10-Q 1 0001.txt GM'S THIRD QUARTER 10-Q FOR 9-30-2000 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549-1004 FORM 10-Q X QUARTERLY REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT OF -- 1934 For the quarterly period ended September 30, 2000 OR TRANSITION REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT OF --- 1934 For the transition period from to --------------- ------------- Commission file number 1-143 GENERAL MOTORS CORPORATION (Exact name of registrant as specified in its charter) STATE OF DELAWARE 38-0572515 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 300 Renaissance Center, Detroit, Michigan 48265-3000 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (313) 556-5000 -------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes X . No . --- --- As of September 30, 2000, there were outstanding 564,950,948 shares of the issuer's $1-2/3 par value common stock and 874,604,340 shares of GM Class H $0.10 par value common stock. - 1 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES INDEX Page No. ------- Part I - Financial Information (Unaudited) Item 1. Financial Statements Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2000 and 1999 3 Consolidated Balance Sheets as of September 30, 2000, December 31, 1999, and September 30, 1999 5 Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2000 and 1999 6 Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Conditions and Results of Operations 15 Part II - Other Information (Unaudited) Item 1. Legal Proceedings 22 Item 6. Exhibits and Reports on Form 8-K 23 Signature 23 Exhibit 99 Hughes Electronics Corporation Financial Statements and Management's Discussion and Analysis of Financial Condition and Results of Operations (Unaudited) 24 Exhibit 27 Financial Data Schedule (Unaudited) (for Securities and Exchange Commission information only) - 2 - PART I GENERAL MOTORS CORPORATION AND SUBSIDIARIES ITEM 1. FINANCIAL STATEMENTS CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, ------------------ ----------------- 2000 1999 2000 1999 ---- ---- ---- ---- (Dollars in Millions Except Per Share Amounts) GENERAL MOTORS CORPORATION AND SUBSIDIARIES Total net sales and revenues $42,690 $42,794 $138,291 $130,296 ------ ------ ------- ------- Cost of sales and other expenses (Note 4) 33,678 34,555 108,888 104,261 Selling, general, and administrative expenses 5,266 4,736 15,604 13,169 Interest expense 2,480 1,985 7,066 5,624 ------- ------- --------- --------- Total costs and expenses 41,424 41,276 131,558 123,054 ------ ------ ------- ------- Income from continuing operations before income taxes and minority interests 1,266 1,518 6,733 7,242 Income tax expense 436 553 2,148 2,538 Equity income/(loss) and minority interests (1) (88) (222) (273) ----- ----- ------ ------ Income from continuing operations 829 877 4,363 4,431 Income from discontinued operations (Note 2) - - - 426 ----- ----- ------ ------ Net income 829 877 4,363 4,857 Dividends on preference stocks (27) (28) (83) (51) ---- ---- ------ ------ Earnings attributable to common stocks $802 $849 $4,280 $4,806 === === ===== ===== Basic earnings (losses) per share attributable to common stocks (Note 8) $1-2/3 par value Continuing operations $1.57 $1.35 $7.51 $6.79 Discontinued operations (Note 2) - - - 0.66 ---- ---- ---- ---- Earnings per share attributable to $1-2/3 par value $1.57 $1.35 $7.51 $7.45 ==== ==== ==== ==== Earnings per share attributable to Class H $(0.09) $(0.04) $(0.23) $(0.06) ==== ==== ==== ==== Earnings (losses) per share attributable to common stocks assuming dilution (Note 8) $1-2/3 par value Continuing operations $1.55 $1.33 $7.37 $6.67 Discontinued operations (Note 2) - - - 0.65 ---- ---- ---- ---- Earnings per share attributable to $1-2/3 par value $1.55 $1.33 $7.37 $7.32 ==== ==== ==== ==== Earnings per share attributable to Class H $(0.09) $(0.04) $(0.23) $(0.06) ==== ==== ==== ==== Reference should be made to the notes to consolidated financial statements. - 3 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME - concluded (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, ------------------ ----------------- 2000 1999 2000 1999 ---- ---- ---- ---- (Dollars in Millions) AUTOMOTIVE, COMMUNICATIONS SERVICES, AND OTHER OPERATIONS Total net sales and revenues $36,602 $37,546 $120,667 $115,186 ------ ------ ------- ------- Cost of sales and other expenses (Note 4) 31,827 32,894 103,408 99,404 Selling, general, and administrative expenses 3,765 3,486 11,304 9,648 ------- ------- -------- -------- Total costs and expenses 35,592 36,380 114,712 109,052 ------ ------ ------- ------- Interest expense 210 223 648 597 Net expense from transactions with Financing and Insurance Operations 197 85 508 245 --- ---- ----- ----- Income from continuing operations before income taxes and minority interests 603 858 4,799 5,292 Income tax expense 193 291 1,433 1,799 Equity income/(loss) and minority interests 13 (80) (207) (250) ---- ---- ----- ----- Income from continuing operations 423 487 3,159 3,243 Income from discontinued operations (Note 2) - - - 426 ---- ---- ----- ----- Net income - Automotive, Communications Services, and Other Operations $423 $487 $3,159 $3,669 === === ===== ===== Three Months Ended Nine Months Ended September 30, September 30, ------------------ ----------------- 2000 1999 2000 1999 ---- ---- ---- ---- (Dollars in Millions) FINANCING AND INSURANCE OPERATIONS Total revenues $6,088 $5,248 $17,624 $15,110 ----- ----- ------ ------ Interest expense 2,270 1,762 6,418 5,027 Depreciation and amortization expense 1,474 1,371 4,480 3,918 Operating and other expenses 1,450 1,216 4,147 3,429 Provision for financing and insurance losses 428 324 1,153 1,031 ----- ----- ------ ------ Total costs and expenses 5,622 4,673 16,198 13,405 ----- ----- ------ ------ Net income from transactions with Automotive, Communications Services, and Other Operations 197 85 508 245 --- ---- ---- ----- Income before income taxes and minority interests 663 660 1,934 1,950 Income tax expense 243 262 715 739 Equity income/(loss) and minority interests (14) (8) (15) (23) --- --- --- ----- Net income - Financing and Insurance Operations $406 $390 $1,204 $1,188 === === ===== ===== Reference should be made to the notes to consolidated financial statements. - 4 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS Sept. 30, Sept. 30, 2000 Dec. 31, 1999 (Unaudited) 1999 (Unaudited) --------- ---- --------- GENERAL MOTORS CORPORATION AND SUBSIDIARIES (Dollars in Millions) ASSETS Automotive, Communications Services, and Other Operations Cash and cash equivalents $9,351 $9,730 $12,056 Marketable securities 1,176 1,698 1,666 ------- ------- ------- Total cash and marketable securities 10,527 11,428 13,722 Accounts and notes receivable (less allowances) 5,975 5,093 5,480 Inventories (less allowances) (Note 3) 11,300 10,638 10,603 Equipment on operating leases (less accumulated depreciation) 5,980 5,744 6,244 Deferred income taxes and other current assets 9,489 9,006 7,494 ------- ------- ------- Total current assets 43,271 41,909 43,543 Equity in net assets of nonconsolidated associates 3,301 1,711 1,642 Property - net 34,036 32,779 31,761 Intangible assets - net 8,651 8,527 12,338 Deferred income taxes 13,202 15,277 17,139 Other assets 33,015 25,358 13,894 ------- ------- ------- Total Automotive, Comm. Serv., and Other