-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GG70VYn9ZSeHOKaDcESojazLfXJFTtj+jjTzZoI2Ph4ujHvd4fqEGH4wGI5DVmd3 XuIC66UeRUR3Y3EiSIs9Gg== 0000040730-98-000005.txt : 19980128 0000040730-98-000005.hdr.sgml : 19980128 ACCESSION NUMBER: 0000040730-98-000005 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980126 ITEM INFORMATION: FILED AS OF DATE: 19980127 SROS: CSE SROS: NYSE SROS: PHLX SROS: PCX FILER: COMPANY DATA: COMPANY CONFORMED NAME: GENERAL MOTORS CORP CENTRAL INDEX KEY: 0000040730 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLES & PASSENGER CAR BODIES [3711] IRS NUMBER: 380572515 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-00143 FILM NUMBER: 98513834 BUSINESS ADDRESS: STREET 1: 100 RENAISSANCE CTR STREET 2: 3044 W GRAND BLVD CITY: DETROIT STATE: MI ZIP: 48243-7301 BUSINESS PHONE: 3135565000 8-K 1 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) January 26, 1998 ---------------- GENERAL MOTORS CORPORATION ----------------------------------------------------- (Exact name of registrant as specified in its charter) STATE OF DELAWARE 1-143 38-0572515 - ---------------------------- ----------------------- ------------------- (State or other jurisdiction (Commission File Number) (I.R.S. Employer of incorporation) Identification No.) 100 Renaissance Center, Detroit, Michigan 48243-7301 3044 West Grand Boulevard, Detroit, Michigan 48202-3091 - -------------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (313)-556-5000 -------------- - 1 - ITEM 5. OTHER EVENTS On January 26, 1998, a news release was issued on the subject of fourth quarter consolidated earnings for General Motors Corporation (GM). The news release did not include financial statement footnotes and certain other financial information that will be filed with the Securities and Exchange Commission as part of GM's Annual Report on Form 10-K. Following are the fourth quarter earnings releases for GM, Hughes Electronics Corporation (Hughes), and General Motors Acceptance Corporation (GMAC), all dated January 26, 1998, and the Principal Important Factors Relating To Forward-Looking Statements: GM NEWS RELEASE GM REPORTS ALL-TIME RECORD NET INCOME OF $6.7 BILLION FOR 1997 CALENDAR YEAR . . . EARNINGS PER SHARE OF $8.70 BEST IN GM HISTORY DETROIT -- General Motors Corp. (GM) today reported record consolidated net income for the fourth quarter of 1997 of $1.7 billion, or a record $2.36 per share of GM $1-2/3 par value common stock, compared with $786 million, or $0.92 per share, in the fourth quarter of 1996. Previous records have been adjusted to exclude EDS. All earnings-per-share amounts are basic (see Highlights for diluted earnings-per-share amounts). Income for calendar-year-1997 was a record $6.7 billion, or $8.70 per share, compared with $5.0 billion, or $6.07 per share, in 1996, excluding EDS. Fully consolidated net sales and revenues totaled $48.4 billion in the fourth quarter of 1997, and $177.7 billion for calendar-year 1997, compared with $40.9 billion in the fourth quarter of 1996, and $164.0 billion for the 1996 calendar year. Two significant factors impacted fourth-quarter and calendar-year-1997 financial results -- a gain of $4.3 billion, or $6.08 per share for the fourth quarter, resulting from the December 17, 1997, completion of the strategic restructuring of GM's Hughes Electronics subsidiary (Hughes Transactions), and charges against income totaling $4.0 billion after taxes, or $5.75 per share for the fourth quarter, resulting from GM's ongoing competitiveness studies. The $4.0 billion of after-tax charges against income consisted of $2.4 billion related to under-performing assets, $0.8 billion related to capacity reductions, $0.3 billion related to assets held for disposal, and $0.5 billion of other charges (see Competitiveness Studies and Highlights for more information). The remainder of the discussion in this release of corporate and sector results of operations excludes special items (see Highlights and Competitiveness Studies for additional information). Income for the fourth quarter of 1997 was $1.5 billion, or $2.03 per share of GM $1-2/3 par value common stock, compared with $848 million, or $1.00 per share, in the fourth quarter of 1996. Calendar-year-1997 income totaled $6.0 billion, or $7.90 per share, compared with $4.7 billion, or $5.74 per share in 1996. "GM's strong financial performance reflects our determination to further increase stockholder value and become more competitive in all our business sectors," GM Chairman, Chief Executive Officer and President John F. Smith, Jr., said. "We've made some good progress, but we still have further to go to achieve our financial objectives, including our target for a 5-percent net-profit margin." - 2 - Following is a summary of results from the GM business sectors in 1997: - GM North American Operations (GM-NAO) income totaled $636 million in the fourth quarter of 1997, compared with a loss of $117 million in the fourth quarter of 1996. Calendar-year-1997 income totaled $2.3 billion, compared with $333 million in 1996. - Delphi Automotive Systems (Delphi) earned $265 million in the fourth quarter of 1997, compared with $56 million in the fourth quarter of 1996. Income totaled $860 million in calendar-year 1997, compared with $728 million in the prior year. - GM International Operations (GMIO) fourth-quarter-1997 income totaled $197 million, compared with $353 million in the prior-year period. Calendar-year-1997 income totaled $981 million, compared with $1.5 billion in 1996. - General Motors Acceptance Corporation (GMAC) reported net income of $279 million for the fourth quarter of 1997, compared with net income of $274 million in the fourth quarter of 1996. Net income for calendar-year 1997 totaled $1.3 billion, compared with $1.2 billion in 1996. - GM completed the previously mentioned restructuring of its Hughes Electronics subsidiary on Dec. 17, 1997. Hughes, as previously structured, earned $251 million in the October 1 through December 17 period of 1997, compared with earnings of $285 million in the fourth quarter of 1996. Calendar-year earnings through Dec. 17, 1997, totaled $1.0 billion, compared with $1.1 billion in calendar-year 1996. - Earnings for the recapitalized telecommunications and space business of Hughes Electronics for the period of Dec. 18 through Dec. 31, 1997, totaled $8 million. GM CONSOLIDATED FINANCIAL DATA (with financing & insurance operations on an equity basis) The corporation's after-tax net-profit margin -- net income as a percentage of net sales and revenues -- was 3.8 percent in the fourth quarter of 1997, and 3.9 percent in calendar-year 1997. That compares with net-profit margins of 2.4 percent and 3.2 percent for the 1996 fourth-quarter and calendar-year periods. The corporation's pretax income was $1.8 billion in the fourth quarter of 1997, compared with pretax income of $305 million in the fourth quarter of 1996. GM's cash position remained strong during the fourth quarter of 1997. Cash and marketable securities totaled $14.5 billion at Dec. 31, 1997, compared with $17.0 billion at Dec. 31, 1996, and $14.6 billion at Sept. 30, 1997. In the fourth quarter of 1997, GM used approximately $900 million in cash to acquire more than 14.3 million shares of GM $1-2/3 par value common stock under the corporation's stock-repurchase program. A total of $3.8 billion in cash was used to repurchase 63.5 million shares during 1997, completing one $2.5 billion repurchase program, and 50 percent of a second $2.5 billion program announced in August 1997. - 3 - Cash contributions to GM's U.S. pension plans during 1997 totaled $1.5 billion, keeping the plans fully funded on an economic basis. The corporation also elected to pre-fund part of its other post-retirement-benefits liability, which is primarily related to post-retirement health-care expenses, by creating a Voluntary Employees' Beneficiary Association (VEBA) trust to which it contributed $3 billion of its cash reserves in December of 1997. "Strong cash generation from operations made it possible to continue to support capital-spending programs, adequately fund pension plans, contribute to a VEBA, continue to repurchase shares of GM common stock, and keep an appropriate level of cash reserves," Smith said. GM NORTH AMERICAN OPERATIONS (GM-NAO) GM North American Operations' fourth-quarter-1997 income totaled $636 million, and calendar-year-1997 income totaled $2.3 billion. That compares with a fourth-quarter-1996 loss of $117 million, and calendar-year income of $333 million. GM-NAO's net profit margin was 2.4 percent in the fourth quarter of 1997, and 2.3 percent for calendar-year 1997. GM-NAO's pretax income totaled $882 million in the fourth quarter of 1997, compared with a pretax loss of $420 million in the prior-year period. Pretax income totaled $3.3 billion in calendar-year 1997, compared with a pretax loss of $34 million in 1996. "We're pleased by the progress of the GM-NAO team as we continue to significantly improve our operating performance," said G. Richard Wagoner, Jr., General Motors executive vice president and president of GM North American Operations. "The 1997 results primarily reflect the success of our new products in the marketplace, and our improving cost competitiveness," Wagoner said. "These results are particularly noteworthy given the intensely competitive North American market, where the continued weakness of Asian and European currencies compared with the dollar has given overseas competitors a distinct pricing advantage in the United States, and has intensified the profit pressure on our export programs to Asia and Europe. This all highlights the need for us to continuously focus our efforts on significantly improving our cost position in 1998," Wagoner said. GM vehicle deliveries in North America for the fourth quarter of 1997 totaled 1,300,000 units, which resulted in a 30.5-percent share of the North American vehicle market, compared with 1,209,000 units, and a 30.1-percent share in the fourth quarter of 1996. Calendar-year-1997 deliveries totaled 5,360,000 units and a market share of 30.8 percent, compared with 5,263,000 units and a 31.0-percent market share in 1996. (See additional information in Highlights). Although vehicle sales were unfavorably affected by strike-related production losses in the second quarter of 1997, Wagoner said, "New products, such as Buick's Park Avenue, the Pontiac Grand Prix, the Oldsmobile Intrigue, and GM's new minivans are being well received in the marketplace and significantly outselling the models they replaced. Our full-size pickups and sport-utility vehicles continue to sell very well even though they are late