Filed by General Motors Corporation
Subject Company - General Motors Corporation
and Hughes Electronics Corporation
and EchoStar Communications Corporation
Pursuant to Rule 425 under the Securities Act of 1933
and Deemed Filed Pursuant to Rule 14a-12
under the Securities Exchange Act of 1934
Commission File No.: 333-84472
[HUGHES LOGO]
MEDIA CONTACT: RICHARD DORE (310) 662-9670
INVESTOR RELATIONS: (310) 662-9688
HUGHES THIRD QUARTER 2002 RESULTS DRIVEN BY CONTINUED STRONG DIRECTV
U.S. FINANCIAL PERFORMANCE
DIRECTV U.S. REVENUES INCREASE 19% TO 1,616 MILLION; EBITDA
INCREASES NEARLY TEN FOLD TO $196 MILLION
EL SEGUNDO, CALIF., OCTOBER 14, 2002 -- Hughes Electronics
Corporation, a world-leading provider of digital television entertainment,
broadband services, satellite-based private business networks, and global video
and data broadcasting, today reported third quarter 2002 revenues increased 5.3%
to $2,214.2 million, compared with $2,103.3 million in the third quarter of
2001. EBITDA1 for the quarter increased to $243.5 million compared with $76.5
million in the third quarter of last year. EBITDA margin1 was 11.0% in the
quarter compared with an EBITDA margin of 3.6% last year. Included in the 2001
third quarter results were one time charges primarily related to severance of
$65.3 million. Excluding these charges, EBITDA was $141.8 million and EBITDA
margin was 6.7%. The operating loss for the third quarter of 2002 was $23.0
million compared with an operating loss (excluding the severance charges) of
$138.4 million in the third quarter of 2001.
"The increases in HUGHES' third quarter revenues and EBITDA were
driven mainly by superior operating performance at DIRECTV U.S.," said Jack A.
Shaw, HUGHES' president and chief executive officer. "Over the past few
quarters, we have implemented several changes at the DIRECTV U.S. business that
were specifically designed to maximize subscriber returns and cash flow. For
example, we have reduced our distribution costs while improving subscriber
activation rates, changed the pricing on our programming packages to create
better value for customers and improve our margins, and we continue to
vigorously attack the pirates who are illegally receiving our service. As a
result of these changes, we believe that we are attaining higher quality
customers and achieving a better return on our subscriber investment--albeit
sometimes at the expense of faster subscriber growth. Considering the 19%
increase in DIRECTV U.S. quarterly revenues and a nearly ten-fold increase in
EBITDA compared with last year, it is clear that these changes are generating
the desired results."
Shaw continued, "In the third quarter, DIRECTV U.S added 206,000 net
subscribers compared with our original estimate for the quarter of 250,000 -
300,000 subscribers. This shortfall was due to increased churn resulting from
our decision to aggressively fight signal piracy by replacing customers' older
generation conditional access cards as well as slightly lower than expected
sales through our national distribution network. At the same time, consistent
with our goal to maximize profitability, third quarter DIRECTV U.S. EBITDA of
$196 million was 31% higher than our original guidance."
Regarding the pending merger with EchoStar Communications, Shaw
added, "We are disappointed that the Federal Communications Commission has
designated the matter for administrative hearing. We will continue to work
aggressively within the context of the FCC and Department of Justice processes
to achieve approval of the merger."
For the full year, HUGHES is reducing its consolidated revenue
forecast to a range of $8.9 billion to $9.0 billion from a prior range of $9.0
billion to $9.2 billion and is updating its EBITDA guidance to approximately
$750 million from a range of $750 million to $850 million. The benefits from the
increase in DIRECTV U.S.' full year revenue and EBITDA guidance due to its
continued strong performance is more than offset by the negative effects from
the devaluation impact on DIRECTV Latin America and the slumping
telecommunications market on HNS. HUGHES is also improving its guidance for cash
requirements to approximately $700 million from a prior range of $1.2 billion to
$1.4 billion. The improvement is mostly due to the cash provided from the sale
of equity investments as well as ongoing efforts to conserve cash. Please see
the table at the end of this press release for a complete listing of HUGHES'
current guidance.
The improvements in DIRECTV U.S. revenues and EBITDA in the third
quarter were partially offset by the further devaluation of several foreign
currencies which has negatively impacted the DIRECTV business in Latin America,
the absence of sales-type lease contracts at PanAmSat and lower sales in the
Carrier businesses of Hughes Network Systems (HNS).