Operations assets 135,476 125,561 120,317 Financing and Insurance Operations Cash and cash equivalents 912 712 328 Investments in securities 9,309 9,110 8,937 Finance receivables - net 87,534 80,627 76,449 Investment in leases and other receivables 37,551 36,407 35,837 Other assets 24,864 21,312 20,589 Net receivable from Automotive, Comm. Serv., and Other Operations 1,599 1,001 369 ------- ------- ------- Total Financing and Insurance Operations assets 161,769 149,169 142,509 ------- ------- ------- Total assets $297,245 $274,730 $262,826 ======== ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Automotive, Communications Services, and Other Operations Accounts payable (principally trade) $18,190 $17,254 $16,323 Loans payable 3,321 1,991 695 Accrued expenses 31,997 32,854 32,803 Net payable to Financing and Insurance Operations 1,599 1,001 369 ------ ------ ------ Total current liabilities 55,107 53,100 50,190 Long-term debt 8,245 7,415 7,880 Postretirement benefits other than pensions 34,376 34,166 34,455 Pensions 3,226 3,339 3,179 Other liabilities and deferred income taxes 16,088 17,426 18,170 ------- ------- ------- Total Automotive, Communications Services, and Other Operations liabilities 117,042 115,446 113,874 Financing and Insurance Operations Accounts payable 5,316 4,262 4,587 Debt 129,325 122,282 115,329 Other liabilities and deferred income taxes 13,238 11,282 11,607 ------- ------- ------- Total Financing and Insurance Operations liabilities 147,879 137,826 131,523 Minority interests 670 596 635 General Motors - obligated mandatorily redeemable preferred securities of subsidiary trusts holding solely junior subordinated debentures of General Motors (Note 5) Series D - 79 79 Series G 139 139 140 Stockholders' equity $1-2/3 par value common stock (issued, 565,371,465; 619,412,233 and 642,050,210 shares) (Notes 6 and 8) 943 1,033 1,071 Class H common stock (issued, 874,807,080; 411,345,561 and 405,587,898 shares) (Notes 6 and 8) 87 14 14 Capital surplus (principally additional paid-in capital) 21,818 13,794 15,282 Retained earnings 10,335 6,961 5,573 ------ ------- ------- Subtotal 33,183 21,802 21,940 Accumulated foreign currency translation adjustments (2,480) (2,033) (1,969) Net unrealized gains on securities 933 996 631 Minimum pension liability adjustment (121) (121) (4,027) ------ ------ ----- Accumulated other comprehensive loss (1,668) (1,158) (5,365) ------ ------- ------- Total stockholders' equity 31,515 20,644 16,575 ------- ------- ------- Total liabilities and stockholders' equity $297,245 $274,730 $262,826 ======== ======== ======== Reference should be made to the notes to consolidated financial statements. - 5 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended September 30, ------------------------------------------------------- 2000 1999 ------------------------- ------------------------- Automotive, Financing Automotive, Financing Comm.Serv. and Comm.Serv. and and Other Insurance and Other Insurance --------- --------- --------- --------- (Dollars in Millions) Net cash provided by operating activities $9,066 $4,746 $15,372 $9,883 Cash flows from investing activities Expenditures for property (6,314) (335) (4,721) (204) Investments in marketable securities - acquisitions (2,425) (18,198) (3,481) (16,089) Investments in marketable securities - liquidations 2,947 17,998 2,217 15,489 Mortgage servicing rights - acquisitions - (698) - (1,199) Mortgage servicing rights - liquidations - - - 34 Finance receivables - acquisitions - (140,295) - (139,165) Finance receivables - liquidations - 88,560 - 100,692 Proceeds from sales of finance receivables - 43,407 - 35,120 Operating leases - acquisitions (5,342) (12,147) (6,175) (13,948) Operating leases - liquidations 4,615 7,313 4,279 7,104 Investments in companies, net of cash acquired (Note 9) (3,911) - (2,885) (2,120) Net investing activity with Financing and Insurance Operations (998) - 75 - Other (558) 356 (831) 677 ------ ------ ------ ------ Net cash used in investing activities (11,986) (14,039) (11,522) (13,609) ------ ------ ------ ------ Cash flows from financing activities Net increase (decrease) in loans payable 1,255 1,121 (551) (7,601) Long-term debt-borrowings 4,130 19,450 5,414 21,672 Long-term debt-repayments (4,213) (11,482) (4,632) (10,536) Net financing activity with Automotive, Communications Services, and Other Operations - 998 - (75) Repurchases of common and preference stocks (652) - (2,149) - Proceeds from issuing common and preference stocks 2,778 - 1,905 - Cash dividends paid to stockholders (989) - (1,023) - ----- ------ ----- ----- Net cash provided by (used in) financing activities 2,309 10,087 (1,036) 3,460 ----- ------ ----- ----- Effect of exchange rate changes on cash and cash equivalents (365) 3 (167) 1 Net transactions with Automotive/ Financing Operations 597 (597) (447) 447 --- --- ----- --- Net cash (used in) provided by continuing operations (379) 200 2,200 182 Net cash provided by discontinued operations (Note 2) - - 128 - --- --- ----- --- Net (decrease) increase in cash and cash equivalents (379) 200 2,328 182 Cash and cash equivalents at beginning of the period 9,730 712 9,728 146 ----- --- ------ --- Cash and cash equivalents at end of the period $9,351 $912 $12,056 $328 ===== === ====== ===
Reference should be made to the notes to consolidated financial statements. - 6 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 1. Financial Statement Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. In the opinion of management, all adjustments (consisting of only normal recurring items), which are necessary for a fair presentation have been included. The results for interim periods are not necessarily indicative of results which may be expected for any other interim period or for the full year. For further information, refer to the December 31, 1999 consolidated financial statements and notes thereto included in General Motors Corporation's (the "Corporation" or "GM") 1999 Annual Report on Form 10-K, and all other GM, Hughes Electronics Corporation and Subsidiaries (Hughes), and General Motors Acceptance Corporation and Subsidiaries (GMAC) filings with the Securities and Exchange Commission. GM presents separate financial information for the following businesses: (1) Automotive, Communications Services, and Other Operations which consists of the design, manufacturing, and marketing of cars, trucks, locomotives, and heavy duty transmissions and related parts and accessories, as well as the operations of Hughes; and (2) Financing and Insurance Operations which consists primarily of GMAC, which provides a broad range of financial services, including consumer vehicle financing, full-service leasing and fleet leasing, dealer financing, car and truck extended service contracts, residential and commercial mortgage services, vehicle and homeowners' insurance, and asset-based lending. Transactions between businesses have been eliminated in the Corporation's consolidated statements of income. Certain amounts for 1999 were reclassified to conform with the 2000 classifications. Note 2. Discontinued Operations On February 5, 1999, Delphi Automotive Systems Corporation (Delphi) completed an initial public offering (IPO) of 100 million shares of its common stock, which represented 17.7% of its outstanding common shares. On April 12, 1999, the GM Board of