Filed by General Motors Corporation
Subject Company - General Motors Corporation
and Hughes Electronics 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.: 001-00143
- 1 -
GM Reports First Quarter Financial Results
o Net income of $1.5 billion, or $2.71 per share
o Adjusted net income of $1 billion, or $1.84 per share, excluding Hughes
and the sale of GM Defense
o Total automotive cash exceeds $20 billion
DETROIT - General Motors Corp. (NYSE: GM, GMH) today reported net income of $1.5
billion, or $2.71 per diluted share of GM's $1-2/3 par value common stock, in
the first quarter of 2003, up from $228 million, or $0.57 per share, in the
first quarter of 2002.
GM's adjusted income, which excludes a gain from the sale of GM Defense and
results from Hughes Electronics, totaled $1 billion, or $1.84 per share, in the
first quarter of 2003. GM's adjusted net income in the first quarter of 2002 was
$791 million, or $1.39 per share. Automotive and financing revenue rose about 5
percent.
GM's performance in the first quarter of 2003 reflected profitable automotive
operations in North America, significantly improved results in Europe and Asia,
record earnings at General Motors Acceptance Corp., and continued strong
automotive cash flow.
The first-quarter 2003 results include a gain of $505 million after tax, or
$0.90 per share, from the previously announced sale of GM Defense. The
first-quarter 2002 results included unfavorable special items totaling $417
million, or $0.72 per share.
"The first quarter financial results reflect solid contributions from both our
automotive operations and our finance unit," said GM Chairman Jack Smith. "As I
prepare to retire from General Motors, I'm confident that GM has the right
products and the right management team to continue to leverage our strengths as
the world's largest automaker to grow the business around the world."
- 2 -
"GM turned in a strong performance overall during the first quarter," GM
President and Chief Executive Officer Rick Wagoner said. "I'm particularly
pleased with the record-breaking performance at GMAC, the continued strength of
our Asia-Pacific operations, and the growing momentum behind GM Europe's
turnaround. While market conditions were admittedly challenging, market share
performance in North America did not meet our expectations. We are launching new
products in key, high-volume segments of the market to improve our
competitiveness, and we expect to remain aggressive in the marketplace. At the
same time, we must continue to build on our tremendous progress in improving
quality and reducing costs around the globe."
Wagoner said GM's passenger car offensive is already underway with the launch of
the Pontiac Grand Prix, followed by the Chevrolet Malibu and Malibu Maxx, and
the Pontiac GTO later this year. In addition, Cadillac's renaissance continues
with the upcoming introduction of the Cadillac XLR roadster and SRX crossover
vehicle. GM is also expanding its truck line-up in 2003 with the Cadillac
Escalade ESV, the Buick Rainier, the GMC Envoy XUV and the all-new Chevrolet
Colorado and the GMC Canyon.
In Europe, GM is introducing five new models this year, including the Opel
Meriva, Signum, Vectra wagon and Speedster Turbo, and the Saab 9-3 Cabrio.
Additionally, GM Daewoo Auto & Technology Co. is launching three new 2003
products in Europe: the Matiz, the Kalos and the Nubira.
Cadillac, Saab Post Impressive Sales Gains
Within the luxury segment of the market, GM continued to demonstrate strong
momentum with Cadillac sales surging 16 percent in the first quarter of 2003 and
Saab Cars USA reporting the best quarterly sales results in its 47-year history.
"Cadillac's resurgence epitomizes GM's strategy to deliver truly exciting and
unique products," Wagoner said. "The Escalade and the CTS are allowing GM to
reach younger, more affluent customers, and we expect that trend to continue
with the introduction of the SRX and the XLR later this year. And, the new Saab
9-3 sports sedan is off to a very strong start."
GM financial results described throughout the remainder of this release exclude
special items unless otherwise noted. See Highlights for reconciliation of
adjusted results to results based on Generally Accepted Accounting Principles
(GAAP).
Cash and Liquidity
GM generated approximately $3.3 billion in automotive cash in the first quarter
of 2003, including approximately $1.1 billion from the sale of GM Defense. Cash,
marketable securities, and assets of the VEBA trust invested in short-term
fixed-income securities totaled $20.6 billion at March 31, 2003, excluding
financing and insurance operations and Hughes, compared with $17.3 billion on
Dec. 31, 2002. The increase in cash improved GM's net liquidity to $5.6 billion
at the end of the first quarter of 2003 versus $2.3 billion at the end of 2002.
As previously announced, GM contributed 149.2 million shares of GM Class H
stock, valued at $1.24 billion, to its U.S. employee benefit plans in the first
quarter of 2003 to further strengthen GM's balance sheet.
GM Automotive Operations
GM's global automotive operations earned $546 million in the first quarter of
2003, compared with $496 million in the prior-year period. Global production
rose 7 percent in the first quarter, compared with the same period in 2002.
- 3 -
GM North America (GMNA) earned $548 million in the first quarter of 2003,
compared with $654 million in the first quarter of 2002. GM continued to show
improvement in sales mix, material cost, and productivity in North America, but
the gains were more than offset by intense pricing pressure, higher pension
expense, and currency exchange losses versus the year-ago period. GM's U.S.
market share was 26.6 percent in the first quarter of 2003, down from 28.2
percent in the year-earlier period.
GM Europe (GME) reported a loss of $65 million in the first quarter of 2003, a
substantial improvement from a year ago when GME posted a loss of $125 million.
The improvement reflected increased volume for GME as new Opel and Saab products
reached the market. In addition, GME made significant progress in cost reduction
at Opel/Vauxhall and Saab.
"We're pleased with the continuing progress of our turnaround effort at
Opel/Vauxhall, and we've made good progress at Saab in a relatively short period
of time," Wagoner said. "During the first quarter of 2003, GM Europe increased
its market share to 9.6 percent, representing six consecutive months of market
share gains in Europe. In addition, Saab reported impressive sales in its key
markets, so we feel we're on the right track in Europe."
GM Asia Pacific earned $75 million in the first quarter of 2003, up from $7
million in the year-ago quarter. Shanghai GM and GM's Australia-based Holden
continued to post strong financial results. Asia-Pacific results also benefited
from lower-than-expected start-up costs at GM Daewoo Auto & Technology Co. GM
Latin America/Africa/Mid-East (GMLAAM) lost $12 million in the first quarter of
2003, compared with a loss of $40 million in the year-ago period.
"GM's Asia-Pacific operations are a growing contributor to our overall
performance," Wagoner said. "Our joint ventures in China are expanding rapidly,
and GM Daewoo is performing better than we had planned. While the Latin American
market remains difficult, we are continuing to increase our market share and
strengthen our number one position in the region, and reduce costs."
GMAC
General Motors Acceptance Corporation (GMAC) reported record quarterly earnings
in the first quarter of 2003, propelled by record performance at its mortgage
operations.
"GMAC's mortgage operations achieved truly exceptional results," Wagoner said.
"We are also pleased to see higher earnings in its financing business."
GMAC earned $699 million in the first quarter of 2003, up nearly 60 percent from
the $439 million a year ago. Earnings at the mortgage group rose to a record
$371 million, more than double the $148 million recorded in the first quarter of
2002. The improvement reflects continued strong volumes at both the residential
and commercial mortgage sectors. GMAC's financing operations also posted a
strong performance with earnings of $302 million in the quarter, up $47 million
from a year ago, reflecting higher asset levels and lower credit loss
provisions. First quarter earnings at the insurance group were $26 million, down
$10 million from a year ago. These results reflect a decline in the investment
portfolio, which more than offset improved underwriting income.
- 4 -
Hughes
Hughes Electronics reduced its losses substantially during the first quarter of
2003 to $54 million from a loss of $146 million in the prior-year period, led by
a strong performance at DirecTV. During the quarter, DirecTV U.S. experienced
better-than-expected subscriber growth and higher average revenue per
subscriber. In addition, operating margins improved sharply, and DirecTV's
monthly customer churn rate fell to 1.5 percent during the quarter, representing
the lowest level attained in a first quarter in four years. DirecTV added
275,000 net subscribers in the first quarter of 2003, bringing the number of
total U.S. subscribers to 11.4 million.
As a result of the improved performance at DirecTV, Hughes reported an operating
profit of nearly $42 million in the first quarter of 2003, the first time Hughes
has generated a quarterly operating profit in over four years.
GM recently announced that it plans to split off Hughes and simultaneously sell
its 19.9 percent economic interest in Hughes to News Corp. for $14 per share, or
approximately $3.8 billion. GM would receive about $3.1 billion in cash, and the
remainder would be paid in cash or News Corp. preferred American Depositary
Receipts (ADRs). GM would also receive a distribution of $275 million from
Hughes in consideration of the value enhancement for Class H stockholders
arising from the conversion from a tracking stock to an asset based stock. The
transaction is expected to close in late 2003 or early 2004.
Looking Ahead
GM expects moderate economic growth in 2003 in the United States, resulting in
total U.S. industry vehicle sales in the low to mid-16 million unit range. In
Europe, total industry vehicle sales are expected to be in the high 18-million
unit range.
Although there is considerable economic uncertainty and increasing price and
volume pressure, GM expects second quarter earnings of at least $1.00 per share,
excluding Hughes and any special items. GM expects to be profitable in both the
third and fourth quarters of 2003. However, GM is now less certain of its
ability to achieve its prior 2003 calendar-year guidance of $5.00 earnings per
share, given the uncertain economic conditions around the globe. In light of
these circumstances, GM is not providing any specific update to its
calendar-year earnings guidance at this time.
