Hughes Electronics
Corporation, the world’s leading provider of digital television entertainment,
broadband services, satellite-based private business networks, and global
video and data broadcasting, today reported fourth quarter 2001 revenues
increased 10.8% to $2,280.6 million, compared with $2,059.0 million in the
fourth quarter of 2000.
EBITDA(1) for the quarter was $118.2 million and
EBITDA margin(1) was 5.2%, compared with the fourth quarter of 2000 EBITDA of
$153.8 million and EBITDA margin of 7.5%.
“I am pleased to report that in the fourth quarter we met or exceeded all
of our key financial commitments while making excellent progress toward our
goal of improving operational performance,” said Jack A. Shaw, HUGHES’
president and chief executive officer.
“Our DIRECTV U.S. business
substantially exceeded expectations by adding 405,000 net new subscribers in
the quarter.
Additionally, we had solid revenue growth in the quarter driven
by continued strong demand for DIRECTV® services in both the United States
and Latin America, as well as increased sales of DIRECTV receivers and
DIRECWAY systems at Hughes Network Systems.”
Shaw continued, “EBITDA increased in each of our key businesses driven by
operational improvements including aggressive cost reductions, a reduced
workforce and lower customer churn at our DIRECTV businesses.
These
improvements were partially offset by the losses from our new DIRECTV DSL(TM)
service, which were not included in our 2000 results, and a $29 million charge
at DIRECTV Latin America due to the devaluation of the Argentinean peso.”
Also impacting the EBITDA change were one-time favorable adjustments in the
fourth quarter of 2000 for corporate expenditures primarily related to pension
and other employee costs.
HUGHES had a fourth quarter 2001 net loss of $132.6 million compared to
net income of $1,057.8 million in the same period of 2000.
The change was
primarily due to the gain on the sale of HUGHES’ satellite manufacturing
businesses in the fourth quarter of 2000, increased net interest expense, and
the lower EBITDA.
These reductions were partially offset by a $42 million tax
benefit resulting from losses previously booked on HUGHES’ investment in
Motient Corporation.
FULL-YEAR Financial review
For 2001, revenues increased 13.4% to $8,262.0 million, compared to
$7,287.6 million for the same period in 2000.
This increase was primarily due
to continued subscriber growth at DIRECTV in the United States and Latin
America, partially offset by fewer sales and sales-type leases at PanAmSat and
lower shipments of DIRECTV receiver systems at Hughes Network Systems.
EBITDA for 2001 was $389.9 million and EBITDA margin was 4.7%, compared to
EBITDA of $594.0 million and EBITDA margin of 8.2% in 2000.
The decrease in
EBITDA and EBITDA margin was primarily attributable to the higher outright
sales and sales-type leases of satellite transponders at PanAmSat in 2000,
increased investment in HNS’ consumer DIRECWAY business, losses from the new
DIRECTV DSL service, as well as one-time severance charges recorded in the
third quarter of 2001.
These items were partially offset by improved DIRECTV
operating performance due to the higher gross profit resulting from the larger
subscriber bases in the United States and Latin America, and lower corporate
expenses.
For 2001, net losses totaled $621.6 million compared to net income of
$813.0 million in 2000.
The change was primarily due to the sale of HUGHES’
satellite manufacturing businesses in 2000, the lower EBITDA and an increase
in depreciation and amortization expense in the Direct-To-Home Broadcast
segment and at PanAmSat.
Segment Financial Review: Fourth Quarter 2001
Direct-To-Home Broadcast
Fourth quarter 2001 revenues for the segment increased 12.7% to
$1,714.2 million from $1,520.5 million in the fourth quarter of 2000.
The
segment had negative EBITDA of $5.3 million compared with EBITDA of
$16.4 million in the fourth quarter of 2000.
United States: As reported last week, DIRECTV added 910,000 gross
subscribers in the quarter and after accounting for churn, substantially
exceeded expectations by adding 405,000 net subscribers in the quarter.
As a
result, DIRECTV had 10.7 million subscribers as of December 31, 2001,
representing a 13% increase over the 9.5 million customers attained as of
December 31, 2000.
DIRECTV reported quarterly revenues of $1,518 million, an increase of 12%
from last year’s fourth quarter revenues of $1,351 million.
The increase was
primarily due to continued subscriber growth.
EBITDA for the fourth quarter of 2001 was $63 million compared to EBITDA
of $59 million in last year’s fourth quarter.
This increase was due to the
additional gross profit gained from DIRECTV’s larger subscriber base, mostly
offset by increased investments in its customer service and installation
network.
