DIRECTV 2009 Annual Report Download - page 130

DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(continued)
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 expense from operating profit, our management and our 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 before depreciation and amortization
to reported net income on the Consolidated Statements of Operations:
Years Ended December 31,
2009 2008 2007
(Dollars in Millions)
Operating profit before depreciation and amortization ............... $5,313 $ 5,015 $ 4,170
Depreciation and amortization expense .......................... (2,640) (2,320) (1,684)
Operating profit .......................................... 2,673 2,695 2,486
Interest income ........................................... 41 81 111
Interest expense .......................................... (423) (360) (235)
Liberty transaction and related charges .......................... (491) — —
Other, net ............................................... 34 55 26
Income from continuing operations before income taxes ............. 1,834 2,471 2,388
Income tax expense ........................................ (827) (864) (943)
Income from continuing operations ............................ 1,007 1,607 1,445
Income from discontinued operations, net of taxes ................. — 6 17
Net income .............................................. 1,007 1,613 1,462
Less: Net income attributable to noncontrolling interests ............. (65) (92) (11)
Net income attributable to DIRECTV .......................... $ 942 $1,521 $ 1,451
118