General Motors, the world's largest vehicle manufacturer, designs, builds and
markets cars and trucks worldwide, and has been the global automotive sales
leader since 1931. More information on GM can be found at www.gm.com.
In this press release and related comments by General Motors management, our use
of the words "expect," "anticipate," "estimate," "forecast," "objective,"
"plan," "goal" and similar expressions is intended to identify forward looking
statements. While these statements represent our current judgment on what the
future may hold, and we believe these judgments are reasonable, actual results
may differ materially due to numerous important factors that are described in
GM's most recent report on SEC Form 10-K (at page II-18) which may be revised or
supplemented in subsequent reports on SEC Forms 10-Q and 8-K. Such factors
include, among others, the following: changes in economic conditions, currency
exchange rates or political stability; shortages of fuel, labor strikes or work
stoppages; market acceptance of the corporation's new products; significant
changes in the competitive environment; changes in laws, regulations and tax
rates; and, the ability of the corporation to achieve reductions in cost and
employment levels to realize production efficiencies and implement capital
expenditures at levels and times planned by management.
- 5 -
In connection with the proposed transactions, General Motors Corporation ("GM"),
Hughes Electronics Corporation ("Hughes") and The News Corporation Limited
("News") intend to file relevant materials with the Securities and Exchange
Commission ("SEC"), including one or more registration statement(s) that contain
a prospectus and proxy/consent solicitation statement. Because those documents
will contain important information, holders of GM $1-2/3 common stock and GM
Class H common stock are urged to read them, if and when they become available.
When filed with the SEC, they will be available for free (along with any other
documents and reports filed by GM, Hughes or News with the SEC) 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. Such documents are not currently available.
GM and its directors and executive officers and Hughes and certain of its
executive officers may be deemed to be participants in the solicitation of
proxies or consents from the holders of GM $1-2/3 common stock and GM Class H
common stock in connection with the proposed transactions. Information about the
directors and executive officers of GM and their ownership of GM stock is set
forth in the proxy statement for GM's 2002 annual meeting of shareholders filed
with the SEC and available free of charge at the SEC's website at www.sec.gov.
Investors may obtain additional information regarding the interests of such
participants by reading the prospectus and proxy/consent solicitation statement
if and when it becomes available.
Participants in GM's solicitation may also be deemed to include the following
persons whose interests in GM are not described in the proxy statement for GM's
2002 annual meeting:
Jack A. Shaw Chief Executive Officer, Hughes
Roxanne S. Austin Executive VP, Hughes; President and COO, DIRECTV
Patrick T. Doyle Corporate VP and Treasurer, Hughes
Michael J. Gaines Corporate VP and CFO, Hughes
Sandra A. Harrison Senior VP, Hughes
Eddy W. Hartenstein Senior Executive VP, Hughes; Chairman, DIRECTV
Larry D. Hunter Senior VP and General Counsel
Mr. Shaw beneficially owns 4,084 shares of GM $1-2/3 common stock and 2,244,987
shares of GM Class H common stock. Ms. Austin beneficially owns 3,293 shares of
GM $1-2/3 common stock and 1,632,071 shares of GM Class H common stock. Mr.
Doyle beneficially owns 746 shares of GM $1-2/3 common stock and 511,149 shares
of GM Class H common stock. Mr. Gaines beneficially owns 482 shares of GM $1-2/3
common stock and 298,745 shares of GM Class H common stock. Ms. Harrison
beneficially owns 1,632 shares of GM $1-2/3 common stock and 916,136 shares of
GM Class H common stock. Mr. Hartenstein beneficially owns 3,036 shares of GM
$1-2/3 common stock and 1,962,614 shares of GM Class H common stock. Mr. Hunter
beneficially owns 0 shares of GM $1-2/3 common stock and 485,130 shares of GM
Class H common stock. The above ownership information includes shares that are
purchasable under options that are exercisable within 60 days of April 9, 2003.
In addition, each of Mr. Shaw, Ms. Austin, Mr. Doyle, Mr. Gaines, Ms. Harrison,
Mr. Hartenstein and Mr. Hunter holds options to acquire shares of GM Class H
common stock that are not exercisable within 60 days of April 9, 2003.
Each of Mr. Shaw, Ms. Austin, Mr. Doyle, Mr. Gaines, Ms. Harrison, Mr.
Hartenstein and Mr. Hunter has a severance agreement with Hughes that provides
for severance in the event of an involuntary termination after a change in
control, and each also has a retention agreement that provides for certain
payments in the event of a change in control.
Investors may obtain additional information regarding the interests of the
participants by reading the prospectuses and proxy/solicitation statements if
and when they become available. This communication shall not constitute an offer
to sell or the solicitation of an offer to buy any securities, 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.
- 6 -
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 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,
Hughes and News to differ materially, many of which are beyond the control of
GM, Hughes or News include, but are not limited to, the following: (1) 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; (2) the
regulatory approvals required for the transaction may not be obtained on the
terms expected or on the anticipated schedule; (3) the effects of legislative
and regulatory changes; (4) an inability to retain necessary authorizations from
the FCC; (5) 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; (6) the introduction of new
technologies and competitors into the subscription television business; (7)
changes in labor, programming, equipment and capital costs; (8) future
acquisitions, strategic partnerships and divestitures; (9) general business and
economic conditions; and (10) other risks described from time to time in
periodic reports filed by GM, Hughes or News with the SEC. 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.
- 7 -
General Motors Corporation
List of Special Items - After Tax
(dollars in millions except per share amounts)
Management believes that the adjusted information set forth herein is
useful to investors as it represents how Management views the results of
operations and cash of the Corporation and, therefore, is the basis on
which internal evaluation metrics are determined. The internal evaluation
metrics are those used by the Corporation's Board of Directors to evaluate
Management.
Three Months Ended
March 31, 2003
---------------------
GM $1-2/3
Par Value
Common Stock
EPS
---------
Net Income $1,483 $2.71
Gain on Sale of GM Defense (A) (505) (0.90)
--- ----
Adjusted Income $978 $1.81
=== ====
Three Months Ended
March 31, 2002
---------------------
GM $1-2/3
Par Value
Common Stock
EPS
---------
Net Income $228 $0.57
GME Restructuring Charge (B) 407 0.72
Hughes Space Shuttle Settlement (C) (59) (0.04)
Hughes GECC Contractual Dispute (D) 51 0.03
Hughes Loan Guarantee Charge (E) 18 0.01
--- ----
Adjusted Income $645 $1.29
=== ====
(A) The Gain on Sale of GM Defense relates to the sale of GM's light armored
vehicle business to General Dynamics Corporation for net proceeds of
approximately $1.1 billion.
(B) The GME Restructuring Charge relates to the initiative implemented in
the first quarter of 2002 to improve the competitiveness of GM's
automotive operations in Europe.
(C) The Space Shuttle Settlement relates to the favorable resolution of a
lawsuit that was filed against the U.S. government by Hughes on March
22, 1991, based upon the National Aeronautics and Space Administration's
(NASA) breach of contract to launch ten satellites on the Space Shuttle.
(D) The GECC Contractual Dispute relates to an expected loss associated with
a contractual dispute with General Electric Capital Corporation.
(E) The Loan Guarantee Charge relates to a loan guarantee for a Hughes
Network Systems affiliate in India.
- 8 -
General Motors Corporation
Summary Corporate Financial Results
First Quarter
-------------
2003 2002
---- ----
Total net sales and
revenues ($Mil's) $49,365 $46,214
Adjusted $48,551 $46,243
Adjusted excluding Hughes
(Automotive and Financing) $46,324 $44,202
Net income ($Mil's) $1,483 $228
Adjusted $978 $645
Adjusted excluding Hughes $1,032 $791
Net margin
(net income / total net sales
and revenues) 3.0% 0.5%
Adjusted 2.0% 1.4%
Adjusted excluding Hughes 2.2% 1.8%
Earnings per share
Basic- $1-2/3 $2.71 $0.58
Diluted- $1-2/3 $2.71 $0.57
Basic- Class H ($0.04) ($0.14)
Diluted- Class H ($0.04) ($0.14)
Adjusted earnings per share
Basic - $1-2/3 $1.81 $1.32
Diluted - $1-2/3 $1.81 $1.29
Diluted - $1-2/3 excluding Hughes $1.84 $1.39
Basic- Class H ($0.04) ($0.13)
Diluted- Class H ($0.04) ($0.13)
GM $1-2/3 par value average shares
outstanding (Mil's)
Basic shares 561 559
Diluted shares 561 570
Cash dividends per share of
common stocks
GM $1-2/3 par value $0.50 $0.50
GM Class H - -
Book value per share of common
stocks at March 31
GM $1-2/3 par value $11.98 $24.58
GM Class H $2.40 $4.92
ACO total cash & marketable securities
at March 31 ($Bil's) $20.2 $15.4
Cash in short-term VEBA $3.4 $3.0
---- ----
ACO total cash & marketable
securities plus short-term VEBA $23.6 $18.4
less: Hughes cash & marketable
securities $3.0 $1.1
---- ----
Total Automotive cash & marketable
securities plus short-term VEBA $20.6 $17.3
==== ====
See reconciliation of adjusted financial results on pages 10 - 13, and
footnotes on page 15.
