SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549-1004
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report
(Date of earliest event reported) April 17, 2001
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GENERAL MOTORS CORPORATION
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(Exact name of registrant as specified in its charter)
STATE OF DELAWARE 1-143 38-0572515
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(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
300 Renaissance Center, Detroit, Michigan 48265-3000
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (313)-556-5000
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ITEM 9. Forward Looking Information Relating to Hughes
General Motors Corporation's (GM) subsidiary Hughes Electronics Corporation
(Hughes) filed the following forward looking information on Form 8-K.
Hughes Electronics Corporation hereby furnishes the following forward
looking information relating to the operating and financial performance of
Hughes and certain of its business units/subsidiaries and trends relating to
such performance. This forward looking information represents our management's
best estimates of the designated indicators of the financial performance of our
business as of the date hereof and Hughes undertakes no obligation to publicly
update these forward-looking statements to reflect subsequent events or
circumstances. The furnishing of this information by Hughes is not intended to,
and does not, constitute a determination by GM or Hughes that the information is
in fact material or create a measure for materiality.
Hughes Consolidated Financial Guidance
(B is billions, M is millions and K is thousands)
Year Ending: 2000 Actual(1) Q2 2001 Full Year 2001
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Revenue $7.3B about $2B 20 to 25% growth
EBITDA(2) $594M $80 to 100M $550 to 650M
Cash Requirements 1.5B(3) N/A $2.5 to 3B
Hughes Consolidated -Trends
Expected average annual growth rates over next 5 years:
Revenue: 20 to 25%
EBITDA(2): Over 50%
DIRECTV U.S. Financial Guidance
Period Ending: 2000 Actual(1) Q2 2001 Full Year 2001
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Revenue $4.7B $1.35 to 1.4B $5.6 to 5.8B
EBITDA(2) $151M $60 to 75M $325 to 425M
Net Subscriber Additions 1.8M 275 to 350K 1.5 to 1.7M
Cumulative Subscribers 9.5M 10.1 to 10.2M 11 to 11.2M
DIRECTV U.S. - Trends
Average Monthly Revenue Per User (ARPU)
- ARPU was $59 in the fourth quarter of 2000
- Modest increase over next 1 to 2 years
- Assumptions driven by roll-out of new advanced products (e.g. TiVo,
UltimateTV, Wink and AOLTV), local channels and periodic price increases
Subscriber Acquisition Costs (per subscriber) (SAC)
- Basic Box
- Fourth quarter 2000 actual approximately $535
- Relatively flat over next 1 to 2 years
- Advanced Boxes
- Over the next 1 to 2 years, a 5 to 10% increase (weighted average over
all gross subscriber additions) versus second half 2000 SAC
- Forecast dependent on penetration mix of new boxes
- SAC will ultimately be driven by the competitive environment
Monthly Churn
- 1.5 to 1.7% average monthly churn over next 1 to 2 years
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DIRECTV Broadband (Telocity) Guidance
Period Ending: Q2 2001 Full Year 2001
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Revenue N/A about $40M
EBITDA(2) Losses $(45M) to (50M) $(120M) to (140M)
Net Subscriber Additions N/A about 100K
Cumulative Subscribers N/A about 150K
DIRECTV Broadband (Telocity) - Trends
Average Revenue Per User (ARPU)
- ARPU was about $46 in the first quarter 2001
- Relatively Flat to modest increase over next 1 to 2 years
- Largely dependent on competitive environment and introduction of new
services
Subscriber Acquisition Costs (SAC)
- SAC expected to be about $400 over the next 1 to 2 years
- Includes capitalized equipment cost of about $200 per subscriber
Monthly Churn
- Expected to be ~1.5% for the next 1 to 2 years
DIRECTV Latin America Financial Guidance
Period Ending: 2000 Actual(1) Q2 2001 Full Year 2001
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Revenue $541M about $180M about $800M
EBITDA(2) Losses $(171M) about $(35M) $(90M) to (130M)
Net Subscriber Additions 501K about 100K about 500K
Cumulative Subscribers 1,305K about 1.5M about 1.8M
DIRECTV Latin America - Trends
Programming Average Revenue Per User (Programming ARPU)
- Flat to modest increase over next 1 to 2 years
- Largely dependent on countries' economies, price increases and competitive
environment
Subscsriber Acquisition Costs (SAC)
- SAC was just under $300 in 2000; Includes capitalized installation cost
of $50 to $60 per subscriber
- Flat to slight increase over the next 1 to 2 years
Monthly Churn
- Average monthly churn approximately 2.6% in 2000
- Flat to slight improvement over next 1 to 2 years
Hughes Network Systems (HNS) Financial Guidance
