SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549-1004
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report
(Date of earliest event reported) April 12, 2000
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HUGHES ELECTRONICS CORPORATIONON
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(Exact name of registrant as specified in its charter)
STATE OF DELAWARE 0-26035 52-1106564
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation or organization) File Number) Identification No.)
200 North Sepulveda Boulevard
El Segundo, California 90245
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(310) 662-9985
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(Address, including zip code, and telephone number,
including area code, of registrants' principal executive office)
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ITEM 5. OTHER EVENTS
On April 12, 2000, a news release was issued on the subject of first
quarter consolidated earnings by Hughes Electronics Corporation (Hughes). The
news release did not include certain financial statements, related footnotes and
certain other financial information that will be filed with the Securities and
Exchange Commission as part of Hughes' Quarterly Report on Form 10-Q. The
release is as follows:
HUGHES REPORTS 85% REVENUE GROWTH AND 57% EBITDA GROWTH
IN FIRST QUARTER
Results Driven by Continued Record Sales of DIRECTV(R)Service and Equipment,
============================================================================
and Expansion of PanAmSat's Satellite Fleet
El Segundo, Calif., April 12, 2000 -- Hughes Electronics Corporation
(Hughes), the world's leading provider of digital television entertainment,
satellite services and wireless systems and services, today reported first
quarter 2000 revenues increased 85.4% to $1,703.1 million, compared with $918.4
million in the first quarter of 1999. EBITDA(1) for the quarter increased 57.1%
to $142.2 million and EBITDA margin(1) was 8.3%, compared to EBITDA of $90.5
million and EBITDA margin of 9.9% in the first quarter of 1999.
"This quarter's results reflect the success of our ongoing strategy to be
a services-driven company," explained Michael T. Smith, Hughes chairman and
chief executive officer. "Each of our operating segments showed excellent
revenue growth, with service revenues generating 84% of our total revenues in
the quarter. The primary driver continued to be DIRECTV, where we added over
half-a-million new subscribers worldwide, including 405,000 here in the United
States. Additionally, Hughes Network Systems (HNS) shipped almost one million
DIRECTV receiver systems in the quarter, and PanAmSat had strong revenue growth
resulting from the expansion of its satellite fleet.
"The EBITDA growth in the quarter was fueled by PanAmSat, as they
continued to launch new satellites, sign-up blue-chip customers and achieve
EBITDA margins of nearly 70%," Smith concluded.
Hughes had a first quarter 2000 loss(2) of $76.6 million, compared to
earnings(2) of $78.3 million in the same period for 1999. The decline was due to
higher depreciation and amortization expenses related principally to the United
States Satellite Broadcasting Company, Inc. (USSB) and PRIMESTAR transactions;
an increase in net interest expense; and an increase in Hughes' portion of the
operational losses of DIRECTV Japan (reported in "Other, net"). Also
contributing to the change was the net effect of two one-time items in 1999
associated with discontinued operations. These were a one-time after-tax gain of
$94 million related to the settlement of the Williams patent infringement
case(3), which was partially offset by a one-time after-tax charge of $49
million associated with the termination of the Asia Pacific Mobile
Telecommunications (APMT) satellite system contract.
Also in the first quarter of 2000, Hughes reported a one-time pre-tax
charge of $171 million (also reported in "Other, net") related to its previously
announced agreement with SkyPerfecTV! and the discontinuation of the DIRECTV
Japan business. The after-tax impact of this charge was a loss of $13 million,
which includes the tax benefits associated with the write-off of Hughes'
historical investments in DIRECTV Japan.
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SEGMENT FINANCIAL REVIEW
Direct-To-Home Broadcast
First quarter revenues for the segment more than doubled to $1,173.8
million from $556.6 million in the first quarter of 1999. The segment had
negative EBITDA of $9.2 million compared with EBITDA of $3.9 million in the
first quarter of 1999.
United States: DIRECTV reported quarterly revenues of $1,059 million, more
than twice last year's first quarter revenues of $474 million. The increase was
due to continued strong subscriber growth, as well as additional revenues
resulting from the USSB and PRIMESTAR transactions.