- 9 -
General Motors Corporation
Summary Corporate Financial Results
First Quarter
2003
--------------
(Dollars in millions)
Total net sales and Reported Special Items Adjusted
revenues -------- ------------ --------
GMNA $29,963 - $29,963
GME 6,622 - 6,622
GMLAAM 1,045 - 1,045
GMAP 1,147 - 1,147
------ ----- ------
Total GMA 38,777 - 38,777
Hughes 2,227 - 2,227
Other 1,038 (814) 224
------ ----- ------
Total ACO 42,042 (814) 41,228
------ ----- ------
GMAC 7,330 - 7,330
Other Financing (7) - (7)
------ ----- ------
Total FIO 7,323 - 7,323
------ ----- ------
Total net sales and
revenues $49,365 (814) $48,551
====== ===== ======
Income / (expense)
before income taxes and
minority interest
GMNA $739 - $739
GME (114) - (114)
GMLAAM (17) - (17)
GMAP 19 - 19
----- ----- -----
Total GMA 627 - 627
Hughes (50) - (50)
Other 449 (814) (365)
----- ----- -----
Total ACO 1,026 (814) 212
----- ----- -----
GMAC 1,147 - 1,147
Other Financing (25) - (25)
----- ----- -----
Total FIO 1,122 - 1,122
Total income / ----- ----- -----
(expense) before
income taxes and
minority interests $2,148 (814) $1,334
===== ===== =====
- 10 -
General Motors Corporation
Summary Corporate Financial Results
First Quarter
2003
---------------
(Dollars in millions) Reported Special Items Adjusted
-------- ------------ --------
Net income
GMNA $548 - $548
GME (65) - (65)
GMLAAM (12) - (12)
GMAP 75 - 75
----- --- ---
-
Total GMA 546 - 546
Hughes (54) - (54)
Other 309 (505) (196)
----- --- ---
Total ACO 801 (505) 296
GMAC 699 - 699
Other Financing (17) - (17)
----- --- ---
Total FIO 682 - 682
----- --- ---
Net income (loss) $1,483 $(505) $978
===== === ===
Income tax expense
(benefit)
GMNA $191 - $191
GME (43) - (43)
GMLAAM (7) - (7)
GMAP 11 - 11
--- --- ---
Total GMA 152 - 152
Hughes (26) - (26)
Other 100 (309) (209)
--- --- ---
Total ACO 226 (309) (83)
--- --- ---
GMAC 438 - 438
Other Financing (8) - (8)
--- --- ---
Total FIO 430 - 430
--- --- ---
Income tax expense
(benefit) $656 (309) $347
=== === ===
Effective tax rate
GMNA 25.8% - 25.8%
GME 37.7% - 37.7%
GMLAAM 41.2% - 41.2%
GMAP 57.9% - 57.9%
Hughes 52.0% - 52.0%
GMAC 38.2% - 38.2%
Total GM Corp. 30.5% 38.0% 26.0%
Equity income (loss)
and minority interests
GMNA $ - - $ -
GME 6 - 6
GMLAAM (2) - (2)
GMAP 67 - 67
-- -- --
Total GMA $71 - $71
== == ==
- 11 -
General Motors Corporation
Summary Corporate Financial Results
First Quarter
2002
-------------
(Dollars in millions)
Total net sales and Reported Special Items Adjusted
revenues -------- ------------ --------
GMNA $29,339 - $29,339
GME 5,584 - 5,584
GMLAAM 1,301 - 1,301
GMAP 1,057 - 1,057
------ -- ------
Total GMA 37,281 - 37,281
Hughes 2,012 29 2,041
Other 480 - 480
------ -- ------
Total ACO 39,773 29 39,802
------ -- ------
GMAC 6,353 - 6,353
Other Financing 88 - 88
------ -- ------
Total FIO 6,441 - 6,441
------ -- ------
Total net sales and
revenues $46,214 29 $46,243
====== == ======
Income / (expense) before
income taxes and minority
interest
GMNA $938 - $938
GME (798) 641 (157)
GMLAAM (41) - (41)
GMAP (13) - (13)
--- --- -----
Total GMA 86 641 727
Hughes (231) 17 (214)
Other (235) - (235)
--- --- -----
Total ACO (380) 658 278
--- --- -----
GMAC 736 - 736
Other Financing (2) - (2)
--- --- -----
Total FIO 734 - 734
--- --- -----
Total income / (expense)
before income taxes and
minority interests
$354 658 $1,012
=== === =====
- 12 -
General Motors Corporation
Summary Corporate Financial Results
First Quarter
2002
-------------
(Dollars in millions) Reported Special Items Adjusted
-------- ------------ --------
Net income
GMNA $654 - $654
GME (532) 407 (125)
GMLAAM (40) - (40)
GMAP 7 - 7
--- --- ---
Total GMA 89 407 496
Hughes (1) (156) 10 (146)
Other (142) - (142)
--- --- ---
Total ACO (209) 417 208
--- --- ---
GMAC 439 - 439
Other Financing (2) - (2)
--- --- ---
Total FIO 437 - 437
--- --- ---
Net income (loss) $228 417 $645
=== === ===
Income tax expense
(benefit)
GMNA $272 - $272
GME (260) 234 (26)
GMLAAM (1) - (1)
GMAP - - -
--- --- ---
Total GMA $11 234 $245
Hughes (92) 7 (85)
Other (79) - (79)
--- --- ---
Total ACO (160) 241 81
--- --- ---
GMAC 285 - 285
Other Financing - - -
--- --- ---
Total FIO 285 - 285
--- --- ---
Income tax expense
(benefit) $125 241 $366
=== === ===
Effective tax rate
GMNA 29.0% - 29.0%
GME 32.6% 36.5% 16.6%
GMLAAM 2.4% - 2.4%
GMAP - - -
Hughes 39.8% 41.2% 39.7%
GMAC 38.7% - 38.7%
Total GM Corp. 35.3% 36.6% 36.2%
Equity income (loss)
and minority interests
GMNA $(12) - $(12)
GME 6 - 6
GMLAAM - - -
GMAP 20 - 20
-- -- --
Total GMA $14 - $14
== == ==
See footnote on page 15.
- 13 -
General Motors Corporation
Operating Statistics
First Quarter
-------------
2003 2002
---- ----
(units in thousands)
Worldwide Wholesale Sales
United States - Cars 500 499
United States - Trucks 756 667
----- -----
Total United States 1,256 1,166
Canada, Mexico, and Other 182 196
----- -----
Total GMNA 1,438 1,362
GME 427 424
GMLAAM 121 155
GMAP 142 108
----- -----
Total Worldwide 2,128 2,049
===== =====
Vehicle Unit Deliveries
Chevrolet - Cars 171 185
Chevrolet - Trucks 373 465
Pontiac 107 118
GMC 108 127
Buick 83 83
Oldsmobile 33 43
Saturn 75 57
Cadillac 46 40
Other 22 12
----- -----
Total United States 1,018 1,130
Canada, Mexico, and Other 151 178
----- -----
Total GMNA 1,169 1,308
GME 473 465
GMLAAM 128 139
GMAP 166 159
----- -----
Total Worldwide 1,936 2,071
===== =====
Market Share
United States - Cars 24.9% 24.7%
United States - Trucks 28.2% 31.4%
Total United States 26.6% 28.2%
Total North America 26.1% 28.0%
Total Europe 9.6% 9.2%
Total LAAM 15.8% 15.3%
Asia and Pacific 4.1% 4.4%
Total Worldwide 13.6% 14.5%
U.S. Fleet Deliveries %
% Fleet Sales - Cars 30.3% 24.9%
% Fleet Sales - Trucks 14.7% 10.3%
Total Vehicles 21.6% 16.4%
Retail Lease as % of Retail Sales
Total Smartlease and Smartbuy 13.9% 9.7%
Days Supply of Inventory at March 31
United States - Cars 88 73
United States - Trucks 109 75
GMNA Capacity Utilization
(2 shift rated) 91.1% 83.2%
GMNA Net Price (3.2%) (1.0%)
- 14 -
General Motors Corporation
Operating Statistics
First Quarter
-------------
2003 2002
---- ----
GMAC's U.S. Cost of Borrowing 3.53% 4.32%
Current Debt Spreads Over U.S.
Treasuries
2 Year 290 bp 170 bp
5 Year 310 bp 180 bp
10 Year 350 bp 205 bp
Worldwide Employment at
March 31, Excluding Contract (in 000's)
United States Hourly 121 124
United States Salary 41 42
--- ---
Total United States 162 166
Canada, Mexico, and Other 32 33
--- ---
GMNA 194 199
GME 66 71
GMLAAM 23 23
GMAP 12 11
Hughes 9 13
GMAC 31 30
Other 7 12
--- ---
Total 342 359
=== ===
Worldwide Payrolls ($Mil's) $5,388 $5,040
Footnote:
--------
(1) Excludes Hughes Series A Preferred Stock dividends paid to General
Motors and Hughes write off of goodwill for DirecTV Latin America and
DirecTV Broadband recorded as a cumulative effect of accounting change
in the first quarter of 2002 in Hughes' stand alone financial
statements. In accordance with SFAS 142, GM evaluated the carrying
value of goodwill associated with its Direct-to-Home Broadcast
reporting unit in the aggregate and determined that the goodwill was
not impaired.
