DIRECTV 2002 Annual Report Download - page 52

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HUGHES ELECTRONICS CORPORATION
EBITDA for 2002 was $591.6 million compared to $580.0 million for 2001. EBITDA margin for
2002 was 72.8% compared to 66.7% for 2001. The higher EBITDA and EBITDA margin was principally
due to increased operating efficiencies that resulted from cost saving initiatives, a $40.1 million net
gain related to the settlement of the PAS-7 insurance claim and a $7.0 million severance charge in the
third quarter of 2001. These gains were partially offset by the decline in revenues from outright sales
and sales type lease transactions discussed above, an $18.7 million charge for the write-off of
receivables due to the conversion of several sales-type leases to operating leases by a PanAmSat
customer and a $13.7 million provision for idle facilities and severance costs in 2002. Operating profit
was $255.9 million for 2002, compared to $165.3 million in 2001. The increase in operating profit
resulted from the increase in EBITDA and lower amortization expense of $65 million for 2002 due to
the discontinuation of goodwill amortization in accordance with SFAS No. 142.
Backlog for the Satellite Services segment, which consists primarily of operating leases on satellite
transponders, was about $5.55 billion as of December 31, 2002 compared to about $5.84 billion as of
December 31, 2001.
Network Systems Segment
Revenues for the Network Systems segment decreased by 11.8% to $1,169.9 million in 2002 from
$1,325.8 million for 2001. The lower revenues resulted primarily from the substantial completion in late
2001 of two significant customer contracts for the sale of phones and systems for mobile satellite
programs, partially offset by increased sales of DIRECTV receiving equipment, which totaled about
2.6 million units in 2002 compared to about 2.0 million units in 2001.
The Network Systems segment reported negative EBITDA of $87.0 million for 2002 compared to
negative EBITDA of $111.8 million for 2001. The Network Systems segment had an operating loss of
$160.7 million in 2002 compared to an operating loss of $171.8 million in 2001. The change in EBITDA
and operating loss resulted from higher operating margins from increased sales of DIRECTV receiving
equipment, a $24.5 million gain resulting from the recovery of receivables written-off in 1999 and lower
general and administrative costs, partially offset by a provision for inventory and receivables and a
$10.3 million charge related to severance benefits in 2002.
Eliminations and Other
The elimination of revenues increased to $240.6 million in 2002 from $238.3 million in 2001.
Operating profit from “Eliminations and Other” improved to $10.9 million in 2002 from an operating
loss of $1.4 million in 2001. The increase in operating profit resulted primarily from the $95 million net
gain recorded from the NASA claim and a 2001 severance charge of $23 million, partially offset by the
$23 million loss recorded in connection with the termination of the AOL alliance, higher corporate
expenditures related to costs associated with the terminated EchoStar Merger and employee benefit
costs.
2001 compared to 2000
Overall
Revenues. Revenues increased 13.4% to $8,264.0 million in 2001 compared with
$7,287.6 million in 2000. The increase in revenues resulted primarily from $1,068.4 million of higher
revenues at the Direct-To-Home Broadcast segment over 2000. This increase was due primarily to the
addition of about 1.5 million net new DIRECTV subscribers in the United States and Latin America
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