Period Ending: 2000 Actual(1) Q2 2001 Full Year 2001
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HNS Revenue $1.4B $300 to $350M ~10% growth
HNS EBITDA/(EBITDA(2) Losses) Breakeven about $(40M) $(100M) to (150M)
Included in HNS EBITDA(2):
SPACEWAY EBITDA(2) Losses $(10M) about $(8M) $(25M) to (35M)
DirecPC EBITDA(2) Losses $(73M) about $(45M) $(160M) to (200M)
DirecPC Net Subscriber Additions N/A about 200K
Cumulative DirecPC subscribers 50K N/A about 250K
PanAmSat Financial Guidance
PanAmSat Consolidated
Period Ending: 2000 Actual(1) Q2 2001 Full Year 2001
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Revenue $1.0B $205 to 210M about $1B
Sales and Sales-type leases as no new sales-
% of Total Revenues 24% type leases 10 to 15%
EBITDA(2) Margin 68% Mid to High 60% Mid to High 60%
Range range
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Core Transponder Leasing Business
Period Ending: 2000 Actual(1) Q2 2001 Full Year 2001
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Revenue $1.0B $205 to 210M $950M to $1.0B
Sales and Sales-type leases as no new sales-
% of Total Revenues 24% type leases 10 to 15%
EBITDA(2) Margin 70% Low 70% range Low 70% range
Net-36
Revenue --- less than $1M $5 to $10M
EBITDA(2) Losses $(20M) $(8) to (10)M about $(30M)
(1) Revenue and EBITDA were derived from the form 10K filed with the SEC on
March 6, 2001
(2) EBITDA is defined as operating profit (loss), plus depreciation and
amortization. EBITDA is not presented as an alternative measure of
operating results or cash flow from operations, as determined in accordance
with generally accepted accounting principles. Hughes management believes
it is a meaningful measure of performance and is commonly used by other
communications, entertainment and media service providers. EBITDA does not
give effect to cash used for debt service requirements and thus does not
reflect funds available for investment in the business of Hughes, dividends
or other discretionary uses. EBITDA margin is calculated by dividing EBITDA
by total revenues. EBITDA and EBITDA margin as presented herein may not be
comparable to similarly titled measures reported by other companies.
(3) Excludes proceeds from sale of satellite manufacturing and financing
Cautionary Statement
This Current Report on Form 8-K contains forward-looking information as to
which there are numerous risks and uncertainties that could cause actual results
to differ materially from the forward-looking information made herein. The
following important factors, in addition to the risk factors, contingencies and
legal matters discussed in the Form 10-K's, Form 10-Q's and Form 8-K's filed by
General Motors, our corporate parent, Hughes and PanAmSat, could cause our
actual financial results to differ materially from those projected, forecasted
or estimated by us in the forward-looking information.
We Will be Adversely Affected if We Fail to Maintain
Leading Technological Capabilities.
The rapid technological changes and innovation that characterize the
entertainment, information and communications services industry could cause the
services and products offered by us to become obsolete. If the new technologies
on which we are currently focusing our research and development investments fail
to achieve acceptance in the marketplace, we would suffer a material adverse
effect on our future competitive position and results of operations. For
example, our competitors could be the first to obtain proprietary technologies
that are perceived by the market as being superior. In addition, after
substantial research and development expenditures, one or more of the
technologies under development by us or any of our strategic partners could
become obsolete prior to its introduction.
Our operating results will depend to a significant extent on our ability
to continue to introduce new products and services on a timely basis and to
reduce costs of our existing products and services. We cannot assure you that we
will successfully identify new product or service opportunities or develop and
market these opportunities in a timely or cost-effective manner. The success of
new product development depends on many factors, including proper identification
of customer needs, cost, timely completion and introduction, differentiation
from offerings of competitors and market acceptances.
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Technological innovation is important to our success and depends, to a
significant degree, on the work of technically skilled employees. Competition
for the services of these types of employees is vigorous. We cannot assure you
that we will be able to attract and retain these employees. If we were unable to
attract and maintain technically skilled employees, our competitive position
could be adversely affected.
We Could Have Inadequate Access to Capital for Growth.