in their model cycles." - 4- DELPHI AUTOMOTIVE SYSTEMS (DELPHI) Delphi Automotive Systems' income totaled $265 million in the fourth quarter of 1997, and $860 million for calendar-year 1997. That compares with fourth-quarter-1996 income of $56 million, and calendar-year-1996 income of $728 million. Delphi's net-profit margin was 3.9 percent in the fourth quarter of 1997, and 3.3 percent for calendar-year 1997. Pretax income for Delphi totaled $460 million in the fourth quarter of 1997, compared with $100 million in the prior-year period. Pretax income totaled $1.3 billion in calendar-year 1997, compared with $936 million in 1996. General Motors Executive Vice President and President of Delphi Automotive Systems J.T. Battenberg III said, "Delphi faced some tough challenges in 1997, including competitive pressures that generated price reductions, and a high level of product turnover by original equipment manufacturers (OEMs), which generated manufacturing start-up costs. However, we met these challenges and continue to take the right steps for the longer term." "Bringing Delco Electronics, GM's automotive electronics business, into Delphi, effective Dec. 17, 1997, puts us in position to lead the component-industry trend toward integrated automotive systems. Electronics capability is key to that systems approach," Battenberg said. "Growing our business continues to be a major focus for Delphi. Delphi's 1997 sales to customers outside the GM-NAO vehicle groups continued to increase and represented approximately 38 percent of total sales, including all joint ventures," Battenberg said. "This improvement occurred despite the adverse effect on Delphi's revenues caused by economic conditions in emerging markets." GM INTERNATIONAL OPERATIONS (GMIO) GM International Operations' fourth-quarter-1997 income totaled $197 million, and calendar-year-1997 income totaled $981 million, excluding the favorable impact of special items totaling $158 million. That compares with fourth-quarter-1996 income of $353 million, and calendar-year-1996 income of $1.5 billion. GMIO's net-profit margin was 2.2 percent in the fourth quarter of 1997, and 2.8 percent for calendar-year 1997. GMIO's pretax income totaled $215 million in the fourth quarter of 1997, compared with $309 million in the prior-year period. Pretax income totaled $1.4 billion in calendar-year 1997, compared with $1.8 billion in 1996. Income for GM's automotive operations in Europe totaled $31 million in the fourth quarter of 1997, compared with income of $99 million in 1996. For the 1997 calendar year, income totaled $313 million, excluding the previously mentioned favorable impact of $158 million, compared with income of $778 million in 1996. - 5 - "The lower European earnings in 1997 were primarily due to higher sales and marketing costs under intensely competitive market conditions, and lower earnings from Saab as they launched the new 9-5 model. Despite these unfavorable factors, the 1997-calendar-year results reflect strong operating performance, which was sufficient to fund our growth expenditures in both Latin America and Asia," said Louis R. Hughes, General Motors executive vice president and president of GM International Operations. For the remainder of GM International Operations, which include the Latin American and Asia and Pacific Operations, income totaled $166 million in the fourth quarter of 1997, and $668 million for calendar-year 1997, compared with $254 million in the 1996-fourth-quarter period, and $754 million in the 1996 calendar year. Results in the fourth quarter of 1997 were affected by significant economic volatility in Brazil, and the start-up of a new plant in Rosario, Argentina. COMPETITIVENESS STUDIES As previously reported by GM, the global automotive industry, including the automotive components and systems market, has become increasingly competitive and is presently undergoing significant restructuring and consolidation activities. All of the major industry participants are continuing to increase their focus on efficiency and cost improvements, while announced capacity increases for the North American market and excess capacity in the European market have led to continuing price pressures. As a result, GM-NAO, Delphi, Delco Electronics, and GMIO initiated studies in 1997 concerning the long-term competitiveness of all facets of their businesses (Competitiveness Studies). These studies were performed in conjunction with GM's current business planning cycle and were substantially completed in December of 1997. Based on the results of these Competitiveness Studies, GM recorded pretax charges against income totaling $6.4 billion ($4.0 billion after taxes). Following are the components of the after-tax charges: $2.4 billion: Under-performing assets, including both vehicle and component-manufacturing ssets $0.8 billion: Capacity reductions $0.3 billion: Assets held for disposal, primarily related to Delphi seating, lighting, and coil spring operations $0.5 billion: Other, primarily related to losses on contracts associated with retail-lease commitments The amount included for under-performing assets represents charges recorded pursuant to the accounting standard for impairment of long-lived assets, Statement of Financial Accounting Standards No. 121. In accordance with this standard, GM evaluated the book values of its long-lived assets as events and circumstances of the industry changed. Long-lived assets are considered impaired when the aggregate, anticipated, undiscounted future cash flows from such assets are separately identifiable and less than their respective book values. In addition, future capital spending for under-performing vehicles and component lines will be evaluated for impairment. - 6- The amount included for capacity reductions represents post-employment benefits payable to employees, pursuant to contractual agreements, and costs associated with the disposal of assets at facilities subject to capacity reductions. This includes the previously announced actions concerning GM-NAO's Buick City Assembly and V-6 Powertrain plants in Flint, Mich.; Detroit Truck Assembly, in Detroit, Mich.; Delphi's Livonia leaf-spring plant in Livonia, Mich.; and certain GMIO facilities in Europe. Future charges related to these competitiveness studies may result from Delphi's fix/close/sell strategy and future cost reductions in international operations. GM will continue to monitor the competitiveness of all aspects of its businesses and such studies will be undertaken when and as market conditions warrant. STRIKE RELATED IMPACT Reported and adjusted results for both the 1997 and 1996 calendar years include the unfavorable impact of strike-related production losses. The after-tax unfavorable impact was $330 million, or $0.45 per share, in 1997, and $1.2 billion, or $1.56 per share, in 1996. The after-tax unfavorable impact for GM-NAO was $238 million in 1997, and $920 million in 1996. The after-tax unfavorable impact at Delphi was $70 million in 1997, and $206 million in 1996. The after-tax unfavorable impact at Delco Electronics was $22 million in 1997, and $75 million in 1996. PROFIT SHARING As a result of the profits generated in 1997 by GM's operations in the United States, profit-sharing payments will be made in 1998 to approximately 239,000 of GM's represented employees in the United States. Each full-time represented employee who worked the entire year should receive approximately $750. This is a record payout, excluding the impact of EDS in prior years, and is approximately $100 higher than the amount called for by the profit-sharing formula. This increase in the payout amount is intended to recognize the contribution of employees to General Motors' success in 1997. Unions representing hourly employees agreed with the decision. This is the fourth consecutive year that profit-sharing payments have been made to U.S. employees. Profits generated in 1996 resulted in a profit-sharing payout of approximately $300. General Motors also announced today that more than 70,000 eligible salaried employees will receive incentive payments under a salaried program supplemented by a separate fund to recognize employees' contributions to the overall performance of the company during 1997. The 1997 salaried cash payout is either one percent of an employee's base salary earnings or $750, whichever is higher. In addition to the cash payout, for the first time in the industry, eligible salaried employees in the United States and Canada will be granted options to purchase General Motors stock. A total of 4.7 million options will be awarded with individual grants of options ranging from 25 to 100 shares, depending upon level of responsibility. The granting of these stock options to non-executive salaried employees is aimed at further aligning the personal financial success of salaried employees with that of the company, and encouraging employees to think and act like owners of the business. General Motors hopes to continue the stock-option program in future years, depending upon business performance. # # # HIGHLIGHTS ATTACHED - 7 - HIGHLIGHTS - Q4 Adjusted for Special Items - With Financing and Insurance Operations on an Equity Basis (Dollars in Millions Except Per Share Amounts) Three Months Ended December 31, 1997 ---------------------------------- Special Items --------------- (1) (2) Comp. Hughes (3) Reported Studies Trans. Adjusted -------- ------- ------ -------- Net sales and revenues$39,458 $(459) $ - $39,917 ------ ------ ------ ------ Cost and expenses: Cost of sales 34,456 1,671 - 32,785 Selling, general, and admin.expenses 3,923 - - 3,923 Depreciation and amort. expenses 6,176 4,095 - 2,081 ------ ------ ------ ------ Total costs and expenses 44,555 5,766 - 38,789 ------ ------ ------ ------ Operating(loss)income (5,097) (6,225) - 1,128 Other income(loss)less income deductions 5,154 (72) 4,269 957 Interest expense 308 - - 308 ------ ------ ------ ------ Income (loss) before income taxes and minority interests (251) (6,297) 4,269 1,777 Income tax (credit) expense (1,773) (2,347) - 574 ------ ------ ------ ------ Income (loss) after income taxes 1,522 (3,950) 4,269 1,203 Minority interests 16 - - 16 Earnings (losses) of noncons. affiliates 199 (89) - 288 ------ ------ ------ ------ Net income (loss) $1,737 $(4,039) $4,269 $1,507 ====== ====== ====== ====== $1-2/3 par value basic EPS from continuing operations $2.36 $(5.75) $6.08 $2.03 Gross profit margin 12.7% 17.9% Effective income tax (credit) rate (706.4%) 32.3% Net profit margin 4.4% 3.8% See footnotes beginning on page 14. continues - 8 - HIGHLIGHTS - Q4 Adjusted for Special Items - With Financing and Insurance