DIRECTV added a record 405,000 net new subscribers to its high-power
DIRECTV service in the quarter, a 33% increase over the 304,000 net new
subscribers added in the first quarter of 1999. In addition, 275,000 customers
were transitioned from the PRIMESTAR By DIRECTV medium-power service to the
high-power service in the quarter. As of March 31, 2000, DIRECTV had more than
8.3 million subscribers, including approximately one million customers
subscribing to PRIMESTAR By DIRECTV. By comparison, DIRECTV had about 4.8
million subscribers as of March 31, 1999.
EBITDA for the first quarter of 2000 was $31 million compared to EBITDA of
$25 million in last year's first quarter. This increase was principally due to
EBITDA contributions from the USSB and PRIMESTAR transactions as well as
improved EBITDA resulting from the larger high-power subscriber base, which more
than offset the higher marketing costs associated with the record subscriber
growth in the quarter.
Latin America:The DIRECTV business in Latin America generated $114 million
in revenues for the quarter compared with $61 million in the first quarter of
1999. This increase was due to continued strong subscriber growth and additional
revenues resulting from the consolidation of Galaxy Brasil, Ltda. (GLB)(4) and
Grupo Galaxy Mexicana, S.A. de C.V. (GGM)(4).
The DIRECTV service in Latin America added 105,000 net new subscribers in
the first quarter of 2000, a 50% increase over the 70,000 acquired in the same
period last year. The total number of DIRECTV subscribers in Latin America as of
March 31, 2000 was 909,000. By comparison, DIRECTV subscribers in Latin America
totaled 554,000 as of March 31, 1999.
The DIRECTV business in Latin America had negative EBITDA of $38 million
compared to negative EBITDA of $20 million for the same period in 1999. The
change was primarily due to the impact of the consolidation of GLB and GGM and
higher marketing expenses associated with the record subscriber growth.
Japan: As part of an agreement announced in March 2000, the 425,000
DIRECTV Japan subscribers (as of March 31, 2000) will have the opportunity to
migrate to the SkyPerfecTV! subscriber base and DIRECTV Japan's operations will
be discontinued. In addition, Hughes obtained an equity interest in SkyPerfecTV!
of approximately 6.6%. As a result of this agreement, Hughes recorded the
previously mentioned one-time pre-tax charge of $171 million ($13 million
after-tax).
Hughes' share of DIRECTV Japan's operating loss was $59 million for the
quarter, compared with a loss of $19 million in the first quarter of 1999. This
higher loss was due to the increased investment in DIRECTV Japan that Hughes
made in the third quarter of 1999, and higher marketing expenses. Hughes will
continue to report its share of DIRECTV Japan's losses throughout 2000, at which
time the business is expected to be discontinued.
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Satellite Services
PanAmSat, which is 81%-owned by Hughes, reported first quarter 2000
revenues of $299.1 million compared with $193.5 million in the prior year's
period. The 54.6% increase was driven primarily by several large outright sales
and sales-type leases of satellite transponders totaling $94 million for
customers on the recently launched Galaxy XR satellite. Revenues from outright
sales and sales-type leases represent substantial long term commitments for
PanAmSat services and these transactions are subject to greater variation from
period to period than are operating lease revenues.
EBITDA for the segment in the quarter was $201.0 million, a 37.7% increase
over first quarter 1999 EBITDA of $146.0 million. The increase in EBITDA was
primarily due to the outright sales and sales-type leases in the first quarter
of 2000. EBITDA margin in the first quarter of 2000 was 67.2%, compared to 75.5%
in the same period of 1999. This decline was due to lower margins associated
with the outright sales and sales-type leases. Excluding sales and sales-type
lease activity in the first quarter of 2000, EBITDA was $153 million or 75% of
corresponding revenues.
Network Systems
Hughes Network Systems (HNS) grew first quarter 2000 revenues 57.9% to
$364.5 million, versus $230.9 million in the first quarter of 1999 principally
due to higher sales of DIRECTV receiver equipment. HNS shipped 980,000 DIRECTV
receiver systems in the first quarter of 2000, compared to 190,000 units in the
same period last year.
