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) July 17, 2000
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HUGHES ELECTRONICS CORPORATION
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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 July 17, 2000, a news release was issued on the subject of second
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 40% Revenue growth and
44% EBITDA growth in Second Quarter
Results Driven by Continued Record Sales of DIRECTV(R)Service and Equipment,
and Increased Sales at PanAmSat;
Galaxy Latin America Signs Up 1 Millionth Subscriber
El Segundo, Calif., July 17, 2000 -- Hughes Electronics Corporation
(Hughes), the world's leading provider of digital television entertainment,
satellite services and satellite-based private business networks, today reported
second quarter 2000 revenues increased 39.6% to $1,837.0 million, compared with
$1,316.1 million in the second quarter of 1999. EBITDA1 for the quarter
increased 44.5% to $179.6 million and EBITDA margin1 was 9.8%, compared to
EBITDA of $124.3 million and EBITDA margin of 9.4% in the second quarter of
1999.
"We're continuing to see excellent growth in DIRECTV subscribers, which is
driving our revenue," explained Michael T. Smith, Hughes chairman and chief
executive officer. "This growth is being fueled by particularly strong
subscriber additions in our urban and suburban markets, driven by the
introduction of local channels and growing demand for our unparalleled service."
Additionally, Hughes' 78%-owned Latin American DIRECTV service achieved
its milestone 1 millionth subscriber in June. "We're also seeing an acceleration
in the growth of our Latin American business with subscriber growth more than
doubling in the second quarter," Smith added.
"PanAmSat also contributed to our solid second quarter revenue growth with
the addition of several new sales-type leases of satellite transponders, and it
was the major contributor to our EBITDA growth in the quarter," Smith continued.
"With the launch of PAS-9 scheduled for this month, more than half of PanAmSat's
satellite fleet expansion plan will be complete, positioning them for future
growth."
Hughes had a second quarter 2000 loss2 of $63.8 million, compared to a
loss2 of $92.3 million in the same period for 1999. The lower loss was primarily
due to the net effect of a one-time second quarter 1999 after-tax charge of $76
million due to increased development costs and schedule delays in the satellite
manufacturing businesses, which are now reported as discontinued operations
pending the closure of their sale to The Boeing Company. The higher EBITDA in
the current quarter was offset by an increase in depreciation and amortization
resulting principally from the mid-1999 acquisitions of USSB and PRIMESTAR and
higher net interest expense.
Six-Month Financial Review
For the first half of 2000, revenues increased 58.4% to $3,540.1 million,
compared to $2,234.5 million in the first half of 1999. This growth was
primarily the result of record subscriber growth at DIRECTV in the United
States, as well as additional revenues resulting from the USSB and PRIMESTAR
transactions, higher outright sales and sales-type leases at PanAmSat, and
additional DIRECTV equipment sales at Hughes Network Systems.
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EBITDA for the first six months of 2000 was $332.3 million and EBITDA
margin was 9.4%, compared to EBITDA of $235.3 million and EBITDA margin of 10.5%
in the same period of 1999. The increase in EBITDA was primarily attributable to
higher outright sales and sales-type leases at PanAmSat. The decline in margin
is mainly attributable to the increased marketing costs associated with the
record subscriber growth at DIRECTV in the United States and in Latin America,
and the lower margins associated with PanAmSat's outright sales and sales-type
leases.
For the first six months of 2000, losses2 totaled $140.4 million, compared
to losses2 of $14.0 million in 1999. The higher loss was primarily due to an
increase in depreciation and amortization resulting principally from the
mid-1999 acquisitions of USSB and PRIMESTAR, higher net interest expense, and an
increase in Hughes' portion of the operating losses of DIRECTV Japan (reported
in "Other, net"). Additionally, in the first quarter of 2000, Hughes took a
one-time pre-tax charge of $171 million (also reported in "Other, net") related
to its 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. These increased losses were partially offset by
the higher EBITDA.
