EBITDA(1) for the quarter was $76.5 million. Excluding a one-time charge primarily related to severance of $65.3 million, EBITDA for the quarter was $141.8 million and EBITDA margin1 was 6.7%. In the third quarter of 2000, EBITDA was $107.9 million and EBITDA margin was 6.4%.

The third quarter was very important for HUGHES because we made key structural and management changes across the businesses. As a result, we are now positioned to generate substantially improved operating results, said Jack A. Shaw, HUGHES’ chief executive officer. I’m particularly pleased with our third quarter financial results because, despite a slowing economy, we grew our revenues by about 25%, exceeded DIRECTV U.S. subscriber growth expectations by adding 425,000 net new subscribers, and met or exceeded our third quarter operational targets in each of our businesses.

Shaw continued, Our revenue growth was again driven by strong demand for DIRECTV services, as well as new satellite transponder sales at PanAmSat and increased sales in all of Hughes Network Systems’ product lines.

Shaw also noted that the $65 million severance charge was related to a 10% company-wide workforce reduction in the U.S. that is expected to result in savings of over $110 million annually. Excluding this one-time charge, HUGHES’ EBITDA increased 31%, primarily due to continued operational improvements in DIRECTV Latin America, the new satellite transponder sales at PanAmSat and lower corporate expenses. These improvements were partially offset by losses from the new DIRECTV DSL service (formerly known as Telocity) and increased investment in Hughes Network Systems’ (HNS) DIRECWAYbroadband business.

HUGHES had a third quarter 2001 net loss of $227.2 million compared to a net loss of $93.8 million in the same period of 2000. The increased loss was primarily due to a pre-tax non-cash charge of $212 million resulting from the revaluation of HUGHES’ SkyPerfecTV! investment, increased depreciation and amortization expense in the Direct-To-Home Broadcast segment and at PanAmSat, and the lower EBITDA. These declines were partially offset by a pre-tax gain of about $108 million that resulted from the sale of 4.1 million shares of Thomson Multimedia common stock, and a favorable adjustment to the expected costs associated with the shutdown of the DIRECTV Japan business.

Subsequent to the end of the third quarter, HUGHES reached a settlement with the Raytheon Company on a purchase price adjustment related to Raytheon’s 1997 merger with Hughes Defense. Under the terms of the agreement, HUGHES will reimburse Raytheon $635.5 million of the original $9.5 billion purchase price. Of the total payment to Raytheon, $500 million was paid on October 16, 2001 and the remaining balance will be paid within six months. There is no impact to HUGHES’ earnings from this settlement.

For the first nine months of 2001, revenues increased 14.4% to $5,981.4 million, compared to $5,228.6 million for the same period in 2000. This increase was primarily due to continued subscriber growth at DIRECTV in the United States and Latin America, partially offset by fewer sales and sales-type leases at PanAmSat.

EBITDA through September 2001 was $271.7 million and EBITDA margin was 4.5%, compared to EBITDA of $440.2 million and EBITDA margin of 8.4% in the same period of 2000. The decrease in EBITDA and EBITDA margin was primarily attributable to the higher outright sales of satellite transponders at PanAmSat in the first nine months of 2000, as well as the 2001 one-time severance charges, increased investment in DIRECWAY and the losses from the new DIRECTV DSL service. These items were partially offset by improved DIRECTV operating performance due to the larger subscriber bases in the United States and Latin America and lower corporate expenses.

For the first nine months of 2001, net losses totaled $489.0 million compared to net losses of $244.8 million in 2000. The change was primarily due to an increase in depreciation and amortization expense in the Direct-To-Home Broadcast segment and at PanAmSat, as well as the lower EBITDA. These declines were partially offset by reduced losses related to HUGHES’ Direct-To-Home television ventures in Japan, as well as the gain from the sale of Thomson Multimedia common stock and improved net interest expense.

Third quarter 2001 revenues for the segment increased 21.8% to $1,572.6 million from $1,291.5 million in the third quarter of 2000. The segment had negative EBITDA of $74.2 million compared with negative EBITDA of $17.7 million in the third quarter of 2000.

United States: DIRECTV reported quarterly revenues of $1,363 million, an increase of 18% from last year’s third quarter revenues of $1,154 million. The increase was primarily due to continued subscriber growth.

DIRECTV substantially exceeded expectations by adding a record 953,000 gross subscribers and, after accounting for churn, 425,000 net subscribers in the quarter. In addition, DIRECTV made a one-time downward adjustment of approximately 143,000 subscribers. This adjustment corrected errors that accumulated over the past 18 months related to subscribers who discontinued service prior to June 30, 2001 but were counted as active subscribers in DIRECTV’s database. As a result, DIRECTV had 10.3 million subscribers as of September 30, 2001, representing a 14% increase over the 9.0 million customers attained as of September 30, 2000.

Excluding a $48 million one-time charge primarily related to severance, EBITDA for the third quarter of 2001 was $20 million, compared to EBITDA of $36 million in last year’s third quarter. EBITDA declined due to increased marketing expenses related to DIRECTV’s record number of gross subscriber additions in the quarter, which more than offset the additional gross profit gained from DIRECTV’s larger subscriber base.

DIRECTV DSL: The DIRECTV DSL service was created following HUGHES’ April 2001 acquisition of Telocity. No comparative financial data for DIRECTV DSL is provided for the third quarter 2000.

The DIRECTV DSL service had third quarter 2001 revenues of $9 million and negative EBITDA of $33 million. Approximately 5,000 net customers were added to the DIRECTV DSL service in the quarter. Subscriber additions in the quarter were negatively impacted by the bankruptcy of Rhythms NetConnections, formerly a wholesale provider of broadband services. As of September 30, 2001, DIRECTV DSL had about 73,000 residential broadband customers in the United States compared to about 23,000 customers as of September 30, 2000.

Latin America: DIRECTV Latin America generated $201 million in revenues for the quarter compared with $136 million in the third quarter of 2000. This 48% increase was primarily due to continued subscriber growth as well as the consolidation of the Argentinean and Colombian local operating companies in the first half of 2001.

SOURCE: COMPANY PRESS RELEASE