In the third quarter of 2002, HUGHES reported an operating loss of
$23.0 million compared with an operating loss of $203.7 million in 2001. This
lower operating loss was due to the higher EBITDA and the elimination of
approximately $70 million of amortization expense for goodwill and intangible
assets in 2002 in accordance with Statement of Financial Accounting Standards
Number 142 "Goodwill and Other Intangible Assets" (SFAS 142). These changes were
partially offset by higher depreciation expense, mostly at DIRECTV U.S. due to
the launch of two new satellites and additional infrastructure expenditures made
during the last year.
HUGHES had a third quarter 2002 net loss of $13.6 million compared to
a net loss of $227.2 million in the same period of 2001. In addition to the
lower operating loss, also impacting the results in the third quarter of 2002
was a pre-tax gain of $158 million resulting from the sale of 8.8 million shares
of Thomson Multimedia common stock, a $32 million write-down of two equity
investments, a pre-tax loss of $25 million related to the sale of SkyPerfecTV!
common stock and increased net interest expense. The third quarter 2001 net loss
included a pre-tax charge of $212 million from the write-down of HUGHES'
SkyPerfecTV! investment, a pre-tax gain of $108 million that resulted from the
sale of 4.1 million shares of Thomson Multimedia common stock, and a favorable
adjustment to the expected costs associated with the shutdown of the DIRECTV
Japan business.
NINE-MONTH FINANCIAL REVIEW
For the first nine months of 2002, revenues increased 8.0% to
$6,462.1 million compared to $5,981.4 million in the first nine months of 2001.
This increase was primarily due to continued subscriber growth at DIRECTV in the
United States partially offset by lower sales in the Carrier businesses of HNS
and the absence of sales-type lease contracts at PanAmSat.
EBITDA through September of 2002 was $500.8 million and EBITDA margin
was 7.7%, compared to EBITDA of $271.7 million and EBITDA margin of 4.5% in the
first nine months of 2001. The 84.3% increase in EBITDA and the increase in
2
EBITDA margin were primarily attributable to additional gross profit gained from
the DIRECTV U.S. 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 the $65 million charge primarily related to
severance recorded in 2001. 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, and a one-time EBITDA charge of
$48 million related to losses associated with the final settlement of a
contractual dispute with General Electric Capital Corporation (GECC).
HUGHES' operating loss for the first nine months of 2002 was $289.3
million compared with an operating loss of $579.2 million in the same period of
2001. The lower loss was due to the higher EBITDA and the elimination of
approximately $204 million of amortization expense for goodwill and intangible
assets in 2002 in accordance with SFAS 142. These changes were partially offset
by higher depreciation expense, 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 nine months of 2002, net losses totaled $325.1 million
compared to net losses of $489.0 million in the same period of 2001. The lower
net loss was principally due to the lower operating loss, the write-down of
HUGHES' SkyPerfecTV! investment in 2001, the larger pre-tax gain on the sale of
HUGHES' Thomson Multimedia common stock in 2002 compared to 2001, and an
improved effective tax rate due to the favorable resolution of certain tax
contingencies. These improvements were partially offset by an increase in net
interest expense including a charge of $74 million related to the GECC
settlement in 2002 and the discontinuation of the minority interest adjustment
related to DIRECTV Latin America.
SEGMENT FINANCIAL REVIEW: THIRD QUARTER 2002
DIRECT-TO-HOME BROADCAST
Third quarter 2002 revenues for the segment increased 13.3% to
$1,781.0 million from $1,572.6 million in the third quarter of 2001. The segment
had EBITDA of $139.4 million compared with negative EBITDA of $74.2 million in
the third quarter of 2001. Operating loss was $29.6 million in the third quarter
of 2002 compared with an operating loss of $245.4 million in the same period
last year.
UNITED STATES: Excluding subscribers in the National Rural
Telecommunications Cooperative (NRTC) territories, DIRECTV's owned and operated
gross subscriber additions in the quarter were 682,000 and after accounting for
churn, DIRECTV added 206,000 net subscribers. DIRECTV owned and operated
subscribers totaled 9.20 million as of September 30, 2002, 14% more than the
8.05 million cumulative subscribers attained as of September 30, 2001. For the
third quarter of 2002, the total number of subscribers in NRTC territories fell
by 31,000, reducing the total number of NRTC subscribers as of September 30,
2002, to 1.72 million. As a result, the DIRECTV platform ended the quarter with
10.92 million total subscribers.