Segment Financial Review: Second Quarter 2000
Direct-To-Home Broadcast
Second quarter revenues for the segment increased 43.9% to $1,252.2
million from $870.2 million in the second quarter of 1999. The segment had
negative EBITDA of $14.0 million compared with negative EBITDA of $11.5 million
in the second quarter of 1999.
United States: DIRECTV reported quarterly revenues of $1,129 million, a
45% increase from last year's second quarter revenues of $778 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 452,000 net new subscribers to its high-power
DIRECTV service in the quarter, a 24% increase over the 364,000 net new
subscribers added in the second quarter of 1999. In addition, 430,000 customers
were transitioned from the PRIMESTAR By DIRECTV medium-power service to the
high-power service in the quarter. As of June 30, 2000, DIRECTV had
approximately 8.7 million subscribers, including approximately 435,000 customers
subscribing to PRIMESTAR By DIRECTV.
EBITDA for the second quarter of 2000 was $26 million compared to EBITDA
of $13 million in last year's second quarter. This increase was principally due
to higher EBITDA attained from the larger high-power subscriber base, which more
than offset the higher marketing costs associated with the record subscriber
growth in the quarter, as well as EBITDA contributions from the USSB and
PRIMESTAR transactions.
Latin America: The DIRECTV business in Latin America generated $122 million
in revenues for the quarter, up 58% over the $77 million reported in the second
quarter of 1999. This increase was due to continued strong subscriber growth and
additional revenues resulting from the consolidation of Galaxy Brasil, Ltda.
(GLB)3.
The DIRECTV service in Latin America added 101,000 net new subscribers in
the second quarter of 2000, a 115% increase over the 47,000 acquired in the same
period last year. The total number of DIRECTV subscribers in Latin America as of
June 30, 2000 was 1,010,000.
The DIRECTV business in Latin America had negative EBITDA of $40 million
compared to negative EBITDA of $18 million for the same period in 1999. The
change was primarily due to the impact of the consolidation of GLB and higher
marketing expenses associated with the record subscriber growth.
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Japan: Hughes' share of DIRECTV Japan's loss was $25 million for the
quarter, compared with a loss of $23 million in the second quarter of 1999.
Hughes will continue to report its share of DIRECTV Japan's losses throughout
2000, during which time the business is expected to be discontinued.
Satellite Services
PanAmSat, which is 81% owned by Hughes, generated second quarter 2000
revenues of $322.3 million compared with $200.4 million in the prior year's
period. The 60.8% increase was driven by new sales-type leases of satellite
transponders totaling $123 million, primarily on the recently launched Galaxy XR
and Galaxy IVR satellites serving customers in the United States and Mexico,
respectively. 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.
Second quarter 2000 EBITDA for the segment was $221.4 million, a 46.7%
increase over second quarter 1999 EBITDA of $150.9 million. The increase in
EBITDA was due to the new sales-type leases in the second quarter of 2000.
EBITDA margin in the second quarter of 2000 was 68.7%, compared to 75.3% in the
same period of 1999. This decline was due to the lower margins associated with
the new sales-type leases.
Network Systems
Hughes Network Systems (HNS) grew second quarter 2000 revenues 9.0% to
$371.8 million, versus $341.1 million in the second quarter of 1999. The
increased revenues were driven principally by higher sales of DIRECTV receiver
equipment. HNS shipped 913,000 DIRECTV receiver systems in the second quarter of
2000, compared to 495,000 units in the same period last year. These gains were
partially offset by lower revenues in HNS's wireless equipment business due to
the discontinuation of certain narrowband wireless businesses announced in
January, 2000.
In the quarter, HNS attained EBITDA of $0.8 million and EBITDA margin of
0.2%, compared to EBITDA of $29.5 million and 8.6% in the second quarter of
1999. The decline in EBITDA and EBITDA margin is primarily attributable to
increased investment in the `AOL Plus Powered by DirecPC' broadband product and
lower revenues resulting from the discontinuation of the narrowband wireless
businesses.
