Hughes 2Q in the red
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July 19, 1999: 2:35 p.m. ET
Acquisition costs cause satellite TV operator to reverse year-earlier net
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NEW YORK (CNNfn) - Hughes Electronics Corp., the satellite television operating unit of General Motors, Monday posted a second-quarter loss -- reversing a year-earlier profit due largely to the cost of two acquisitions by the producer of DirecTV satellite entertainment systems.
Hughes' loss of $92.3 million, or 23 cents a diluted share, compared with earnings of $56.1 million, or 14 cents a share, in the year-earlier period. Analysts polled by First Call Corp. had anticipated a loss of 24 cents for the quarter.
Hughes issued a warning in June that it would report a loss in the 20-to-25-cent a share range.
Revenue rose almost 30 percent to $1.78 billion.
Higher depreciation and amortization expenses associated with its purchases of U.S. Satellite Broadcasting Co. and Primestar Inc., and an increase in net interest expense were to blame for the quarterly loss, Hughes said.
Also denting results were other costs associated with adjustments to its books related to GM's purchase of the company back in 1985, as well as charges related to buying back some of its satellites on loan.
In addition, development costs and shipping delays at Hughes Space and Communications Co. resulted in a charge of $125 million in the most recent quarter.
26-year-old patent case settled
Offsetting the expenses and charges, however, was a gain from a $1.5 billion investment from America Online Inc. announced in May, and the settlement of a 26-year-old patent infringement case, which was finally settled on June 21.
Hughes received a payment of $154.6 million in the first quarter of the year from the U.S. government for "repeated infringement" of a patent that Hughes has for satellite communications and altitude control.
All told, Hughes' loss from operations was $97.6 million, the company said.
Earnings before income, taxes, depreciation and amortization, or EBITDA, rang in at $63.2 million, down from $178.4 million in the second quarter of 1998. Higher EBITDA at its PanAmSat and Hughes Network Systems divisions helped offset some of the expenses associated with its other costs, the company said.
As of the end of June, Hughes said there were 7.4 million subscribers of DirecTV. About 369,000 new subscriptions were added during the quarter, a 63 percent increase from a year earlier.
For the first six months of 1999, Hughes posted a loss of $4.3 million, or 4 cents a share, compared with a profit of $26.2 million, or 25 cents, a year earlier. Revenue in the six-month period rose to $3.28 billion from $2.66 billion.
El Segundo, Calif.-based Hughes (GMH) designs and manufactures advanced electronic systems, telecommunications equipment and digital satellite television. It is traded separately from GM (GM) as the carmaker's class H stock.
GM owns roughly 300 million of the 430 million shares of Hughes Electronics outstanding. One hundred thirty million of those shares are actively traded on the New York stock exchange. Those shares rose 1-9/16 to 62-1/8 in Monday afternoon trading.
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Hughes
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