leading providers of digital television entertainment services. Through its subsidiaries and affiliated companies in the United States, Brazil, Mexico and other countries in Latin America, DIRECTV provides digital television service to over 20 million customers in the United States and over 17 million customers in Latin America. DIRECTV sports and entertainment properties include two regional sports networks (Rocky Mountain and Pittsburgh) and minority ownership interests in Root Sports Northwest and Game Show Network. For more information on DIRECTV, visit directv.com.

DIRECTV
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Millions, Except Per Share Amounts)
(Unaudited)
		Three Months Ended September 30,								Nine Months Ended September 30,
		2013				2012				2013				2012
Revenues		$	7,880			$	7,416			$	23,160			$	21,686
Operating costs and expenses
Costs of revenues, exclusive of depreciation and amortization expense
Broadcast programming and other		3,441				3,288				9,912				9,249
Subscriber service expenses		583				566				1,674				1,592
Broadcast operations expenses		98				103				305				310
Selling, general and administrative expenses, exclusive of depreciation and amortization expense
Subscriber acquisition costs		941				944				2,564				2,549
Upgrade and retention costs		411				382				1,153				1,056
General and administrative expenses		473				447				1,452				1,332
Venezuelan currency devaluation charge		-				-				166				-
Depreciation and amortization expense		708				618				2,117				1,811
Total operating costs and expenses		6,655				6,348				19,343				17,899
Operating profit		1,225				1,068				3,817				3,787
Interest income		15				17				56				40
Interest expense		(182		)		(204		)		(618		)		(622		)
Other, net		43				39				6				13
Income before income taxes		1,101				920				3,261				3,218
Income tax expense		(391		)		(348		)		(1,192		)		(1,189		)
Net income		710				572				2,069				2,029
Less: Net income attributable to noncontrolling interest		(11		)		(7		)		(20		)		(22		)
Net income attributable to DIRECTV		$	699			$	565			$	2,049			$	2,007
Basic earnings attributable to DIRECTV per common share		$	1.29			$	0.91			$	3.68			$	3.08
Diluted earnings attributable to DIRECTV per common share		$	1.28			$	0.90			$	3.65			$	3.06
Weighted average number of common shares outstanding (in millions):
Basic		541				624				557				651
Diluted		545				629				562				655

DIRECTV
CONSOLIDATED BALANCE SHEETS
(Dollars in Millions)
(Unaudited)
ASSETS		September 30, 2013				December 31, 2012
Current assets
Cash and cash equivalents		$	1,622			$	1,902
Accounts receivable, net of allowances of $118 and $81		2,527				2,696
Inventories		350				412
Deferred income taxes		73				73
Prepaid expenses and other		457				471
Total current assets		5,029				5,554
Satellites, net		2,443				2,357
Property and equipment, net		6,462				6,038
Goodwill		3,985				4,063
Intangible assets, net		930				832
Investments and other assets		1,739				1,711
Total assets		$	20,588			$	20,555
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Accounts payable and accrued liabilities		$	4,017			$	4,618
Unearned subscriber revenues and deferred credits		715				565
Current debt		597				358
Total current liabilities		5,329				5,541
Long-term debt		18,635				17,170
Deferred income taxes		1,542				1,672
Other liabilities and deferred credits		1,290				1,203
Commitments and contingencies
Redeemable noncontrolling interest		400				400
Total stockholders' deficit		(6,608		)		(5,431		)
Total liabilities and stockholders' deficit		$	20,588			$	20,555

DIRECTV
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Millions)
(Unaudited)
		Nine Months Ended September 30,
		2013				2012
Cash Flows From Operating Activities
Net income		$	2,069			$	2,029
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense		2,117				1,811
Venezuelan currency devaluation charge		166				-
DSN Northwest deconsolidation charge		59				-
Amortization of deferred revenues and deferred credits		(40		)		(54		)
Share-based compensation expense		79				77
Equity in earnings from unconsolidated affiliates		(86		)		(107		)
Net foreign currency transaction loss		42				32
Dividends received		38				28
Net gains from sale of investments		(8		)		(11		)
Deferred income taxes		(19		)		41
Excess tax benefit from share-based compensation		(24		)		(30		)
Other		(91		)		76
Change in other operating assets and liabilities:
Accounts receivable		200				15
Inventories		53				(97		)
Prepaid expenses and other		9				146
Accounts payable and accrued liabilities		(477		)		(143		)
Unearned subscriber revenue and deferred credits		152				139
Other, net		116				181
Net cash provided by operating activities		4,355				4,133
Cash Flows From Investing Activities
Cash paid for property and equipment		(2,471		)		(2,160		)
Cash paid for satellites		(276		)		(231		)
Investment in companies, net of cash acquired		(47		)		(4		)
Proceeds from sale of investments		140				24
Other, net		(158		)		25
Net cash used in investing activities		(2,812		)		(2,346		)