- 15 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
March 31,
---------------------
2003 2002
---- ----
(dollars in millions
except per share
amounts)
Total net sales and revenues $49,365 $46,214
------ ------
Cost of sales and other expenses 39,383 38,401
Selling, general, and administrative expenses 5,706 5,601
Interest expense 2,128 1,858
------ ------
Total costs and expenses 47,217 45,860
Income before income taxes and minority interests 2,148 354
Income tax expense 656 125
Equity income (loss) and minority interests (9) (1)
------ ------
Net income 1,483 228
Dividends on preference stocks - (24)
------ ---
Earnings attributable to common stocks $1,483 $204
===== ===
Basic earnings (losses) per share attributable to
common stocks
Earnings per share attributable to $1-2/3 par value $2.71 $0.58
==== ====
Earnings per share attributable to Class H $(0.04) $(0.14)
==== ====
Earnings (losses) per share attributable to common
stocks
assuming dilution
Earnings per share attributable to $1-2/3 par value $2.71 $0.57
==== ====
Earnings per share attributable to Class H $(0.04) $(0.14)
==== ====
- 16 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION TO THE CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
March 31,
---------------------
2003 2002
---- ----
(dollars in
millions)
AUTOMOTIVE, COMMUNICATIONS SERVICES, AND OTHER OPERATIONS
Total net sales and revenues $42,042 $39,773
------- ------
Cost of sales and other expenses 37,313 36,211
Selling, general, and administrative expenses 3,341 3,690
------- -------
Total costs and expenses 40,654 39,901
------ ------
Interest expense 321 162
Net expense from transactions with
Financing and Insurance Operations 41 90
------ ----
Income (loss) before income taxes and minority
interests 1,026 (380)
Income tax expense (benefit) 226 (160)
Equity income (loss) and minority interests 1 11
----- ----
Net income (loss) - Automotive, Communications
Services, and Other Operations $801 $(209)
=== ===
FINANCING AND INSURANCE OPERATIONS
Total revenues $7,323 $6,441
----- -----
Interest expense 1,807 1,696
Depreciation and amortization expense 1,506 1,361
Operating and other expenses 2,177 1,905
Provisions for financing and insurance losses 752 835
----- -----
Total costs and expenses 6,242 5,797
----- -----
Net income from transactions with Automotive,
Communications Services, and Other Operations (41) (90)
----- ----
Income before income taxes and minority interests 1,122 734
Income tax expense 430 285
Equity income/(loss) and minority interests (10) (12)
---- ---
Net income - Financing and Insurance Operations $682 $437
=== ===
The above supplemental Information is intended to facilitate analysis of
General Motors Corporation's businesses: (1) Automotive, Communications
Services, and Other Operations; and (2) Financing and Insurance Operations.
- 17 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Mar. 31, Dec. 31, Mar. 31,
2003 2002 2002
(Unaudited) (Unaudited)
--------- -------- ---------
ASSETS (dollars in millions)
Cash and cash equivalents $26,982 $21,449 $19,049
Marketable securities 16,841 16,825 13,282
------ ------ ------
Total cash and marketable securities 43,823 38,274 32,331
Finance receivables - net 141,273 134,647 112,686
Accounts and notes receivable (less
allowances) 16,209 15,715 11,091
Inventories (less allowances) 10,769 9,967 9,802
Deferred income taxes 39,000 39,865 28,677
Equipment on operating leases - (less
accumulated depreciation) 36,997 32,988 32,378
Equity in net assets of nonconsolidated
associates 4,976 5,044 4,871
Property - net 37,681 37,514 35,512
Intangible assets - net 17,975 17,954 16,972
Other assets 33,733 37,028 40,360
------ ------ ------
Total assets $382,436 $368,996 $324,680
======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable (principally trade) $28,738 $27,452 $27,465
Notes and loans payable 211,726 201,940 166,470
Postretirement benefits other than
pensions 38,239 38,187 38,586
Pensions 22,536 22,762 11,113
Deferred income taxes 7,342 7,178 6,318
Accrued expenses and other liabilities 63,654 63,829 54,386
-------- -------- ------
Total liabilities 372,235 361,348 304,338
Minority interests 835 834 766
Stockholders' equity
$1-2/3 par value common stock
(outstanding, 560,616,422;
560,447,797; and 560,021,275 shares) 934 936 934
Class H common stock (outstanding,
1,107,517,793; 958,284,272;
and 877,777,148 shares) 111 96 88
Capital surplus (principally additional
paid-in capital) 22,808 21,583 21,589
Retained earnings 11,234 10,031 9,387
------ ------ -----
Subtotal 35,087 32,646 31,998
Accumulated foreign currency translation
adjustments (2,665) (2,784) (3,014)
Net unrealized loss on derivatives (196) (205) (256)
Net unrealized gains on securities 344 372 428
Minimum pension liability adjustment (23,204) (23,215) (9,580)
------ ------ ------
Accumulated other comprehensive loss (25,721) (25,832) (12,422)
------ ------ ------
Total stockholders' equity 9,366 6,814 19,576
------- ------ -------
Total liabilities and stockholders' equity $382,436 $368,996 $324,680
======= ======= =======
- 18 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION TO THE CONSOLIDATED BALANCE SHEETS
Mar. 31, Dec. 31, Mar. 31,
2003 2002 2002
(Unaudited) (Unaudited)
--------- ------- ---------
ASSETS (dollars in millions)
Automotive, Communications Services, and Other
Operations
Cash and cash equivalents $16,977 $13,291 $14,656
Marketable securities 3,239 2,174 781
------- ------- --------
Total cash and marketable securities 20,216 15,465 15,437
Accounts and notes receivable (less
allowances) 6,085 5,861 5,957
Inventories (less allowances) 10,769 9,967 9,802
Equipment on operating leases - (less
accumulated depreciation) 5,661 5,305 3,675
Deferred income taxes and other current
assets 10,957 10,816 7,974
------ ------ -------
Total current assets 53,688 47,414 42,845
Equity in net assets of nonconsolidated
associates 4,976 5,044 4,871
Property - net 35,856 35,693 33,888
Intangible assets - net 14,637 14,611 13,745
Deferred income taxes 30,473 31,431 22,826
Other assets 7,753 7,781 17,494
------- ------- --------
Total Automotive, Communications
Services, and Other Operations
assets 147,383 141,974 135,669
Financing and Insurance Operations
Cash and cash equivalents 10,005 8,158 4,393
Investments in securities 13,602 14,651 12,501
Finance receivables - net 141,273 134,647 112,686
Investment in leases and other receivables 39,476 35,517 31,794
Other assets 30,697 34,049 27,637
Net receivable from Automotive,
Communications 486 1,089 477
------- ------- -------
Total Financing and Insurance Operations
assets 235,539 228,111 189,488
------- ------- -------
Total assets $382,922 $370,085 $325,157
======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Automotive, Communications Services, and
Other Operations
Accounts payable (principally trade) 21,659 $20,169 $19,367
Loans payable 815 1,516 1,591
Accrued expenses 41,718 40,518 34,352
Net payable to Financing and Insurance
Operations 486 1,089 477
------- ------- --------
Total current liabilities 64,678 63,292 55,787
Long-term debt 19,228 16,651 16,797
Postretirement benefits other than
pensions 34,291 34,275 34,719
Pensions 22,481 22,709 11,072
Other liabilities and deferred income
taxes 15,307 15,461 13,741
-------- ------- --------
Total Automotive, Communications
Services, and Other Operations
liabilities 155,985 152,388 132,116
Financing and Insurance Operations
Accounts payable 7,079 7,283 8,098
Debt 191,683 183,773 148,082
Other liabilities and deferred income
taxes 17,974 18,993 16,519
-------- -------- --------
Total Financing and Insurance Operations
liabilities 216,736 210,049 172,699
------- ------- -------
Total liabilities 372,721 362,437 304,815
Minority interests 835 834 766
Stockholders' equity
$1-2/3 par value common stock
(outstanding, 560,616,422;
560,447,797; and 560,021,275 shares) 934 936 934
Class H common stock (outstanding,
1,107,517,793; 958,284,272;
and 877,777,148 shares) 111 96 88
Capital surplus (principally additional
paid-in capital) 22,808 21,583 21,589
Retained earnings 11,234 10,031 9,387
------ ------ --------
Subtotal 35,087 32,646 31,998
Accumulated foreign currency translation
adjustments (2,665) (2,784) (3,014)
Net unrealized loss on derivatives (196) (205) (256)
Net unrealized gains on securities 344 372 428
Minimum pension liability adjustment (23,204) (23,215) (9,580)
------ ------ ------
Accumulated other comprehensive loss (25,721) (25,832) (12,422)
------ ------ ------
Total stockholders' equity 9,366 6,814 19,576
------- ------- --------
Total liabilities and stockholders' equity $382,922 $370,085 $325,157
======= ======= =======
The above supplemental Information is intended to facilitate analysis of General
Motors Corporation's businesses: (1) Automotive, Communications Services, and
Other Operations; and (2) Financing and Insurance Operations.