DIRECTV reported quarterly revenues of $1,616 million, an increase of
19% from last year's third quarter revenues of $1,363 million. The increase was
due to continued subscriber growth and higher monthly revenue per subscriber.
3
EBITDA for the third quarter of 2002 was $196 million. Excluding a
$48 million one-time charge primarily related to severance, EBITDA in the same
period of 2001 was $20 million. The increased EBITDA was primarily due to the
additional gross profit gained from DIRECTV's increased revenue, lower general
and administrative expenses and lower subscriber acquisition costs. Operating
profit in the current quarter increased to $94 million compared with an
operating loss, excluding the severance charge, of $93 million in 2001
principally due to the improved EBITDA and reduced amortization expense in
accordance with SFAS 142. These increases were partially offset by higher
depreciation expense, mostly related to the launch of the DIRECTV 4S satellite
in December 2001 and DIRECTV 5 in May 2002, as well as additional infrastructure
expenditures made during the last year.
Please refer to the "Selected DIRECTV U.S. Financial Highlights"
attachment for additional information on DIRECTV's subscribers and other
important financial metrics.
DIRECTV DSL: In the third quarter of 2002, the DIRECTV DSL service
added approximately 18,000 net customers. As of September 30, 2002, DIRECTV DSL
had about 151,000 residential broadband customers in the United States compared
with about 73,000 customers as of September 30, 2001, representing an increase
of approximately 107%.
The DIRECTV DSL service had third quarter 2002 revenues of $20
million compared with $9 million reported in the third quarter of 2001. The
increase was driven by the larger subscriber base and an increase in monthly
revenue per subscriber.
DIRECTV DSL had negative EBITDA of $27 million in the quarter
compared with negative EBITDA of $33 million in the same period last year. This
improvement was driven by the additional gross profit gained from the revenue
growth as well as improved operational efficiencies. DIRECTV DSL's operating
loss in the third quarter of 2002 decreased to $40 million compared with an
operating loss of $44 million in 2001 primarily due to the improved EBITDA.
LATIN AMERICA: Due to extremely difficult economic conditions in
several countries throughout the region, the DIRECTV service in Latin America
lost 65,000 net subscribers in the third quarter of 2002. As a result, the total
number of subscribers in Latin America as of the end of the quarter was
approximately 1,604,000 compared with about 1,497,000 as of September 30, 2001.
4
Revenues for DIRECTV Latin America were $146 million for the quarter
compared with $201 million in the third quarter of 2001. This decrease was due
to the devaluation of several foreign currencies, the most significant of which
was in Argentina.
DIRECTV Latin America had negative EBITDA of $29 million in the
quarter. Excluding a $10 million one-time charge primarily related to severance,
EBITDA in the same period of 2001 was negative $7 million. The decrease in
EBITDA was primarily due to the devaluation of several foreign currencies in the
region. DIRECTV Latin America's operating loss increased to $84 million in the
quarter from an operating loss, excluding the severance charge, of $53 million
in the same period of 2001. The increased loss was due to the increased negative
EBITDA and higher depreciation expense associated with additional infrastructure
expenditures partially offset by reduced amortization expense in accordance with
SFAS 142.
SATELLITE SERVICES
PanAmSat, which is 81%-owned by HUGHES, generated third quarter 2002
revenues of $199.1 million compared with $252.9 million in the same period of
the prior year. EBITDA for the quarter was $145.4 million and EBITDA margin was
73.0%. Excluding an approximately $7 million one-time charge primarily related
to severance, EBITDA in the third quarter of 2001 was $173.1 million and EBITDA
margin was 68.5%. The decrease in revenues and EBITDA was primarily due to a $46
million sales-type lease recorded in the third quarter of 2001. The increase in
EBITDA margin was primarily due to the company's continued focus on reducing its
operating costs. Operating profit for the quarter was $66.4 million compared
with operating profit, excluding the severance charge, of $69.0 million in the
third quarter of 2001. The decline was primarily due to the reduced EBITDA
mostly offset by lower amortization expense in accordance with SFAS 142 and
lower depreciation expense.
As of September 30, 2002, PanAmSat had contracts for satellite
services representing future payments (backlog) of over $5.50 billion compared
to approximately $5.55 billion at the end of the second quarter of 2002.