Directors (GM Board) approved the complete separation of Delphi from GM by means of a spin-off (which was tax-free to GM and its stockholders for U.S. federal income tax purposes). On May 28, 1999, GM distributed to holders of its $1-2/3 par value common stock 80.1% of the outstanding shares of Delphi, which resulted in 0.69893 shares of Delphi common stock being distributed for each share of GM $1-2/3 par value common stock outstanding on the record date of May 25, 1999. In addition, GM contributed the remaining 2.2% of Delphi shares (around 12.4 million shares), to a Voluntary Employee Beneficiary Association (VEBA) trust established by GM to fund benefits to its hourly retirees. The financial data related to GM's investment in Delphi through May 28, 1999 is classified as discontinued operations for all periods presented. Delphi net sales (including sales to GM) included in discontinued operations totaled $12.5 billion for the nine months ended September 30, 1999. Income from Delphi discontinued operations of $426 million for the nine months ended September 30, 1999 is reported net of income tax expense of $314 million. Note 3. Inventories Inventories included the following for Automotive, Communications Services, and Other Operations (in millions): Sept. 30, Dec. 31, Sept. 30, 2000 1999 1999 ---------- --------- ---------- Productive material, work in process, and supplies $6,121 $5,505 $5,858 Finished product, service parts, etc. 7,062 7,023 6,647 ------ ------ ------- Total inventories at FIFO 13,183 12,528 12,505 Less LIFO allowance 1,883 1,890 1,902 ------- ------- ------- Total inventories (less allowances) $11,300 $10,638 $10,603 ====== ====== ====== - 7 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited) Note 4. Depreciation and Amortization Depreciation and amortization included in cost of sales and other expenses for Automotive, Communications Services, and Other Operations was as follows (in millions): Three Months Ended Nine Months Ended September 30, September 30, ------------------ ----------------- 2000 1999 2000 1999 ---- ---- ---- ---- Depreciation $1,002 $1,004 $2,964 $3,075 Amortization of special tools 537 635 1,852 1,889 Amortization of intangible assets 57 78 209 157 ------ ------ ------ ------ Total $1,596 $1,717 $5,025 $5,121 ===== ===== ===== ===== Note 5. Preferred Securities of Subsidiary Trusts The General Motors Capital Trust G's (Series G Trust) sole assets, are its 9.87% Junior Subordinated Deferrable Interest Debentures, Series G, due July 1, 2012 but redeemable, in whole or part, at GM's option on or after January 1, 2001, which have an aggregate principal amount of $131 million. ---------------- sm "Trust Originated Preferred Securities" and "TOPrS" are service trademarks of Merrill Lynch & Co. Note 6. Capital Stock Transactions As part of GM's previously announced plans for a broad restructuring of its economic interest in Hughes, during the second quarter of 2000, GM completed an exchange offer in which GM repurchased 86 million shares of GM $1-2/3 par value common stock and issued 92 million shares of GM Class H common stock. In addition, on June 12, 2000, GM contributed approximately 54 million shares and approximately 7 million shares of GM Class H common stock to its U.S. Hourly-Rate Employees Pension Plan and VEBA trust, respectively. The total value of the contributions was approximately $5.6 billion. As a result of the exchange offer and employee-benefit plan contributions, the economic interest in Hughes attributable to GM $1-2/3 par value common stock decreased from approximately 62% to approximately 30%, and the economic interest in Hughes attributable to GM Class H common stock increased from approximately 38% to approximately 70%, on a fully diluted basis. On June 6, 2000, the GM Board declared a three-for-one stock split of the GM Class H common stock. The stock split was in the form of a 200% stock dividend, paid on June 30, 2000 to GM Class H common stockholders of record on June 13, 2000. All per share amounts and numbers of shares for all periods presented, as well as GM Class H common stock and capital surplus as of June 30, 2000, were adjusted to reflect the stock split. Furthermore, as a result of this stock split, the voting and liquidation rights of the GM Class H common stock were reduced from 0.6 votes per share and 0.6 liquidation units per share, to 0.2 votes per share and 0.2 liquidation units per share in order to avoid dilution in the aggregate voting or liquidation rights of any class. The voting and liquidation rights of the GM $1-2/3 par value common stock remained at one vote per share and one liquidation unit per share. During the nine months ended September 30, 2000, GM used $310 million to acquire approximately 5 million shares of GM $1-2/3 par value common stock under the Corporation's $1.4 billion stock repurchase program announced in March, 2000. GM also used approximately $97 million and $6 million to repurchase shares of GM $1-2/3 par value common stock and GM Class H common stock for certain employee benefit plans, respectively, during the nine months ended September 30, 2000. Note 7. Comprehensive Income GM's total comprehensive income was as follows (in millions): Three Months Ended Nine Months Ended September 30, September 30, ------------------ ----------------- 2000 1999 2000 1999 ---- ---- ---- ---- Net income $829 $877 $4,363 $4,857 Other comprehensive (loss)/income (171) 88 (510) 332 --- ---- ------ ----- Total $658 $965 $3,853 $5,189 === === ===== ===== - 8 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited) Note 8. Earnings Per Share Attributable to Common Stocks Earnings per share (EPS) attributable to each class of GM common stock was determined based on the attribution of earnings to each such class of common stock for the period divided by the weighted-average number of common shares for each such class outstanding during the period. Diluted EPS attributable to each class of GM common stock considers the impact of potential common shares, unless the inclusion of the potential common shares would have an antidilutive effect. The attribution of earnings to each class of GM common stock was as follows (in millions): Three Months Ended Nine Months Ended September 30, September 30, ------------------ ----------------- 2000 1999 2000 1999 ---- ---- ---- ---- Earnings (losses) attributable to common stocks $1-2/3 par value Continuing operations $878 $866 $4,424 $4,400 Discontinued operations - - - 426 ----- ----- --------- ------ Earnings attributable to $1-2/3 par value $878 $866 $4,424 $4,826 (Losses) attributable to Class H $(76) $(17) $(144) $(20) Earnings attributable to $1-2/3 par value common stock for the period represent the earnings attributable to all GM common stocks for the period, reduced by the Available Separate Consolidated Net Income (Loss) (ASCNI) of Hughes for the respective period. Losses attributable to GM Class H common stock for the three and nine months ended September 30, 2000 and 1999, represent the ASCNI of Hughes. Losses used for computation of the ASCNI of Hughes are based on the separate consolidated net income (loss) of Hughes, excluding the effects of GM purchase accounting adjustments arising from GM's acquisition of Hughes Aircraft Company (HAC) which remains after the spin-off of Hughes Defense, reduced by the amount of dividends