DIRECTV 2002 Annual Report Download - page 54

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HUGHES ELECTRONICS CORPORATION
Other, Net. Other, net decreased to a loss of $92.7 million in 2001 from a loss of $292.6 million
in 2000. Other, net for 2001 resulted primarily from equity method investee losses of $61.3 million, a
write-down of $212.0 million related to the Sky Perfect investment, partially offset by $130.6 million of
net gains from the sale of certain marketable equity securities and the reversal of $32.0 million of
accrued exit costs related to the DIRECTV Japan business. Including the write-down of the Sky Perfect
investment, Hughes recognized $226.1 million of write-downs related to other-than-temporary declines
in the fair value of marketable equity securities in 2001. The loss in 2000 included $164.2 million of
equity method investee losses and $128.4 million of costs related to the exit of the DIRECTV Japan
business. The change in equity method investee losses in 2001 compared to 2000 resulted from lower
losses at DIRECTV Japan due to the shutdown of the business at September 30, 2000. See “Liquidity
and Capital Resources—Acquisitions and Divestitures” and “Liquidity and Capital Resources—
Investments in Marketable Securities” below for additional information regarding the transaction
discussed above.
Income Taxes. Hughes recognized an income tax benefit of $325.6 million in 2001 compared to
$406.1 million in 2000. The lower tax benefit in 2001 was primarily due to an additional tax benefit in
2000 associated with the write-off of Hughes’ historical investment in DIRECTV Japan as well as the
effect of favorable tax settlements recorded in 2000. The 2000 tax benefits were partially offset by
higher pre-tax losses in 2001 compared to 2000 and a 2001 tax benefit resulting from the write-off of
an investment in Motient Corporation (“Motient”).
Loss from Continuing Operations. Hughes reported a loss from continuing operations before
cumulative effect of accounting change of $614.2 million in 2001, compared to $355.4 million in 2000.
Cumulative Effect of Accounting Change. Hughes adopted SFAS No. 133, “Accounting for
Derivative Instruments and Hedging Activities,” on January 1, 2001. SFAS No. 133 requires Hughes to
carry all derivative financial instruments on the balance sheet at fair value. In accordance with the
transition provisions of SFAS No. 133, Hughes recorded a one-time after-tax charge of $7.4 million on
January 1, 2001 as a cumulative effect of accounting change and an after-tax unrealized gain of
$0.4 million in “Accumulated other comprehensive income (loss).”
Direct-To-Home Broadcast Segment
Direct-To-Home Broadcast segment revenues increased 20.4% to $6,306.4 million in 2001 from
$5,238.0 million in 2000. The Direct-To-Home Broadcast segment had negative EBITDA of
$74.8 million in 2001 compared with negative EBITDA of $24.5 million in 2000. The operating loss for
the segment increased to $749.9 million in 2001 from $557.9 million in 2000.
United States. The DIRECTV U.S. businesses were the biggest contributors to the segment’s
revenue growth with revenues of $5,552 million in 2001, an 18% increase over 2000 revenues of
$4,694 million. The large increase in revenues resulted primarily from an increased number of
DIRECTV subscribers since December 31, 2000 and higher revenues from local channel offerings,
pay-per-view movies, sporting events and other subscriber revenues, such as revenues from an
increased number of subscribers with multiple set-top boxes. The DIRECTV U.S. businesses added
1.2 million net new subscribers in 2001, compared to 1.8 million net new subscribers in 2000. In
addition, during the third quarter of 2001, DIRECTV made a one-time downward adjustment of
approximately 143,000 subscribers. This adjustment primarily corrected errors that had accumulated
over the preceding 18 months related to subscribers who disconnected service prior to June 30, 2001
but were counted as active subscribers in DIRECTV’s database. As of December 31, 2001, DIRECTV
had about 10.3 million subscribers compared to about 9.1 million subscribers at December 31, 2000.
ARPU for DIRECTV U.S. was $58.70 and $57.70 in 2001 and 2000, respectively.
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