In the quarter, HNS attained EBITDA of $11.8 million and EBITDA margin of
3.2%, compared to negative EBITDA of $5.9 million in the first quarter of 1999.
The improved EBITDA is primarily attributable to the increased revenue and
profit resulting from higher volumes of DIRECTV receiver systems shipped in the
current quarter, a one-time first quarter 1999 charge of $11 million associated
with the termination of the APMT satellite system contract, and higher margins
on sales of private business network systems in the first quarter of 2000.
BALANCE SHEET
From December 31, 1999 to March 31, 2000, the Company's consolidated cash
balance declined $5.7 million to $232.5 million and total debt increased $448.4
million to $2,589.8 million. The principal cash requirements for the first three
months of 2000 were related to capital expenditures for property, plant,
equipment and satellites.
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).
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
GM and Hughes.
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(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.
(2) Excludes the effects of purchase accounting adjustments related to General
Motors' acquisition of Hughes in 1985.
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(3) Hughes was awarded a final judgement arising from its long-running Williams
patent infringement case, which was originally filed by Hughes in 1973. The
award resulted from the repeated infringement by the U.S. Government over a
span of two decades of a patent that revolutionized communications
satellite attitude control and made the geosynchronous satellite practical.
A payment of $154.6 million was received in the first quarter of 1999 and
the after-tax amount of $94.3 million was recorded in "Income from
discontinued operations, net of taxes."
(4) Galaxy Brasil, Ltda. (GLB) is the local operating company providing DIRECTV
service in Brazil. Grupo Galaxy Mexicana, S.A. de C.V. (GGM) is the local
operating company providing DIRECTV service in Mexico. SurFin Ltd.,
provides financing for DIRECTV receiving equipment in Latin America. As a
result of transactions that were completed in July 1999 (GLB), February
1999 (GGM) and November 1998 (SurFin), Hughes now consolidates each of
these companies from their respective dates of acquisition.
###
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STATEMENT OF OPERATIONS AND
AVAILABLE SEPARATE CONSOLIDATED NET INCOME (LOSS)
(Dollars in Millions)
Three Months Ended
March 31,
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2000 1999
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Revenues
Direct broadcast, leasing and other services $1,432.0 $755.8
Product sales 271.1 162.6
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Total Revenues 1,703.1 918.4
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Operating Costs and Expenses
Broadcast programming and other costs 667.8 313.9
Cost of products sold 198.3 136.2
Selling, general, and administrative expenses 694.8 377.8
Depreciation and amortization 204.7 110.9
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Total Operating Costs and Expenses 1,765.6 938.8
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Operating Loss (62.5) (20.4)
Interest income 3.9 13.6
Interest expense (44.9) (6.9)
Other, net (234.2) (17.3)
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Loss from Continuing Operations Before Income Taxes
And Minority Interests (337.7) (31.0)
Income tax benefit (221.8) (13.4)
Minority interests in net losses of subsidiaries 7.6 6.5
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Loss from continuing operations (108.3) (11.1)
Income from discontinued operations,
net of taxes 26.4 84.1
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Net Income (Loss) (81.9) 73.0
Adjustments to exclude the effect of GM
purchase accounting adjustments 5.3 5.3
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Earnings (Loss) Excluding the Effect of
GM Purchase Accounting Adjustments (76.6) 78.3
Preferred stock dividends (24.7) -
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Earnings (Loss) Used for Computation of Available
Separate Consolidated Net Income (Loss) $(101.3) $78.3
============================================================================
Available Separate Consolidated Net Income (Loss)
Average number of shares of General Motors
Class H Common Stock outstanding
(in millions) (Numerator) 137.8 106.3