accrued on the Hughes Series A Preferred Stock (as an equivalent measure of the effect that GM's payment of dividends on the GM Series H 6.25% Automatically Convertible Preference Stock would have if paid by Hughes). The calculated losses used for computation of the ASCNI of Hughes are then multiplied by a fraction, the numerator of which is equal to the weighted-average number of shares of GM Class H common stock outstanding during the three and nine months ended September 30, 2000 and 1999 (874 million and 405 million for the third quarters of 2000 and 1999, respectively, and 618 million and 363 million for the nine month periods ended September 30, 2000 and 1999, respectively), and the denominator of which is a number equal to the weighted-average number of shares of GM Class H common stock, which if issued and outstanding would represent a 100% interest in the earnings of Hughes (Average Class H dividend base). The Average Class H dividend base was 1.3 billion for the third quarters of 2000 and 1999, and 1.3 billion and 1.2 billion for the nine month periods ended September 30, 2000 and 1999, respectively. - 9 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited) Note 8. Earnings Per Share Attributable to Common Stocks (concluded) The reconciliation of the amounts used in the basic and diluted EPS computations for income from continuing operations was as follows (in millions except per share amounts):
$1-2/3 Par Value Common Stock Class H Common Stock ------------------------------- ---------------------------- Per Share Per Share Income Shares Amount ASCNI Shares Amount ------ ------ ------ ----- ------ ------ Three Months Ended September 30, 2000 Income (loss) from continuing operations $889 $(60) Less:Dividends on preference stocks 11 16 ---- -- Basic EPS Income (loss) from continuing operations attributable to common stockholders 878 559 $1.57 (76) 874 $(0.09) ==== ==== Effect of Dilutive Securities Assumed exercise of dilutive stock options - 8 - - ---- ---- --- --- Diluted EPS Adjusted income (loss) from continuing operations attributable to common stockholders $878 567 $1.55 $(76) 874 $(0.09) === === ==== == === ==== Three Months Ended September 30, 1999 Income (loss) from continuing operations $886 $(9) Less:Dividends on preference stocks 20 8 --- -- Basic EPS Income (loss) from continuing operations attributable to common stockholders 866 641 $1.35 (17) 405 $(0.04) ==== ==== Effect of Dilutive Securities Assumed exercise of dilutive stock options - 11 - - --- --- -- --- Diluted EPS Adjusted income (loss) from continuing operations attributable to common stockholders $866 652 $1.33 $(17) 405 $(0.04) === === ==== == === ==== Nine Months Ended September 30, 2000 Income (loss) from continuing operations $4,472 $(109) Less:Dividends on preference stocks 48 35 ----- --- Basic EPS Income (loss) from continuing operations attributable to common stockholders 4,424 589 $7.51 (144) 618 $(0.23) ==== ==== Effect of Dilutive Securities Assumed exercise of dilutive stock options - 11 - - ----- --- --- --- Diluted EPS Adjusted income (loss) from continuing operations attributable to common stockholders $4,424 600 $7.37 $(144) 618 $(0.23) ===== === ==== === === ==== Nine Months Ended September 30, 1999 Income (loss) from continuing operations $4,444 $(13) Less:Dividends on preference stocks 44 7 ----- --- Basic EPS Income (loss) from continuing operations attributable to common stockholders 4,400 648 $6.79 (20) 363 $(0.06) ==== ==== Effect of Dilutive Securities Assumed exercise of dilutive stock options - 12 - - ----- --- --- --- Diluted EPS Adjusted income (loss) from continuing operations attributable to common stockholders $4,400 660 $6.67 $(20) 363 $(0.06) ===== === ==== == === ====
- 10 - Version4 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited) Note 9. Acquisitions, Investments, and Divestitures Acquisitions and Investments On January 28, 2000, GM completed the acquisition of the remaining 50% of Saab Automobile AB from Investor A.B. for $125 million. The transaction was accounted for using the purchase method of accounting. The allocation of the purchase price is expected to be finalized in the fourth quarter of 2000. On April 12, 2000, GM finalized the previously announced Agreement of Strategic Alliance (the "Alliance Agreement") between GM and Fuji Heavy Industries Ltd. (Fuji) in which GM purchased 157,262,925 newly-issued shares of Fuji's voting common stock, par value 50 yen ((Y)50) per share, for approximately $1.3 billion, an equity interest in Fuji of 20% on a fully diluted basis, at the time of payment. This investment is accounted for using the equity method of accounting and Fuji will remain an independent company with GM as its largest shareholder. This Alliance Agreement will allow GM and Fuji to collaborate in the design, development, and manufacturing of cars, trucks, and related technology. On July 24, 2000, GM finalized its previously announced strategic industrial alliance with Fiat S.p.A. (Fiat). As part of this alliance, GM acquired a 20% interest in Fiat Auto Holdings, B.V. (Fiat Auto), a new holding company that controls Fiat's automobile and light-commercial vehicle operations, except for Ferrari and Maserati for $2.4 billion. This investment is accounted for using the cost method of accounting. In addition, Fiat purchased for $2.4 billion approximately 32 million shares of GM $1-2/3 par value common stock, or approximately 5.6% of GM's $1-2/3 par value common stock outstanding as of July 24, 2000. In 1999, significant transactions included the merger with United States Satellite Broadcasting Company, Inc. (USSB) and acquisitions of PRIMESTAR, the asset-based lending and factoring business unit of The Bank of New York (BNYFC), and the full-service leasing business of Arriva Automotive Solutions Limited (Arriva). The following selected unaudited pro forma information is being provided to present a summary of the combined results of GM, USSB, PRIMESTAR, BNYFC, and Arriva for the nine months ended September 30, 1999 as if the acquisitions had occurred as of the beginning of the period, giving effect to purchase accounting adjustments. The pro forma data presents only significant transactions, is presented for informational purposes only, and may not necessarily reflect the results of operations of GM had these companies operated as part of GM for the period presented, nor are they necessarily indicative of the results of future operations. The pro forma information excludes the effect of non-recurring charges. Pro forma information related to the 2000 transactions would not be material to GM's results of operations, and therefore, is not presented. The pro forma information is as follows (in millions except per share amounts): Nine Months Ended September 30, 1999 ------------------ Total net sales and revenues $131,623 Income from continuing operations $4,432 Income from discontinued operations 426 ----- Net income $4,858 ===== Basic earnings (losses) per share attributable to common stocks $1-2/3 par value common stock Continuing operations $6.80 Discontinued operations 0.66 ---- Earnings per share attributable to $1-2/3 par value $7.46 ==== Earnings per share attributable to Class H $(0.06) ==== Earnings (losses) per share attributable to common stocks assuming dilution $1-2/3 par value common stock Continuing operations $6.67 Discontinued operations 0.65 ---- Earnings per share attributable to $1-2/3 par value $7.32 ==== Earnings per share attributable to Class H $(0.06) ==== - 11 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited) Note 9. Acquisitions, Investments, and Divestitures (concluded) Divestitures On October 6, 2000, Hughes completed the sale, which was first announced on January 13, 2000, of its satellite systems manufacturing businesses to The Boeing Company (Boeing) for approximately $3.8 billion in cash, which will result in a fourth quarter 2000 after-tax gain in excess of $1.0 billion. The purchase price is subject to adjustment based upon the final closing net assets of the satellite manufacturing businesses compared to a target amount, which could require amounts to be paid to or received from Boeing. On March 1, 2000, Hughes announced that the operations of DIRECTV Japan, Hughes' affiliate that provides DIRECTV services in Japan, would be discontinued and that its subscribers would have the opportunity to migrate during 2000 to SkyPerfecTV!, a publicly traded company in Japan that provides direct-to-home satellite broadcast services. In connection with the agreement, Hughes acquired an approximate 6.6% interest in SkyPerfecTV!. As a result of the transaction, in the first quarter of 2000, Hughes wrote off its investment and accrued for the estimated costs to exit the DIRECTV Japan business. The principal components of the accrued exit costs include estimated subscriber migration and termination costs and costs to terminate certain leases, programming agreements, and other long-term contractual commitments. These one-time charges were offset by the estimated fair value of the SkyPerfecTV! interest acquired. The fair value of the SkyPerfecTV! interest recorded was estimated based upon an independent appraisal. The total loss related to DIRECTV Japan for the third quarter of 2000 and the nine months ended September 30, 2000, including Hughes' share of DIRECTV Japan's operating losses was approximately $3 million and $258 million, respectively. The after-tax impact for the same periods was approximately $2 million and $69 million, respectively. DIRECTV Japan ceased broadcasting on September 30, 2000 and is completing the migration of customers to SkyPerfecTV!. Note 10. Commitments and Contingent Matters Commitments On September 14, 2000, GM announced that it plans to invest approximately $600 million in Suzuki, which will increase its equity ownership in Suzuki from 10% to 20%, primarily with the issuance of new GM $1-2/3 par value common stock. This transaction is expected to be completed in early 2001. Contingent Matters In Anderson, et al v. General Motors Corporation, a jury in a Los Angeles Superior Court returned a verdict of $4.9 billion against GM in a product liability lawsuit involving a post-collision fuel fed fire in a 1979 Chevrolet Malibu. In post-trial developments, the trial court has reduced the punitive damages from $4.8 billion to $1.1 billion and has entered an order which stays execution of the judgment pending resolution of all appeals by GM and has released the bond GM had posted for the punitive and compensatory damages (the cost of which was not material to the Corporation). GM continues to pursue its appellate rights, including efforts to secure a new trial and the complete elimination of responsibility to pay any damages in this matter consistent with GM's view that the design of the Chevrolet Malibu was not responsible for plaintiffs' injuries. GM is subject to potential liability under government regulations and various claims and legal actions which are pending or may be asserted against them. Some of the pending actions purport to be class actions. The aggregate ultimate liability of GM under these government regulations and under these claims and actions, was not determinable at September 30, 2000. After discussion with counsel, it is the opinion of management that such liability is not expected to have a material adverse effect on the Corporation's consolidated financial condition or results of operations. Refer to Note 9 Contingencies to the Hughes financial statements, included in Exhibit 99 to this GM Form 10-Q for the period ended September 30, 2000 for information regarding Hughes' contingent matters. - 12 - Version4 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited) Note 11. Segment Reporting GM's reportable operating segments within its Automotive, Communications Services, and Other Operations business consist of GM Automotive (GMA), which is comprised of four regions: GM North America (GMNA), GM Europe (GME), GM Latin America/Africa/Mid-East (GMLAAM), and GM Asia/Pacific (GMAP); Hughes; and Other. GM's reportable operating segments within its Financing and Insurance Operations business consist of GMAC and Other. Selected information regarding GM's reportable operating segments and regions were as follows:
Total Other Total GMNA GME GMLAAM GMAP GMA Hughes Other Automotive GMAC Financing Financing ------ ----- ------ ----- ---- ------ ----- ---------- ----- --------- --------- (in millions) For the Three Months Ended September 30, 2000 Net sales and revenues: External customers $26,566 $5,115 $1,471 $834 $33,986 $2,082 $534 $36,602 $6,067 $21 $6,088 Intersegment (395) 224 53 118 - 6 (6) - - - - ------ ----- ----- --- ------ ----- --- ------ ----- ---- ----- Total net sales and revenues $26,171 $5,339 $1,524 $952 $33,986 $2,088 $528 $36,602 $6,067 $21 $6,088 ====== ===== ===== === ====== ===== === ====== ===== == ===== Interest income (a) $157 $105 $5 $3 $270 $21 $(153) $138 $587 $(87) $500 Interest expense $323 $100 $15 $1 $439 $66 $(295) $210 $2,158 $112 $2,270 Net income (loss) $728 $(181) $31 $(10) $568 $(88)(b) $(57) $423 $401 $5 $406 Segment assets $91,585 $18,596 $4,580 $1,060 $115,821 $20,248 (c) $(593) $135,476 $160,254 $1,515 $161,769 For the Three Months Ended September 30, 1999 Net sales and revenues: External customers $27,322 $5,793 $1,135 $791 $35,041 $2,003 $502 $37,546 $5,203 $45 $5,248 Intersegment (756) 598 65 93 - (5) 5 - - - - ------ ----- ----- --- ------ ----- --- ------ ----- --- ----- Total net sales and revenues $26,566 $6,391 $1,200 $884 $35,041 $1,998 $507 $37,546 $5,203 $45 $5,248 ====== ===== ===== === ====== ===== === ====== ===== == ===== Interest income (a) $231 $115 $11 $2 $359 $2 $(196) $165 $456 $(76) $380 Interest expense $326 $89 $29 $2 $446 $52 $(275) $223 $1,667 $95 $1,762 Net income (loss) $671 $32 $(36) $(54) $613 $(30)(b) $(96) $487 $393 $(3) $390 Segment assets $74,773 $19,764 $3,908 $1,223 $99,668 $18,395 (c) $2,254 $120,317 $142,591 $(82) $142,509 (a)Interest income is included in net sales and revenues from external customers. (b)The amount reported for Hughes excludes amortization of GM purchase accounting adjustments of approximately $5 million for both 2000 and 1999, related to GM's acquisition of HAC. Such amortization was allocated to GM's Other segment which is consistent with the basis upon which the segments are evaluated. (c)The amount reported for Hughes excludes the unamortized GM purchase accounting adjustments of approximately $390 million and $411 million, for 2000 and 1999, respectively, related to GM's acquisition of HAC. These adjustments were allocated to GM's Other segment which is consistent with the basis upon which the segments are evaluated.