DIRECTV
CONSOLIDATED STATEMENTS OF CASH FLOWS-(continued)
(Dollars in Millions)
(Unaudited)
		Nine Months Ended September 30,
		2013				2012
Cash Flows From Financing Activities
Issuance of commercial paper (maturity 90 days or less), net		90				-
Proceeds from short-term borrowings		441				-
Repayment of short-term borrowings		(327		)		-
Proceeds from borrowings under revolving credit facility		10				400
Repayment of borrowings under revolving credit facility		(10		)		(400		)
Proceeds from long-term debt		1,484				5,190
Debt issuance costs		(8		)		(35		)
Repayment of long-term debt		(9		)		(1,500		)
Repayment of other long-term obligations		(48		)		(40		)
Common shares repurchased and retired		(3,228		)		(3,828		)
Stock options exercised		-				2
Taxes paid in lieu of shares issued for share-based compensation		(61		)		(58		)
Excess tax benefit from share-based compensation		24				30
Other, net		6				-
Net cash used in financing activities		(1,636		)		(239		)
Effect of exchange rate changes on Venezuelan cash and cash equivalents		(187		)		-
Net increase (decrease) in cash and cash equivalents		(280		)		1,548
Cash and cash equivalents at beginning of the period		1,902				873
Cash and cash equivalents at end of the period		$	1,622			$	2,421
Supplemental Cash Flow Information
Cash paid for interest		$	784			$	710
Cash paid for income taxes		1,035				881

DIRECTV
SELECTED SEGMENT DATA
(Dollars in Millions)
(Unaudited)
		Three Months Ended September 30,								Nine Months Ended September 30,
		2013				2012				2013				2012
DIRECTV U.S.
Revenues		$	6,170			$	5,769			$	17,903			$	16,915
Operating profit before depreciation and amortization (1)		1,396				1,251				4,568				4,246
Operating profit before depreciation and amortization margin (1)		22.6		%		21.7		%		25.5		%		25.1		%
Operating profit		$	987			$	876			$	3,343			$	3,130
Operating profit margin		16.0		%		15.2		%		18.7		%		18.5		%
Depreciation and amortization		$	409			$	375			$	1,225			$	1,116
SKY BRASIL
Revenues		$	883			$	868			$	2,790			$	2,587
Operating profit before depreciation and amortization (1)		353				255				926				802
Operating profit before depreciation and amortization margin (1)		40.0		%		29.4		%		33.2		%		31.0		%
Operating profit		$	169			$	122			$	379			$	399
Operating profit margin		19.1		%		14.1		%		13.6		%		15.4		%
Depreciation and amortization		$	184			$	133			$	547			$	403
PANAMERICANA
Revenues		$	779			$	709			$	2,286			$	1,983
Operating profit before depreciation and amortization (1)		205				200				467				566
Operating profit before depreciation and amortization margin (1)		26.3		%		28.2		%		20.4		%		28.5		%
Operating profit		$	93			$	99			$	139			$	295
Operating profit margin		11.9		%		14.0		%		6.1		%		14.9		%
Depreciation and amortization		$	112			$	101			$	328			$	271
SPORTS NETWORKS, ELIMINATIONS and OTHER
Revenues		$	48			$	70			$	181			$	201
Operating loss before depreciation and amortization (1)		(21		)		(20		)		(27		)		(16		)
Operating loss		(24		)		(29		)		(44		)		(37		)
Depreciation and amortization		3				9				17				21
TOTAL
Revenues		$	7,880			$	7,416			$	23,160			$	21,686
Operating profit before depreciation and amortization (1)		1,933				1,686				5,934				5,598
Operating profit before depreciation and amortization margin (1)		24.5		%		22.7		%		25.6		%		25.8		%
Operating profit		$	1,225			$	1,068			$	3,817			$	3,787
Operating profit margin		15.5		%		14.4		%		16.5		%		17.5		%
Depreciation and amortization		$	708			$	618			$	2,117			$	1,811
(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,
		2013				2012				2013				2012
Revenues		$	6,170			$	5,769			$	17,903			$	16,915
Operating costs and expenses
Costs of revenues, exclusive of depreciation and amortization expense
Broadcast programming and other		2,904				2,685				8,147				7,549
Subscriber service expenses		391				390				1,102				1,096
Broadcast operations expenses		68				74				220				229
Selling, general and administrative expenses, exclusive of depreciation and amortization expense
Subscriber acquisition costs		756				757				1,979				2,017
Upgrade and retention costs		359				340				1,002				930
General and administrative expenses		296				272				885				848
Depreciation and amortization expense		409				375				1,225				1,116
Total operating costs and expenses		5,183				4,893				14,560				13,785
Operating profit		987				876				3,343				3,130
Interest income		1				1				2				1
Interest expense		(207		)		(189		)		(615		)		(577		)
Other, net		6				17				22				(39		)
Income before income taxes		787				705				2,752				2,515
Income tax expense		(302		)		(266		)		(1,031		)		(936		)
Net income		$	485			$	439			$	1,721			$	1,579

