Hughes Second Quarter 2002 Results Driven By Strong DirecTV Sales

SPACEMART

El Segundo - July 18, 2002
Hughes Electronics Corporation reported Monday that second quarter 2002 revenues increased 11.3% to $2,209.7 million, compared with $1,985.1 million in the second quarter of 2001.

EBITDA(1) for the quarter increased 50.1% to $123.1 million compared with $82.0 million in the second quarter of last year. EBITDA margin(1) was 5.6% in the quarter compared with an EBITDA margin of 4.1% last year. The operating loss for the quarter was $138.5 million compared with an operating loss of $223.0 million in the second quarter of 2001.

"The improving financial performance at DirecTV U.S. continues to fuel HUGHES' growth," said Jack A. Shaw, HUGHES' president and chief executive officer. "DirecTV U.S. had quarterly revenues of $1,549 million, which were 15% higher than last year, primarily due to subscriber growth during the last 12 months."

Shaw added, "DirecTV U.S. was also the driving force behind our EBITDA growth. As a result of the strong revenue growth and lower subscriber acquisition costs, the DirecTV U.S. EBITDA of $148 million was nearly double last year's second quarter result. In addition, excluding the losses from the World Cup soccer tournament at DirecTV Latin America, each of our business units showed improvement in EBITDA compared to last year.

"Although DirecTV U.S. net subscriber additions of 202,000 fell short of our target of 225,000 to 250,000 for the second quarter, we gained 53% more subscribers than in last year's second quarter. Furthermore, because the operating performance of the business continues to improve, we are increasing DirecTV U.S.' full year estimates for revenue and EBITDA, while maintaining our year-end subscriber guidance."

In the second quarter of 2002, HUGHES reported an operating loss of $138.5 million compared with an operating loss of $223.0 million in 2001. This lower operating loss was due to higher EBITDA and the elimination of approximately $72 million of goodwill amortization expense in 2002 as a result of adopting the new Statement of Financial Accounting Standards Number 142 (SFAS 142) accounting rules for goodwill and intangible assets.

These changes were partially offset by higher depreciation expense in each of HUGHES' operating segments, mostly at DirecTV U.S. due to the launch of two new satellites as well as additional infrastructure expenditures made during the last year.

HUGHES had a second quarter 2002 net loss of $155.1 million compared to a net loss of $156.5 million in the same period of 2001. The lower operating loss and a $37 million gain resulting from the favorable resolution of remaining contingencies associated with the exit from the DirecTV Japan business (recorded in Other, net), were mostly offset by increased net interest expense including an interest charge of $47 million for losses associated with the final settlement of a contractual dispute with General Electric Capital Corporation (GECC), and the discontinuation of the minority interest adjustment related to DirecTV Latin America.

Six-Month Financial Review

For the first half of 2002, revenues increased 9.5 % to $4,247.9 million, compared to $3,878.1 million in the first half of 2001. This increase was due to continued subscriber growth at DirecTV in the United States and revenues associated with the 2002 World Cup at DirecTV Latin America, partially offset by lower sales in the Carrier businesses of Hughes Network Systems (HNS).

EBITDA for the first six months of 2002 was $257.3 million and EBITDA margin was 6.1%, compared to EBITDA of $195.2 million and EBITDA margin of 5.0% in the first half of 2001. The 31.8% increase in EBITDA and the increase in EBITDA margin were primarily attributable to DirecTV U.S.' additional gross profit gained from its revenue growth and lower subscriber acquisition costs, a $95 million one-time gain based on the favorable resolution of litigation related to the National Aeronautics and Space Administration's (NASA) breach of contract to launch ten HUGHES satellites, and improved operational efficiencies at PanAmSat. These improvements were partially offset by the devaluation of several foreign currencies and the costs associated with the 2002 World Cup in the DirecTV Latin America business, a one-time EBITDA charge of $48 million related to the GECC settlement, as well as the inclusion of DirecTV Broadband for two full quarters in 2002. DirecTV Broadband, formerly known as Telocity, was purchased April 1, 2001.

HUGHES' operating loss for the first six months of 2002 was $266.3 million compared with an operating loss of $375.5 million in the first half of 2001. The lower loss was due to the higher EBITDA and the elimination of approximately $134 million of goodwill amortization expense in 2002 as a result of adopting SFAS 142. These changes were partially offset by higher depreciation expenses, particularly at DirecTV U.S. due to the recent launch of two new satellites and additional infrastructure expenditures made during the last year.

For the first six months of 2002, net losses totaled $311.5 million compared to net losses of $261.8 million in the same period of 2001. The increased net loss was principally due to an increase in net interest expense including a charge of $74 million ($27 million of which was recorded in the first quarter of 2002) related to the GECC settlement, and the discontinuation of the minority interest adjustment related to DirecTV Latin America. These declines more than offset the benefits from the lower operating loss, and an improved effective tax rate due to the favorable resolution of certain tax contingencies.

SPACEMART

EchoStar DirecTV Deal Is Filled With Contradictions Says Lobby Group

Herndon - Apr 5, 2002
The two dominant satellite TV companies have failed to demonstrate how their proposed merger is in the public interest and have instead shown a disturbing tendency to contradict on core consumer protection issues, the National Rural Telecommunications Cooperative (NRTC) said.

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