DIRECTV Reports 1st Quarter 2014 Revenues Increased 4% to US$ 7.86 billion

El Segundo, Calif., May 6, 2014--DIRECTV  today reported that first quarter 2014 revenues increased 4% to US$ 7.86 billion, adjusted operating profit before depreciation and amortization(OPBDA) increased 7% to US$ 2.22 billion, adjusted operating profit increased 7% to US$ 1.51 billion and adjusted diluted earnings per share improved 14% to $1.63 compared to last year’s first quarter.

Adjusted financial results exclude a pre-tax (and after-tax) charge of US$ 281 million in the first quarter of 2014 and a pre-tax charge of US$ 166 million (US$ 136 million after tax) in the first quarter of 2013, resulting from the revaluation of the net monetary assets of the company’s subsidiary in Venezuela. Reported OPBDA increased 1% to US$ 1.94 billion, reported operating profit decreased to US$ 1.23 billion and reported diluted earnings per share declined to $1.09 compared with the same period last year.

“Our first quarter results continue to demonstrate the strong execution of our operations,” said 
Mike White, President and CEO of DIRECTV. “In the U.S., operating profit before depreciation and amortization margin expanded year-over-year for the third consecutive quarter, highlighting our commitment to profitably grow our businesses through significantly improving the customer service experience, disciplined expense management and productivity initiatives. In Latin America, despite challenging macroeconomic headwinds, we continue to profitably expand our share of the growing pay TV market while delivering adjusted OPBDA margin of 30%. In addition, by leveraging the achievements of both DIRECTV U.S. and DIRECTV Latin America with the strength and stability of our cash flow, we continue to return cash to shareholders through stock repurchases at an industry leading clip,” White added.

 

DIRECTV'S Operational Review
 
    Three Months Ended
DIRECTV Consolidated   March 31,
Dollars in Millions except Earnings per Common Share   2014   2013
Revenues   $ 7,855     $ 7,580  
Adjusted Operating Profit Before Depreciation and Amortization(1)     2,222       2,086  
Adjusted OPBDA Margin(1)     28.3 %     27.5 %
Adjusted Operating Profit     1,508       1,408  
Adjusted Operating Profit Margin     19.2 %     18.6 %
Adjusted Net Income Attributable to DIRECTV     842       826  
Adjusted Diluted Earnings Per Common Share   $ 1.63     $ 1.43  
Capital Expenditures and Cash Flow        
Cash paid for property and equipment     199       152  
Cash paid for subscriber leased equipment - subscriber acquisitions     245       369  
Cash paid for subscriber leased equipment - upgrade and retention     206       227  
Cash paid for satellites     54       78  
Cash Flow Before Interest and Taxes(2)     1,285       1,107  
Free Cash Flow(3)     886       710  
Reported Financial Results        
Reported Operating Profit Before Depreciation and Amortization(1)     1,941       1,920  
Reported OPBDA Margin(1)     24.7 %     25.3 %
Reported Operating Profit     1,227       1,242  
Reported Operating Profit Margin     15.6 %     16.4 %
Reported Net Income Attributable to DIRECTV     561       690  
Reported Diluted Earnings Per Common Share   $ 1.09     $ 1.20  
 

DIRECTV’s first quarter revenues of US$ 7.86 billion increased 4% principally due to strong ARPU growth at DIRECTV U.S. First quarter 2014 adjusted OPBDA and adjusted operating profit increased 7% to US$ 2.22 billion and US$ 1.51 billion, respectively, while adjusted OPBDA margin and adjusted operating profit margin increased to 28.3% and 19.2%, respectively. The improvements in margin were primarily due to lower upgrade and retention costs and general and administrative expenses, partially offset by higher programming and other expenses at both DIRECTV U.S. and DTVLA. In addition, adjusted operating profit margin was negatively 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. Reported OPBDA increased 1% to US$ 1.94 billion and reported operating profit decreased to US$ 1.23 billion.

First quarter adjusted net income attributable to DIRECTV increased 2% to US$ 842 million mainly due to the higher adjusted operating profit, partially offset by the impact of a higher effective tax rate primarily due to a benefit recorded for settlements with state taxing authorities in the first quarter of 2013. Adjusted diluted earnings per share grew 14% to US$ 1.63 in the quarter due to the higher adjusted net income attributable to DIRECTV and the impact of share repurchases made over the last twelve months. Reported net income attributable to DIRECTV declined to US$ 561 million and reported diluted earnings per share decreased to US$ 1.09 compared to last year’s first quarter.

Cash flow before interest and taxes increased 16% to US$ 1.29 billion and free cash flow increased 25% to US$ 886 million compared to the first quarter of 2013 primarily due to a reduction in cash paid for leased equipment at DIRECTV U.S. and DTVLA related to declining set-top box costs and lower subscriber gross additions, along with the higher OPBDA, partially offset by growth in cash used for working capital at DIRECTV U.S. driven by the timing of vendor payments. Also during the quarter but not included in free cash flow was cash paid for share repurchases of $895 million, a March 2014 debt issuance by DIRECTV U.S. of US$ 1,250 million principal amount of 4.45% senior notes due in 2024 and a $316 million reduction in DIRECTV’s cash balance resulting from the remeasurement of the bolivar denominated cash balance in Venezuela.

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