BALANCE SHEET
From December 31, 1999 to June 30, 2000, the Company's consolidated cash
balance increased $39.4 million to $277.6 million and total debt increased
$625.9 million to $2,767.3 million. The principal cash requirements for the
first six 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 are used to calculate the earnings per share 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 Equals reported Net Loss excluding the effects of purchase accounting
adjustments related to General Motors' acquisition of Hughes in 1985.
3 Galaxy Brasil, Ltda. (GLB) is the local operating company providing DIRECTV
service in Brazil, and its results have been consolidated since July of
1999 when Hughes purchased a majority ownership position.
###
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STATEMENTS OF OPERATIONS AND
AVAILABLE SEPARATE CONSOLIDATED NET LOSS
(Dollars in Millions)
(Unaudited)
Six Months Ended
Second Quarter June 30,
2000 1999 2000 1999
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Revenues
Direct broadcast, leasing, and
other services $1,565.4 $1,060.9 $3,037.8 $1,802.0
Product sales 271.6 255.2 502.3 432.5
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Total Revenues 1,837.0 1,316.1 3,540.1 2,234.5
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Operating Costs and Expenses
Broadcast programming and
other costs 686.7 478.3 1,354.5 778.0
Cost of products sold 234.7 207.8 433.0 358.2
Selling, general, and
administrative expenses 736.0 505.7 1,420.3 863.0
Depreciation and amortization 224.6 153.2 434.8 271.3
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Total Operating Costs and
Expenses 1,882.0 1,345.0 3,642.6 2,270.5
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Operating Loss (45.0) (28.9) (102.5) (36.0)
Interest income 4.3 4.6 8.2 18.2
Interest expense (57.8) (12.4) (102.7) (19.3)
Other, net (43.3) (34.1) (282.5) (64.7)
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Loss from Continuing Operations
Before Income Taxes and
Minority Interests (141.8) (70.8) (479.5) (101.8)
Income tax benefit (54.8) (9.5) (276.6) (22.9)
Minority interests in net losses
of subsidiaries 4.5 6.8 12.1 13.3
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Loss from continuing operations (82.5) (54.5) (190.8) (65.6)
Income (loss) from discontinued
operations, net of taxes 13.4 (43.1) 39.8 41.0
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Net Loss (69.1) (97.6) (151.0) (24.6)
Adjustments to exclude the effect
of GM purchase accounting
adjustments 5.3 5.3 10.6 10.6
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Loss Excluding the Effect of
GM Purchase Accounting
Adjustments (63.8) (92.3) (140.4) (14.0)
Preferred stock dividends (24.1) (1.6) (48.8) (1.6)
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Loss Used for Computation of
Available Separate Consolidated
Net Loss ($87.9) ($93.9) ($189.2) ($15.6)
=============================================================================
Available Separate Consolidated Net Loss
Average number of shares of
General Motors Class H Common
Stock outstanding (in millions)
(Numerator) 562.7 363.0 488.0 340.8
Average Class H dividend base
(in millions)(Denominator) 1,297.0 1,244.7 1,295.8 1,222.5
Available Separate Consolidated
Net Loss ($38.1) ($27.4) ($71.3) ($4.3)
=============================================================================
Certain 1999 amounts have been reclassified to conform with the
2000 presentation.