NETWORK SYSTEMS
Hughes Network Systems (HNS) generated third quarter 2002 revenues of
$300.2 million compared with $339.7 million in the third quarter of 2001. The
decline was due to lower sales in the Carrier businesses primarily related to
the substantial completion of the XM Satellite Radio and Thuraya Satellite
Telecommunications Company contracts partially offset by higher DIRECTV receiver
shipments. HNS shipped 737,000 DIRECTV receiver systems in the third quarter of
2002 compared to 500,000 units in the same period last year.
Additionally, HNS added approximately 15,000 net DIRECWAY residential
and small office/home office (SOHO) broadband customers in the quarter. As of
September 30, 2002, DIRECWAY had approximately 138,000 residential and SOHO
subscribers in North America compared to 87,000 one year ago, a 59% increase.
Excluding one-time adjustments of $9 million for severance costs and
an inventory provision, HNS reported negative EBITDA of $16.5 million in the
quarter compared to negative EBITDA of $22.6 million in the third quarter of
2001. Improved margins in the Satellite Broadband and Set-Top Box businesses
were partially offset by the lower EBITDA associated with the decline in sales
in the Carrier businesses. HNS' operating loss of $36.5 million, before the
one-time adjustments, was slightly higher than the prior year's loss of $35.1
million. The change in operating loss was attributable to the increased
depreciation and amortization expense associated with additional infrastructure
expenditures, partially offset by the improved EBITDA.
BALANCE SHEET
From December 31, 2001 to September 30, 2002, the company's
consolidated cash balance increased $163.1 million to $863.2 million and total
debt increased $728.7 million to $3,376.0 million. The major uses of cash were
$1,030.7 million for satellite and capital expenditures, the payment of $180
million to GECC and the final purchase price adjustment payment of $134 million
to the Raytheon Company. Additionally, in the first nine months of 2002 were
5
receipts of $215 million from an insurance claim on the PAS-7 satellite, $211
million for the sale of Thomson Multimedia common stock and $95 million from the
resolution of the breach of contract lawsuit with NASA.
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).
A live webcast of HUGHES' third quarter 2002 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) 981-5572. The
webcast will be archived on the Investor Relations portion of the HUGHES website
and a replay will be available (dial in number: 719-457-0820, code: 278463)
beginning at 2:00 p.m. ET on Wednesday, October 16.
6
HUGHES FINANCIAL GUIDANCE
---------------------------------- ------------------------------- ------------------------------ ------------------------------
FOURTH QUARTER 2002 PRIOR FULL YEAR 2002 REVISED FULL YEAR 2002
---------------------------------- ------------------------------- ------------------------------ ------------------------------
HUGHES
---------------------------------- ------------------------------- ------------------------------ ------------------------------
Revenues $2.4 - $2.5B $9.0 - 9.2B $8.9 - 9.0B
---------------------------------- ------------------------------- ------------------------------ ------------------------------
EBITDA $225 - $275M $750 - 850M ~$750M
---------------------------------- ------------------------------- ------------------------------ ------------------------------
Cash Requirements ~$300M $1.2 - 1.4B ~$700M
---------------------------------- ------------------------------- ------------------------------ ------------------------------
DIRECTV U.S.
