DIRECTV 2006 Annual Report Download - page 59

THE DIRECTV GROUP, INC.
DIRECTV U.S. Segment
The following table provides operating results and a summary of key subscriber data for the
DIRECTV U.S. segment:
Change
2006 2005 $ %
(Dollars in Millions, Except Per
Subscriber Amounts)
Revenues ...................................... $13,744.0 $12,216.1 $1,527.9 12.5%
Operating Costs and Expenses
Costs of revenues, exclusive of depreciation and
amortization expense
Broadcast programming and other ............. 5,830.4 5,050.1 780.3 15.5%
Subscriber service expenses .................. 1,057.1 935.4 121.7 13.0%
Broadcast operations expenses ................ 179.3 145.8 33.5 23.0%
Selling, general and administrative expenses, exclusive of
depreciation and amortization expense
Subscriber acquisition costs .................. 1,844.5 2,675.8 (831.3) (31.1)%
Upgrade and retention costs .................. 851.7 1,106.5 (254.8) (23.0)%
General and administrative expenses ............ 760.3 802.3 (42.0) (5.2)%
Depreciation and amortization expense ................ 873.0 698.2 174.8 25.0%
Total Operating Costs and Expenses ......... 11,396.3 11,414.1 (17.8) (0.2)%
Operating Profit ................................. $ 2,347.7 $ 802.0 $1,545.7 192.7%
Other Data:
Operating Profit Before Depreciation & Amortization ..... $ 3,220.7 $ 1,500.2 $1,720.5 114.7%
Total number of subscribers (000’s) ................... 15,953 15,133 820 5.4%
ARPU ........................................ $ 73.74 $ 69.61 $ 4.13 5.9%
Average monthly subscriber churn% .................. 1.60% 1.70% — (5.9)%
Gross subscriber additions (000’s) .................... 3,809 4,170 (361) (8.7)%
Net subscriber additions (000’s) ...................... 820 1,193 (373) (31.3)%
Average subscriber acquisition costs—per subscriber (SAC) . . $ 641 $ 642 $ (1) (0.2)%
Subscribers. The decrease in average monthly subscriber churn to 1.60% and the 361,000 decrease
in gross subscriber additions in 2006 were primarily due to more stringent credit policies we
implemented beginning in the second quarter of 2005, and changes made to our distribution network to
better align dealers with our objective to improve the overall credit quality of DIRECTV subscribers.
DIRECTV U.S.’ gross subscriber additions and churn were also affected by increased competition. The
373,000 reduction in the number of net new subscribers was mainly due to the lower number of gross
subscriber additions.
Revenues. DIRECTV U.S.’ revenues increased $1,527.9 million to $13,744.0 million resulting from
higher ARPU and the larger subscriber base. The 5.9% increase in ARPU to $73.74 resulted primarily
from price increases on programming packages and an increase in the number of subscribers paying
mirroring, lease, DVR and HD programming fees.
Total Operating Costs and Expenses. DIRECTV U.S.’ total operating costs and expenses decreased
from $11,414.1 million to $11,396.3 million in 2006 due mostly to the capitalization of $1,071.5 million
of set-top receivers in 2006 under our new lease program, decreased subscriber acquisition costs
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