DIRECTV HOLDINGS LLC (DIRECTV U.S.)
CONSOLIDATED BALANCE SHEETS
(Dollars in Millions)
(Unaudited)
ASSETS		September 30, 2013				December 31, 2012
Current assets
Cash and cash equivalents		$	702			$	739
Accounts receivable, net of allowances of $74 and $42		2,002				2,096
Inventories		307				372
Prepaid expenses and other		182				247
Total current assets		3,193				3,454
Satellites, net		1,820				1,795
Property and equipment, net		3,556				3,290
Goodwill		3,188				3,177
Intangible assets, net		525				453
Other assets		410				321
Total assets		$	12,692			$	12,490
LIABILITIES AND OWNER'S DEFICIT
Current liabilities
Accounts payable and accrued liabilities		$	3,008			$	3,391
Unearned subscriber revenues and deferred credits		518				367
Current debt		562				358
Total current liabilities		4,088				4,116
Long-term debt		18,585				17,170
Deferred income taxes		1,463				1,386
Other liabilities and deferred credits		423				326
Commitments and contingencies
Owner's deficit		(11,867		)		(10,508		)
Total liabilities and owner's deficit		$	12,692			$	12,490

DIRECTV HOLDINGS LLC (DIRECTV U.S.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Millions)
(Unaudited)
		Nine Months Ended September 30,
		2013				2012
Cash Flows From Operating Activities
Net income		$	1,721			$	1,579
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense		1,225				1,116
Amortization of deferred revenues and deferred credits		(40		)		(54		)
Share-based compensation expense		60				61
Deferred income taxes		128				86
Excess tax benefit from share-based compensation		(20		)		(25		)
Other		4				21
Change in other operating assets and liabilities:
Accounts receivable		127				92
Inventories		66				(88		)
Prepaid expenses and other		67				242
Accounts payable and accrued liabilities		(385		)		(251		)
Unearned subscriber revenue and deferred credits		153				111
Other, net		37				70
Net cash provided by operating activities		3,143				2,960
Cash Flows From Investing Activities
Cash paid for property and equipment		(420		)		(377		)
Cash paid for subscriber leased equipment - subscriber acquisitions		(515		)		(462		)
Cash paid for subscriber leased equipment - upgrade and retention		(392		)		(209		)
Cash paid for satellites		(154		)		(139		)
Investment in companies, net of cash acquired		(38		)		(1		)
Proceeds from sale of investments		12				24
Other, net		(67		)		(1		)
Net cash used in investing activities		(1,574		)		(1,165		)
Cash Flows From Financing Activities
Issuance of commercial paper (maturity 90 days or less), net		90				-
Proceeds from short-term borrowings		441				-
Repayment of short-term borrowings		(327		)		-
Proceeds from borrowings under revolving credit facility		10				400
Repayment of borrowings under revolving credit facility		(10		)		(400		)
Proceeds from issuance of long-term debt		1,390				5,190
Debt issuance costs		(8		)		(35		)
Repayment of long-term debt		-				(1,500		)
Repayment of other long-term obligations		(18		)		(15		)
Cash dividends paid to Parent		(3,200		)		(5,000		)
Excess tax benefit from share-based compensation		20				25
Other, net		6				-
Net cash used in financing activities		(1,606		)		(1,335		)
Net increase (decrease) in cash and cash equivalents		(37		)		460
Cash and cash equivalents at beginning of the period		739				232
Cash and cash equivalents at end of the period		$	702			$	692
Supplemental Cash Flow Information
Cash paid for interest		$	733			$	665
Cash paid for income taxes		786				581

