DIRECTV 2012 Annual Report Download - page 62

DIRECTV
connection with the exchange of accumulated Venezuelan cash balances to U.S. Broadcast Programming and Other. These costs primarily include license fees
dollars using the parallel exchange process. for subscription service programming, pay-per-view programming, live sports and
other events. Other costs include continuing service fees paid to third parties for
In February 2013, the Venezuelan government announced a devaluation of the active subscribers and warranty service costs.
bolivar, which will result in a pre-tax charge in ‘‘General and administrative
expenses’’ in the Consolidated Statements of Operations of approximately Subscriber Service Expenses. Subscriber service expenses include the costs of
$160 million in the first quarter of 2013. See ‘‘Liquidity and Capital Resources’’ customer call centers, billing, remittance processing and service calls.
below for additional information regarding the Venezuelan devaluation and foreign
Broadcast Operations Expenses. These expenses include broadcast center
currency exchange controls.
operating costs, signal transmission expenses (including costs of collecting signals for
our local channel offerings), and costs of monitoring, maintaining and insuring our
Share Repurchase Program
satellites. Also included are engineering expenses associated with deterring theft of
Since 2006 our Board of Directors has approved multiple authorizations for our signal.
the repurchase of our common stock. As of December 31, 2012, we had
approximately $1,719 million remaining under the authorization given by the Subscriber Acquisition Costs. These costs include the cost of set-top receivers
Board of Directors in 2012. In February 2013, our Board of Directors terminated and other equipment, commissions we pay to national retailers, independent
the remaining $857 million available under the 2012 authorization and authorized satellite television retailers, dealers and telcos, and the cost of installation,
up to an additional $4 billion for repurchases of our common stock. The following advertising, marketing and customer call center expenses associated with the
table sets forth information regarding shares repurchased and retired for the years acquisition of new subscribers. Set-top receivers leased to new subscribers are
ended December 31: capitalized in ‘‘Property and equipment, net’’ in the Consolidated Balance Sheets
and depreciated over their useful lives. In certain countries in Latin America, where
2012 2011 2010 our customer agreements provide for the lease of the entire DIRECTV or SKY
(Amounts in Millions, Except System, we also capitalize the costs of the other customer premises equipment and
Per Share Amounts) related installation costs. The amount of set-top receivers capitalized each period for
Total cost of repurchased and retired shares ....... $5,148 $5,455 $5,179 subscriber acquisitions is included in ‘‘Cash paid for property and equipment’’ in
Average price per share ..................... $48.24 $45.78 $38.20 the Consolidated Statements of Cash Flows.
Number of shares repurchased and retired ........ 107 119 136
Upgrade and Retention Costs. Upgrade and retention costs are associated with
KEY TERMINOLOGY upgrade efforts for existing subscribers that we believe will result in higher average
monthly revenue per subscriber, or ARPU, and lower churn. Our upgrade efforts
Revenues. We earn revenues mostly from monthly fees we charge subscribers
include subscriber equipment upgrade programs for DVR, HD and HD DVR
for subscriptions to basic and premium channel programming, advanced receiver
receivers and local channels, our multiple set-top receiver offers and similar
fees (which include HD, DVR and multi-room viewing), pay-per-view
initiatives. Retention costs also include the costs of installing and providing
programming, and seasonal live sporting events. We also earn revenues from
hardware under our movers program for subscribers relocating to a new residence.
monthly fees we charge subscribers for multiple leased set-top receivers, monthly
Set-top receivers leased to existing subscribers under upgrade and retention
fees that we charge subscribers with multiple non-leased set-top receivers (which we
programs are capitalized in ‘‘Property and equipment, net’’ in the Consolidated
refer to as mirroring fees), hardware revenues from subscribers who lease or
Balance Sheets and depreciated over their useful lives. The amount of set-top
purchase set-top receivers from us, warranty service fees and advertising services.
receivers capitalized each period for upgrade and retention programs is included in
Revenues are reported net of customer credits and discounted promotions.
42