---------------------------------- ------------------------------- ------------------------------ ------------------------------
Revenues ~$1.75B ~$6.3B ~$6.38B
---------------------------------- ------------------------------- ------------------------------ ------------------------------
EBITDA ~$150M $525 - 545M# ~$580M#
---------------------------------- ------------------------------- ------------------------------ ------------------------------
Net Subscriber Adds 250 - 300K## ~1.2M## 1.0 - 1.05M##
---------------------------------- ------------------------------- ------------------------------ ------------------------------
DIRECTV DSL
---------------------------------- ------------------------------- ------------------------------ ------------------------------
Revenues $20 -25M ~$75M No Change
---------------------------------- ------------------------------- ------------------------------ ------------------------------
EBITDA ~$(30)M $(110) - (120)M No Change
---------------------------------- ------------------------------- ------------------------------ ------------------------------
Net Subscriber Adds 10 - 25K 70 - 85K No Change
---------------------------------- ------------------------------- ------------------------------ ------------------------------
DIRECTV LATIN AMERICA
---------------------------------- ------------------------------- ------------------------------ ------------------------------
Revenues $130 - 160M $745-765M $670 - 700M
---------------------------------- ------------------------------- ------------------------------ ------------------------------
EBITDA $(10) - 10M $(135) - (155)M $(180) - (200)M
---------------------------------- ------------------------------- ------------------------------ ------------------------------
Net Subscriber Adds ~0 120 - 140K ~0
---------------------------------- ------------------------------- ------------------------------ ------------------------------
HUGHES NETWORK SYSTEMS
---------------------------------- ------------------------------- ------------------------------ ------------------------------
Revenues ~$400M ~$1.3B ~$1.2B
---------------------------------- ------------------------------- ------------------------------ ------------------------------
EBITDA $(5) - 5M $(50) - (75)M $(85) - (95)M
---------------------------------- ------------------------------- ------------------------------ ------------------------------
DIRECWAY Net Sub Adds ~35K ~100K ~75K
---------------------------------- ------------------------------- ------------------------------ ------------------------------
PANAMSAT
---------------------------------- ------------------------------- ------------------------------ ------------------------------
Revenues $190 - 200M $790 - 825M $805 - 815M
---------------------------------- ------------------------------- ------------------------------ ------------------------------
New Outright Sales and Sales- None No Change
Type Leases None
---------------------------------- ------------------------------- ------------------------------ ------------------------------
EBITDA Margin ~72% 70% or higher 72% or higher
---------------------------------- ------------------------------- ------------------------------ ------------------------------
EBITDA $135 - 150M $570 - 590M $580 - 595M
---------------------------------- ------------------------------- ------------------------------ ------------------------------
# Excludes $56 million EBITDA charge for loss related to GECC lawsuit
## Excludes subscribers in NRTC territories
------------------------
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. EBITDA is not presented as
an alternative measure of operating results or cash flow from operations, as
determined in accordance with accounting principles generally accepted in the
United States of America. EBITDA does not reflect the funds available for
investment in the business of HUGHES, dividends or other discretionary uses.
EBITDA as presented herein may not be comparable to similarly titled measures
reported by other companies.
###
7
SELECTED DIRECTV U.S. FINANCIAL HIGHLIGHTS
---------------------------------------------------------------------------------------------------------------------------------
Quarters Ended
-----------------------------------------------------------------------------
9/30/2001 12/31/2001 3/31/2002 6/30/2002 9/30/2002
--------- ---------- --------- --------- ---------
DIRECTV U.S. KEY PERFORMANCE METRICS
---------------------------------------------------------------------------------------------------------------------------------
Average Revenue per User (ARPU), $ (1) $57.30 $61.35 $56.70 $58.10 $59.20
---------------------------------------------------------------------------------------------------------------------------------
Subscriber Acquisition Cost (SAC), $ (2) $560 $565 $525 $530 $535
---------------------------------------------------------------------------------------------------------------------------------
Churn, % (3) 1.9% 1.7% 1.6% 1.7% 1.7%
---------------------------------------------------------------------------------------------------------------------------------
Pre-Marketing Cash Flow (PMCF), % 40% 38% 39% 40% 41%