DIRECTV Consolidated Non-GAAP Financial Measure Reconciliation Schedules
(Dollars in Millions)
(Unaudited)
DIRECTV
Reconciliation of Cash Flow Before Interest and Taxes2 and Free Cash Flow3 to Net Cash Provided by Operating Activities
		Three Months Ended September 30,								Nine Months Ended September 30,
		2013				2012				2013				2012
Cash Flow Before Interest and Taxes		$	1,085			$	957			$	3,371			$	3,293
Adjustments:
Cash paid for interest		(395		)		(333		)		(784		)		(710		)
Interest income		15				17				56				40
Income taxes paid		(333		)		(322		)		(1,035		)		(881		)
Subtotal - Free Cash Flow		372				319				1,608				1,742
Add Cash Paid For:
Property and equipment		891				743				2,471				2,160
Satellites		82				47				276				231
Net Cash Provided by Operating Activities		$	1,345			$	1,109			$	4,355			$	4,133
(2) and (3) - See footnotes above
Reconciliation of Reported Operating Profit Before Depreciation and Amortization to Operating Profit*
		Three Months Ended September 30,								Nine Months Ended September 30,
		2013				2012				2013				2012
Operating profit before depreciation and amortization		$	1,933			$	1,686			$	5,934			$	5,598
Subtract: Depreciation and amortization		708				618				2,117				1,811
Operating profit		$	1,225			$	1,068			$	3,817			$	3,787
* 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, 2013, which is expected to be filed with the SEC in November 2013.

DIRECTV Consolidated Non-GAAP Financial Measure Reconciliation Schedules
(Dollars in Millions, Except Per Share Amounts)
(Unaudited)
DIRECTV
Reconciliation of Adjusted Operating Profit Before Depreciation and Amortization (excluding the Venezuelan currency devaluation charge) to Operating Profit
			Three Months Ended September 30,										Nine Months Ended September 30,
			2013					2012					2013				2012
Revenues			$	7,880				$	7,416				$	23,160			$	21,686
Operating profit before depreciation and amortization excluding the Venezuelan currency devaluation charge			$	1,933				$	1,686				$	6,100			$	5,598
OPBDA growth excluding Venezuelan currency devaluation charge			14.7		%								9.0		%
Subtract: Venezuelan currency devaluation charge			-					-					166				-
Operating profit before depreciation and amortization			1,933					1,686					5,934				5,598
Subtract: Depreciation and amortization			708					618					2,117				1,811
Operating profit			$	1,225				$	1,068				$	3,817			$	3,787
Operating profit before depreciation and amortization margin excluding the Venezuelan currency devaluation charge			24.5		%			22.7		%			26.3		%		25.8		%
Reconciliation of Adjusted Operating Profit (excluding the Venezuelan currency devaluation charge) to Operating Profit
			Three Months Ended September 30,										Nine Months Ended September 30,
			2013					2012					2013				2012