We may not be able to raise adequate capital to complete some or all of
our business strategies or to react rapidly to changes in technology, products,
services or the competitive landscape. We believe that key success factors in
the entertainment, information and communications services industry include
superior access to capital and financial flexibility. Industry participants
often face high capital requirements in order to take advantage of new market
opportunities, respond to rigorous competitive pressures and react quickly to
changes in technology. For example, as a result of the competitive environment
in the multi-channel entertainment industry, DIRECTV may have to incur increased
subscriber acquisition costs by making competitive offers in the future to
maintain its market leadership.
We expect the global entertainment, information and communications
services market to continue to grow due to the high demand for communications
infrastructure and the opportunities created by industry deregulation. Many of
our competitors are committing substantial capital and, in many instances, are
forming alliances to acquire or maintain market leadership. Our strategy is to
be a leader in providing entertainment, information and communications products
and services by building on its experience in satellite technology and by making
acquisitions and establishing, maintaining and restructuring strategic alliances
as appropriate. This strategy will require substantial investments of capital
over the next several years. We cannot assure you that we will be able to
satisfy our capital requirements in the future.
Our Future Growth Depends Upon our Ability to
Implement our Business Strategy.
Our business strategy is focused on becoming a premier provider of
integrated entertainment, information and communications services. As part of
this strategy, we have implemented several new initiatives and entered into a
strategic alliance with America Online, Inc. We cannot assure you that the
implementation of these initiatives will not be delayed, or that they will ever
be fully implemented, or, if implemented, will allow us to successfully
capitalize on the emerging communications services markets we are targeting. We
cannot assure you that we will be successful in implementing these new
initiatives, or any other new initiatives, or that we will realize the
anticipated benefits of our alliance with AOL.
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We Are Vulnerable to Satellite Failure.
DIRECTV, PanAmSat, HNS and our other businesses own or utilize satellites
in their businesses. Orbiting satellites are subject to the risk of failing
prematurely due to, among other things, mechanical failure, a collision with
objects in space or an inability to maintain proper orbit. Satellites are
subject to the risk of launch delay and failure, destruction and damage while on
the ground or during launch and failure to become fully operational once
launched. Delays in the production or launch of a satellite or the complete or
partial loss of a satellite, in-orbit or during launch, could have a material
adverse impact on the operation of our businesses. With respect to both in-orbit
and launch problems, insurance carried by PanAmSat and us does not compensate
for business interruption or loss of future revenues or customers. We have, in
the past, experienced technical anomalies on some of our satellites. We cannot
assure you that we will not experience further satellite anomalies in the
future. Service interruptions caused by these anomalies, depending on their
severity, could result in claims by affected customers for termination of their
transponder agreements, cancellation of other service contracts or the loss of
other customers.
We May Be Unable to Effectively Manage the
Growth of Our DIRECTV Businesses.
Our ability to continue the planned expansion of our DIRECTV businesses and
to increase our customer base while maintaining our price structure, reducing
our churn rate and managing costs will depend upon, among other things, our
ability to manage our growth effectively. To accomplish this, we must continue
to develop our internal and external sales force, installation capability and
customer service representatives, maintain our relationships with third party
vendors and implement procedures to mitigate subscriber credit risk. We will
also need to continue to grow, train and manage our employee base. If we are
unable to manage its growth effectively, we could experience an increase in
subscriber churn, and as a result, our business could be adversely affected. In
addition, subscriber acquisition costs may increase if DIRECTV offers additional
incentives in order to respond to competition, to expand our businesses or for
other reasons. If subscriber acquisition costs increase significantly, it could
have a material adverse effect on our business.
Our Main Satellite Supplier is No Longer an Affiliate of Ours.
Historically, we have been able to fulfill most of our satellite needs from
Hughes Space and Communications, which was previously one of our wholly-owned
subsidiaries. Since the sale of Hughes Space and Communications to Boeing, we no
longer manufacture satellites. Although DIRECTV and PanAmSat currently have
contracts with Hughes Space and Communications, now Boeing Satellite Systems,
designed to satisfy our satellite needs over the near term, we will need to
obtain new contracts with Boeing Satellite Systems or with alternative suppliers
for our future satellite needs. We cannot assure you that we will be able to
obtain contracts for the manufacture of new satellites from Boeing Satellite
Systems or from alternative suppliers on similar terms.
We Could Be Adversely Affected by Our Customers'
Inability to Obtain Financing.
Our customers are dependent from time to time upon third party equity or
debt financing in order to pay for products and services purchased from us.
Collection of amounts due to us from these customers may be adversely affected
by their inability to obtain this third party financing. If these customers are
unable to obtain, or are delayed in obtaining, third party financing, and are
therefore unable to pay amounts due to us in the future, we may incur
substantial losses related to costs it has incurred in excess of amounts
collected to date from those customers. This could also have a negative effect
on our future cash flows.