Average Class H dividend base (in millions)
(Denominator) 431.5 400.2
Available Separate Consolidated Net Income (Loss) $(32.4) $20.8
============================================================================
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SELECTED SEGMENT DATA
(Dollars in Millions)
Three Months Ended
March 31,
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2000 1999
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DIRECT-TO-HOME BROADCAST
Total Revenues $1,173.8 $556.6
EBITDA (1) (9.2) $3.9
EBITDA Margin (1) N/A 0.7%
Operating Loss $(126.0) $(23.4)
Depreciation and Amortization $116.8 $27.3
Capital Expenditures (2) $168.0 $77.6
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SATELLITE SERVICES
Total Revenues $299.1 $193.5
EBITDA (1) 201.0 $146.0
EBITDA Margin (1) 67.2% 75.5%
Operating Profit $127.3 $78.3
Operating Profit Margin 42.6% 40.5%
Depreciation and Amortization $73.7 $67.7
Capital Expenditures (3) $158.0 $339.8
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NETWORK SYSTEMS
Total Revenues $364.5 $230.9
EBITDA (1) $11.8 $(5.9)
EBITDA Margin (1) 3.2% N/A
Operating Profit (Loss) $0.6 $(17.8)
Operating Profit Margin 0.2% N/A
Depreciation and Amortization $11.2 $11.9
Capital Expenditures (4) $67.6 $2.2
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ELIMINATIONS and OTHER
Total Revenues $(134.3) $(62.6)
EBITDA (1) $(61.4) $(53.5)
Operating Loss $(64.4) $(57.5)
Depreciation and Amortization $3.0 $4.0
Capital Expenditures $20.7 $(32.2)
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TOTAL
Total Revenues $1,703.1 $918.4
EBITDA (1) $142.2 $90.5
EBITDA Margin (1) 8.3% 9.9%
Operating Loss $(62.5) $(20.4)
Depreciation and Amortization $204.7 $110.9
Capital Expenditures $414.3 $387.4
==========================================================================
(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.
(2) Includes expenditures related to satellites amounting to $11.6 million
and $53.0 million in the first quarter of 2000 and 1999, respectively.
(3) Includes expenditures related to satellites amounting to $146.0 million and
$189.7 million in the first quarter of 2000 and 1999, respectively. Also
included in the first quarter of 1999 amount is $141.3 million related to
the early buy-out of a satellite sale-leaseback.
(4) Includes expenditures related to satellites amounting to $53.7 million in
the first quarter of 2000.
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BALANCE SHEET
(Dollars in Millions)
March 31, December 31,
ASSETS 2000 1999
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Current Assets
Cash and cash equivalents $232.5 $238.2
Accounts and notes receivable 987.0 960.9
Contracts in process 163.3 155.8
Inventories 319.7 236.1
Net assets of discontinued operations 1,322.4 1,224.6
Deferred income taxes 545.9 254.3
Prepaid expenses and other 969.5 788.1
- ----------------------------------------------------------------------------
Total Current Assets 4,540.3 3,858.0
Satellites - net 4,037.3 3,907.3
Property - net 1,314.6 1,223.0
Net Investment in Sales-type Leases 178.3 146.1
Intangible Assets - net 7,341.8 7,406.0
Investments and Other Assets 2,556.0 2,056.6
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Total Assets $19,968.3 $18,597.0
============================================================================
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities
Accounts payable $1,147.6 $1,062.2
Deferred revenues 132.5 130.5
Short-term borrowings and current
portion of long-term debt 732.6 555.4
Accrued liabilities and other 1,281.5 894.0
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Total Current Liabilities 3,294.2 2,642.1
Long-Term Debt 1,857.2 1,586.0
Other Liabilities and Deferred Credits 1,399.8 1,454.2
Deferred Income Taxes 1,042.7 689.1
Commitments and Contingencies
Minority Interests 564.2 544.3
Stockholder's Equity 11,810.2 11,681.3
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Total Liabilities and Stockholder's Equity $19,968.3 $18,597.0
============================================================================
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).
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
HUGHES ELECTRONICS CORPORATION
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(Registrant)
By
Date April 12, 2000 /s/Roxanne S. Austin
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(Roxanne S. Austin,
Chief Financial Officer)
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