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SELECTED SEGMENT DATA
(Dollars in Millions)
(Unaudited)
Six Months Ended
Second Quarter June 30,
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2000 1999 2000 1999
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DIRECT-TO-HOME BROADCAST
Total Revenues $1,252.2 $870.2 $2,426.0 $1,426.8
EBITDA (1) $(14.0) $(11.5) $(23.2) $(9.1)
Operating Loss $(134.8) $(73.1) $(260.8) $(98.0)
Depreciation and Amortization $120.8 $61.6 $237.6 $88.9
Capital Expenditures (2) 219.1 $78.2 387.1 $155.8
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SATELLITE SERVICES
Total Revenues $322.3 $200.4 $621.4 $393.9
EBITDA (1) $221.4 $150.9 $422.4 $296.9
EBITDA Margin (1) 68.7% 75.3% 68.0% 75.4%
Operating Profit $139.8 $82.4 $267.1 $160.7
Operating Profit Margin 43.4% 41.1% 43.0% 40.8%
Depreciation and Amortization $81.6 $68.5 $155.3 $136.2
Capital Expenditures (3) $50.2 $135.4 $208.2 $475.2
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NETWORK SYSTEMS
Total Revenues $371.8 $341.1 $736.3 $572.0
EBITDA (1) $0.8 $29.5 $17.6 $30.7
EBITDA Margin (1) 0.2% 8.6% 2.4% 5.4%
Operating Profit (Loss) $(17.1) $9.7 $(17.0) $(8.2)
Operating Profit Margin N/A 2.8% N/A N/A
Depreciation and Amortization $17.9 $19.8 $34.6 $38.9
Capital Expenditures (4) $94.2 $70.6 $161.8 $72.8
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ELIMINATIONS and OTHER
Total Revenues $(109.3) $(95.6) $(243.6) $(158.2)
EBITDA (1) $(28.6) $(44.6) $(84.5) $(83.2)
Operating Loss $(32.9) $(47.9) $(91.8) $(90.5)
Depreciation and Amortization $4.3 $3.3 $7.3 $7.3
Capital Expenditures $1.6 $(18.4) $22.3 $(50.6)
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TOTAL
Total Revenues $1,837.0 $1,316.1 $3,540.1 $2,234.5
EBITDA (1) $179.6 $124.3 $332.3 $235.3
EBITDA Margin (1) 9.8% 9.4% 9.4% 10.5%
Operating Loss $(45.0) $(28.9) $(102.5) $(36.0)
Depreciation and Amortization $224.6 $153.2 $434.8 $271.3
Capital Expenditures $365.1 $265.8 $779.4 $653.2
==========================================================================
Certain 1999 amounts have been reclassified to conform with the 2000
presentation.
(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 $24.1 million,
$22.5 million, $35.7 million, and $75.5 million, respectively.
(3)Includes expenditures related to satellites amounting to $31.1 million,
$125.9 million, $177.1 million, and $315.6 million, respectively. Also
included in the first six months of 1999 is $141.3 million related to the
early buy-out of satellite sale-leaseback.
(4)Includes expenditures related to satellites amounting to $70.8 million,
$46.9 million, $124.5 million, and $46.9 million, respectively.
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BALANCE SHEET
(Dollars in Millions)
June 30,
2000 December 31,
ASSETS (Unaudited) 1999
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Current Assets
Cash and cash equivalents $277.6 $238.2
Accounts and notes receivable 1,048.8 960.9
Contracts in process 148.3 155.8
Inventories 327.8 236.1
Net assets of discontinued operations 1,201.3 1,224.6
Deferred income taxes 536.6 254.3
Prepaid expenses and other 776.3 788.1
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Total Current Assets 4,316.7 3,858.0
Satellites - net 4,096.1 3,907.3
Property - net 1,441.0 1,223.0
Net Investment in Sales-type Leases 262.5 146.1
Intangible Assets - net 7,271.2 7,406.0
Investments and Other Assets 2,336.8 2,056.6
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Total Assets $19,724.3 $18,597.0
============================================================================
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities
Accounts payable $1,044.7 $1,062.2
Deferred revenues 147.0 130.5
Short-term borrowings and current portion of
long-term debt 850.8 555.4
Accrued liabilities and other 1,244.5 894.0
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Total Current Liabilities 3,287.0 2,642.1
Long-Term Debt 1,916.5 1,586.0
Other Liabilities and Deferred Credits 1,431.9 1,454.2
Deferred Income Taxes 940.0 689.1
Commitments and Contingencies
Minority Interests 592.2 544.3
Stockholder's Equity 11,556.7 11,681.3
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Total Liabilities and Stockholder's Equity $19,724.3 $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 July 18, 2000 /s/Roxanne S. Austin
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(Roxanne S. Austin,
Chief Financial Officer)
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