Operations on an Equity Basis (Dollars in Millions Except Per Share Amounts) Three Months Ended December 31, 1996 -------------------- (4) Reported Adjusted -------- -------- Net sales and revenues $35,966 $35,966 ------ ------ Costs and expenses: Cost of sales 31,088 30,818 Selling, general, and administrative expenses 3,574 3,574 Depreciation and amortization expenses 1,710 1,710 Plant closing adjustment (318) - ------ ------ Total costs and expenses 36,054 36,102 ------ ------ Operating loss (88) (136) Other income less income deductions 488 636 Interest expense 195 195 ------ ------ Income before income taxes and minority interests 205 305 Income tax credit (262) (224) ------ ------ Income after income taxes 467 529 Minority interests 35 35 Earnings of nonconsolidated affiliates 284 284 ------ ------ Net income $786 $848 ====== ====== $1-2/3 par value basic EPS from continuing operations $0.92 $1.00 Gross profit margin 13.6% 14.3% Effective income tax (credit) rate (127.8%) (73.4%) Net profit margin 2.2% 2.4% See footnotes beginning on page 14. continues - 9 - HIGHLIGHTS - Q4 Adjusted for Special Items By Sector (Dollars in Millions) Three Months Ended December 31, 1997 ----------------------------------- Special Items (3) ---------------- Reported (1) (2) Adjusted Income Comp. Hughes Income (Loss) Studies Trans. (Loss) ------- ------- ------- ------- GM-NAO $(1,747) $(2,383) $ - $636 Delphi (605) (870) - 265 GMIO (5) (461) (658) - 197 Hughes earnings 259 - - 259 GMAC 279 - - 279 Other 4,012 (128) 4,269 (129) ------ ------ ------ ------ Consolidated income (loss) $1,737 $(4,039) $4,269 $1,507 ====== ====== ====== ====== Three Months Ended December 31, 1996 ----------------------------------- (4) Reported Adjusted Income Special Income (Loss) Items (Loss) ------- ------- ------- GM-NAO $27 $144 $(117) Delphi (146) (202) 56 GMIO (5) 353 - 353 Hughes earnings 281 (4) 285 GMAC 274 - 274 Other (3) - (3) ------ ------ ------ Consolidated income (loss) $786 $(62) $848 ====== ====== ====== See footnotes beginning on page 14. continues - 10 - HIGHLIGHTS - Q4 Automotive Sectors Special Item Analysis (Dollars in Millions) Three Months Ended December 31, 1997 ------------------------------- (5) GM-NAO Delphi GMIO ------- ------- ------- Reported -------- Net sales and revenues $25,527 $6,830 $9,024 ------ ------ ------ Pre-tax loss (2,826) (902) (807) Income tax credit (1,132) (319) (308) Equity income (loss) and minority interests (53) (22) 38 ------ ------ ------ Net loss $(1,747) $(605) $(461) ====== ====== ====== Net loss margin (6.8%) (8.9%) (5.1%) Effective income tax (credit) rate (40.1%) (35.4%) (38.2%) Competitiveness Studies(1) ----------------------- Net sales and revenues $(450) $ - $(9) ------ ------ ------ Pre-tax loss (3,708) (1,362) (1,022) Income tax credit (1,396) (502) (373) Equity income (loss) and minority interests (71) (10) (9) ------ ------ ------ Net loss $(2,383) $(870) $(658) ====== ====== ====== Adjusted(3) -------- Net sales and revenues $25,977 $6,830 $9,033 ------ ------ ------ Pre-tax income 882 460 215 Income tax expense 264 183 65 Equity income (loss) and minority interests 18 (12) 47 ------ ------ ------ Net income $636 $265 $197 ====== ====== ====== Net profit margin 2.4% 3.9% 2.2% Effective income tax rate 29.9% 39.8% 30.2% See footnotes beginning on page 14. continues - 11 - HIGHLIGHTS - Q4 Automotive Sectors Special Items Analysis (Dollars in Millions) Three Months Ended December 31, 1996 ------------------------------ (5) GM-NAO Delphi GMIO ------- ------- ------- Reported -------- Net sales and revenues $22,503 $6,137 $8,893 ------ ------ ------ Pre-tax (loss) income (187) (226) 309 Income tax credit (215) (62) (37) Equity income (loss) and minority interests (1) 18 7 ------ ------ ------ Net income (loss) $27 $(146) $353 ====== ====== ====== Net profit (loss) margin 0.1% (2.4%) 4.0% Effective income tax (credit) rate (115.0%) (27.4%) (12.0%) Special Items ------------- Net sales and revenues $- $- $ - ------ ------ ------ Pre-tax income (loss) 233 (326) - Income tax expense (credit) 89 (124) - Equity income and minority interests - - - ------ ------ ------ Net income (loss) $144 $(202) $ - ====== ====== ====== Adjusted(4) -------- Net sales and revenues $22,503 $6,137 $8,893 ------ ------ ------ Pre-tax (loss) income (420) 100 309 Income tax (credit) expense (304) 62 (37) Equity income (loss) and minority interests (1) 18 7 ------ ------ ------ Net (loss) income $(117) $56 $353 ====== ====== ====== Net (loss) profit margin (0.5%) 0.9% 4.0% Effective income tax (credit) rate (72.4%) 62.0% (12.0%) See footnotes beginning on page 14. continues - 12 - HIGHLIGHTS - Q4 Operating Information Three Months Ended December 31, ---------------------- 1997 1996 --------- ---------- Worldwide Wholesale Sales (units in 000s) United States: Cars 699 581 Trucks 599 504 ------ ------ Total United States 1,298 1,085 Canada and Mexico 152 122 ------ ------ Total North America 1,450 1,207 International 763 779 ------ ------ Total Worldwide 2,213 1,986 ====== ====== .................................................... Vehicle Unit Deliveries (units in 000s) United States Chevrolet - Cars 216 188 - Trucks 382 370 Pontiac 132 129 GMC 117 118 Buick 113 93 Oldsmobile 77 75 Saturn 52 62 Cadillac 44 45 Other 5 5 ------ ------ Total United States 1,138 1,085 Canada and Mexico 162 124 ------ ------ Total North America 1,300 1,209 ------ ------ International Europe 424 386 Latin America, Africa and the Middle East 192 180 Asia and Pacific 130 151 ------ ------ Total International 746 717 ------ ------ Total Worldwide 2,046 1,926 ====== ====== .................................................... Market share United States Cars 32.2% 31.2% Trucks 28.9% 29.1% Total 30.6% 30.2% Total North America 30.5% 30.1% Western Europe 11.1% 11.2% Latin America 18.9% 18.2% Asia and Pacific 4.1% 4.3% Total Worldwide 15.8% 15.4% ..................................................... U.S. Retail/Fleet Mix % Fleet Sales - Cars 27.0% 22.3% % Fleet Sales - Trucks 12.4% 11.3% Total vehicles 20.2% 17.2% ..................................................... Days Supply of Inventory - U.S. Gross Landed Stock Cars 92 93 Trucks 97 97 .................................................... Capacity Utilization % U.S. and Canada (2-shift rated) 100.5% 79.9% ..................................................... Retail Incentives ($ per unit) GM-NAO $1,148 $739 .................................................... See footnotes beginning on page 14. continues - 13 - HIGHLIGHTS - Q4 Other Financial Information (Dollars in Millions Except Per Share Amounts) Three Months Ended December 31, ---------------------- 1997 1996 --------- ---------- Earnings Attributable to Common Stocks $1-2/3 par value $1,654 $696 Class H (6) $65 $70 Class H (7) $2 $- .................................................... Basic Earnings Per Share Attributable to Common Stocks $1-2/3 par value $2.36 $0.92 Class H (6) $0.63 $0.70 Class H (7) $0.02 $- .................................................... Diluted Earnings Per Share Attributable to Common Stocks $1-2/3 par value $2.33 $0.91 Class H (6) $0.63 $0.70 Class H (7) $0.02 $- .................................................... Cash Dividends Per Share of Common Stocks $1-2/3 par value $0.50 $0.40 Class H (6) $0.25 $0.24 Class H (7) $- $- .................................................... Depreciation and Amortization(8) Depreciation $2,693 $1,084 Amortization of special tools 3,407 579 Amortization of intangible assets 76 47 ------ ------ Total $6,176 $1,710 ====== ====== .................................................... Worldwide Employment at December 31 (in 000s) GM-NAO 237 245 Delphi 210 179 GMIO 116 111 GMAC 21 17 Hughes 15 86 Other 9 9 ------ ------ Total 608 647 ====== ====== .................................................... Worldwide Payrolls $7,617 $7,345 .................................................... Book Value Per Share of Common Stocks December 31, ---------------------- 1997 1996 --------- --------- $1-2/3 par value $23.44 $27.95 Class H $11.72 $13.97 .................................................... (1) During December 1997, GM-NAO, Delphi, Delco Electronics, and GMIO substantially completed studies concerning the long-term competitiveness of all facets of their businesses (Competitiveness Studies). These studies were performed in conjunction with GM's current business planning cycle. Based on the results of these Competitiveness Studies, GM recorded pre-tax charges against income totaling $6.4 billion ($4.0 billion after-tax or $5.75 per share of $1-2/3 par value common stock) in the fourth-quarter of 1997. continues - 14 - HIGHLIGHTS - Q4 Other Financial Information (Dollars in Millions Except Per Share Amounts) (2) On December 17, 1997, GM completed the restructuring of its Hughes Electronics subsidiary (Hughes Transactions), which resulted in a gain of $4.3 billion or $6.08 per share of $1-2/3 par value common stock in the fourth quarter of 1997. (3) Adjusted amounts represent the reported amounts less the effects of special items. (4) Adjusted amounts represent the reported amounts less the effects of special items. The adjusted amounts include the unfavorable effects of strike-related work stoppages which occurred during the fourth quarter of 1996. The unfavorable after-tax impact of the work stoppages was $700 million, or $0.91 per share of $1-2/3 par value common stock, including the unfavorable after-tax effects for GM-NAO and Delphi of $544 million and $111 million, respectively. (5) GMIO includes: Three Months Ended December 31, ---------------------- 1997 1996 --------- --------- GM Europe $(457) $99 Other GMIO (4) 254 --------- --------- Reported net(loss)income $(461) $353 ========= ========= GM Europe $31 $99 Other GMIO 166 254 --------- --------- Adjusted net income - excluding special items $197 $353 ========= ========= (6) Data relates to the period ending December 17, 1997, the date on which GM recapitalized the Class H common stock ("GM's Recapitalization Date"). (7) Data relates to the period beginning December 18, 1997, through December 31, 1997, which is subsequent to GM's Recapitalization Date. (8) Calculated with financing and insurance operations on an equity basis. - 15 - HIGHLIGHTS - Year Ended Adjusted for Special Items - With Financing and Insurance Operations on an Equity Basis (Dollars in Millions Except Per Share Amounts) Year Ended December 31, 1997 ----------------------------------- Special Items --------------- (1) (2) Comp. Hughes Sub- Reported Studies Trans. Total -------- ------- ------ ------- Net sales and revenues$153,781 $(459) $ - $154,240 ------- ------ ------ ------- Cost and expenses: Cost of sales 129,962 1,671 - 128,291 Selling, general, and admin.expenses 13,254 - - 13,254 Depreciation and amort. expenses 11,803 4,095 - 7,708 Plant closing expense 80 - - 80 ------- ------ ------ ------- Total costs and expenses 155,099 5,766 - 149,333 ------- ------ ------ ------- Operating (loss)income (1,318) (6,225) - 4,907 Other income (loss) less income deductions 7,836 (72) 4,269 3,639 Interest expense 971 - - 971 ------ ------ ------ ------ Income (loss) before income taxes and minority interests 5,547 (6,297) 4,269 7,575 Income tax expense (credit) 155 (2,347) - 2,502 ------ ------ ------ ------ Income (loss) after income taxes 5,392 (3,950) 4,269 5,073 Minority interests 66 - - 66 Earnings (losses) of noncons. affiliates 1,240 (89) - 1,329 ------ ------ ------ ------ Net income (loss) $6,698 $(4,039) $4,269 $6,468 ====== ====== ====== ====== $1-2/3 par value basic EPS from continuing operations $8.70 $(5.59) $5.91 $8.38 Gross profit margin 15.5% Effective income tax rate 2.8% Net profit margin 4.4% See footnotes beginning on page 23. continues - 16 - HIGHLIGHTS - Year Ended Adjusted for Special Items - With Financing and Insurance Operations on an Equity Basis (Dollars in Millions Except Per Share Amounts) Year Ended December 31, 1997 ------------------------------ Other Sub- Special (3) Total Items Adjusted ------- ------- -------- Net sales and revenues $154,240 $- $154,240 ------- ------ ------- Cost and expenses: Cost of sales 128,291 - 128,291 Selling, general, and admin. expenses 13,254 - 13,254 Depreciation and amortization expenses 7,708 - 7,708 Plant closing expense 80 80 - ------- ------ ------- Total costs and expenses 149,333 80 149,253 ------- ------ ------- Operating income (loss) 4,907 (80) 4,987 Other income less income deductions 3,639 706 2,933 Interest expense 971 - 971 ------ ------ ------ Income before income taxes and minority interests 7,575 626 6,949 Income tax expense 2,502 200 2,302 ------ ------ ------ Income after income taxes 5,073 426 4,647 Minority interests 66 - 66 Earnings of nonconsolidated affiliates 1,329 - 1,329 ------ ------ ------ Net income $6,468 $426 $6,042 ====== ====== ====== $1-2/3 par value basic EPS from continuing operations $8.38 $0.48 $7.90 Gross profit margin 16.8% Effective income tax rate 33.1% Net profit margin 3.9% See footnotes beginning on page 23. continues - 17 - HIGHLIGHTS - Year Ended Adjusted for Special Items - With Financing and Insurance Operations on an Equity Basis (Dollars in Millions Except Per Share Amounts) Year Ended December 31, 1996 --------------------- (3) Reported Adjusted -------- -------- Net sales and revenues $145,427 $145,427 ------- ------- Costs and expenses: Cost of sales 123,966 123,696 Selling, general and administrative expenses 11,827 11,827 Depreciation and amortization expenses 7,145 7,145 Plant closing adjustments (727) - ------- ------- Total costs and expenses 142,211 142,668 ------- ------- Operating income 3,216 2,759 Other income less income deductions 2,056 2,084 Interest expense 859 859 ------ ------ Income before income taxes and minority interests 4,413 3,984 Income tax expense 885 719 ------ ------ Income after income taxes 3,528 3,265 Minority interests 56 56 Earnings of nonconsolidated affiliates 1,369 1,369 ------ ------ Income from continuing operations 4,953 4,690 Income from discontinued operations 10 10 ------ ------ Net income $4,963 $4,700 ====== ====== $1-2/3 par value basic EPS from continuing operations $6.07 $5.74 Gross profit margin 14.8% 14.9% Effective income tax rate 20.1% 18.0% Net profit margin 3.4% 3.2% See footnotes beginning on page 23. continues - 18 - HIGHLIGHTS - Year Ended Adjusted for Special Items By Sector (Dollars in Millions) Year Ended December 31, 1997 ---------------------------------- Special Items ---------------- Reported (1) (2) Income Comp. Hughes Sub- (Loss) Studies Trans. Total ------ ------- ------ ------ GM-NAO $(86) $(2,383) $ - $2,297 Delphi (60) (870) - 810 GMIO (4) 481 (658) - 1,139 Hughes earnings 1,276 - - 1,276 GMAC 1,301 - - 1,301 Other 3,786 (128) 4,269 (355) ------ ------ ------ ------ Consolidated income (loss) from continuing operations $6,698 $(4,039) $4,269 $6,468 ====== ====== ====== ====== Year Ended December 31, 1997 ------------------------------- (3) Other Adjusted Sub- Special Income Total Items (Loss) ------ ------- ------ GM-NAO $2,297 $- $2,297 Delphi 810 (50) 860 GMIO (4) 1,139 158 981 Hughes earnings 1,276 318 958 GMAC 1,301 - 1,301 Other (355) - (355) ------ ------ ------ Consolidated income from continuing operations $6,468 $426 $6,042 ====== ====== ====== Year Ended December 31, 1996 ------------------------------- (3) Reported Adjusted Income Special Income (Loss) Items (Loss) ------ ------- ------ GM-NAO $730 $397 $333 Delphi 526 (202) 728 GMIO (4) 1,532 - 1,532 Hughes earnings 1,151 68 1,083 GMAC 1,240 - 1,240 Other (226) - (226) ------ ------ ------ Consolidated income from continuing operations $4,953 $263 $4,690 ====== ====== ====== See footnotes beginning on page 23. continues - 19 - HIGHLIGHTS - Year Ended Automotive Sectors Special Items Analysis (Dollars in Millions) Year Ended December 31, 1997 ------------------------------- (4) GM-NAO Delphi GMIO ------- ------- ------- Reported -------- Net sales and revenues $100,256 $26,316 $35,659 ------- ------- ------- Pre-tax (loss) income (408) (167) 561 Income tax (credit) expense (357) (83) 136 Equity income (loss) and minority interests (35) 24 56 ------- ------- ------- Net (loss) income $(86) $(60) $481 ======= ======= ======= Net (loss) profit margin (0.1%) (0.2%) 1.3% Effective income tax (credit) rate (87.5%) (49.7%) 24.2% Competitiveness Studies(1) ----------------------- Net sales and revenues $(450) $ - $(9) ------ ------ ------ Pre-tax loss (3,708) (1,362) (1,022) Income tax credit (1,396) (502) (373) Equity income (loss) and minority interests (71) (10) (9) ------ ------ ------ Net loss $(2,383) $(870) $(658) ====== ====== ====== Other Special Items ------------------- Net sales and revenues $- $- $ - ------ ------ ------ Pre-tax (loss) income - (80) 216 Income tax (credit) expense - (30) 58 Equity income (loss) and minority interests - - - ------ ------ ------ Net (loss) income $- $(50) $158 ====== ====== ====== Adjusted(3) -------- Net sales and revenues $100,706 $26,316 $35,668 ------- ------- ------- Pre-tax income 3,300 1,275 1,367 Income tax expense 1,039 449 451 Equity income (loss) and minority interests 36 34 65 ------- ------- ------- Net income $2,297 $860 $981 ======= ======= ======= Net profit margin 2.3% 3.3% 2.8% Effective income tax rate 31.5% 35.2% 33.0% See footnotes beginning on page 23. continues - 20 - HIGHLIGHTS - Year Ended Automotive Sectors Special Items Analysis (Dollars in Millions) Year Ended December 31, 1996 ------------------------------- (4) GM-NAO Delphi GMIO ------- ------- ------- Reported -------- Net sales and revenues $93,382 $26,002 $35,251 ------ ------ ------ Pre-tax income 608 610 1,786 Income tax (credit) expense (85) 134 307 Equity income (loss) and minority interests 37 50 53 ------ ------ ------ Net income $730 $526 $1,532 ====== ====== ====== Net profit margin 0.8% 2.0% 4.3% Effective income tax (credit) rate (14.0%) 22.0% 17.2% Other Special Items ------------------- Net sales and revenues $- $- $ - ------ ------ ------ Pre-tax income (loss) 642 (326) - Income tax expense (credit) 245 (124) - Equity income (loss) and minority interests - - - ------ ------ ------ Net income (loss) $397 $(202) $ - ====== ====== ====== Adjusted(3) -------- Net sales and revenues $93,382 $26,002 $35,251 ------ ------ ------ Pre-tax (loss) income (34) 936 1,786 Income tax (credit) expense (330) 258 307 Equity income and minority interests 37 50 53 ------ ------ ------ Net income $333 $728 $1,532 ====== ====== ====== Net profit margin 0.4% 2.8% 4.3% Effective income tax (credit) rate (970.6%) 27.6% 17.2% See footnotes beginning on page 23. continues - 21 - HIGHLIGHTS - Years Ended Operating Information Years Ended December 31, ---------------------- 1997 1996 --------- ---------- Worldwide Wholesale Sales (units in 000s) United States: Cars 2,754 2,647 Trucks 2,177 2,026 ------ ------ Total United States 4,931 4,673 Canada and Mexico(5) 618 479 ------ ------ Total North America 5,549 5,152 International 3,227 3,111 ------ ------ Total Worldwide 8,776 8,263 ====== ====== .................................................... Vehicle Unit Deliveries (units in 000s) United States Chevrolet - Cars 981 1,046 - Trucks 1,504 1,497 Pontiac 609 551 GMC 468 464 Buick 438 427 Oldsmobile 305 331 Saturn 251 279 Cadillac 183 170 Other 27 28 ------ ------ Total United States 4,766 4,793 Canada and Mexico(5) 594 470 ------ ------ Total North America 5,360 5,263 ------ ------ International Europe 1,845 1,789 Latin America, Africa and the Middle East 776 691 Asia and Pacific 584 625 ------ ------ Total International 3,205 3,105 ------ ------ Total Worldwide 8,565 8,368 ====== ====== .................................................... Market Share United States Cars 32.4% 32.7% Trucks 28.8% 29.0% Total 30.8% 31.0% Total North America 30.8% 31.0% Western Europe 11.3% 11.7% Latin America 19.0% 19.2% Asia and Pacific 4.4% 4.6% Total Worldwide 16.0% 16.2% ..................................................... U.S. Retail/Fleet Mix % Fleet sales - Cars 25.5% 25.0% % Fleet sales - Trucks 13.0% 10.9% Total vehicles 20.0% 19.1% ..................................................... Capacity Utilization % U.S. and Canada (2-shift rated) 94.4% 82.4% ..................................................... Retail Incentives ($ per unit) GM-NAO $1,027 $700 .................................................... See footnotes beginning on page 23. continues - 22 - HIGHLIGHTS - Years Ended Other Financial Information (Dollars in Millions Except Per Share Amounts) Years Ended December 31, ---------------------- 1997 1996 ---------- ---------- .................................................... Earnings Attributable to Common Stocks $1-2/3 par value $6,276 $4,584 Class E $- $15 Class H(6) $322 $283 Class H(7) $2 $- .................................................... Basic Earnings Per Share Attributable to Common Stocks $1-2/3 par value $8.70 $6.06 Class E $- $0.04 Class H(6) $3.17 $2.88 Class H(7) $0.02 $- .................................................... Diluted Earnings Per Share Attributable to Common Stocks $1-2/3 par value $8.62 $6.02 Class E $- $0.04 Class H(6) $3.17 $2.88 Class H(7) $0.02 $- .................................................... Cash Dividends Per Share of Common Stocks $1-2/3 par value $2.00 $1.60 Class E $- $0.30 Class H(6) $1.00 $0.96 Class H(7) $- $- .................................................. Depreciation and Amortization(8) Depreciation $5,901 $4,139 Amortization of special tools 5,674 2,856 Amortization of intangible assets 228 150 ------ ------ $11,803 $7,145 ====== ====== .................................................... Worldwide Payrolls - Continuing Operations $30,445 $29,807 .................................................... (1) During December 1997, GM-NAO, Delphi, Delco Electronics, and GMIO substantially completed studies concerning the long-term competitiveness of all facets of their businesses (Competitiveness Studies). These studies were performed in conjunction with GM's current business planning cycle. Based on the results of these Competitiveness Studies, GM recorded pre-tax charges against income totaling $6.4 billion ($4.0 billion after-tax or $5.59 per share of $1-2/3 par value common stock) in 1997. (2) On December 17, 1997, GM completed the restructuring of its Hughes Electronics subsidiary (Hughes Transactions), which resulted in a gain of $4.3 billion or $5.91 per share of $1-2/3 par value common stock. (3) Adjusted amounts represent the reported amounts less the effects of special items. The adjusted amounts for 1997 and 1996 include the unfavorable effects of strike-related work stoppages. The unfavorable after-tax impacts of the work stoppages were $330 million, or $0.45 per share of $1-2/3 par value common stock, in 1997 and $1.2 billion, or $1.56 per share of $1-2/3 par value common stock, in 1996. The unfavorable after-tax impacts for GM-NAO were $238 million and $920 million in 1997 and 1996, respectively. The unfavorable after-tax impacts for Delphi were $70 million and $206 million in 1997 and 1996, respectively. continues - 23 - HIGHLIGHTS - Years Ended Other Financial Information (Dollars in Millions) (4) GMIO includes: Years Ended December 31, ---------------------- 1997 1996 --------- --------- GM Europe $(17) $778 Other GMIO 498 754 --------- --------- Reported net income $481 $1,532 ========= ========= GM Europe $313 $778 Other GMIO 668 754 --------- --------- Adjusted net income - excluding special items $981 $1,532 ========= ========= (5) Total unit sales for GM Canada, which includes factory and import sales, were 1,310,590 units and 1,075,233 units for the years ended December 31, 1997 and 1996, respectively. Net sales and revenues for GM Canada were $24.3 billion ($Cdn 33.6 billion) and $20.0 billion ($Cdn 27.3 billion) for the years ended December 31, 1997 and 1996, respectively. (6) Data relates to the period ending December 17, 1997, the date on which GM recapitalized the Class H common stock ("GM's Recapitalization Date"). (7) Data relates to the period beginning December 18, 1997, through December 31, 1997, which is subsequent to GM's Recapitalization Date. (8) Calculated with financing and insurance operations on an equity basis. - 24 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME Years Ended December 31, 1997 1996 1995 ---- ---- ---- (Dollars in Millions Except Per Share Amounts) Net sales and revenues Manufactured products $153,683 $145,341 $143,666 Financial services 12,762 12,674 11,664 Other income 11,239 5,998 4,924 -------- -------- -------- Total net sales and revenues 177,684 164,013 160,254 ------- ------- ------- Costs and expenses Cost of sales and other operating charges, exclusive of items listed below 129,948 123,922 121,300 Selling, general and administrative expenses 16,192 14,580 12,550 Depreciation and amortization expenses 16,616 11,840 11,213 Interest expense 6,113 5,695 5,182 Plant closing expense (adjustments) 80 (727) - Other deductions 1,021 2,083 1,678 -------- -------- -------- Total costs and expenses 169,970 157,393 151,923 ------- ------- ------- Income from continuing operations before income taxes and minority interests 7,714 6,620 8,331 Income taxes 1,069 1,723 2,316 Minority interests 53 56 18 ------- ------ ------- Income from continuing operations before cumulative effect of accounting change 6,698 4,953 6,033 Income from discontinued operations - 10 900 Cumulative effect of accounting change - - (52) --------- --------- -------- Net income 6,698 4,963 6,881 Premium on exchange of/tender offer for preference stocks 26 - 153 Dividends on preference stocks 72 81 211 -------- -------- ------- Earnings on common stocks $6,600 $4,882 $6,517 ===== ===== ===== Basic earnings per share attributable to common stocks $1-2/3 par value common stock Continuing operations $8.70 $6.07 $7.14 Discontinued operations - (0.01) 0.14 Cumulative effect of accounting change - - (0.07) ------ ------- ---- Earnings per share attributable to $1-2/3 par value $8.70 $6.06 $7.21 ==== ==== ==== Income from discontinued operations attributable to Class E $ - $0.04 $1.96 ------ ---- ---- Earnings per share attributable to Class H (prior to its recapitalization on December 17, 1997) $3.17 $2.88 $2.77 Earnings per share attributable to Class H (subsequent to its recapitalization on December 17, 1997) $0.02 $ - $ - ---- ---- ---- Diluted earnings per share attributable to common stocks $1-2/3 par value common stock Continuing operations $8.62 $6.03 $7.14 Discontinued operations - (0.01) 0.14 Cumulative effect of accounting change - - (0.07) ---- ---- ---- Earnings per share attributable to $1-2/3 par value $8.62 $6.02 $7.21 ==== ==== ==== Income from discontinued operations attributable to Class E $ - $0.04 $1.96 ---- ---- ---- Earnings per share attributable to Class H (prior to its recapitalization on December 17, 1997) $3.17 $2.88 $2.77 Earnings per share attributable to Class H (subsequent to its recapitalization on December 17, 1997) $0.02 $ - $ - ---- ----- ----- - 25 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31, ASSETS 1997 1996 ---- ---- (Dollars in Millions) Cash and cash equivalents $11,262 $14,063 Other marketable securities 11,722 8,199 ------ -------- Total cash and marketable securities 22,984 22,262 Finance receivables - net 58,870 57,550 Accounts and notes receivable (less allowances) 7,493 6,557 Inventories (less allowances) 12,102 11,898 Deferred income taxes 22,478 19,510 Equipment on operating leases (less accumulated depreciation) 33,302 30,112 Property - net 34,567 37,504 Intangible assets - net 11,469 12,691 Other assets 25,623 24,058 -------- -------- Total assets $228,888 $222,142 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities Accounts payable (principally trade) $15,782 $14,221 Notes and loans payable 93,027 85,300 Deferred income taxes 4,267 3,207 Postretirement benefits other than pensions 41,168 43,190 Pensions 6,691 7,599 Other liabilities 49,498 45,115 -------- -------- Total liabilities 210,433 198,632 ------- ------- Minority interests 727 92 General Motors - obligated mandatorily redeemable preferred securities of subsidiary trusts holding solely junior subordinated debentures of General Motors Series D 79 - Series G 143 - Stockholders' equity Preference stocks 1 1 Common stocks $1-2/3 par value (issued, 693,456,394 and 756,619,625 shares) 1,156 1,261 Class H (issued, 100,075,000 shares in 1996) - 10 Class H (issued, 103,885,803 shares in 1997) 10 - Capital surplus (principally additional paid-in capital) 15,369 19,189 Retained earnings 5,416 6,137 Subtotal 21,952 26,598 Accumulated foreign currency translation adjustments (888) (113) Net unrealized gains on securities 504 423 Minimum pension liability adjustment (4,062) (3,490) ----- ----- Total stockholders' equity 17,506 23,418 Total liabilities and stockholders' equity $228,888 $222,142 - 26 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended December 31, 1997 1996 1995 (Dollars in Millions) Cash flows from operating activities Income from continuing operations before cumulative effect of accounting change $6,698 $4,953 $6,033 Adjustments to reconcile income from continuing operations before cumulative effect of accounting change to net cash provided by operating activities Depreciation and amortization expenses 16,616 11,840 11,213 Gain on Hughes Defense spin-off (4,269) - - Net (payments and VEBA contribution) expense - postretirement benefits other than pensions (1,425) 1,575 1,684 Net expense (contributions) - pensions 240 801 (2,932) Originations and purchases of mortgage loans (30,878) (19,455) (12,086) Proceeds on sales of mortgage loans 28,543 18,157 11,613 Originations and purchases of mortgage securities (2,516) (970) (515) Proceeds on sales of mortgage securities 1,449 758 533 Change in other investments, misc. assets, etc. (1,837) (713) (510) Change in other operating assets and liabilities 2,237 184 751 Other (607) 1,379 765 ------- ------ ------- Net cash provided by operating activities 14,251 18,509 16,549 ------ ------ ------ Cash flows from investing activities Expenditures for property (10,320) (9,949) (8,786) Investments in other marketable securities - acquisitions (30,897) (27,431) (17,794) Investments in other marketable securities - liquidations 29,279 24,966 17,254 Finance receivables - acquisitions (163,614) (155,477) (163,033) Finance receivables - liquidations 129,577 120,253 134,265 Finance receivables - other 1,354 312 244 Proceeds from sales of finance receivables 31,191 36,657 25,389 Operating leases - acquisitions (19,879) (18,494) (15,125) Operating leases - liquidations 12,467 10,507 6,268 Proceeds from borrowings of Hughes Defense prior to the Hughes Defense spin-off 4,006 - - Investments in companies, net of cash acquired (2,296) (167) (381) Special inter-company payment from EDS - 500 - Other 378 980 (358) -------- -------- -------- Net cash used in investing activities (18,754) (17,343) (22,057) ------ ------ ------ Cash flows from financing activities Net increase in loans payable 5,069 662 6,227 Increase in long-term debt 14,971 15,933 11,242 Decrease in long-term debt (12,429) (12,810) (9,580) Repurchases of common and preference stocks (4,365) (251) (1,681) Proceeds from issuing common stocks 614 480 453 Cash dividends paid to stockholders (1,645) (1,530) (1,328) ----- ----- ----- Net cash provided by financing activities 2,215 2,484 5,333 ------ ------ ------ Effect of exchange rate changes on cash and cash equivalents (513) (185) 146 ------ ------ ----- Net cash (used in) provided by continuing operations (2,801) 3,465 (29) Net cash provided by discontinued operations - 103 193 Net (decrease) increase in cash and cash equivalents (2,801) 3,568 164 Cash and cash equivalents at beginning of the year 14,063 10,495 10,331 Cash and cash equivalents at end of the year $11,262 $14,063 $10,495 - 27 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES Consolidated Statements of Income With Financing and Insurance