DIRECTV DSL: The DIRECTV DSL service was created following HUGHES’ April
2001 acquisition of Telocity.
As a result, no comparative financial data for
DIRECTV DSL is included for 2000.
The DIRECTV DSL service had fourth quarter 2001 revenues of $11 million
and negative EBITDA of $32 million.
Approximately 17,500 net customers were
added to the DIRECTV DSL service in the quarter.
As of December 31, 2001,
DIRECTV DSL had about 91,000 residential broadband customers in the United
States compared to about 48,000 customers as of December 31, 2000.
Latin America: The DIRECTV service in Latin America added 113,000 net
subscribers in the fourth quarter of 2001.
The total number of DIRECTV
subscribers in Latin America as of December 31, 2001, was approximately
1,610,000 compared to about 1,305,000 as of December 31, 2000, representing an
increase of approximately 23%.
DIRECTV Latin America generated $186 million in revenues for the quarter
compared with $169 million in the fourth quarter of 2000.
This 10% increase
was primarily due to continued subscriber growth and the impact from the
financial consolidation of the Argentinean and Colombian local operating
companies following their acquisition in the first half of 2001.
Excluding a $29 million charge for the recent devaluation of the
Argentinean peso, DIRECTV Latin America had negative EBITDA of $7 million in
the quarter compared to negative EBITDA of $43 million in the same period of
2000.
The improvement was primarily due to the increased gross profit
generated from the larger subscriber base, aggressive costs reductions and
reduced marketing costs.
These improvements were partially offset by losses
related to the consolidation of the Argentinean and Colombian local operating
companies.
Satellite Services
PanAmSat, which is 81%-owned by HUGHES, generated fourth quarter 2001
revenues of $203.7 million compared with $202.9 million in the prior year’s
period.
EBITDA for the quarter was $139.3 million and EBITDA margin was
68.4%, compared with fourth quarter 2000 EBITDA of $136.1 million and EBITDA
margin of 67.1%.
The increase in EBITDA and EBITDA margin was principally due
to recently implemented cost reduction programs.
As of December 31, 2001, PanAmSat had contracts for satellite services
representing future payments (backlog) of over $5.8 billion compared to
approximately $6.0 billion at the end of the fourth quarter of 2000.
Network Systems
Hughes Network Systems (HNS) generated fourth quarter 2001 revenues of
$435.7 million versus $389.5 million in the fourth quarter of 2000.
The 11.9%
increase resulted from increased shipments of DIRECTV receiver systems and
higher sales of DIRECWAY® systems to both enterprises and consumers.
HNS
added approximately 14,000 net DIRECWAY residential broadband customers in the
quarter, bringing the cumulative total to approximately 101,000 subscribers in
North America.
Additionally, HNS shipped 814,000 DIRECTV receiver systems in
the fourth quarter of 2001 compared to 680,000 units in the same period last
year.
In the quarter, HNS reported negative EBITDA of $14.1 million compared to
negative EBITDA of $34.3 million in the fourth quarter of 2000.
The
improvement in EBITDA is primarily attributable to higher operating margins on
the increased DIRECTV receiver shipments, partially offset by increased
investment in the DIRECWAY and SPACEWAY broadband businesses.
BALANCE SHEET
From December 31, 2000 to December 31, 2001, the company’s consolidated
cash balance decreased $808.0 million to $700.1 million and total debt
increased $1,330.7 million to $2,647.3 million.
The major uses of cash were
for satellite and capital expenditures, a settlement with the Raytheon Company
on a purchase price adjustment related to Raytheon’s 1997 merger with Hughes
Defense, and the purchase of Telocity.
Hughes Electronics Corporation is a unit of General Motors Corporation.
The earnings of Hughes Electronics are used to calculate the earnings
attributable to the General Motors Class H common stock (NYSE: GMH – news).
A live webcast of HUGHES’ fourth quarter 2001 earnings call will be
available on the company’s website at www.hughes.com .
The call will begin at
2:00 p.m. ET, today.
The dial in number for the call is (913) 981-5537.
The
webcast will be archived on the Investor Relations portion of the HUGHES
website and a replay will be available (dial in number: 888-203-1112, code:
671802) beginning on Friday, January 18.
Hughes Financial Guidance
First Quarter Prior Full Year Revised Full
2002 2002 Year 2002
HUGHES
Revenues $1,950 - 2,000M* $9.0 - 9.2B No Change*
EBITDA $100 - 150M* $750 - 850M No Change*
Cash Requirements N/A $1.5 - 1.7B No Change*
DIRECTV U.S.
