• Earnings Releases
  • Releases
  • 2002 Results
  • 2001 Results
  • 2000 Results
  • 1999 Results
  • 1998 Results

FOR IMMEDIATE RELEASE

LOS ANGELES,  CA - April 16, 1998 -  Hughes Electronics Corporation (Hughes) today reported that first quarter 1998 revenues increased 26.1% to $1,291.0 million compared with $1,024.0 million in the first quarter of 1997.

First quarter earnings(1) more than doubled to $53.7 million from $23.9 million in the first quarter of 1997. Earnings per share on the same basis for the first quarter were $0.13 per share versus pro forma earnings per share(2) of $0.06 in 1997.

Operating profit(1) also rose sharply in the quarter to $83.6 million compared with $33.1 million in the first quarter of 1997. First quarter operating profit margin on the same basis increased to 6.5% in 1998 from 3.2% in 1997.

"This is an impressive report card for Hughes' first full quarter of operations as a satellite and wireless communications company. It demonstrates continued growth in each of our four principal business segments," said Michael T. Smith, Hughes chairman and chief executive officer. "The increases in revenues, operating profit and earnings were driven by another record quarter of DIRECTV® subscriber growth, continued strong performance in our satellite services segment resulting from the PanAmSat merger, and higher commercial satellite sales."

SEGMENT FINANCIAL REVIEW: FIRST QUARTER 1998

Direct-To-Home Broadcast

For the quarter, revenues increased 64.6% to $387.9 million from $235.6 million in the first quarter of 1997. The increase resulted from continued record subscriber growth, strong average monthly revenue per subscriber, and low subscriber churn rates. Domestic DIRECTV propelled this growth with quarterly revenues of $353 million, a 55% increase over last year's first quarter revenues of $228 million. With its best-ever first quarter of 227,000 net new subscribers, total DIRECTV subscribers grew to 3,528,000 in the United States as of March 31, 1998. The Company's Latin American DIRECTV subsidiary, Galaxy Latin America (GLA), had first quarter revenues of $31 million compared with $8 million in 1997. With the addition of 38,000 net new subscribers in the first quarter, cumulative DIRECTV subscribers in Latin America were 338,000 as of March 31, 1998.

The operating loss in the quarter was $31.6 million compared with an operating loss of $67.5 million in the first quarter of 1997. The lower operating loss in 1998 was principally due to increased subscriber revenues that more than offset higher sales and marketing expenditures. The first quarter 1998 operating loss in the domestic DIRECTV business was $10 million compared with $38 million last year, and GLA's first quarter operating loss was $22 million compared with $30 million last year.

Satellite Services

First quarter 1998 revenues were up 51.3% to $193.0 million compared with $127.6 million in the prior year. Operating profit in the quarter rose 25.5% to $85.7 million from $68.3 million in 1997. The revenue and operating profit growth were primarily due to the May 1997 PanAmSat merger and increased operating lease revenues for both video distribution and business communications services. Operating profit margin in the period declined to 44.4% from 53.6% in the same period last year primarily from goodwill amortization associated with the PanAmSat merger.

Satellite Manufacturing

For the first quarter of 1998, revenues increased 11.6% to $624.3 million from revenues of $559.3 million for the same period in 1997. Operating profit in the quarter increased 4.4% to $55.1 million from $52.8 million in the prior year. The increases in revenue and operating profit were principally due to higher commercial satellite sales to customers such as ICO Global Communications, Thuraya Satellite Telecommunications Company and PanAmSat Corporation. Operating profit margin in the quarter declined to 8.8% from 9.4% last year primarily due to increased costs related to the completion of certain satellite component contracts.

Network Systems

First quarter revenues for Hughes Network Systems (HNS) were $184.7 million compared with $182.5 million in the same period last year. Increased sales of private business networks and satellite-based mobile telephony equipment were mostly offset by lower sales of international wireless local loop telephone systems.

The operating loss in the quarter was $11.9 million compared with an operating loss of $15.3 million in the first quarter of 1997. The lower operating loss in the first quarter of 1998 was primarily due to higher revenues and profits on satellite-based mobile telephony equipment.

BALANCE SHEET

The cash balance of $2,499.5 million at March 31, 1998 reflected a $284.3 million decline during the quarter primarily due to expenditures for PanAmSat satellites and general working capital requirements.

During the first quarter of 1998, long-term debt increased $150.0 million to $787.6 million reflecting an increase in PanAmSat's long-term debt. In January 1998, PanAmSat issued $750.0 million of privately-placed debt securities with maturities between five and 30 years at interest rates ranging between 6% and 7%. The net proceeds were used to repay $600.0 million of existing bank loans, exercise an early buy-out option on a satellite sale-leaseback agreement, and for general corporate purposes.

(1) Excludes the effects of purchase accounting adjustments related to General Motors' (GM) acquisition of Hughes Aircraft Company in 1985.

(2) 1997 earnings per share are presented on a pro forma basis. Historically, such earnings per share amounts were calculated based on the financial performance of former Hughes, which consisted of the defense electronics, automotive electronics, and telecommunications and space businesses. Since these financial statements relate only to the telecommunications and space businesses of former Hughes, the pro forma presentation is used to present the earnings per share that would have been achieved relative to the GM Class H common stock had it been calculated based upon only such telecommunications and space businesses.