- 19 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31,
------------------------
2003 2002
---- ----
(dollars in millions)
Net cash provided by (used in) operating
activities $10,055 $7,707
Cash flows from investing activities
Expenditures for property (1,686) (1,904)
Investments in marketable securities -
acquisitions (2,830) (12,883)
Investments in marketable securities -
liquidations 2,906 12,182
Net change in mortgage servicing rights (461) (551)
Increase in finance receivables (33,775) (32,185)
Proceeds from sales of finance receivables 23,446 28,196
Operating leases - acquisitions (3,661) (2,991)
Operating leases - liquidations 2,510 2,307
Investments in companies, net of cash
acquired (32) (161)
Proceeds from sale of business units 1,076 -
Other (504) 318
----- ---
Net cash (used in) provided by investing
activities (13,011) (7,672)
------ -----
Cash flows from financing activities
Net decrease in loans payable (585) (6,391)
Long-term debt - borrowings 19,391 13,667
Long-term debt - repayments (10,066) (6,543)
Proceeds from issuing common stocks - 50
Proceeds from sales of treasury stocks - 19
Cash dividends paid to stockholders (280) (304)
----- -----
Net cash provided by (used in) financing
activities 8,460 498
----- ---
Effect of exchange rate changes on cash and
cash equivalents 29 (39)
----- ----
Net increase (decrease) in cash and cash
equivalents 5,533 494
Cash and cash equivalents at beginning of
the period 21,449 18,555
------ ------
Cash and cash equivalents at end of the
period $26,982 $19,049
====== ======
- 20 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION TO THE CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Automotive, Comm. Financing and
Serv. and Other Insurance
Three Months Ended March 31,
-----------------------------------
2003 2002 2003 2002
---- ---- ---- ----
(dollars in millions)
Net cash provided by (used in)
operating activities $4,681 $3,762 $5,374 $3,945
Cash flows from investing activities
Expenditures for property (1,582) (1,888) (104) (16)
Investments in marketable securities
- acquisitions (1,155) (399) (1,675) (12,484)
Investments in marketable securities
- liquidations 90 408 2,816 11,774
Net change in mortgage servicing
rights - - (461) (551)
Increase in finance receivables - - (33,775) (32,185)
Proceeds from sales of finance
receivables - - 23,446 28,196
Operating leases - acquisitions - - (3,661) (2,991)
Operating leases - liquidations - - 2,510 2,307
Investments in companies, net of cash
acquired (32) (39) - (122)
Proceeds from sale of business units 1,076 - - -
Other (306) 524 (198) (206)
----- --- ---- -----
Net cash (used in) provided by
investing activities (1,909) (1,394) (11,102) (6,278)
----- ----- ------ -----
Cash flows from financing activities
Net increase (decrease) in loans
payable (733) (811) 148 (5,580)
Long-term debt - borrowings 2,566 6,414 16,825 7,253
Long-term debt - repayments (36) (392) (10,030) (6,151)
Proceeds from issuing common stocks - 50 - -
Proceeds from sales of treasury stocks - 19 - -
Cash dividends paid to stockholders (280) (304) - -
----- ----- ----- ------
Net cash provided by (used in)
financing activities 1,517 4,976 6,943 (4,478)
----- ----- ----- ------
Effect of exchange rate changes on
cash and cash equivalents 1 (40) 28 1
Net transactions with
Automotive/Financing Operations (604) (1,080) 604 1,080
----- ----- --- -----
Net increase (decrease) in cash and
cash equivalents 3,686 6,224 1,847 (5,730)
Cash and cash equivalents at
beginning of the period 13,291 8,432 8,158 10,123
------ ------- ----- ------
Cash and cash equivalents at end of
the period $16,977 $14,656 $10,005 $4,393
====== ====== ====== =====
The above supplemental Information is intended to facilitate analysis of General
Motors Corporation's businesses: (1) Automotive, Communications Services, and
Other Operations; and (2) Financing and Insurance Operations.
- 21 -
HUGHES REPORTS FIRST QUARTER 2003 RESULTS;INCREASES FULL-YEAR HUGHES
AND DIRECTV U.S REVENUE, EBITDA AND OPERATING PROFIT GUIDANCE
DUE TO STRONG DIRECTV U.S. FINANCIAL PERFORMANCE
DIRECTV U.S. Revenues Increase over 16% to $1.71 Billion;
DIRECTV U.S. EBITDA More than Doubles to Record $230 Million and
Operating Profit Increases to $106 Million;
DIRECTV U.S. Attains Higher than Expected Net New Owned and Operated
Subscriber Additions of 275,000; Increases Full Year Guidance
El Segundo, Calif., April 14, 2003 -- Hughes Electronics Corporation ("HUGHES"),
a world-leading provider of digital television entertainment, broadband
satellite networks and services, and global video and data broadcasting, today
reported that first quarter 2003 revenues increased 10.0% to $2,227.3 million,
compared with $2,024.8 million in the first quarter of 2002. EBITDA/1/ for the
quarter was $305.0 million and EBITDA margin/1/ was 13.7%, compared with the
first quarter of 2002 EBITDA of $164.5 million and EBITDA margin of 8.1%.
Operating profit for the first quarter of 2003 was $41.9 million compared with
an operating loss of $87.7 million in the first quarter of 2002.
"An outstanding first quarter performance by DIRECTV U.S. drove HUGHES' strong
first quarter revenue and EBITDA growth," said Jack A. Shaw, HUGHES' president
and chief executive officer. "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."
Shaw added, "DIRECTV U.S.' better-than-expected quarterly performance for both
subscribers and average monthly revenue per subscriber drove revenues up by over
16% to more than $1.7 billion. In addition, DIRECTV U.S.' EBITDA more than
doubled in the quarter to $230 million -- an all-time record -- as a result of
the strong revenue growth along with a sharp increase in operating margins due
in part to our ongoing efforts to improve our cost structure." Shaw continued,
"Also contributing to DIRECTV U.S.' strong financial performance was a monthly
customer churn rate of only 1.5% during the quarter, representing the lowest
level attained in a first quarter in four years."
Shaw finished, "The first quarter was very significant for HUGHES in many ways.
First, due to strong operating results across the company, HUGHES reached an
important milestone in the first quarter: operating profit of nearly $42 million
-- the first time we have generated operating profit in a quarter in over four
years. Next, because of DIRECTV U.S.' strong performance in the first quarter,
we are increasing HUGHES' and DIRECTV U.S.' full year 2003 guidance for both
revenue and EBITDA, and we are also raising our DIRECTV U.S. full year
subscriber guidance. In addition, last week, GM and HUGHES announced their
intentions to split-off HUGHES into an asset-based security that will be 34%
owned by News Corp. The combination of HUGHES' improving outlook along with the
planned News Corp. transaction will provide GMH shareholders with considerable
potential for value creation."
Also impacting the EBITDA comparison were several one-time items in the first
quarter of 2002. HUGHES recorded a $95 million one-time gain in last year's
first quarter based on the favorable resolution of a lawsuit filed against the
U.S. government on March 22, 1991. The lawsuit was based upon the National
Aeronautics and Space Administration's ("NASA") breach of contract to launch ten
satellites on the Space Shuttle. Also impacting the 2002 first quarter was a
charge of $83 million to provide for losses associated with a contractual
dispute with General Electric Capital Corporation ("GECC"). Of this amount, $56
million was recorded as a charge to "Selling, general and administrative
expenses," and the remaining $27 million was recorded as "Interest expense" (see
the Direct-To-Home Broadcast segment for more details). In addition, DIRECTV
Latin America ("DLA") recognized an EBITDA loss of approximately $32 million in
the first quarter of 2002 due to the devaluation of the Argentinean peso.
***HUGHES believes EBITDA is a measure of performance used by some investors,
equity analysts and others to make informed investment decisions. HUGHES
management uses EBITDA to evaluate the operating performance of HUGHES and its
business segments, as a measure of performance for incentive compensation
purposes, and for other purposes discussed in footnote 1, below. HUGHES
reconciles this non-GAAP measure to operating profit in the schedule below
titled Non-GAAP Financial Reconciliation Schedule.***
Operating profit for the first quarter of 2003 improved to $41.9 million
compared with an operating loss of $87.7 million in the first quarter of 2002
primarily due to the DIRECTV U.S. operational improvements and the first quarter
2002 items that impacted EBITDA discussed above.
- 22 -
HUGHES had a first quarter 2003 net loss of $50.9 million compared to a net loss
of $837.7 million in the same period of 2002. The improvement was primarily due
to a first quarter 2002 charge associated with HUGHES' adoption of Statement of
Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible
Assets." As a result of the completion of the required transitional impairment
tests, HUGHES wrote-down $557 million of goodwill related to DIRECTV Latin
America, $108 million of goodwill related to DIRECTV Broadband, Inc ("DIRECTV
Broadband") and $16 million of goodwill associated with a Hughes Network Systems
("HNS") equity investment in the first quarter of 2002. In accordance with SFAS
No. 142, these charges were recorded as "Cumulative effect of accounting change,
net of taxes." Also impacting the quarter was the improved operating profit, a
lower income tax benefit in the first quarter of 2003 due primarily to the lower
pre-tax loss, and a $29 million charge in the first quarter of 2002 related to a
loan guarantee for an HNS affiliate in India. In addition, DIRECTV Broadband,
now accounted for as a discontinued operation, had lower net losses in the first
quarter of 2003 due to its shutdown on February 28, 2003.
SEGMENT FINANCIAL REVIEW: FIRST QUARTER 2003
Direct-To-Home Broadcast
First quarter 2003 revenues for the segment increased 13.3% to $1,847.9 million
from $1,630.4 million in the first quarter of 2002. The segment had EBITDA of
$211.3 million compared with negative EBITDA of $20.9 million in the first
quarter of 2002. Operating profit for the segment was $38.3 million in the first
quarter of 2003 compared to an operating loss of $164.0 million in the same
period of 2002. Included in the segment's 2002 EBITDA and operating loss is a
charge of $56 million to provide for losses related to a contractual dispute
with GECC associated with an agreement consummated in July
1995 whereby GECC agreed to establish and manage a credit program for consumers
who purchased DIRECTV(R) programming and related hardware.
Also, on February 28, 2003, HUGHES completed the shutdown of the DIRECTV DSL/TM/
service. DIRECTV Broadband is now accounted for as a discontinued operation in
the consolidated financial statements and its revenues, operating costs and
expenses, and non-operating results are no longer included in the Direct-To-Home
Broadcast segment for the periods presented.