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We Are Subject to Domestic and Foreign Regulations that Could Adversely
Affect the Nature and Extent of the Services We Offer.
Our businesses are subject to various regulations. DIRECTV is subject to
substantial regulation by the U.S. Federal Communications Commission. FCC rules
and regulations are subject to change in response to industry developments, new
technology and political considerations. In addition, the satellite industry is
highly regulated both in the United States and internationally. We are subject
to the regulatory authority of the U.S. Government and the national
communications authorities of the countries in which we operate. These agencies
regulate the construction, launch and operation of our satellites and the
orbital slots planned for these satellites. We are currently subject to an
investigation regarding certain of our export compliance activities. We, our
customers or companies with which we do business, must have authority from each
country in which we provide services or provides its customers' use of its
satellites. Although we believe that we and our customers and/or companies with
which we do business presently hold the requisite licenses and approvals for the
countries in which we/they currently provide services, regulations in each
country are different and, as a result, there may be instances of noncompliance
of which we are not aware.
Our businesses could be adversely affected by the adoption of new laws,
policies and regulations. We cannot assure you that we will succeed in obtaining
all requisite regulatory approvals for our operations without the imposition of
restrictions on, or adverse consequences to, our businesses. We also cannot
assure you that material adverse changes in regulations affecting the industries
in which we operate our businesses will not occur in the future.
We Are Subject to Other Risks Related to Our International Operations.
About 21% of our revenues in 1999, excluding revenues from our former
subsidiary, Hughes Space and Communications, were generated outside the United
States. We are currently evaluating expansion opportunities in select
international markets. These international operations subject us to many risks
inherent in international business activities, including:
- limitations and disruptions resulting from the imposition of government
controls;
- difficulty meeting export license requirements;
- obtaining and/or maintaining licenses which are necessary to conduct our
business;
- economic or political instability;
- trade restrictions;
- changes in tariffs;
- currency fluctuations;
- greater difficulty in safeguarding intellectual property; and
- difficulties in managing overseas subsidiaries and international
operations.
These risks could have a material adverse effect on our business.
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Grand Jury Investigation/State Department
Review Could Result in Sanctions
There is a pending grand jury investigation into whether we should be
accused of criminal violations of the export control laws arising out of the
participation of two of our employees on a committee formed to review the
findings of Chinese engineers regarding the failure of a Long March rocket in
China in 1996. We are also subject to the authority of the U.S. State Department
to impose sanctions for non-criminal violations of the Arms Export Control Act.
The possible criminal and/or civil sanctions could include fines as well as
debarment from various export privileges and participation in government
contracts. On October 6, 2000, we completed the sale of our satellite
manufacturing business to The Boeing Company. In that transaction, we retained
limited liability for certain possible fines and penalties and the financial
consequences of debarment related to the business now owned by Boeing, should
either the Department of Justice or State Department impose such sanctions
against the satellite manufacturing business. We do not expect the grand jury
investigation or State Department review to result in a material adverse effect
upon our business. However, there can be no assurance as to those conclusions.
Compromise of Satellite Programming Signals
Could Adversely Affect Our Business.
The delivery of direct broadcast television programming requires the use
of encryption technology to assure that only authorized subscribers can receive
the programming. It is illegal to create, sell or otherwise distribute or use
mechanisms or devices to circumvent that encryption. Theft of cable and
satellite programming does occur and attempts have been made to circumvent our
signal encryption. We have implemented measures intended to reduce signal theft
of our programming. If we were unable to respond to any widespread compromise of
our encryption technology, our business could be materially adversely affected.
Disputes with Raytheon Regarding Former Defense Operations Could
Result in a Material Payment from Us to Raytheon.
In connection with the 1997 spin-off of the defense electronics business of
our predecessor as part of our restructuring transactions and the subsequent
merger of that business with Raytheon, the terms of the merger and related
agreements between us and Raytheon provided processes for resolving disputes
that might arise in connection with post-closing financial adjustments that were
also called for by the terms of the merger agreement. These financial
adjustments might require a cash payment from Raytheon to us or vice versa. A
dispute currently exists regarding the post-closing adjustments that we and
Raytheon have proposed to one another and related issues regarding the adequacy
of disclosures made by us to Raytheon in the period prior to consummation of the
merger. We are proceeding with the dispute resolution process with Raytheon. It
is possible that the ultimate resolution of the post-closing financial
adjustment and of related disclosure issues may result in us making a payment to
Raytheon that would be material to us. However, the amount of any payment that
either party might be required to make to the other cannot be determined at this
time. We intend to vigorously pursue resolution of the disputes through the
arbitration process, opposing the adjustments proposed by Raytheon and seeking
the payment from Raytheon that we have proposed.