- 13 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - concluded (Unaudited) Note 11. Segment Reporting (concluded)
Total Other Total GMNA GME GMLAAM GMAP GMA Hughes Other Automotive GMAC Financing Financing ------ ----- ------ ----- ---- ------ ----- ---------- ----- --------- --------- (in millions) For the Nine Months Ended September 30, 2000 Net sales and revenues: External customers $87,094 $18,593 $4,142 $2,357 $112,186 $6,440 $2,041 $120,667 $17,443 $181 $17,624 Intersegment (1,110) 722 140 248 - 26 (26) - - - - ------ ------ ----- ----- ------- ----- ----- ------- ------ --- ------ Total net sales and revenues $85,984 $19,315 $4,282 $2,605 $112,186 $6,466 $2,015 $120,667 $17,443 $181 $17,624 ====== ====== ===== ===== ======= ===== ===== ======= ====== === ====== Interest income (a) $418 $319 $19 $9 $765 $58 $(367) $456 $1,609 $(322) $1,287 Interest expense $879 $293 $77 $2 $1,251 $169 $(772) $648 $6,095 $323 $6,418 Net income (loss) $3,428 $206 $42 $(126) $3,550 $(229)(c) $(162) $3,159 $1,193 $11 $1,204 For the Nine Months Ended September 30, 1999 Net sales and revenues: External customers $83,900 $18,912 $3,278 $2,066 $108,156 $5,402 $1,628 $115,186 $14,931 $179 $15,110 Intersegment (1,107) 757 170 180 - 15 (15) - - - - ------ ------ ------ ----- ------- ----- ----- ------- ------ --- ------ - ---------- Total net sales and revenues $82,793 $19,669 $3,448 $2,246 $108,156 $5,417 $1,613 $115,186 $14,931 $179 $15,110 ====== ====== ===== ===== ======= ===== ===== ======= ====== === ====== Interest income (a) $734 $313 $36 $6 $1,089 $21 $(525) $585 $1,278 $(170) $1,108 Interest expense $928 $242 $64 $9 $1,243 $71 $(717) $597 $4,718 $309 $5,027 Net income (loss) $3,575 $393 $(99) $(195) $3,674 $(44)(c) $39 (b) $3,669 $1,176 $12 $1,188 (a)Interest income is included in net sales and revenues from external customers. (b)The amount for Other includes income from discontinued operations related to Delphi of $426 million for the nine months ended September 30, 1999. (c)The amount reported for Hughes excludes amortization of GM purchase accounting adjustments of approximately $16 million for both 2000 and 1999, related to GM's acquisition of HAC. Such amortization was allocated to GM's Other segment which is consistent with the basis upon which the segments are evaluated.
* * * * * * - 14 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following management's discussion and analysis of financial condition and results of operations (MD&A) should be read in conjunction with the December 31, 1999 consolidated financial statements and notes thereto along with the MD&A included in General Motors Corporation's (the "Corporation" or "GM") 1999 Annual Report on Form 10-K, and all other GM, Hughes Electronics Corporation and Subsidiaries (Hughes), and General Motors Acceptance Corporation and Subsidiaries (GMAC) filings with the Securities and Exchange Commission (SEC). All earnings per share amounts included in the MD&A are reported as diluted. GM presents separate financial information for the following businesses: Automotive, Communications Services, and Other Operations and Financing and Insurance Operations. GM's reportable operating segments within its Automotive, Communications Services, and Other Operations business consist of: . GM Automotive (GMA), is comprised of four regions: GM North America (GMNA), GM Europe (GME), GM Latin America/Africa/Mid-East (GMLAAM), and GM Asia/Pacific (GMAP). . Hughes includes activities relating to digital entertainment, information and communications services, and satellite-based private business networks. . The Other segment includes the design, manufacturing, and marketing of locomotives and heavy-duty transmissions, the elimination of intersegment transactions, and certain non-segment specific revenues and expenditures. GM's reportable operating segments within its Financing and Insurance Operations business consist of GMAC and Other. The Financing and Insurance Operations' Other segment includes financing entities operating in the U.S., Canada, Brazil, Sweden, and Mexico which are not associated with GMAC. The following discussion of GM's reportable operating segments should be read in conjunction with Note 11 to the GM consolidated financial statements. The disaggregated financial results for GMA have been prepared using a management approach, which is consistent with the basis and manner in which GM management internally disaggregates financial information for the purpose of assisting in making internal operating decisions. In this regard, certain common expenses were allocated among regions less precisely than would be required for stand-alone financial information prepared in accordance with generally accepted accounting principles (GAAP) and certain expenses (primarily certain U.S. taxes related to non-U.S. operations) were included in the Automotive, Communications Services, and Other Operations' Other segment. The financial results represent the historical information used by management for internal decision making purposes; therefore, other data prepared to represent the way in which the business will operate in the future, or data prepared on a GAAP basis, may be materially different. RESULTS OF OPERATIONS In the third quarter of 2000, GM's consolidated income from continuing operations totaled $829 million or $1.55 per share of GM $1-2/3 par value common stock, which represents a decrease of $48 million compared with $877 million or $1.33 per share of GM $1-2/3 par value common stock in the third quarter of 1999. GM's consolidated income from continuing operations for the nine months ended September 30, 2000 was $4.4 billion or $7.37 per share of GM $1-2/3 par value common stock, which represents a decrease of $68 million compared with $4.4 billion or $6.67 per share of GM $1-2/3 par value common stock for the nine months ended September 30, 1999. On April 12, 1999, the GM Board of Directors (GM Board) approved the complete separation of Delphi Automotive Systems Corporation (Delphi) from GM by means of a spin-off (which was tax-free to GM and its stockholders for U.S. federal income tax purposes) which was completed on May 28, 1999 and, accordingly, the financial results related to Delphi for all periods presented are reported as discontinued operations. GM's net income for the nine months ended September 30, 1999, including the income from discontinued operations, totaled $4.9 billion or $7.32 per share of GM $1-2/3 par value common stock. Additional information regarding the spin-off of Delphi is contained in Note 2 to the GM consolidated financial statements. - 15 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES Vehicle Unit Deliveries of Cars and Trucks - GMA Three Months Ended September 30, ------------------------------------------------------ 2000 1999 ------------------------ ------------------------- GM as GM as a % of a % of Industry GM Industry Industry GM Industry -------- --- -------- -------- --- -------- (Units in Thousands) GMNA United States Cars 2,297 670 29.2% 2,286 675 29.5% Trucks 2,260 579 25.6% 2,210 623 28.2% ----- ------ ----- ------ Total United States 4,557 1,249 27.4% 4,496 1,298 28.9% Canada, Mexico, and Other 673 186 27.6% 637 168 26.4% ----- ------ ------ ------ Total GMNA 5,230 1,435 27.4% 5,133 1,466 28.6% GME 4,640 413 8.9% 4,924 483 9.8% GMLAAM 955 153 16.1% 919 149 16.2% GMAP 3,224 128 4.0% 3,020 121 4.0% ------ ----- ------ ----- Total Worldwide 14,049 2,129 15.2% 13,996 2,219 15.9% ====== ===== ====== ===== Nine Months Ended September 30, ----------------------------------------------------- 2000 1999 ------------------------- ------------------------ GM as GM as a % of a % of Industry GM Industry Industry GM Industry -------- --- -------- -------- --- -------- (Units in Thousands) GMNA United States Cars 6,974 2,009 28.8% 6,692 2,030 30.3% Trucks 6,942 1,878 27.1% 6,571 1,826 27.8% ------ ----- ------ ----- Total United States 13,916 3,887 27.9% 13,263 3,856 29.1% Canada, Mexico, and Other 1,989 541 27.2% 1,871 512 27.4% ------ ----- ------ ------ Total GMNA 15,905 4,428 27.8% 15,134 4,368 28.9% GME 15,544 1,459 9.4% 15,590 1,531 9.8% GMLAAM 2,735 436 15.9% 2,502 401 16.0% GMAP 9,646 349 3.6% 8,994 337 3.7% ------ ----- ------ ----- Total Worldwide 43,830 6,672 15.2% 42,220 6,637 15.7% ====== ===== ====== ===== Three Months Ended Nine Months Ended September 30, September 30, ------------------ ------------------ 2000 1999 2000 1999 ------ ------ ------ ------ (Units in Thousands) Wholesale Sales GMNA Cars 703 661 2,240 2,199 Trucks 625 680 2,153 2,181 ----- ----- ----- ----- Total GMNA 1,328 1,341 4,393 4,380 ----- ----- ----- ----- GME Cars 367 413 1,332 1,367 Trucks 29 33 102 104 ---- ---- ----- ----- Total GME 396 446 1,434 1,471 --- --- ----- ----- GMLAAM Cars 131 98 328 266 Trucks 50 43 142 133 --- --- --- --- Total GMLAAM 181 141 470 399 --- --- --- --- GMAP Cars 49 45 130 121 Trucks 85 76 215 191 --- --- --- --- Total GMAP 134 121 345 312 --- --- --- --- Total Worldwide 2,039 2,049 6,642 6,562 ===== ===== ===== ===== - 16 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES GMA Financial Review GMA reported income of $568 million and a net margin of 1.7% on net sales and revenues of $34.0 billion for the third quarter of 2000 compared with income of $613 million and a net margin of 1.7% on net sales and revenues of $35.0 billion for the prior year quarter. The decrease in income from the prior year quarter was primarily due to an increase in spending for product development activities, a decrease in wholesale sales volume, unfavorable product mix in Europe and North America, unfavorable net price and currency exchange, partially offset by material and structural cost savings. These factors were partially offset by an overall increase in wholesale sales volume for the nine months ended September 30, 2000 to contribute to the decrease in income to $3.6 billion and a net margin of 3.2% on net sales and revenues of $112.2 billion compared with income of $3.7 billion and a net margin of 3.4% on net sales and revenues of $108.2 billion for the prior year nine-month period. In September 2000, General Motors and the other founding partners of Covisint (DaimlerChrysler Corporation, Ford Motor Company, and Renault/Nissan) received requisite clearances from competition law authorities in the United States and the Republic of Germany to begin operations. Final agreements among the founding partners and their technology partners are being completed. Operations by the original equipment manufacturers and their suppliers are anticipated to begin in the fourth quarter of 2000 or early 2001. GMNA reported income of $728 million for the third quarter of 2000 compared with $671 million for the prior year quarter. The increase in GMNA's third quarter 2000 income was primarily due to manufacturing and material cost improvements, as well as improvements related to quality initiatives. These improvements were partially offset by decreased wholesale sales volume, unfavorable product mix largely due to the production ramp-up of two North American truck assembly plants, and an increase in spending for growth initiatives such as eGM, OnStar, TradeXchange and Order-To-Delivery. Income for the nine months ended September 30, 2000 totaled $3.4 billion compared with $3.6 billion for the prior year nine-month period. The decrease in income for the first nine months of 2000 was primarily due to competitive pricing pressure, labor economics, and an increase in spending for product development activities and growth initiatives, partially offset by material cost improvements. Net price, which comprehends the percent increase/(decrease) a customer pays in the current period for the same comparably equipped vehicle produced in the previous year's period, was slightly lower for the quarter at (0.3)%. GME reported a loss of $181 million for the third quarter of 2000 compared with income of $32 million for the prior year quarter. The decrease in GME's third quarter 2000 income was primarily due to the start-up of the Corsa, a shift in volume within Europe from higher margin markets to lower margin markets, increased pricing pressures, and a decrease in wholesale sales volume. These factors were partially offset by material cost improvements and structural cost reductions. Income for the nine months ended September 30, 2000 totaled $206 million compared with $393 million for the prior year nine-month period. The decrease in income for the first nine months of 2000 was primarily due to the unfavorable shift in market mix, increased pricing pressures, and the start-up of the Corsa, partially offset by material and structural cost improvements. During the third quarter 2000, the European parliament passed a directive requiring member states to adopt legislation regarding end-of-life vehicles and the responsibility of manufacturers for dismantling and recycling vehicles they have sold. GME is currently assessing the impact of this potential legislation on their results of operations and financial position. GMLAAM reported income of $31 million for the third quarter of 2000 compared with a loss of $36 million for the prior year quarter. The increase in GMLAAM's third quarter 2000 earnings compared to third quarter 1999 results was primarily due to higher wholesale sales volume and nominal price increases, partially offset by an increase in material costs due to continuous supplier cost pressures, a deterioration in product mix, and increased manufacturing costs due to increased depreciation, amortization, labor economics, and the start-up of the Celta at the Gravatai Plant in Brazil. The increase in income for the nine months ended September 30, 2000 to $42 million compared to a loss of $99 million for the prior year nine-month period is primarily due to the factors discussed above, partially offset by increased material and freight costs driven by GM do Brasil's and its suppliers' exposure to hard currencies and inflationary factors. GMAP reported a loss of $10 million for the third quarter of 2000 compared with a loss of $54 million for the prior year quarter. The decrease in GMAP's third quarter 2000 losses compared to third quarter 1999 results was primarily due to increased equity earnings at Isuzu resulting from material and logistics savings along with lower structural costs, and an increase in volume primarily at Thailand related to the new Zafira and in Australia by Holden. These increases were partially offset by start-up costs in Thailand related to the Zafira and a decrease in equity earnings at Shanghai GM due to lower volume and price pressures in China. Losses for the nine months ended September 30, 2000 totaled $126 million compared with losses of $195 million for the prior year nine-month period. The decrease in losses for the first nine months of 2000 was primarily due to continued strong performance at Holden and improved equity earnings at Shanghai GM, partially offset by the increased equity losses at Isuzu. - 17 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES Hughes Financial Review Hughes' net sales and revenues increased to $2.1 billion and $6.5 billion in the third quarter and first nine months of 2000, respectively, compared to $2.0 billion and $5.4 billion for the comparable periods in 1999. The increase in net sales and revenues in the third quarter of 2000 compared to the third quarter of 1999 was primarily attributable to the growth in the DIRECTV businesses due to the addition of approximately 1,639,000 net new subscribers in the United States and Latin America since December 31, 1999. This increase was partially offset by a decrease in net sales and revenues at Hughes Network Systems primarily due to lower sales of DIRECTV receiver equipment associated with the completion of the transition of the PRIMESTAR By DIRECTV subscribers to the high-power DIRECTV service. The increase in net sales and revenues for the first nine months of 2000 compared to the first nine months of 1999 was primarily attributable to the growth in the DIRECTV businesses due to the addition of net new subscribers discussed above and added revenues from the PRIMESTAR By DIRECTV and premium channel services. The PRIMESTAR medium-power direct-to-home and United States Satellite Broadcasting Company, Inc. premium channel services were acquired in mid-1999. PanAmSat also contributed to the increase in net sales and revenues due primarily to increased revenues