United States/2/: Excluding subscribers in the National Rural Telecommunications
Cooperative ("NRTC") territories, DIRECTV added 701,000 gross subscribers and,
after accounting for churn, 275,000 net subscribers in the quarter. DIRECTV
owned and operated subscribers totaled 9.77 million as of March 31, 2003, 11%
more than the 8.79 million cumulative subscribers as of March 31, 2002. For the
first quarter of 2003, the total number of subscribers in NRTC territories fell
by 30,000, reducing the total number of NRTC subscribers as of March 31, 2003,
to 1.65 million. As a result, the DIRECTV platform ended the quarter with 11.42
million total subscribers.
DIRECTV reported quarterly revenues of $1,708.1 million, an increase of over 16%
from last year's first quarter revenues of $1,465.8 million. The increase was
primarily due to continued strong subscriber growth as well as increased average
monthly revenue per subscriber ("ARPU"). ARPU increased $2.40 to $59.10 in the
quarter 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.
EBITDA for the first quarter of 2003 more than doubled to a record $230.4
million compared to EBITDA of $93.7 million in last year's first quarter. This
increase was due to the additional gross profit gained from DIRECTV's increased
revenue, an improved mix of higher-margin revenues primarily related to
increased sales of local channel packages and fees from customers that have
multiple set-top receivers, and the favorable impact resulting from continued
cost reductions.
Operating profit in the quarter increased to $106.0 million compared to an
operating profit of $8.6 million in the first quarter of 2002. The improved
operating profit was primarily due to the reasons discussed above for the change
in EBITDA partially offset by increased depreciation and amortization related to
the launch of DIRECTV 5 in May of 2002, and additional infrastructure
expenditures made during the last year.
- 23 -
Latin America: On March 18, 2003 DIRECTV Latin America, LLC announced that in
order to aggressively address the company's financial and operational
challenges, it had filed a voluntary petition for reorganization under Chapter
11 of the U.S. Bankruptcy Code. The filing applies only to DIRECTV Latin
America, LLC, a U.S. company, and does not include any of its operating
companies in Latin America and the Caribbean. DIRECTV Latin America, LLC and its
operating companies are continuing regular operations.
The DIRECTV service in Latin America lost 54,000 net subscribers in the first
quarter of 2003 primarily due to the economic turmoil following the general
strike in Venezuela. The total number of DIRECTV subscribers in Latin America as
of March 31, 2003, was approximately 1,528,000 compared to about 1,642,000 as of
March 31, 2002, representing a decline of approximately 7%.
Revenues for DIRECTV Latin America declined to $140 million in the quarter from
$165 million in the first quarter of 2002 mostly due to the devaluation of the
Venezuelan and Brazilian currencies over the last year, as well as the lower
average number of subscribers.
DIRECTV Latin America recorded negative EBITDA of $22 million in the quarter
compared to negative EBITDA of $61 million in the same period of 2002. The lower
EBITDA loss was primarily due to the $32 million loss related to the devaluation
of the Argentinean peso in 2002 and aggressive cost cutting over the past year,
partially offset by the lower gross profit related to the lower revenues.
Operating loss in the quarter was $71 million compared to operating loss of $119
million in the first quarter of 2002. The lower operating loss was due to the
reasons discussed above for the change in EBITDA and decreased depreciation
expense.
Satellite Services
PanAmSat Corporation ("PanAmSat"), which is approximately 81%-owned by HUGHES,
generated first quarter 2003 revenues of $199.8 million compared with $207.1
million in the same period of the prior year. The decrease was primarily due to
a termination fee received in 2002 associated with one of the company's video
customers and lower occasional-use revenues during the first quarter of 2003.
These declines were partially offset by increased network services revenue and
PanAmSat's new G2 Satellite Solutions division, which was formed after the
acquisition of Hughes Global Services on March 7, 2003.
EBITDA for the quarter was $148.6 million and EBITDA margin was 74.4%, compared
with first quarter 2002 EBITDA of $151.1 million and EBITDA margin of 73.0%. The
EBITDA margin improvement was principally due to the company's continued focus
on operational efficiencies and lower bad debt expense partially offset by the
termination fee received in 2002. The decrease in EBITDA was primarily due to
the termination fee received in 2002. Also impacting the change in EBITDA and
EBITDA margin were several significant items recorded in the first quarter of
2002 including a $40 million gain in relation to the settlement of the PAS-7
insurance claim, net facilities restructuring and severance charges of $13
million, and a $19 million loss on the conversion of sales-type leases to
operating leases.
PanAmSat generated operating profit of $76.3 million in the first quarter of
2003 compared with operating profit of $57.1 million in the same period of 2002.
The improved operating profit was due to reduced satellite depreciation expense
which was partially offset by the EBITDA changes discussed above.
As of March 31, 2003, PanAmSat had contracts for satellite services representing
future payments (backlog) of approximately $5.46 billion compared to
approximately $5.55 billion at the end of the fourth quarter of 2002.
Network Systems
HNS generated first quarter 2003 revenues of $247.4 million compared with $242.8
million in the first quarter of 2002. The increase was principally due to higher
sales of DIRECTV(R) receiver systems and revenues from the larger DIRECWAY
residential and small office/home office ("SOHO") subscriber base, partially
offset by lower sales in the carrier segment due to the substantial completion
of the Thuraya Satellite Telecommunications Company and Inmarsat Ltd. contracts.
HNS shipped 629,000 DIRECTV receiver systems in the first quarter of 2003
compared to 430,000 units in the same period last year. Additionally, as of
March 31, 2003, DIRECWAY had approximately 152,000 subscribers in North America
compared to 111,000 one year ago, an increase of approximately 37%.
HNS reported negative EBITDA of $22.2 million compared to negative EBITDA of
$30.5 million in the first quarter of 2002. Operating loss in the quarter was
$39.8 million compared to an operating loss of $48.5 million in the first
quarter of 2002. The improvement in EBITDA and operating loss was primarily
attributable to a lower loss in the Consumer DIRECWAY business due to improved
efficiencies associated with the larger subscriber base and a $6 million charge
related to headcount reductions recorded in 2002.
BALANCE SHEET
From December 31, 2002 to March 31, 2003, the company's consolidated cash
balance increased $1,833.6 million to $2,962.2 million and total debt increased
$1,897.0 million to $5,014.8 million. These changes resulted in an increase in
net debt of $63.4 million to $2,052.6 million. Net debt is defined as the
difference between the consolidated cash balance and the consolidated debt
balance of HUGHES.
In the first quarter of 2003, DIRECTV U.S. completed several financing
transactions. On February 28, DIRECTV U.S. closed a $1.4 billion senior notes
offering. The $1.4 billion senior notes were offered in a Rule 144A / Regulation
S private placement and bear interest at an 8.375 percent annual rate, payable
semi-annually. The notes will mature on March 15, 2013 and are callable on or
after March 15, 2008. The notes are guaranteed by all of DIRECTV U.S.' domestic
subsidiaries. On March 6, DIRECTV U.S. closed senior secured credit facilities
totaling $1.675 billion. The facilities consist of a $250 million five-year
revolving credit facility, a $375 million five-year Term A loan and a $1.05
billion seven-year Term B loan. The Term A loan includes a $200 million delayed
draw component. The facilities are secured by substantially all of DIRECTV U.S.'
assets and are guaranteed by all of DIRECTV U.S.' domestic subsidiaries.
Approximately $2.56 billion of the proceeds from the financing, after
transaction fees, were paid to HUGHES in a distribution that was used to repay
$506 million of outstanding short-term debt, and is expected to fund HUGHES'
business plan through projected cash flow breakeven and for HUGHES' other
corporate purposes.
Hughes Electronics Corporation is a unit of General Motors Corporation. The
earnings of HUGHES are used to calculate the earnings attributable to the
General Motors Class H common stock (NYSE:GMH).
A live webcast of HUGHES' first quarter 2003 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
of the call will be available (dial in number: 719-457-0820, code: 644679)
beginning at 8:00 a.m. ET on Tuesday, April 15 through Sunday, April 20, at 1:00
a.m. ET.
- 25 -
HUGHES FINANCIAL GUIDANCE
Second Quarter Prior Full Year Revised Full Year
2003 2003 2003
-------------- --------------- -----------------
HUGHES
Revenues.............................. $2.25 - 2.3B $9.3 - 9.5B $9.5 - 9.6B
EBITDA................................ $250 - 300M ~$1.1B $1.15 - 1.2B
Operating Profit/(Loss)............... $(25) - 25M ~$0.0B $50 - 100M
Cash Requirements/a/.................. N/A $(200) - (300)M ~$(200)M
DIRECTV U.S.
Revenues.............................. ~$1,750M ~$7.1B ~$7.3B
EBITDA................................ ~$225M $800 - 850M ~$900M
Operating Profit...................... ~$95M $275 - 325M ~$375M
Net Subscriber Adds/b/................ N/A 750 - 800K 800 - 850K
DIRECTV Latin America.