Operations on an Equity Basis Years Ended December 31, 1997 1996 1995 ---- ---- ---- (Dollars in Millions) Net sales and revenues $153,781 $145,427 $143,754 ------- ------- ------- Costs and expenses Cost of sales and other operating charges, exclusive of items listed below 129,962 123,966 121,312 Selling, general, and administrative expenses 13,254 11,827 10,195 Depreciation and amortization expenses 11,803 7,145 6,787 Plant closing expense (adjustments) 80 (727) - ------- ------- ------- Total costs and expenses 155,099 142,211 138,294 ------- ------- ------- Operating (loss) income (1,318) 3,216 5,460 Other income less income deductions 7,836 2,056 1,150 Interest expense 971 859 344 ------ ------- ------- Income from continuing operations before income taxes, minority interests, and earnings of nonconsolidated affiliates 5,547 4,413 6,266 Income taxes 155 885 1,563 ------ ------- ----- Income from continuing operations before minority interests, earnings of nonconsolidated affiliates, and cumulative effect of accounting change 5,392 3,528 4,703 Minority interests 66 56 18 Earnings of nonconsolidated affiliates 1,240 1,369 1,312 ----- ----- ----- Income from continuing operations before cumulative effective of accounting change 6,698 4,953 6,033 Income from discontinued operations - 10 900 Cumulative effect of accounting change (1) - - (52) ------ ------ ----- Net income $6,698 $4,963 $6,881 ===== ===== ===== Net profit margin (2) 4.4% 3.4% 4.8% (1) Effective January 1, 1995, GM adopted EITF Issue No. 95-1. (2) Net profit margin represents net income as a percentage of net sales and revenues. - 28 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets With Financing and Insurance Operations on an Equity Basis December 31, 1997 1996 ASSETS (Dollars in Millions) Cash and cash equivalents $10,685 $13,320 Other marketable securities 3,826 3,642 ------- ------- Total cash and marketable securities 14,511 16,962 Accounts and notes receivable (less allowances) Trade 5,164 4,909 Nonconsolidated affiliates 836 927 Inventories (less allowances) 12,102 11,898 Equipment on operating leases (less accumulated depreciation) 4,677 3,918 Deferred income taxes and other 6,278 5,327 Total current assets 43,568 43,941 Equity in net assets of nonconsolidated affiliates 10,164 9,855 Deferred income taxes 20,721 20,075 Other investments and miscellaneous assets 13,564 11,712 Property - net 33,914 37,156 Intangible assets - net 10,752 12,523 -------- -------- Total assets $132,683 $135,262 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable $12,474 $11,527 Loans payable 656 1,214 Accrued liabilities and customer deposits 33,459 29,822 ------ ------ Total current liabilities 46,589 42,563 Long-term debt 5,491 5,192 Capitalized leases 185 198 Postretirement benefits other than pensions 38,388 40,578 Pensions 3,929 5,966 Other liabilities and deferred income taxes 19,678 17,255 -------- -------- Total liabilities 114,260 111,752 ------- ------- Minority interests 695 92 General Motors - obligated mandatorily redeemable preferred securities of subsidiary trusts holding solely junior subordinated debentures of General Motors Series D 79 - Series G 143 - Stockholders' equity 17,506 23,418 -------- -------- Total liabilities and stockholders' equity $132,683 $135,262 ======= ======= - 29 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows With Financing and Insurance Operations on an Equity Basis Years Ended December 31, 1997 1996 1995 ---- ---- ---- Cash flows from operating activities (Dollars in Millions) Income from continuing operations before cumulative effect of accounting change $6,698 $4,953 $6,033 Adjustments to reconcile income from continuing operations before cumulative effect of accounting change to net cash provided by operating activities Depreciation and amortization expenses 11,803 7,145 6,787 Gain on Hughes Defense spin-off (4,269) - - Net (payments and VEBA contribution) expense - postretirement benefits other than pensions (1,448) 1,549 1,659 Net expense (contributions) - pensions 240 801 (2,932) Change in other operating assets and liabilities Accounts receivable (1,067) 1,196 (137) Prepaid expenses and other deferred charges 604 (426) 11 Inventories (716) (757) (1,214) Accounts payable 1,163 898 (288) Deferred taxes and income taxes payable (2,651) (303) 1,077 Other liabilities 4,292 517 576 Other (751) 1,133 (470) ------- ------- ------- Net cash provided by operating activities 13,898 16,706 11,102 ------ ------ ------ Cash flows from investing activities Expenditures for property (9,801) (9,606) (8,653) Investments in other marketable securities - acquisitions (13,167) (14,340) (5,581) Investments in other marketable securities - liquidations 12,984 11,891 5,496 Operating leases - acquisitions (5,680) (4,090) (1,090) Operating leases - liquidations 3,711 3,819 506 Proceeds from borrowings of Hughes Defense prior to the Hughes Defense spin-off 4,006 - - Investments in companies, net of cash acquired (1,875) (166) (381) Special inter-company payment from EDS - 500 - Other 476 847 310 ------ -------- ------- Net cash used in investing activities (9,346) (11,145) (9,393) ----- ------ ----- Cash flows from financing activities Net (decrease) increase in loans payable (558) (971) 1,383 Increase in long-term debt 398 1,937 646 Decrease in long-term debt (1,118) (871) (1,597) Repurchases of common and preference stocks (4,365) (251) (1,681) Proceeds from issuing common stocks 614 480 453 Cash dividends paid to stockholders (1,645) (1,530) (1,328) ----- ----- ----- Net cash used in financing activities (6,674) (1,206) (2,124) ----- ----- ----- Effect of exchange rate changes on cash and cash equivalents (513) (185) 146 ------- ------ ----- Net cash (used in) provided by continuing operations (2,635) 4,170 (269) Net cash provided by discontinued operations - 103 193 Net (decrease) increase in cash and cash equivalents (2,635) 4,273 (76) Cash and cash equivalents at beginning of the year 13,320 9,047 9,123 Cash and cash equivalents at end of the year $10,685 $13,320 $9,047 - 30 - HUGHES ELECTRONICS NEWS RELEASE Los Angeles, January 26, 1998 - In its first earnings release as a satellite and wireless communications company, the "new" Hughes Electronics Corporation (Hughes) today reported that full-year 1997 revenues increased 27.9% to $5,128.3 million compared with $4,008.7 million in 1996. Operating profit, before the effects of purchase accounting adjustments related to General Motors' (GM) acquisition of Hughes Aircraft Company in 1985, increased 45.8% in 1997 to $306.4 million compared with $210.1 million in 1996. Full-year operating profit margin on the same basis rose to 6.0% from 5.2% in 1996. "The solid financial performance reported in our first earnings release demonstrates the tremendous growth opportunities we have in our satellite and wireless communications businesses" said Michael T. Smith, Hughes chairman and chief executive officer. "The full-year revenue and operating profit increases were propelled by strong DIRECTV subscriber growth, including a record-setting fourth quarter for new subscribers. In addition, higher sales of commercial satellites and completion of the PanAmSat merger in May 1997 contributed to the strong financial showing by Hughes." "Now that the Hughes Defense and Delco Electronics transactions are behind us, it is exciting to focus all of our resources on our dynamic telecommunications and space businesses," Mr. Smith further noted. "We will use our strong balance sheet, experienced management team and exceptional employee base to build on our market leadership, creating significant growth and value opportunities." Full year 1997 earnings, adjusted to exclude GM purchase accounting adjustments, were $470.7 million compared with $183.5 million in 1996. Earnings per share on the same basis for the full year were $1.18 per share versus $0.46 per share in 1996. Included in 1997 results were a $318.3 million after-tax gain ($0.80 per share) related to the PanAmSat merger, a $62.8 million after-tax gain ($0.16 per share) related to the sale of Hughes-Avicom International and a $20.6 million after-tax extraordinary charge ($0.05 per share) associated with PanAmSat's tender offer to retire its high-yield debt securities. Earnings in 1996 included a $71.6 million after-tax gain ($0.18 per share) recognized from the sale of 2.5% of DIRECTV to AT&T. Excluding these one-time items, full-year earnings were $110.2 million compared with $111.9 million in 1996 and earnings per share were $0.28 in both years. When comparing the years, the strong operating profit improvement in 1997 was offset by nonoperating items such as increased interest expense and losses related to investments in affiliated companies. Fourth Quarter Financial Review Revenues for the fourth quarter increased 38.8% to $1,694.6 million compared with revenues of $1,221.2 million for the same period in 1996. The increase was principally due to record DIRECTV subscriber growth, higher sales of commercial satellites, and the PanAmSat merger. Fourth quarter operating profit (excluding GM purchase accounting adjustments) increased 40.6% to $91.8 million from $65.3 million in last year's fourth quarter. The increase was mostly related to higher commercial satellite sales and the PanAmSat merger, partially offset by higher DIRECTV operating losses. Operating profit margin on the same basis was 5.4% compared with 5.3% in last year's fourth quarter. Earnings, adjusted to exclude GM purchasing accounting adjustments, were $70.0 million in the period compared with $33.1 million last year. Earnings per share on the same basis in the fourth quarter were $0.18 per share versus $0.08 per share last year. Excluding the one-time items, earnings were $27.8 million versus $33.1 million in last year's fourth quarter. Earnings per share on the same basis were $0.07 in the quarter compared with $0.08 in 1996. When comparing the quarters, the strong operating profit improvement in the fourth quarter of 1997 was more than offset by nonoperating items such as increased interest expense and losses related to investments in affiliated companies. - 31 - Segment Financial Review: Calendar Year and Fourth Quarter Direct-To-Home Broadcast For the full year, revenues more than doubled to $1,276.9 million from $621.0 million in 1996. The increase was a result of strong subscriber growth, solid average monthly revenue per subscriber, and continued low subscriber churn rates in the United States and Latin America. Domestic DIRECTV fueled this growth with revenues of $1,103 million, a 78% increase over last year's revenue of $618 million. The Company's Latin American DIRECTV