Revenue ~$1,425M $6.0 - 6.2B No Change
EBITDA $80 - 100M $525 - 575M No Change
Net Subscriber Adds 200 - 250K 1.0 - 1.2M No Change
DIRECTV DSL
Revenue N/A ~$75M No Change
EBITDA ~$(30)M ~$(100)M No Change
Net Subscriber Adds N/A ~100K No Change
DIRECTV Latin America
Revenue ~$190M* $925 - 975M No Change*
EBITDA ~$(20)M* Break-even No Change*
Net Subscriber Adds ~40K* ~250K No Change*
Hughes Network Systems
Revenue $225 - 250M $1.3 - 1.4B No Change
EBITDA $(30) - (40)M $(50) - (75)M No Change
DIRECWAY Net Sub Adds N/A 100 - 200K No Change
PanAmSat
Revenue $200 - 205M $790 - 825M No Change
New Outright Sales and
Sales-Type Leases None None No Change
EBITDA Margin 70% or higher 70% or higher No Change
* Excludes the potential impact from the devaluation of the Argentinean
peso.
NOTE: Hughes Electronics Corporation believes that some of the foregoing
statements may constitute forward-looking statements.
When used in this
report, the words “estimate,” “plan,” “project,” “anticipate,” “expect,”
“intend,” “outlook,” “believe,” and other similar expressions are intended to
identify such forward-looking statements and information.
Important factors
that may cause actual results of HUGHES to differ materially from the forward-
looking statements in this report are set forth in the Form 10-Ks filed with
the SEC by General Motors and HUGHES.
(1) EBITDA (Earnings Before Interest, Taxes, Depreciation and
Amortization) is the sum of operating profit (loss) and depreciation
and amortization. EBITDA margin is calculated by dividing EBITDA by
total revenues.
CONSOLIDATED STATEMENTS OF OPERATIONS AND
AVAILABLE SEPARATE CONSOLIDATED NET INCOME (LOSS)
(Dollars in Millions)
(Unaudited) Three Months Ended Year Ended
December 31, December 31,
2001 2000 2001 2000
Revenues
Direct broadcast, leasing
and other services $1,934.6 $1,738.9 $7,202.3 $6,262.2
Product sales 346.0 320.1 1,059.7 1,025.4
Total Revenues 2,280.6 2,059.0 8,262.0 7,287.6
Operating Costs and Expenses
Broadcast programming and
other costs 898.8 776.9 3,254.2 2,812.8
Cost of products sold 309.8 234.5 900.2 815.1
Selling, general and
administrative expenses 953.8 893.8 3,717.7 3,065.7
Depreciation and
amortization 296.8 275.0 1,147.7 948.1
Total Operating Costs
and Expenses 2,459.2 2,180.2 9,019.8 7,641.7
Operating Loss (178.6) (121.2) (757.8) (354.1)
Interest income 4.5 34.0 56.7 49.3
Interest expense (61.9) (49.0) (195.9) (218.2)
Other, net (2.7) 1.8 (92.7) (292.6)
Loss From Continuing
Operations Before Income
Taxes, Minority Interests
and Cumulative Effect of
Accounting Change (238.7) (134.4) (989.7) (815.6)
Income tax benefit 107.8 51.7 325.6 406.1
Minority interests in
net (earnings) losses
of subsidiaries (1.7) 22.4 49.9 54.1
Loss from continuing
operations before
cumulative effect of
accounting change (132.6) (60.3) (614.2) (355.4)
Income (Loss) from
discontinued operations,
net of taxes -- (14.2) -- 36.1
Gain on sale of
discontinued operations,
net of taxes -- 1,132.3 -- 1,132.3
Income (Loss) before
cumulative effect of
accounting change (132.6) 1,057.8 (614.2) 813.0
Cumulative effect of
accounting change,
net of taxes -- -- (7.4) --
Net Income (Loss) (132.6) 1,057.8 (621.6) 813.0
Adjustment to exclude
the effect of GM
purchase accounting 0.8 1.0 3.3 16.9
Income (Loss) Excluding
the Effect of GM Purchase
Accounting Adjustment (131.8) 1,058.8 (618.3) 829.9
Preferred stock
dividends (24.1) (24.1) (96.4) (97.0)
Earnings (Loss) Used for
Computation of Available
Separate Consolidated
Net Income (Loss) $(155.9) $1,034.7 $(714.7) $732.9
Available Separate
Consolidated Net Income (Loss)
Average number of shares
of General Motors Class H
Common Stock outstanding
(in millions) (Numerator) 877.3 874.9 876.3 681.2
Average Class H dividend
base (in millions)
(Denominator) 1,300.9 1,298.7 1,300.0 1,297.0
Available Separate
Consolidated Net Income
(Loss) $(105.1) $697.1 $(481.8) $384.9
Certain 2000 amounts have been reclassified to conform to the 2001
presentation.