Revenues.............................. $125 - 150M/c/ $550 - 600M No Change/c/
EBITDA................................ $(30) - (50)M/c/ $(50) - (75)M No Change/c/
Operating Loss........................ $(80) - (100)M/c/ $(250) - (275)M No Change/c/
Hughes Network Systems
Revenues.............................. $250 - 275M $1.1 - 1.2B No Change
EBITDA................................ $(10) - (20)M Breakeven No Change
Operating Loss........................ $(30) - (40)M $(65) - (75)M No Change
PanAmSat
Revenues.............................. $200 - 212M/d/ $790 - 820M $800 - 840M/d/
New Outright Sales and Sales- Type Leases None/d/ None None/d/
EBITDA................................ $145 - 155M/d/ $580 - 600M No Change/d/
Operating Profit...................... $65 - 85M/d/ $250 - 300M No Change/d/
a) Defined as cash flows from operating activities less cash flows from
investing activities excluding any potential payments for the Boeing
purchase price adjustment
b) Excludes subscribers in NRTC territories
c) Excludes the impact of any bankruptcy related charges or the impact of the
announced transaction with News Corp.
d) Includes Hughes Global Services, which was formerly included in HUGHES'
consolidated guidance
- 26 -
NON-GAAP FINANCIAL RECONCILIATION SCHEDULE*
First Quarter First Quarter Second Quarter Prior Full Year Revised Full Year
2003 Actual 2002 Actual 2003 Guidance 2003 Guidance 2003 Guidance
------------- ------------- -------------- --------------- -----------------
HUGHES
Operating Profit/(Loss).. $41.9M $(87.7)M $(25) - 25M ~$0.0B $50 - 100M
Plus: Depreciation &
Amortization. $263.1M $252.2M ~$275M ~$1.1B ~$1.1B
------- ------- ------ ------ ------
EBITDA................... $305.0M $164.5M $250 - 300M ~$1.1B $1.15 - 1.2B
DIRECTV U.S.
Operating Profit......... $106.0M $8.6M ~$95M $275 - 325M ~$375M
Plus: Depreciation &
Amortization. $124.4M $85.1M ~$130M ~$525M ~$525M
------- ------ ------ ------ ------
EBITDA................... $230.4M $93.7M ~$225M $800 - 850M ~$900M
DIRECTV Latin America
Operating Loss........... $(80) - $(250) -
$(71)M $(119)M (100)M (275)M No Change
Plus: Depreciation &
Amortization. $49M $58 M ~$50M ~$200M No Change
------- ------ ------ ------ ---------
EBITDA................... $(22)M $(61)M $(30) - (50)M $(50) - (75)M No Change
Hughes Network Systems
Operating Loss........... $(39.8)M $(48.5)M $(30) - (40)M $(65) - (75)M No Change
Plus: Depreciation &
Amortization. $17.6M $18.0M ~$20M $65 - 75M No Change
-------- ------ ------ --------- ---------
EBITDA................... $(22.2)M $(30.5)M $(10) - (20)M ~$0 No Change
PanAmSat
Operating Profit......... $76.3M $57.1M $65 - 85M $250 - 300M No Change
Plus: Depreciation &
Amortization. $72.3M $94.0M $80 - 70M $330 - 300M No Change
------ ------ --------- ----------- ---------
EBITDA................... $148.6M $151.1M $145 - 155M $580 - 600M No Change
* Additional DIRECTV U.S. non-GAAP financial reconciliation is included with the
DIRECTV U.S. stand-alone financial statements included in this earnings release.
(1) EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization)
is defined as operating profit (loss) plus 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. HUGHES management uses
EBITDA to evaluate the operating performance of HUGHES and its business
segments, to allocate resources and capital to its business segments, and as
a measure of performance for incentive compensation purposes. HUGHES
believes EBITDA is a measure of performance used by some investors, equity
analysts and others to make informed investment decisions. EBITDA is used as
an analytical indicator of income generated to service debt and fund capital
expenditures. In addition, multiples of current or projected EBITDA are used
to estimate current or prospective enterprise value. HUGHES management
believes that EBITDA is a common measure used to compare HUGHES' operating
performance and enterprise value to other communications, entertainment and
media service providers. EBITDA does not give effect to cash used for
interest payments related to debt service requirements. As a result, EBITDA
does not reflect funds available for investment in the business of HUGHES,
dividends or other discretionary uses. EBITDA and EBITDA margin as presented
herein may not be comparable to similarly titled measures reported by other
companies.
(2) The discussion of financial results for DIRECTV U.S. reflects amounts
included in the stand-alone financial statements of DIRECTV Holdings, LLC
that are included later in this earnings release. In accordance with
generally accepted accounting principles, certain items in the stand-alone
financial statements of DIRECTV Holdings, LLC are required to be accounted
for differently than in the financial results reported by HUGHES in Selected
Segment Data pursuant to Statement of Financial Accounting Standards No.
131. For example, the DIRECTV U.S. EBITDA and operating profit results
include approximately $3 million and $4 million of pension expense in the
first quarter of 2002 and 2003, respectively, which HUGHES includes in
"Eliminations and Other" for segment reporting purposes.
- 27 -
In connection with the proposed transactions announced on April 9, 2003,
General Motors Corporation ("GM"), Hughes Electronics Corporation ("Hughes")
and The News Corporation Limited ("News") intend to file relevant materials
with the Securities and Exchange Commission ("SEC"), including one or more
registration statement(s) that contain a prospectus and proxy/consent
solicitation statement. Because those documents will contain important
information, holders of GM $1-2/3 common stock and GM Class H common stock
are urged to read them, if and when they become available. When filed with
the SEC, they will be available for free (along with any other documents and
reports filed by GM, Hughes or News with the SEC) 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. Such
documents are not currently available.
GM and its directors and executive officers and Hughes and certain of its
executive officers may be deemed to be participants in the solicitation of
proxies or 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 interest in the solicitation was filed
pursuant to Rule 425 with the SEC by each of GM and Hughes on April 10,
2003. Investors may obtain additional information regarding the interests of
such participants by reading the prospectus and proxy/consent solicitation
statement if and when it becomes available.
This communication shall not constitute an offer to sell or the solicitation
of an offer to buy any securities, 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 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, Hughes and News to differ materially, many
of which are beyond the control of GM, Hughes or News include, but are not
limited to, the following: (1) 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; (2) the regulatory
approvals required for the transaction may not be obtained on the terms
expected or on the anticipated schedule; (3) the effects of legislative and
regulatory changes; (4) an inability to retain necessary authorizations from
the FCC; (5) 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; (6) the
introduction of new technologies and competitors into the subscription
television business; (7) changes in labor, programming, equipment and
capital costs; (8) future acquisitions, strategic partnerships and
divestitures; (9) general business and economic conditions; and (10) other
risks described from time to time in periodic reports filed by GM, Hughes or
News with the SEC. 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.
###
- 28 -
HUGHES ELECTRONICS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND
AVAILABLE SEPARATE CONSOLIDATED NET INCOME (LOSS)
(Dollars in Millions)
(Unaudited)
Three Months
Ended March 31,
---------------
2003 2002
---- ----
Revenues
Direct broadcast, leasing and other services........................ $2,081.8 $1,844.6
Product sales....................................................... 145.5 180.2
----- -----
Total Revenues...................................................... 2,227.3 2,024.8
------- -------
Operating Costs and Expenses, Exclusive of Depreciation and
Amortization Expense Shown Below
Broadcast programming and other costs.............................. 1,061.7 905.7
Cost of products sold.............................................. 143.0 173.0
Selling, general and administrative expenses....................... 717.6 781.6
Depreciation and amortization...................................... 263.1 252.2
----- -----
Total Operating Costs and Expenses................................. 2,185.4 2,112.5
------- -------
Operating Profit (Loss)............................................ 41.9 (87.7)
Interest income.................................................... 6.2 4.3
Interest expense................................................... (80.5) (76.3)
Other, net......................................................... (28.1) (41.6)
Reorganization expense............................................. (6.9) --
----- --
Loss From Continuing Operations Before Income Taxes, Minority
Interests and Cumulative Effect of Accounting Change............. (67.4) (201.3)
Income tax benefit................................................. 24.2 76.5
Minority interests in net earnings of subsidiaries................. (7.4) (6.7)
----- -----
Loss from continuing operations before cumulative
effect of accounting change (50.6) (131.5)
Loss from discontinued operations, net of taxes.................... (0.3) (24.9)
----- ------
Loss before cumulative effect of accounting change................. (50.9) (156.4)
Cumulative effect of accounting change, net of taxes............... -- (681.3)
-- -------
Net Loss........................................................... (50.9) (837.7)
Preferred stock dividends.......................................... -- (24.1)
-- -----
Loss Used for Computation of Available Separate Consolidated
Net Income (Loss)................................................ $(50.9) $(861.8)
===== =====
Available Separate Consolidated Net Income (Loss)
Average number of shares of General Motors Class H
Common Stock outstanding (in millions) (Numerator)............... 989.8 877.6
Average Class H dividend base (in millions) (Denominator).......... 1,381.9 1,301.2
Available Separate Consolidated Net Income (Loss).................. $(36.5) $(581.2)
======= =======
- 29 -
HUGHES ELECTRONICS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in Millions)
March 31, December
2003 31, 2002
--------- ---------
ASSETS (Unaudited)
Current Assets.
Cash and cash equivalents..................................... $2,962.2 $1,128.6
Accounts and notes receivable................................. 1,126.0 1,133.9
Contracts in process.......................................... 123.8 165.9
Inventories................................................... 290.1 230.3
Deferred income taxes......................................... 84.6 97.7
Prepaid expenses and other.................................... 889.4 900.0
----- -----
Total Current Assets.......................................... 5,476.1 3,656.4
Satellites, net............................................... 4,912.2 4,922.6
Property, net................................................. 1,966.4 2,017.4
Goodwill, net................................................. 5,775.2 5,775.2
Intangible Assets, net........................................ 626.2 644.7
Net Investment in Sales-type Leases........................... 155.8 161.9
Investments and Other Assets.................................. 762.3 706.9
----- -----
Total Assets.................................................. $19,674.2 $17,885.1
========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY.
