DIRECTV 2002 Annual Report Download - page 56

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HUGHES ELECTRONICS CORPORATION
2001, compared to $356.6 million for 2000. The decrease in operating profit resulted from the decrease
in EBITDA and higher depreciation expense related to additional satellites placed into service since
December 31, 2000, and increased depreciation expense that resulted from a reduction in the useful
life of the Galaxy VIII-i satellite due to the failure of its primary propulsion system during the third
quarter of 2000.
Backlog for the Satellite Services segment, which consists primarily of operating leases on satellite
transponders, was about $5.84 billion as of December 31, 2001 compared to about $6.0 billion as of
December 31, 2000.
Network Systems Segment
Revenues for the Network Systems segment decreased by 6.0% to $1,325.8 million in 2001 from
$1,409.8 million in 2000. The lower revenues resulted primarily from decreased shipments of
DIRECTV receiver equipment, which totaled about 2.0 million units in 2001 compared to about
3.0 million units in 2000, due primarily to DIRECTV completing the conversion of PRIMESTAR By
DIRECTV customers to the DIRECTV service in the third quarter of 2000.
The Network Systems segment reported negative EBITDA of $111.8 million for 2001 compared to
EBITDA of $0.1 million for 2000. The Network Systems segment had an operating loss of
$171.8 million for 2001 compared to an operating loss of $63.5 million for 2000. The change in EBITDA
and operating loss resulted from increased costs associated with the rollout of new DIRECWAY
services, including AOL Plus Powered by DIRECWAY and the decreased revenues discussed above.
Eliminations and Other
The elimination of revenues decreased to $238.3 million in 2001 from $383.8 million in 2000 due
primarily to the decline in intercompany purchases of DIRECTV receiving equipment and lower
manufacturing subsidies paid by DIRECTV to HNS. Intercompany transactions include sales of
receiving equipment from HNS to DIRECTV, and PanAmSat transponder leases to HNS and DLA.
Operating losses from “Eliminations and Other” improved to a loss of $1.4 million in 2001 from a
loss of $89.3 million in 2000 due primarily to decreased corporate expenditures for employee benefits
and lower margins on intercompany sales.
Liquidity and Capital Resources
In 2002, Hughes had sources of cash of $2,141.7 million, resulting primarily from additional net
borrowings of $470.5 million, proceeds from the sale of investments of $322.4 million, insurance
proceeds of $215.0 million and cash provided by operations of $1,126.1 million. Cash provided by
operations included cash receipts of $600.0 million from the settlement payment related to the
terminated merger agreement with EchoStar and a cash payment by Hughes of $180.0 million related
to the GECC settlement. These sources of cash were offset by cash used during 2002 of about
$1,713.2 million, primarily for expenditures for satellites and property of $1,298.1 million, the final
settlement payment to Raytheon of $134.2 million, the $99.8 million purchase of short-term
investments, preferred stock dividends paid to GM of $68.7 million and debt issuance costs of
$85.4 million.
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