DIRECTV 2009 Annual Report Download - page 156
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DIRECTV U.S.
Non-GAAP Financial Measure Reconciliation
(Unaudited)
Reconciliation of Pre-SAC Margin* to Operating Profit
Twelve Months
Ended
December 31,
2009 2008
Operating Profit ................................................... $2,410 $2,330
Adjustments:
Subscriber acquisition costs (expensed) ................................. 2,478 2,191
Depreciation and amortization expense ................................ 2,275 2,061
Cash paid for subscriber leased equipment—upgrade and retention ............ (419) (537)
Pre-SAC margin* .................................................. $6,744 $6,045
Pre-SAC margin as a percentage of revenue* .............................. 36.1% 34.9%
* Pre-SAC Margin, which is a financial measure that is not determined in accordance with
accounting principles generally accepted in the United States of America, or GAAP, is calculated
for DIRECTV U.S. by adding amounts under the captions ‘‘Subscriber acquisition costs’’ and
‘‘Depreciation and amortization expense’’ to ‘‘Operating Profit’’ from DIRECTV U.S.’ segment
operating results and subtracting ‘‘subscriber leased equipment—upgrade and retention’’ as
discussed in Item 7—Management’s Discussion and Analysis of Financial Condition and Results of
Operations. This financial 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. DIRECTV management uses Pre-SAC Margin to evaluate the profitability of
DIRECTV U.S.’ current subscriber base for the purpose of allocating resources to discretionary
activities such as adding new subscribers, upgrading and retaining existing subscribers and for
capital expenditures. To compensate for the exclusion of ‘‘Subscriber acquisition costs,’’
management also uses operating profit and operating profit before depreciation and amortization
expense to measure profitability.
DIRECTV believes this measure is useful to investors, along with GAAP measures (such as
revenues, operating profit and net income), to compare DIRECTV U.S.’ operating performance to
other communications, entertainment and media companies. DIRECTV believes that investors also
use current and projected Pre-SAC Margin to determine the ability of DIRECTV U.S.’ current
and projected subscriber base to fund discretionary spending and to determine the financial returns
for subscriber additions.