---------------------------------------------------------------------------------------------------------------------------------
SUBSCRIBER DETAIL (IN MILLIONS)
----------------------------------------------------
DIRECTV - Owned & Operated
---------------------------------------------------------------------------------------------------------------------------------
Residential 7.55 7.88 8.27 8.46 8.68
---------------------------------------------------------------------------------------------------------------------------------
Commercial 0.31 0.33 0.34 0.37 0.38
---------------------------------------------------------------------------------------------------------------------------------
Suspended 0.19 0.23 0.18 0.16 0.14
---------------------------------------------------------------------------------------------------------------------------------
Total DIRECTV - Owned & Operated (4) 8.05 8.44 8.79 8.99 9.20
---------------------------------------------------------------------------------------------------------------------------------
NRTC, Total (5) 1.87 1.89 1.75 1.75 1.72
---------------------------------------------------------------------------------------------------------------------------------
Grand Total 9.92 10.33 10.54 10.74 10.92
----------------------------------------------------=============================================================================
(1) Total revenue divided by average period-end total DIRECTV Owned & Operated
customers
(2) Sales and marketing acquisition costs divided by DIRECTV Owned & Operated
customer gross adds in the period; includes advanced and leased set-top
boxes
(3) Net customer disconnects divided by average period-end DIRECTV Owned and
Operated customers
(4) Excludes pending customers to reflect policy change effective 1/1/02
(5) Reflects DIRECTV billing system data except Q1 and Q2 2002 which also
reflect Pegasus Communicatons Corp. policy change and adjustments reported
in Pegasus' Form 10Q filings
CONSOLIDATED STATEMENTS OF OPERATIONS AND
AVAILABLE SEPARATE CONSOLIDATED NET INCOME (LOSS)
(DOLLARS IN MILLIONS)
(UNAUDITED)
Nine Months
Third Quarter Ended September 30,
------------------------------ --------------------------------
2002 2001 2002 2001
------------------------------------------------------------------------------------------------- --------------------------------
REVENUES
Direct broadcast, leasing and other services $1,972.3 $1,830.9 $5,834.3 $5,267.7
Product sales 241.9 272.4 627.8 713.7
----------------------------------------------------------------------------------------------------------------------------------
TOTAL REVENUES 2,214.2 2,103.3 6,462.1 5,981.4
----------------------------------------------------------------------------------------------------------------------------------
Operating Costs and Expenses, Exclusive of Depreciation and
AMORTIZATION EXPENSE SHOWN BELOW
Broadcast programming and other costs 957.2 830.1 2,939.3 2,355.4
Cost of products sold 209.5 246.7 567.2 590.4
Selling, general and administrative expenses 804.0 950.0 2,454.8 2,763.9
Depreciation and amortization 266.5 280.2 790.1 850.9
----------------------------------------------------------------------------------------------------------------------------------
TOTAL OPERATING COSTS AND EXPENSES 2,237.2 2,307.0 6,751.4 6,560.6
----------------------------------------------------------------------------------------------------------------------------------
OPERATING LOSS (23.0) (203.7) (289.3) (579.2)
Interest income 5.4 9.4 17.1 52.2
Interest expense (76.4) (40.6) (275.1) (134.0)
Other, net 78.7 (86.3) 46.0 (90.0)
----------------------------------------------------------------------------------------------------------------------------------
LOSS BEFORE INCOME TAXES, MINORITY INTERESTS AND
CUMULATIVE EFFECT OF ACCOUNTING CHANGE (15.3) (321.2) (501.3) (751.0)
Income tax benefit 5.8 93.1 190.5 217.8
Minority interests in net (earnings) losses of subsidiaries (4.1) 0.9 (14.3) 51.6
----------------------------------------------------------------------------------------------------------------------------------
Loss before cumulative effect of accounting change (13.6) (227.2) (325.1) (481.6)
Cumulative effect of accounting change, net of taxes - - - (7.4)
----------------------------------------------------------------------------------------------------------------------------------
NET LOSS (13.6) (227.2) (325.1) (489.0)
Adjustment to exclude the effect of GM purchase accounting - 0.9 - 2.5
----------------------------------------------------------------------------------------------------------------------------------
Loss excluding the effect of GM purchase accounting (13.6) (226.3) (325.1) (486.5)
Preferred stock dividends - (24.1) (46.9) (72.3)
----------------------------------------------------------------------------------------------------------------------------------
LOSS USED FOR COMPUTATION OF AVAILABLE SEPARATE CONSOLIDATED
NET INCOME (LOSS) $(13.6) $(250.4) $(372.0) $(558.8)
==================================================================================================================================
AVAILABLE SEPARATE CONSOLIDATED NET INCOME (LOSS)
Average number of shares of General Motors Class H
