DirecTV in the News

Hughes Reports 85% Revenue Growth in First Quarter

EL SEGUNDO, Calif., April 12 /PRNewswire/ -- 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.

``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.

Hughes had a first quarter 2000 loss of $76.6 million, compared to earnings 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, 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.

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.

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.

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.

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.

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.

Hughes Electronics Corporation is a unit of General Motors Corporation.