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Potential Purchase Price Adjustment related to the sale of
Hughes' Satellite Manufacturing Operations to
The Boeing Company Could Result in a Material Payment by Hughes.
In connection with the sale by Hughes of the Satellite Businesses to
Boeing, the terms of the stock purchase agreement provide for an adjustment to
the purchase price based upon the final closing net assets of the Satellite
Businesses compared to the estimated closing net assets. The stock purchase
agreement also provides a process for resolving any disputes that might arise in
connection with the final determination of the final closing net assets.
Boeing recently submitted proposed changes to the closing net assets, which
Hughes is currently reviewing. It is possible that the ultimate resolution of
these proposed changes may result in Hughes making a cash payment to Boeing that
would be material to Hughes. Although Hughes believes it has adequately provided
for an adjustment to the purchase price, the total amount of any such adjustment
cannot be determined at this time.
General Motors Corporation ("GM") is Currently Considering Strategic
Alternatives Involving Hughes, Including the
Possible Separation of Hughes from GM.
Due to rapid consolidation in the media and telecommunications industries,
GM, which is the parent company of Hughes, has announced that it is now
considering alternative strategic transactions involving Hughes and other
participants in those industries. Any such transaction might involve the
separation of Hughes from GM. GM's objective in this effort is to maximize the
enterprise value of Hughes for the long-term benefit of the holders of GM's
Class H common stock and GM $1-2/3 par value common stock through a structure
that maintains the financial strength of GM. No assurance can be given that any
transaction will be agreed upon with any party or that other conditions,
including any stockholder or regulatory approvals will be satisfied.
Forecasts and Other Estimates Could be Unreliable
This Current Report on Form 8-K includes certain forward looking
information provided by the Company with respect to our anticipated future
performance. Such forward looking information reflects various assumptions by us
concerning anticipated results and are subject to the risks described herein,
significant business, economic and competitive uncertainties and contingencies,
many of which are beyond our control. Accordingly, there can be no assurance
that such forward looking information will be realized. The forward looking
information and actual results will likely vary, and those variations may be
material.
Forward-Looking Statements
The following are additional important factors which may cause actual
results to differ materially from those expressed in forward looking information
provided by the managements of GM and Hughes:
Changes in economic conditions, currency exchange rates, or political
stability in the major markets where the corporation procures material,
components, and supplies for the production of its principal products or where
its products and services are produced, distributed, or sold (i.e., North
America, Europe, Latin America, and Asia-Pacific).
Shortages of fuel or interruptions in transportation systems, labor
strikes, work stoppages, or other interruptions to or difficulties in the
employment of labor in the major markets where the corporation purchases
material, components, and supplies for the production of its products or where
its products and services are produced, distributed, or sold.
Significant changes in the competitive environment in the major markets
where the corporation purchases material, components, and supplies for the
production of its products or where its products and services are produced,
distributed or sold.
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Changes in the laws, regulations, policies, or other activities of
governments, agencies, and similar organizations where such actions may affect
the production, licensing, distribution, or sale of the corporation's products
and services, the cost thereof, or applicable tax rates.
The ability of the corporation to achieve reductions in cost and
employment levels, to realize production efficiencies, and to implement capital
expenditures, all at the levels and times planned by management.
Additional risk factors include: economic conditions, product demand and
market acceptance, government action, local political or economic developments
in or affecting countries where Hughes has operations, ability to obtain export
licenses, competition, ability to achieve cost reductions, technological risk,
limitations on access to distribution channels, the success and timeliness of
satellite launches, in-orbit performance of satellites, ability to timely
perform material contracts, ability of customers to obtain financing, and
Hughes' ability to access capital to maintain its financial flexibility, and the
effects of any strategic transactions involving Hughes that GM may enter into as
noted above. Additionally, Hughes and its 81% owned subsidiary, PanAmSat
Corporation, have experienced satellite anomalies in the past and may experience
satellite anomalies in the future that could lead to the loss or reduced
capacity of such satellites that could materially affect Hughes' operations.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
GENERAL MOTORS CORPORATION
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(Registrant)
Date April 17, 2001
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By
s/Peter R. Bible
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(Peter R. Bible,
Chief Accounting Officer)
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