Common Stock outstanding (in millions) (Numerator) 958.1 876.8 906.6 876.0
Average Class H dividend base (in millions) (Denominator) 1,381.7 1,300.5 1,330.2 1,299.7
Available Separate Consolidated Net Income (Loss) $(9.4) $(168.8) $(253.5) $(376.6)
==================================================================================================================================
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN MILLIONS)
September 30,
2002 December 31,
ASSETS (Unaudited) 2001
------------------------------------------------------------------------------------------------------------------------
CURRENT ASSETS
Cash and cash equivalents $863.2 $700.1
Accounts and notes receivable 1,068.8 1,090.5
Contracts in process 142.8 153.1
Inventories 272.6 360.1
Deferred income taxes 143.6 118.9
Prepaid expenses and other 955.7 918.4
------------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 3,446.7 3,341.1
SATELLITES, NET 4,940.2 4,806.6
PROPERTY, NET 2,138.6 2,197.8
GOODWILL, NET 6,715.3 6,496.6
INTANGIBLE ASSETS, NET 445.9 660.2
NET INVESTMENT IN SALES-TYPE LEASES 167.8 227.0
INVESTMENTS AND OTHER ASSETS 910.2 1,480.8
------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $18,764.7 $19,210.1
========================================================================================================================
LIABILITIES AND STOCKHOLDER'S EQUITY
------------------------------------------------------------------------------------------------------------------------
CURRENT LIABILITIES
Accounts payable $1,143.9 $1,227.5
Deferred revenues 190.4 178.5
Short-term borrowings and current portion of long-term debt 985.4 1,658.5
Accrued liabilities and other 1,230.9 1,342.0
------------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 3,550.6 4,406.5
LONG-TERM DEBT 2,390.6 988.8
OTHER LIABILITIES AND DEFERRED CREDITS 1,250.2 1,465.1
DEFERRED INCOME TAXES 560.5 746.5
COMMITMENTS AND CONTINGENCIES
MINORITY INTERESTS 547.6 531.3
STOCKHOLDER'S EQUITY 10,465.2 11,071.9
------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $18,764.7 $19,210.1
========================================================================================================================
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)
Nine Months
Third Quarter Ended September 30,
---------------------------------- ----------------------------------------
2002 2001 2002 2001
--------------------------------------------------------------------------------------------------------------------------------
DIRECT-TO-HOME BROADCAST
Total Revenues $ 1,781.0 $ 1,572.6 $ 5,218.5 $ 4,590.2
EBITDA (1) $ 139.4 $ (74.2) $ 97.4 $ (69.5)
EBITDA Margin (1) 7.8% N/A 1.9% N/A
Operating Loss $ (29.6) $ (245.4) $ (381.5) $ (573.8)
Depreciation and Amortization $ 169.0 $ 171.2 $ 478.9 $ 504.3
Capital Expenditures $ 103.9 $ 168.6 $ 400.6 $ 522.5
--------------------------------------------------------------------------------------------------------------------------------
SATELLITE SERVICES
Total Revenues $ 199.1 $ 252.9 $ 615.5 $ 666.4
EBITDA (1) $ 145.4 $ 166.2 $ 447.2 $ 440.7
EBITDA Margin (1) 73.0% 65.7% 72.7% 66.1%
Operating Profit $ 66.4 $ 62.1 $ 184.5 $ 136.0
Operating Profit Margin 33.4% 24.6% 30.0% 20.4%
Depreciation and Amortization $ 79.0 $ 104.1 $ 262.7 $ 304.7
Capital Expenditures $ 76.5 $ 80.3 $ 260.0 $ 241.7
--------------------------------------------------------------------------------------------------------------------------------
NETWORK SYSTEMS
Total Revenues $ 300.2 $ 339.7 $ 797.4 $ 890.1
EBITDA (1) $ (25.5) $ (22.6) $ (88.1) $ (97.7)
Operating Loss $ (45.5) $ (35.1) $ (142.7) $ (144.2)
Depreciation and Amortization $ 20.0 $ 12.5 $ 54.6 $ 46.5
Capital Expenditures $ 99.3 $ 121.9 $ 315.4 $ 467.2
--------------------------------------------------------------------------------------------------------------------------------
ELIMINATIONS AND OTHER
Total Revenues $ (66.1) $ (61.9) $ (169.3) $ (165.3)
EBITDA (1) $ (15.8) $ 7.1 $ 44.3 $ (1.8)
Operating Profit (Loss) $ (14.3) $ 14.7 $ 50.4 $ 2.8
Depreciation and Amortization $ (1.5) $ (7.6) $ (6.1) $ (4.6)
Capital Expenditures $ 22.6 $ (4.8) $ 54.7 $ (4.0)
--------------------------------------------------------------------------------------------------------------------------------
TOTAL
Total Revenues $ 2,214.2 $ 2,103.3 $ 6,462.1 $ 5,981.4
EBITDA (1) $ 243.5 $ 76.5 $ 500.8 $ 271.7
EBITDA Margin (1) 11.0% 3.6% 7.7% 4.5%
Operating Loss $ (23.0) $ (203.7) $ (289.3) $ (579.2)
Depreciation and Amortization $ 266.5 $ 280.2 $ 790.1 $ 850.9
Capital Expenditures $ 302.3 $ 366.0 $ 1,030.7 $ 1,227.4
================================================================================================================================
(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. EBITDA
is not presented as an alternative measure of operating results or cash
flow from operations, as determined in accordance with accounting
principles generally accepted in the United States of America. EBITDA does
not reflect the funds available for investment in the business of HUGHES,
dividends or other discretionary uses. EBITDA as presented herein may not
be comparable to similarly titled measures reported by other companies.