Current Liabilities
Accounts payable.............................................. $1,150.2 $1,039.0
Deferred revenues............................................. 173.2 166.4
Short-term borrowings and current portion of long-term debt 45.1 727.8
Accrued liabilities and other................................. 1,185.6 1,269.9
------- -------
Total Current Liabilities..................................... 2,554.1 3,203.1
Long-Term Debt................................................ 4,969.7 2,390.0
Other Liabilities and Deferred Credits........................ 1,132.3 1,178.4
Deferred Income Taxes......................................... 530.2 581.2
Commitments and Contingencies
Minority Interests............................................ 563.7 555.3
Stockholder's Equity.......................................... 9,924.2 9,977.1
------- -------
Total Liabilities and Stockholder's Equity.................... $19,674.2 $17,885.1
========= =========
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).
- 30 -
HUGHES ELECTRONICS CORPORATION
SELECTED SEGMENT DATA
(Dollars in Millions)
(Unaudited)
Three Months
Ended March 31,
---------------
2003 2002
---- ----
DIRECT-TO-HOME BROADCAST.
Total Revenues................. $1,847.9 $1,630.4
EBITDA (1)..................... $211.3 $(20.9)
EBITDA Margin (1).............. 11.4% N/A
Operating Profit (Loss)........ $38.3 $(164.0)
Operating Profit Margin........ 2.1% N/A
Depreciation and Amortization $173.0 $143.1
Capital Expenditures........... $73.2 $124.6
SATELLITE SERVICES.
Total Revenues................. $199.8 $207.1
EBITDA (1)..................... $148.6 $151.1
EBITDA Margin (1).............. 74.4% 73.0%
Operating Profit............... $76.3 $57.1
Operating Profit Margin........ 38.2% 27.6%
Depreciation and Amortization $72.3 $94.0
Capital Expenditures........... $33.1 $74.0
NETWORK SYSTEMS
Total Revenues................. $247.4 $242.8
EBITDA (1)..................... $(22.2) $(30.5)
Operating Loss................. $(39.8) $(48.5)
Depreciation and Amortization $17.6 $18.0
Capital Expenditures........... $54.1 $128.3
ELIMINATIONS and OTHER.
Total Revenues................. $(67.8) $(55.5)
EBITDA (1)..................... $(32.7) $64.8
Operating Profit (Loss)........ $(32.9) $67.7
Depreciation and Amortization $0.2 $(2.9)
Capital Expenditures........... $27.1 $19.0
TOTAL
Total Revenues................. $2,227.3 $2,024.8
EBITDA (1)..................... $305.0 $164.5
EBITDA Margin (1).............. 13.7% 8.1%
Operating Profit (Loss)........ $41.9 $(87.7)
Operating Profit Margin........ 1.9% N/A
Depreciation and Amortization $263.1 $252.2
Capital Expenditures........... $187.5 $345.9
(1) EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization)
is defined as operating profit (loss) plus 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. HUGHES management uses
EBITDA to evaluate the operating performance of HUGHES and its business
segments, to allocate resources and capital to its business segments, and as
a measure of performance for incentive compensation purposes. HUGHES
believes EBITDA is a measure of performance used by some investors, equity
analysts and others to make informed investment decisions. EBITDA is used as
an analytical indicator of income generated to service debt and fund capital
expenditures. In addition, multiples of current or projected EBITDA are used
to estimate current or prospective enterprise value. HUGHES management
believes that EBITDA is a common measure used to compare HUGHES' operating
performance and enterprise value to other communications, entertainment and
media service providers. EBITDA does not give effect to cash used for
interest payments related to debt service requirements. As a result, EBITDA
does not reflect funds available for investment in the business of HUGHES,
dividends or other discretionary uses. EBITDA and EBITDA margin as presented
herein may not be comparable to similarly titled measures reported by other
companies.
- 31 -
The Following Pages Reflect DIRECTV U.S.' Financial Statements and
Other Data as a Stand Alone Entity
DIRECTV HOLDINGS LLC
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended March 31,
---------------------------
2003 2002
---- ----
(dollars in millions)
Revenues............................................................ $1,708.1 $1,465.8
Operating Costs and Expenses, exclusive of depreciation and
amortization expense shown below
Programming and other costs...................................... 695.5 604.4
Subscriber service expenses...................................... 156.4 147.3
Subscriber acquisition costs:
Third party customer acquisitions............................. 325.0 368.2
Direct customer acquisitions.................................. 55.8 22.9
Retention, upgrade and other marketing costs..................... 93.8 77.6
Broadcast operations expenses.................................... 33.9 30.9
General and administrative expenses.............................. 117.3 120.8
Depreciation and amortization expense............................... 124.4 85.1
----- ----
Total Operating Costs and Expenses............................... 1,602.1 1,457.2
------- -------
Operating Profit.................................................... 106.0 8.6
Interest expense, net............................................... (29.2) (28.1)
Other loss, net..................................................... (1.1) (0.2)
----- -----
Income (Loss) Before Income Taxes................................... 75.7 (19.7)
Income tax benefit (expense)........................................ (28.4) 7.3
------ ---
Net Income (Loss)................................................... $47.3 $(12.4)
===== =====
- 32 -
DIRECTV HOLDINGS LLC
CONSOLIDATED BALANCE SHEETS
March 31,
2003 December 31,
(Unaudited) 2002
---------- -----------
(dollars in millions)
ASSETS
Current Assets
Cash and cash equivalents...................... $273.8 $14.1
Accounts receivable, net of allowances......... 466.9 506.7
Inventories, net............................... 78.2 62.6
Prepaid expenses and other..................... 490.9 545.8
----- -----
Total Current Assets....................... 1,309.8 1,129.2
Satellites, net................................... 1,019.0 1,011.3
Property, net..................................... 786.2 838.6
Goodwill, net..................................... 2,888.5 2,888.5
Intangible Assets, net............................ 605.2 623.7
Investments and Other Assets...................... 106.3 87.3
----- ----
Total Assets............................... $6,715.0 $6,578.6
======== ========
LIABILITIES AND OWNER'S EQUITY
Current Liabilities
Accounts payable and accrued liabilities....... $1,204.6 $1,139.2
Unearned subscriber revenue.................... 162.7 156.6
Current portion of long-term debt.............. 10.5 --
---- --
Total Current Liabilities.................. 1,377.8 1,295.8
Long-Term Debt.................................... 2,614.5 --
Other Liabilities and Deferred Credits............ 446.6 477.6
Deferred Income Taxes............................. 269.6 246.7
Commitments and Contingencies..................... -- --
Owner's Equity
Capital stock and additional paid-in capital. 2,782.9 5,385.1
Accumulated deficit............................ (776.4) (823.7)
------- -------
Subtotal Owner's Equity........................... 2,006.5 4,561.4
------- -------
Accumulated Other Comprehensive Loss.
Accumulated unrealized losses on securities.. -- (2.9)
-- -----
Total Owner's Equity....................... 2,006.5 4,558.5
------- -------
Total Liabilities and Owner's Equity.............. $6,715.0 $6,578.6
======== =======
- 33 -
DIRECTV HOLDINGS LLC
Non-GAAP Financial Reconciliation and Other Data
(Unaudited)
Pre-Marketing Margin Reconciliation to Operating Profit
For the Quarter Ended Guidance
March 31, Full Year
2003 2002 2003
(dollars in millions)
Operating profit........................................... $106.0 $8.6 ~ $375
Add back: Subscriber acquisition costs.
Third party customer acquisitions............ 325.0 368.2 **
Direct customer acquisitions................. 55.8 22.9 **
Depreciation and amortization expense............... 124.4 85.1 **
Retention, upgrade and other marketing costs........ 93.8 77.6 **
---- ---- --
Subtotal................................................... 599.0 553.8 ~2,545
----- ----- ------
Pre-marketing margin*...................................... $705.0 $562.4 ~ $2,920
====== ====== ======
Pre-marketing margin as a percentage of revenue*........... 41.3% 38.4% ~40%
Other Data
For the Quarter Ended
March 31,
---------
2003 2002
---- ----
(dollars except where noted)
Average monthly revenue per subscriber (ARPU) $59.10 $56.70
Average monthly subscriber churn-- %.......... 1.5% 1.6%
Average subscriber acquisition costs (SAC)... $545 $510
Total number of subscribers--platform (000's) 11,421 10,544
Total owned and operated subscribers (000's). 9,768 8,793
(*) Pre-marketing margin is a measure of profitability before subscriber
acquisition costs; retention, upgrade and other marketing costs; and
depreciation and amortization. Pre-marketing margin 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. HUGHES and DIRECTV U.S. management use pre-marketing
margin to aid in the evaluation of DIRECTV U.S.' operating performance. HUGHES
and DIRECTV U.S. believe pre-marketing margin is a measure of performance used
by some investors, equity analysts and others to make informed investment
decisions. Pre-marketing margin is used as an additional analytical indicator of
profitability. HUGHES and DIRECTV management believe that pre-marketing margin
is a common measure used to compare DIRECTV U.S.' operating performance to other
multi-channel video providers. Pre-marketing margin does not reflect funds
available for investment in the business of DIRECTV, dividends or other
discretionary uses. Pre-marketing margin as presented herein may not be
comparable to similarly titled measures reported by other companies.
(**) No individual guidance provided.
# # #
- 34 -