DIRECTV Latin America Non-GAAP Financial Measure Reconciliation Schedules
(Dollars in Millions)
(Unaudited)
DIRECTV Latin America
Reconciliation of Cash Flow Before Interest and Taxes2 and Free Cash Flow3 to Net Cash Provided by Operating Activities
		Three Months Ended September 30,										Nine Months Ended September 30,
		2013					2012					2013					2012
Cash Flow Before Interest and Taxes		$	53				$	81				$	162				$	238
Adjustments:
Cash paid for interest		(39			)		(13			)		(69			)		(40			)
Interest income		10					16					41					39
Income taxes paid		(64			)		(69			)		(223			)		(242			)
Subtotal - Free Cash Flow		(40			)		15					(89			)		(5			)
Add Cash Paid For:
Property and equipment		62					40					142					167
Subscriber leased equipment - subscriber acquisitions		228					195					675					619
Subscriber leased equipment - upgrade and retention		93					107					326					324
Satellites		32					22					112					86
Net Cash Provided by Operating Activities		$	375				$	379				$	1,166				$	1,191
(2) and (3) - See footnotes above
Reconciliation of Adjusted Operating Profit Before Depreciation and Amortization (excluding the Venezuelan currency devaluation charge) to Operating Profit
		Three Months Ended September 30,										Nine Months Ended September 30,
		2013					2012					2013					2012
Revenues		$	1,662				$	1,577				$	5,076				$	4,570
Operating profit before depreciation and amortization excluding the Venezuelan currency devaluation charge		$	558				$	455				$	1,559				$	1,368
OPBDA growth excluding Venezuelan currency devaluation charge		22.6		%								14.0		%
Subtract: Venezuelan currency devaluation charge		-					-					166					-
Operating profit before depreciation and amortization		558					455					1,393					1,368
Subtract: Depreciation and amortization		296					234					875					674
Operating profit		$	262				$	221				$	518				$	694
Operating profit before depreciation and amortization margin excluding the Venezuelan currency devaluation charge		33.6		%			28.9		%			30.7		%			29.9		%
Reconciliation of Adjusted Operating Profit (excluding the Venezuelan currency devaluation charge) to Operating Profit
		Three Months Ended September 30,										Nine Months Ended September 30,
		2013					2012					2013					2012
Revenues		$	1,662				$	1,577				$	5,076				$	4,570
Operating profit excluding the Venezuelan currency devaluation charge		$	262				$	221				$	684				$	694
Operating Profit growth excluding Venezuelan currency devaluation charge		18.6		%								(1.4		)%
Subtract: Venezuelan currency devaluation charge		-					-					166					-
Operating profit		$	262				$	221				$	518				$	694
Operating profit margin excluding the Venezuelan currency devaluation charge		15.8		%			14.0		%			13.5		%			15.2		%

DIRECTV Latin America Non-GAAP Financial Measure Reconciliation Schedules
(Dollars in Millions)
(Unaudited)
Reconciliation of Adjusted Operating Profit Before Depreciation and Amortization (excluding the ECAD settlement gain) to Operating Profit
		Three Months Ended September 30,								Nine Months Ended September 30,
		2013				2012				2013				2012
Revenues		$	1,662			$	1,577			$	5,076			$	4,570
Operating profit before depreciation and amortization excluding the ECAD settlement gain		$	488			$	455			$	1,323			$	1,368
Subtract: ECAD settlement gain		(70		)		-				(70		)		-
Operating profit before depreciation and amortization		558				455				1,393				1,368
Subtract: Depreciation and amortization		296				234				875				674
Operating profit		$	262			$	221			$	518			$	694
Operating profit before depreciation and amortization margin excluding the ECAD settlement gain		29.4		%		28.9		%		26.1		%		29.9		%
DIRECTV Latin America
Reconciliation of Adjusted Operating Profit (excluding the ECAD settlement gain) to Operating Profit
		Three Months Ended September 30,								Nine Months Ended September 30,
		2013				2012				2013				2012
Revenues		$	1,662			$	1,577			$	5,076			$	4,570
Operating profit excluding the ECAD settlement gain		$	192			$	221			$	448			$	694
Subtract: ECAD settlement gain		(70		)		-				(70		)		-
Operating profit		$	262			$	221			$	518			$	694
Operating profit margin excluding the ECAD settlement gain		11.6		%		14.0		%		8.8		%		15.2		%

DIRECTV U.S. Non-GAAP Financial Measure Reconciliation Schedules

(Dollars in Millions)

(Unaudited)

DIRECTV U.S. Non-GAAP Financial Measure SAC Calculations
(Dollars in Millions, Except Per Subscriber Amounts)
(Unaudited)
DIRECTV HOLDINGS LLC (DIRECTV U.S.)
SAC Calculation
		Three Months Ended September 30,								Nine Months Ended September 30,
		2013				2012				2013				2012
Subscriber acquisition costs (expensed)		$	756			$	757			$	1,979			$	2,017
Cash paid for subscriber leased equipment - subscriber acquisitions		190				184				515				462
Total acquisition costs		$	946			$	941			$	2,494			$	2,479
Gross subscriber additions (000's)		1,109				1,107				2,841				2,911
Average subscriber acquisition costs - per subscriber (SAC)		$	853			$	850			$	878			$	852

DIRECTV
Media Contact: Darris Gringeri, [phone]
Investor Relations: [phone]

Source: DIRECTV

News Provided by Acquire Media