DIRECTV 2003 Annual Report Download - page 43

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THE DIRECTV GROUP, INC.
Cumulative Effect of Accounting Changes. As a result of our adoption of FIN 46, we began consolidating
the Venezuelan and Puerto Rican LOCs on July 1, 2003. The adoption of this standard resulted in an after-tax
charge of $64.6 million in the third quarter of 2003, which was recorded as a cumulative effect of accounting
change in the Consolidated Statements of Income. See “Accounting Changes” below for additional information.
We adopted Statement of Financial Accounting Standards, or SFAS, No. 142, “Goodwill and Other
Intangible Assets,” on January 1, 2002. The adoption of this standard resulted in the discontinuation of
amortization of goodwill and intangible assets with indefinite lives. In accordance with the transition provisions
of SFAS No. 142, on January 1, 2002, we recorded a one-time after-tax charge of $681.3 million related to the
initial impairment test as a cumulative effect of accounting change in the Consolidated Statements of Income.
See “Accounting Changes” below for additional information.
Direct-To-Home Broadcast Segment
The following table provides the significant components of the Direct-To-Home Broadcast segment
operating results for the years ended December 31:
Change
2003 2002 $ %
(Dollars in Millions)
Revenues
DIRECTVU.S.............................................. $7,695.6 $6,444.6 $1,251.0 19.4%
DIRECTV Latin America .................................... 597.7 679.7 (82.0) (12.1)%
Operating Profit (Loss) Before Depreciation & Amortization
DIRECTVU.S.............................................. $ 970.2 $ 608.8 $ 361.4 59.4%
DIRECTV Latin America .................................... (85.3) (201.9) 116.6 57.8%
Operating Profit (Loss)
DIRECTVU.S.............................................. $ 473.2 $ 203.2 $ 270.0 132.9%
DIRECTV Latin America .................................... (284.6) (415.1) 130.5 31.4%
United States. The 19.4% increase in revenues resulted primarily from the addition of new subscribers in
2003 and higher ARPU on the larger subscriber base. A summary of DIRECTV U.S.’ subscriber data for the
years ended December 31 is as follows:
2003 2002 Change
Owned and operated subscribers (000’s) .............................. 10,680 9,493 1,187
NRTC subscribers (000’s) ......................................... 1,532 1,683 (151)
Total number of subscribers (000’s) ............................. 12,212 11,176 1,036
Net owned and operated subscriber additions (000’s) .................... 1,187 1,050 137
ARPU(1) ...................................................... $ 63.90 $ 59.80 $ 4.10
Average monthly subscriber churn %(2) .............................. 1.5% 1.6% (0.1)%
Average subscriber acquisition costs—per subscriber (SAC) .............. $ 595 $ 540 $ 55
(1) ARPU is calculated by dividing average monthly revenues for the period (total revenues during the period
divided by the number of months in the period) by average DIRECTV U.S. owned and operated subscribers
for the period, which excludes subscribers who receive DIRECTV service from members and affiliates of
the NRTC.
(2) Average monthly subscriber churn represents the number of DIRECTV U.S. subscribers whose service is
disconnected, expressed as a percentage of the average total number of DIRECTV U.S. subscribers. It is
calculated by dividing the average monthly number of disconnected DIRECTV U.S. owned and operated
subscribers for the period (total subscribers disconnected during the period divided by the number of months
in the period) by average DIRECTV U.S. owned and operated subscribers for the period.
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