subsidiary, Galaxy Latin America (GLA), had revenues of $70 million compared with $3 million in 1996. Total DIRECTV subscribers as of December 31, 1997 were 3,301,000 in the United States and 300,000 in Latin America. In addition, DIRECTV Japan initiated its service in December 1997. The operating loss in 1997 was $254.6 million compared with an operating loss of $319.8 million in 1996. The lower operating loss in 1997 was principally due to increased subscriber revenues which more than offset higher marketing expenditures. The full-year 1997 operating loss for domestic DIRECTV was $137 million compared with $192 million in 1996. GLA's operating loss was $116 million in 1997 versus $131 million in 1996. Revenues for the quarter were $415.9 million, an increase of 79.7% over revenues of $231.4 million for the same period in 1996. The increase was a result of record subscriber growth, continued strong average monthly revenue per subscriber, and low subscriber churn rates in both the United States and Latin America. In the fourth quarter, domestic DIRECTV revenues increased 46.7% to $330 million from $225 million and GLA's revenues increased to $28 million from $3 million in 1996. Domestic DIRECTV attained its best-ever quarterly subscriber growth with the addition of 409,000 net subscribers in the United States and GLA added 67,000 net subscribers in Latin America. The operating loss in the quarter was $95.9 million compared with a loss of $90.9 million in 1996. The higher loss was primarily due to increased marketing expenses in the United States related to new promotions and increased advertising expenditures which more than offset a lower operating loss in GLA. The operating loss in the domestic DIRECTV business was $62 million compared with $24 million in last year's fourth quarter and GLA's operating loss was $27 million compared with $60 million last year. Satellite Services Revenues in 1997 increased 30.5% to $630.0 million from $482.7 million in 1996. Full-year operating profit was $296.2 million, an increase of 22.2% over last year's operating profit of $242.4 million. The revenue and operating profit growth were primarily due to the May 1997 PanAmSat merger and increased operating lease revenues for both video distribution and business communications services. Operating profit margin in the period declined to 47.0% from 50.2% last year principally due to goodwill amortization associated with the PanAmSat merger. Fourth quarter 1997 revenues were up 74.5% to $197.9 million compared with $113.4 million in the prior year's comparable period. Operating profit in the quarter rose 71.7% to $91.7 million from $53.4 million in 1996. The revenue and operating profit growth were primarily due to the May 1997 PanAmSat merger and increased operating leases revenues for both video distribution and business communications services. Operating profit margin in the period declined to 46.3% from 47.1% last year primarily due to goodwill amortization associated with the PanAmSat merger. Satellite Manufacturing For the full year, revenues increased 21.2% to $2,491.9 million from $2,056.4 million last year primarily due to higher commercial satellite sales to customers including ICO Global Communications, Orion Asia Pacific Corporation, Japan Satellite Systems, Inc., PanAmSat Corporation, Telenor, Telecommunicaciones de Mexico and Thuraya Satellite Telecommunications Company. Operating profit in 1997 was $226.3 million, an increase of 23.5% over $183.3 million in 1996. The increase was primarily due to higher commercial program sales. Operating profit margin for the year was 9.1% compared with 8.9% last year. - 32 - Fourth quarter 1997 revenues increased 30.5% to $743.8 million from revenues of $570.0 million in the same period in 1996 principally due to increased commercial satellite sales. Operating profit in the fourth quarter increased 80.5% to $66.6 million from $36.9 million in the prior year's fourth quarter. The increase is principally due to reduced development costs related to the geostationary satellite mobile telephony product line and higher commercial program sales. Consequently, fourth quarter operating profit margin increased to 9.0% compared with 6.5% last year. Network Systems Full-year revenues for Hughes Network Systems (HNS) were $1,011.3 million compared with $1,070.0 million in 1996. The decline was primarily due to lower domestic mobile cellular telephone equipment sales which were partially offset by higher satellite-based mobile telephony equipment sales. HNS operating profit in 1997 was $74.1 million versus $107.7 million in 1996 and operating profit margin declined to 7.3% from 10.1% last year. These decreases were primarily the result of lower domestic mobile cellular telephone equipment sales and higher marketing expenditures associated with the launch of the DirecPC/DirecDuo products. HNS revenues in the fourth quarter were $402.4 million compared with $412.4 million in the same period last year. Operating profit in the quarter increased 9.4% to $68.5 million from $62.6 million in 1996. The operating profit increase was principally a result of improved margins associated with the sale of international wireless local loop telephone systems which more than offset the higher marketing expenses related to the introduction of the DirecPC/DirecDuo products. As a result, operating profit margin in the quarter increased to 17.0% from 15.2% last year. Balance Sheet The 1997 year-end cash balance of $2,783.8 million reflects the $4.0 billion cash injection received at the completion of the Hughes Defense and Delco Electronics transactions, repayment of a $1,725 million loan from GM used to facilitate the 1997 PanAmSat merger, and existing Hughes Electronics cash of approximately $500 million. Year-end 1997 long-term debt was $637.6 million consisting primarily of PanAmSat's revolving bank debt used to finance a tender offer for high-yield debt securities completed on December 24, 1997. The tender offer and refinancing substantially reduced the restrictive liens and covenants contained in the high-yield debt securities, thereby increasing PanAmSat's financial flexibility and reducing annual interest expense. On January 16, 1998, PanAmSat issued $750 million of privately-placed debt securities with maturities between five and 30 years at interest rates ranging between six and seven percent. The net proceeds from the offering were used to repay bank loans incurred to finance the tender offer and for general corporate purposes. Basis of Financial Statements - the financial information herein pertains only to those telecommunications and space businesses of the new Hughes and does not include financial information related to Hughes Defense and Delco Electronics. As described above, the Hughes Transactions, which include the spin-off and merger of Hughes Defense with Raytheon Company and the transfer of Delco Electronics to GM's Delphi Automotive Systems, had a significant impact on the balance sheet. At December 31, 1996, the balance sheet reflects the telecommunications and space businesses as subsidiaries or divisions of the parent company, Hughes Electronics, which provided necessary funding. As a result, cash and debt balances were minimal. At December 31, 1997, however, the balance sheet includes the effects of the Hughes Transactions, including a cash injection, the repayment of certain debt, and the contribution of certain other assets and liabilities from the parent company. - 33 - STATEMENT OF INCOME AND PRO FORMA AVAILABLE SEPARATE CONSOLIDATED NET INCOME (Dollars in Millions Except Per Share Amounts) Year Ended Fourth Quarter December 31, 1997 1996 1997 1996 ---- ---- ---- ------ Revenues Product sales $1,079.2 $1,040.8 $3,143.6 $3,009.0 Direct broadcast, leasing and other services 615.4 180.4 1,984.7 999.7 - ---------------------------------- ------- ----- ----- ------- Total Revenues 1,694.6 1,221.2 5,128.3 4,008.7 -------------- ------- ------- ------- -------- Operating Costs and Expenses Cost of products sold 807.0 728.0 2,493.3 2,183.7 Broadcast programming and other costs 288.8 138.2 912.3 631.8 Selling, general, and administrative expenses 405.9 236.8 1,119.9 788.5 Depreciation and amortization 101.1 52.9 296.4 194.6 Amortization of GM purchase accounting adjustments related to Hughes Aircraft Company 5.1 5.1 21.0 21.0 Total Operating Costs and Expenses 1,607.9 1,161.0 4,842.9 3,819.6 Operating Profit 86.7 60.2 285.4 189.1 Interest income 15.0 1.8 33.1 6.8 Interest expense (32.9) (12.8) (91.0) (42.9) Other, net (61.9) (20.9) 390.7 69.1 - ---------- ------ ------ ----- ----- Income from Continuing Operations Before Income Taxes, Minority Interests and Extraordinary Item 6.9 28.3 618.2 222.1 Income taxes (credit) (7.8) 22.8 236.7 104.8 Minority interests in net losses of subsidiaries 8.0 23.2 24.8 52.6 - --------------------------------- --- ---- ---- ---- Income from continuing operations before extraordinary item 22.7 28.7 406.3 169.9 Income (Loss) from discontinued operations, net of taxes 0.0 (0.7) 1.2 (7.4) Gain on sale of discontinued operations, net of taxes 62.8 62.8 - -------------------------------- ---- ---- Income before extraordinary item 85.5 28.0 470.3 162.5 Extraordinary item, net of taxes (20.6) (20.6) - -------------------------------- ------ ----- ------ ------ Net Income $64.9 $28.0 $449.7 $162.5 ========== ===== ===== ====== ====== Pro Forma Net Earnings Attributable to General Motors Class H Common Stock: Net income $64.9 $28.0 $449.7 $162.5 Adjustments to exclude the effect of GM purchase accounting adjustments related to Hughes Aircraft Company 5.1 5.1 21.0 21.0 - ---------------------------------- --- --- ---- ---- Net Earnings Used for Pro Forma Computation of Available Separate Consolidated Net Income $70.0 $33.1 $470.7 $183.5 ==================================== ==== ==== ===== ===== Pro Forma Available Separate Consolidated Net Income $18.0 $8.2 $119.4 $45.2 ========================== ===== ==== ====== ===== Pro Forma Net Earnings Attributable to General Motors Class H Common Stock on a Per Share Basis $0.18 $0.08 $1.18 $0.46 ==================================== ===== ===== ===== ===== Certain 1996 amounts have been reclassified to conform with the 1997 presentation. - 34 - BALANCE SHEET (Dollars in Millions) Years Ended December 31, ASSETS 1997 1996 - ------ ---------- --------- Current Assets Cash and cash equivalents $2,783.8 $6.7 Accounts and notes receivable 662.8 423.0 Contracts in process 575.6 401.4 Inventories 486.4 423.1 Net assets of discontinued operations - 35.0 Deferred subscriber acquisition costs 26.4 97.5 Prepaid expenses, including deferred income taxes 