NOTE: In connection with the proposed transactions, General Motors Corporation
("GM"), HEC Holdings, Inc. ("Hughes Holdings") and EchoStar Communications
Corporation ("EchoStar") have filed amended preliminary materials with the
Securities and Exchange Commission ("SEC"), including a Registration Statement
of Hughes Holdings on Form S-4 that contains a consent solicitation
statement/information statement/prospectus. These materials are not yet final
and will be further amended. Holders of GM $1-2/3 and GM Class H common stock
are urged to read the definitive versions of these materials, as well as any
other relevant documents filed or that will be filed with the SEC, as they
become available, because these documents contain or will contain important
information. The preliminary materials, the definitive versions of these
materials and other relevant materials (when they become available), and any
other documents filed by GM, Hughes Electronics Corporation ("Hughes"), Hughes
Holdings or EchoStar with the SEC may be obtained for free at the SEC's website,
www.sec.gov, and GM stockholders will receive information at an appropriate time
on how to obtain transaction-related documents for free from GM.
GM and its directors and executive officers, Hughes and certain of its officers,
and EchoStar and certain of its executive officers may be deemed to be
participants in GM's solicitation of consents from the holders of GM $1-2/3
common stock and GM Class H common stock in connection with the proposed
transactions. Information regarding the participants and their interests in the
solicitation was filed pursuant to Rule 425 with the SEC by EchoStar on November
1, 2001 and by each of GM and Hughes on November 16, 2001. Investors may obtain
additional information regarding the interests of the participants by reading
the amended preliminary consent solicitation statement/information
statement/prospectus filed with the SEC and the definitive consent solicitation
statement/information statement/prospectus when it becomes available.
This communication shall not constitute an offer to sell or the solicitation of
an offer to buy, nor shall there be any sale of securities in any jurisdiction
in which such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such
jurisdiction. No offering of securities shall be made except by means of a
prospectus meeting the requirements of Section 10 of the Securities Act of 1933,
as amended.
Materials included in this document contain "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors that could cause our actual results to be materially different
from historical results or from any future results expressed or implied by such
forward-looking statements. The factors that could cause actual results of GM,
EchoStar, Hughes, or a combined EchoStar and Hughes, to differ materially, many
of which are beyond the control of EchoStar, Hughes, Hughes Holdings or GM
include, but are not limited to, the following: (1) the businesses of EchoStar
and Hughes may not be integrated successfully or such integration may be more
difficult, time-consuming or costly than expected; (2) expected benefits and
synergies from the combination may not be realized within the expected time
frame or at all; (3) revenues following the transaction may be lower than
expected; (4) operating costs, customer loss and business disruption including,
without limitation, difficulties in maintaining relationships with employees,
customers, clients or suppliers, may be greater than expected following the
transaction; (5) generating the incremental growth in the subscriber base of the
combined company may be more costly or difficult than expected; (6) the
regulatory approvals required for the transaction may not be obtained on the
terms expected or on the anticipated schedule; (7) the effects of legislative
and regulatory changes; (8) an inability to obtain certain retransmission
consents; (9) an inability to retain necessary authorizations from the FCC; (10)
an increase in competition from cable as a result of digital cable or otherwise,
direct broadcast satellite, other satellite system operators, and other
providers of subscription television services; (11) the introduction of new
technologies and competitors into the subscription television business; (12)
changes in labor, programming, equipment and capital costs; (13) future
acquisitions, strategic partnership and divestitures; (14) general business and
economic conditions; and (15) other risks described from time to time in
periodic reports filed by EchoStar, Hughes or GM with the Securities and
Exchange Commission. You are urged to consider statements that include the words
"may," "will," "would," "could," "should," "believes," "estimates," "projects,"
"potential," "expects," "plans," "anticipates," "intends," "continues,"
"forecast," "designed," "goal," or the negative of those words or other
comparable words to be uncertain and forward-looking. This cautionary statement
applies to all forward-looking statements included in this document.