DIRECTV 2004 Annual Report Download - page 108

THE DIRECTV GROUP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)
(1)
Operating Profit (Loss) 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, can be calculated by
adding amounts under the caption “Depreciation and amortization” to “Operating Profit (Loss).” This 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. Our management and Board of Directors use Operating Profit (Loss) Before
Depreciation and Amortization to evaluate the operating performance of our company and our business segments and to
allocate resources and capital to business segments. This metric is also used as a measure of performance for incentive
compensation purposes and to measure income generated from operations that could be used to fund capital expenditures,
service debt or pay taxes. Depreciation and amortization expense primarily represents an allocation to current expense of
the cost of historical capital expenditures and for intangible assets resulting from prior business acquisitions. To
compensate for the exclusion of depreciation and amortization from operating profit, our management and Board of
Directors separately measure and budget for capital expenditures and business acquisitions.
We believe this measure is useful to investors, along with GAAP measures (such as revenues, operating profit and net
income), to compare our operating performance to other communications, entertainment and media service providers. We
believe that investors use current and projected Operating Profit (Loss) Before Depreciation and Amortization and similar
measures to estimate our current or prospective enterprise value and make investment decisions. This metric provides
investors with a means to compare operating results exclusive of depreciation and amortization. Our management believes
this is useful given the significant variation in depreciation and amortization expense that can result from the timing of
capital expenditures, the capitalization of intangible assets, potential variations in expected useful lives when compared to
other companies and periodic changes to estimated useful lives.
The following represents a reconciliation of operating profit (loss) before depreciation and amortization to reported net loss on
the Consolidated Statements of Operations:
Years Ended December 31,
2004
2003
2002
(Dollars in Millions)
Operating Profit (Loss) Before Depreciation and Amortization
$
(1,281.4
)
$
617.4
$
267.1
Depreciation and amortization
(838.0
)
(754.9
)
(676.7
)
Operating loss
(2,119.4
)
(137.5
)
(409.6
)
Interest income
50.6
28.4
17.5
Interest expense
(131.9
)
(156.3
)
(188.6
)
Reorganization (expense) income
43.0
(212.3
)
—
Other, net
397.6
—
425.5
Loss from continuing operations before income taxes, minority interests and cumulative effect of accounting changes
(1,760.1
)
(477.7
)
(155.2
)
Income tax benefit
690.6
104.3
42.2
Minority interests in net (earnings) losses of subsidiaries
13.1
(1.9
)
(1.9
)
Loss from continuing operations before cumulative effect of accounting changes
(1,056.4
)
(375.3
)
(114.9
)
Income (loss) from discontinued operations, net of taxes
(582.3
)
78.1
(97.6
)
Cumulative effect of accounting changes, net of taxes
(310.5
)
(64.6
)
(681.3
)
Net Loss
$
(1,949.2
)
$
(361.8
)
$
(893.8
)
99