270.9 110.4 - ------------------------------------------------- ----- ------ Total Current Assets 4,805.9 1,497.1 Satellites - Net 2,643.4 1,056.6 Property - Net 889.7 690.8 Net Investment in Sales-type Leases 337.6 320.6 Intangible Assets - Net 2,954.8 468.0 Investments and Other Assets 1,132.4 383.3 - ---------------------------- -------- ------ Total Assets $12,763.8 $4,416.4 - ------------ ---------- --------- LIABILITIES AND OWNER'S EQUITY Current Liabilities Accounts payable $472.8 $359.0 Advances on contracts 209.8 287.8 Deferred revenues 110.6 142.8 Accrued liabilities 689.4 430.0 Total Current Liabilities 1,482.6 1,219.6 Long-Term Debt and Capitalized Leases 637.6 - Deferred Gains on Sales and Leasebacks 191.9 234.8 Accrued Operating Leaseback Expense 100.2 107.8 Postretirement Benefits Other Than Pensions 154.8 - Other Liabilities and Deferred Credits 706.4 136.9 Deferred Income Taxes 570.8 204.1 Minority Interests 607.8 21.6 Owner's Equity 8,311.7 2,491.6 - -------------- -------- -------- Total Liabilities and Owner's Equity $12,763.8 $4,416.4 ==================================== ======== ======= Holders of GM Class H common stock have no direct rights in the equity or assets of Hughes, but rather have rights in the equity and assets of General Motors (which includes 100% of the stock of Hughes). Certain 1996 amounts have been reclassified to conform with the 1997 presentation. - 35 - STATEMENT OF CASH FLOWS (Dollars in Millions) Years Ended December 31, 1997 1996 Cash Flows from Operating Activities Net income $449.7 $162.5 Adjustments to reconcile net income to net cash provided by continuing operations (Income) loss from discontinued operations (1.2) 7.4 Gain on sale of discontinued operations (62.8) - Extraordinary item, net of taxes 20.6 - Depreciation and amortization 296.4 194.6 Amortization of GM purchase accounting adjustments related to Hughes Aircraft Company 21.0 21.0 Net gain on sale of investments and businesses sold (489.7) (120.3) Gross profit on sales-type leases (33.6) (51.8) Deferred income taxes and other 285.5 91.9 Change in other operating assets and liabilities Accounts receivable (228.0) (120.1) Contracts in process (174.2) 54.1 Inventories (60.7) (121.5) Deferred subscriber acquisition costs 71.1 (97.5) Collections of principal on net investment in sales-type leases 26.9 31.2 Accounts payable (184.1) 116.8 Advances on contracts (95.6) 97.6 Accrued liabilities 217.8 22.4 Deferred revenues (32.2) 113.7 Deferred gains on sales and leasebacks (42.9) (57.2) Other (144.3) (9.6) ----- ------- ----- Net Cash Provided by (Used in) Continuing Operations (160.3) 335.2 Net Cash Used by Discontinued Operations (15.9) (8.0) Net Cash Provided by (Used in) Operating Activities (176.2) 327.2 Cash Flows from Investing Activities Investment in companies, net of cash acquired (1,466.2) - Expenditures for property (251.3) (261.5) Increase in satellites (633.5) (191.6) Proceeds from sale of long-term investments 242.0 - Proceeds from sale and leaseback of satellite transponders with General Motors Acceptance Corporation - 252.0 Proceeds from sale of minority interest in subsidiary - 137.5 Repurchase of minority interest in subsidiary (161.8) - Proceeds from sale of discontinued operations 155.0 - Proceeds from disposal of property 55.1 15.3 Net Cash Used in Investing Activities (2,060.7) (48.3) ------------------------------------- --------- ------ Cash Flows from Financing Activities Long-term debt borrowings 2,383.3 - Repayment of long-term debt (2,851.9) - Premium paid to retire debt (34.4) - Contributions from (distributions to) Parent Company 1,124.2 (279.8) Capital infusion resulting from Hughes transactions 4,392.8 - - --------------------------------------------------- ------- - Net Cash Provided by (Used in) Financing Activities 5,014.0 (279.8) Net increase (decrease) in cash and cash equivalents 2,777.1 (0.9) Cash and cash equivalents at beginning of the year 6.7 7.6 - -------------------------------------------------- --- ---- Cash and cash equivalents at end of the year $2,783.8 $6.7 ============================================ ======== ===== Certain 1996 amounts have been reclassified to conform with the 1997 presentation. - 36 - PRO FORMA SELECTED SEGMENT DATA* (Dollars in Millions) Years Ended Fourth Quarter December 31, 1997 1996 1997 1996 ---- ---- ---- ------ DIRECT-TO-HOME BROADCAST Total Revenues $415.9 $231.4 $1,276.9 $621.0 Operating Loss $(95.9) $(90.9) $(254.6) $(319.8) Depreciation and Amortization $23.6 $19.7 $86.1 $67.3 Capital Expenditures $51.4 $33.6 $105.6 $63.5 - -------------------- ------ ------ ------- ------ SATELLITE SERVICES Total Revenues $197.9 $113.4 $630.0 $482.7 Operating Profit $91.7 $53.4 $296.2 $242.4 Operating Profit Margin 46.3% 47.1% 47.0% 50.2% Depreciation and Amortization (1) $53.0 $6.3 $141.9 $55.2 Capital Expenditures (2) $199.1 $144.5 $625.7 $308.7 - ------------------------ ------- ------- ------- ------- SATELLITE MANUFACTURING Total Revenues $743.8 $570.0 $2,491.9 $2,056.4 Operating Profit $66.6 $36.9 $226.3 $183.3 Operating Profit Margin 9.0% 6.5% 9.1% 8.9% Depreciation and Amortization (1) $11.7 $8.9 $39.4 $34.4 Capital Expenditures $45.7 $40.8 $113.9 $87.8 - -------------------- ------ ------ ------- ------ NETWORK SYSTEMS Total Revenues $402.4 $412.4 $1,011.3 $1,070.0 Operating Profit $68.5 $62.6 $74.1 $107.7 Operating Profit Margin 17.0% 15.2% 7.3% 10.1% Depreciation and Amortization $10.3 $8.8 $32.0 $28.3 Capital Expenditures $10.1 $7.3 $43.1 $45.4 ==================== ====== ===== ====== ====== Certain 1996 amounts have been reclassified to conform with the 1997 presentation. * The Consolidated Financial Statements reflect the application of purchase accounting adjustments related to GM's acquisition of Hughes Aircraft Company. However, as provided in the General Motors Certificate of Incorporation, the earnings attributable to GM Class H common stock for purposes of determining the amount available for the payment of dividends on GM Class H common stock specifically exclude such adjustments. In order to provide additional analytical data, the above unaudited pro forma selected segment data, which exclude the purchase accounting adjustments related to GM's acquisition of Hughes Aircraft Company, are presented. (1)Excludes amortization arising from purchase accounting adjustments related to GM's acquisition of Hughes Aircraft Company amounting to $0.8 million in each of the fourth quarters and $3.3 million in each of the years ended for the Satellite Services segment and $4.3 million in each of the fourth quarters and $17.7 million in each of the years ended for the Satellite Manufacturing segment. (2)Includes expenditures related to satellites amounting to $165.1 million, $45.3 million, $575.3 million, and $259.2 million, respectively. - 37 - GMAC NEWS RELEASE GMAC ANNOUNCES HIGHEST EARNINGS IN SIX YEARS DETROIT -- General Motors Acceptance Corporation (GMAC) reported 1997 consolidated net income of $1,301 million, up 5% from the $1,240 million earned in 1996, GMAC President John D. Finnegan announced today. These earnings were the highest recorded by GMAC since 1991. In 1997, net income from auto financing operations totaled $910 million, down 4% from the $946 million earned in 1996. Earnings were lower due to reduced net financing margins partially offset by lower losses and loss provisions and operating expenses. GMAC's insurance operations earned a record $224 million in 1997, up 17% from the $192 million earned in 1996. The increase is principally due to favorable underwriting experience and higher capital gains. GMAC's mortgage operations also generated a record net income of $167 million in 1997, up 64% from the $102 million earned in 1996, driven by a significant increase in commercial mortgage assets and a shift to higher margin products. Overall origination levels increased to $31 billion, and the mortgage servicing portfolio grew by 31% to $144 billion. Fourth quarter 1997 consolidated results totaled $279 million, up 2% from the $274 million earned in the final quarter of 1996. For the quarter, net income from auto financing operations totaled $186 million, up from $175 million earned a year ago. Net income from GMAC's insurance operations for the fourth quarter of 1997 totaled $54 million, compared to $68 million earned a year ago. Net income from GMAC's mortgage operations was $39 million for the fourth quarter of 1997, up from the $31 million for the fourth quarter of 1996. * * * Principal Important Factors Relating To Forward-Looking Statements Following are the principal important factors which may cause actual results to differ materially from those expressed in forward-looking statements made by management of General Motors Corporation and Hughes Electronics Corporation during telephonic presentations to and discussions with securities analysts and the media following the Corporation's release of fourth quarter and calendar year earnings for 1997: 1. 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 are produced, distributed or sold (i.e., North America, Europe, Latin America and Asia-Pacific), including the effects of current economic problems in Asia and political problems in the Near East. 2. 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 are produced, distributed or sold. - 38 - 3. 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 are produced, distributed or sold. 4. Changes in the laws, regulations, policies or other activities of governments, agencies and similar organizations where such actions may affect the production, distribution or sale of the Corporation's products, the cost thereof or applicable tax rates. 5. 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. 6. The ability of the Corporation to achieve the sale of assets held for disposal by its Delphi Automotive Systems Group within the timing and revenue levels and upon the terms contemplated by management. 7. With respect to the Corporation's Hughes Electronics subsidiary, additional risk factors include: the ability to achieve subscriber growth in its Direct-to-Home businesses, ability to sustain technological competitiveness, failure of planned satellite launches, and access to capital and financial flexibility in order to take advantages of new market opportunities, respond to competitive pressures and react quickly to other major changes in the marketplace. * * * * * * 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 -------------------------- (Registrant) Date January 27, 1998 ----------------- By s/Peter R. Bible ------------------------------- (Peter R. Bible, Chief Accounting Officer) - 39 - -----END PRIVACY-ENHANCED MESSAGE-----