Breaking News-Hughes' 1st-Quarter Results Bolstered By DirecTV

<a href=www.smartmoney.com>smartmoney.com-Dow Jones Newswires April 14, 2003

EL SEGUNDO, Calif. -- Hughes Electronics Corp. (GMH) posted a much narrower first-quarter net loss, largely because of the year-earlier adoption of new accounting rules regarding goodwill amortization.

Nonetheless, the firm reported better-than-expected results, thanks largely to continued strengthening of its DirecTV business in the U.S.

The satellite-services provider reported a net loss of $50.9 million, compared with a year-earlier net loss of $837.7 million. Hughes doesn't provide per-share figures because it is a tracking stock of General Motors Corp. (GM).

The prior year's results included a $681.3 million goodwill write-down and $24.9 million losses from discontinued operations.

Revenue rose 10% to $2.23 billion from $2.02 billion.

Earnings before interest, taxes, depreciation and amortization, or Ebitda, soared to $305 million from $164.5 million.

When the company released its fourth-quarter results in January, Hughes projected first-quarter revenue of $2.1 billion and Ebitda of $175 million to $225 million.

Meanwhile, Hughes also posted its first operating profit in four years -- $41.9 million. The company defines operating profit as revenue minus operating costs, depreciation and amortization.

"An outstanding first-quarter performance by DirecTV U.S. drove Hughes' strong first-quarter revenue and Ebitda growth," President and Chief Executive Jack A. Shaw said in a prepared statement. "The DirecTV U.S. performance is a direct result of our profitable growth strategy that focuses on attracting long-term, high-quality subscribers who provide us with exceptional financial returns."

DirecTV's U.S. revenue jumped 17% to $1.71 billion, and the home-satellite operator added a net 275,000 subscribers, both of which Mr. Shaw noted were better than anticipated. Ebitda surged to $230.4 million from $93.7 million. Hughes had forecast revenue of $1.63 billion and Ebitda of $160 million.

Total U.S. subscribership as of March 31 was 9.8 million, up 11% from a year earlier. Average monthly revenue per users increased 4.2% to $59.10, "primarily due to increased customer purchases of local-channel and premium-programming packages, as well as additional fees from the increased number of customers that have multiple set-top receivers," said Hughes.

As for DirecTV's struggling Latin America business, which filed for bankruptcy last month, it lost 54,000 net subscribers in the first quarter "primarily due to the economic turmoil following the general strike in Venezuela," putting total subscribership in the region at 1.6 million, down 7%.

Revenue slumped 15% to $140 million, largely the result of the subscriber losses and the 2002 devaluation of the currencies of Brazil and Venezuela.

PanAmSat Corp. (SPOT), which is 81%-owned by Hughes, reported net income Friday of $30.9 million, or 21 cents a share, up from $21 million, or 14 cents a share, a year earlier. Revenue fell 3.6% to $199.8 million from $207.1 million.

Going forward, Hughes is forecasting second-quarter revenue of $2.25 billion to $2.3 billion and Ebitda of $250 million to $300 million. DirecTV U.S. is projected to generate revenue of $1.75 billion and Ebitda of $225 million.

Hughes also raised its 2003 revenue forecast to $9.5 billion to $9.6 billion from $9.3 billion to $9.5 billion. Ebitda is now projected to be $1.15 billion to $1.2 billion, versus the company's January estimate of $1.1 billion.

DirecTV's 2003 revenue target was raised to $7.3 billion from $7.1 billion, while Ebitda is now anticipated to be $900 million, compared with the earlier forecast of $800 million to $850 million. Subscribership is projected to grow by 800,000 to 850,000, not the 750,000 to 800,000 first estimated.

It was announced Wednesday night that News Corp. (NWS) agreed to acquire a controlling 34% stake in Hughes for about $6.6 billion in cash and stock, ending a three-year pursuit by Rupert Murdoch's media conglomerate to buy a stake in the satellite broadcaster.

The deal calls for News Corp. buying GM's 20% stake in Hughes, plus an additional 14% stake from Hughes shareholders and GM's pension and other benefit plans, for $14 a share. Investor reaction has been cool to the proposal, as Hughes' shares have dropped below $11 from the $11.48 the stock was at before the deal was announced.

-Kevin Kingsbury; Dow Jones Newswires; 609-520-4367 (END)