CONSOLIDATED BALANCE SHEETS
(Dollars in Millions) December 31,
2001 December 31,
ASSETS (Unaudited) 2000
Current Assets
Cash and cash equivalents $700.1 $1,508.1
Accounts and notes receivable 1,090.5 1,253.0
Contracts in process 153.1 186.0
Inventories 360.1 338.0
Deferred income taxes 118.9 89.9
Prepaid expenses and other 918.4 778.7
Total Current Assets 3,341.1 4,153.7
Satellites, net 4,806.6 4,230.0
Property, net 2,197.8 1,707.8
Net Investment in Sales-type Leases 227.0 221.1
Intangible Assets, net 7,156.8 7,151.3
Investments and Other Assets 1,480.8 1,815.4
Total Assets $19,210.1 $19,279.3
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities
Accounts payable $1,227.5 $1,224.2
Deferred revenues 178.5 137.6
Short-term borrowings and current
portion of long-term debt 1,658.5 24.6
Accrued liabilities and other 1,342.0 1,304.5
Total Current Liabilities 4,406.5 2,690.9
Long-Term Debt 988.8 1,292.0
Other Liabilities and Deferred Credits 1,465.1 1,647.3
Deferred Income Taxes 746.5 769.3
Commitments and Contingencies
Minority Interests 531.3 553.7
Stockholder's Equity 11,071.9 12,326.1
Total Liabilities and Stockholder's Equity $19,210.1 $19,279.3
Holders of GM Class H common stock have no direct rights in the equity or
assets of Hughes, but rather have rights in the equity and assets of
General Motors (which includes 100% of the stock of Hughes).
SELECTED SEGMENT DATA
(Dollars in Millions)
(Unaudited) Twelve Months
Fourth Quarter Ended December 31,
2001 2000 2001 2000
DIRECT-TO-HOME BROADCAST
Total Revenues $1,714.2 $1,520.5 $6,304.4 $5,238.0
EBITDA(1) $(5.3) $16.4 $(74.8) $(24.5)
EBITDA Margin(1) N/A 1.1% N/A N/A
Operating Loss $(176.1) $(147.0) $(749.9) $(557.9)
Depreciation and
Amortization $170.8 $163.4 $675.1 $533.4
Capital Expenditures $211.8 $264.4 $734.3 $913.5
SATELLITE SERVICES
Total Revenues $203.7 $202.9 $870.1 $1,023.6
EBITDA(1) $139.3 $136.1 $580.0 $694.0
EBITDA Margin(1) 68.4% 67.1% 66.7% 67.8%
Operating Profit $29.3 $37.5 $165.3 $356.6
Operating Profit Margin 14.4% 18.5% 19.0% 34.8%
Depreciation and
Amortization $110.0 $98.6 $414.7 $337.4
Capital Expenditures $96.5 $131.9 $338.2 $449.5
NETWORK SYSTEMS
Total Revenues $435.7 $389.5 $1,325.8 $1,409.8
EBITDA(1) $(14.1) $(34.3) $(111.8) $0.1
Operating Loss $(27.6) $(48.1) $(171.8) $(63.5)
Depreciation and
Amortization $13.5 $13.8 $60.0 $63.6
Capital Expenditures $197.4 $128.5 $664.6 $369.5
ELIMINATIONS and OTHER
Total Revenues $(73.0) $(53.9) $(238.3) $(383.8)
EBITDA(1) $(1.7) $35.6 $(3.5) $(75.6)
Operating Profit (Loss) $(4.2) $36.4 $(1.4) $(89.3)
Depreciation and
Amortization $2.5 $(0.8) $(2.1) $13.7
Capital Expenditures $10.4 $(14.1) $6.4 $(16.4)
TOTAL
Total Revenues $2,280.6 $2,059.0 $8,262.0 $7,287.6
EBITDA(1) $118.2 $153.8 $389.9 $594.0
EBITDA Margin(1) 5.2% 7.5% 4.7% 8.2%
Operating Loss $(178.6) $(121.2) $(757.8) $(354.1)
Depreciation and
Amortization $296.8 $275.0 $1,147.7 $948.1
Capital Expenditures $516.1 $510.7 $1,743.5 $1,716.1
(1) EBITDA (Earnings Before Interest, Taxes, Depreciation and
Amortization) is the sum of operating profit (loss) and depreciation
and amortization.EBITDA margin is calculated by dividing EBITDA by
total revenues.