from outright sales and sales-type lease transactions executed during 2000. Hughes had a net loss of $88 million in the third quarter of 2000, compared with a net loss of $30 million in the third quarter of 1999. The increased net loss resulted primarily from increased marketing costs to support the increased subscriber growth at the Direct-To-Home businesses. Hughes' net loss was $229 million for the first nine months of 2000, compared with a net loss of $44 million for the same period in 1999. The increased net loss for the first nine months of 2000 was primarily due to higher marketing costs at the Direct-To-Home businesses and an increase in depreciation and amortization expense due to 1999 acquisitions and additions to satellites and property. The increased net loss was partially offset by an increase in Hughes' income tax benefit related to both the write-off of Hughes' historical investments in DIRECTV Japan and increased operating losses in 2000. The net loss for the first nine-months of 1999 included a $155 million pre-tax gain related to the settlement of a patent infringement case, partially offset by a pre-tax charge of $92 million resulting from the termination of a satellite systems contract with Asia-Pacific Mobile Telecommunications Satellite Pte. Ltd. and a $125 million pre-tax charge at Hughes Space and Communications Systems related to increased development costs and schedule delays on several new product lines. Due to rapid consolidation in the media and telecommunications industries, GM is now considering alternative strategic transactions involving Hughes and other participants in those industries. Any such transaction might involve the separation of Hughes from General Motors. 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 General Motors. 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. GMAC Financial Review GMAC's revenue totaled $6.0 billion and $17.4 billion in the third quarter and first nine months of 2000, respectively, compared to $5.2 billion and $14.9 billion for the comparable periods in 1999. The growth was mainly due to higher average retail and other loan receivable balances, which resulted primarily from strong GM sales levels and continued GM-sponsored special financing programs. GMAC's revenue also increased due to an increase in asset earning rates compared to the same periods in 1999. GMAC earned record third quarter consolidated net income of $401 million, up from the previous record of $393 million earned in the third quarter of 1999. Net income for the first nine months of 2000 was $1.2 billion, up $17 million from the $1.2 billion reported in the same period a year ago. Higher asset levels were more than offset by the negative impact stemming from the higher level of market interest rates and the corresponding increased cost of funds over the past year. In addition, net income from mortgage operations increased quarter-over-quarter primarily as a result of an increase in mortgage servicing and processing fees due to significant growth in the servicing portfolio over the last twelve months and to the revaluation to fair value of mortgage servicing rights and retained interests in securities. Additionally, investment income increased due to an increase in GMAC Mortgage Group's international investment portfolio. These increases were partially offset by lower realized capital gains in the quarter. - 18 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES LIQUIDITY AND CAPITAL RESOURCES Automotive, Communications Services, and Other Operations --------------------------------------------------------- Cash, marketable securities, and $3.0 billion of assets of the Voluntary Employees' Beneficiary Association (VEBA) trust invested in fixed-income securities, at September 30, 2000 totaled $13.5 billion compared with $14.4 billion at December 31, 1999 and $16.7 billion at September 30, 1999. The decrease from December 31, 1999 is primarily due to GM's purchase of 20% of Fuji Heavy Industries Ltd., and a $1.0 billion cash equity injection in GMAC, partially offset by improvements in managed working capital and an increase in debt. The total VEBA assets in the VEBA trust used to pre-fund part of GM's other postretirement benefits liability were $6.7 billion at September 30, 2000, compared to $6.3 billion at December 31, 1999 and $4.7 billion at September 30, 1999. GM previously indicated that it had a goal of maintaining $13.0 billion of cash and marketable securities in order to continue funding product development programs throughout the next downturn in the business cycle. This $13.0 billion target includes cash to pay certain costs that were pre-funded in part by VEBA contributions. Net liquidity, calculated as cash and marketable securities less the total of loans payable and long-term debt, was $(1.0) billion at September 30, 2000, compared with $2.0 billion at December 31, 1999 and $5.1 billion at September 30, 1999. Long-term debt was $8.2 billion at September 30, 2000, compared to $7.4 billion at December 31, 1999 and $7.9 billion at September 30, 1999. The ratio of long-term debt to long-term debt and GM's net assets of Automotive, Communications Services, and Other Operations was 31.6% at September 30, 2000, compared to 43.7% at December 31, 1999 and 57.2% at September 30, 1999. The ratio of long-term debt and short-term loans payable to the total of this debt and GM's net assets of Automotive, Communications Services, and Other Operations was 39.3% at September 30, 2000, compared to 49.6% at December 31, 1999 and 59.3% at September 30, 1999. Financing and Insurance Operations ---------------------------------- At September 30, 2000, GMAC owned assets and serviced automotive receivables totaling $174.9 billion, $12.6 billion above December 31, 1999. The increase over year-end 1999 was principally the result of higher serviced retail receivables, commercial and other loan receivables, other assets, receivables with Automotive, Communications Services, and Other Operations, mortgage loans held for investment, mortgage lending receivables, mortgage servicing rights, and factored receivables. Automotive and Commercial finance receivables serviced by GMAC, including sold receivables, totaled $104.9 billion at September 30, 2000, $7.9 billion above December 31, 1999 levels. This increase was primarily a result of a $4.7 billion increase in serviced retail receivables and a $4.2 billion increase in commercial and other loan receivables. Continued GM-sponsored retail financing incentives contributed to the rise in serviced retail receivables. The change in commercial and other loan receivables was primarily attributable to increases in secured notes as well as continued growth at GMAC Commercial Credit LLC and GMAC Business Credit. As of September 30, 2000, GMAC's total borrowings were $127.7 billion, compared with $121.2 billion at December 31, 1999. The increased borrowings since December 31,1999 were used to fund increased asset levels. GMAC's ratio of consolidated debt to total stockholder's equity at September 30, 2000 was 9.4:1, compared to 10.9:1 at December 31, 1999. The decline was due to capital contributions from GM totaling $1.5 billion during the first quarter of 2000 and an increase of $1.2 billion in retained earnings from net income for the first nine months of 2000. Book Value Per Share Book value per share of GM $1-2/3 par value common stock was $40.39 at September 30, 2000, compared with $27.02 at December 31, 1999 and $20.59 at September 30, 1999. Book value per share of GM Class H common stock was $8.08 at September 30, 2000, compared with $5.40 at December 31, 1999 and $4.12 at September 30, 1999. Book value per share was determined based on the liquidation rights of the various classes of common stock, adjusted to reflect the GM Class H common stock split. Return on Net Assets (RONA) As part of its shareholder value initiatives, GM has adopted RONA as a performance measure to heighten management's focus on balance sheet investments and the return on those investments. GM's RONA calculation is based on principles established by management and approved by the GM Board. GM's four-quarter rolling-average RONA for continuing operations, excluding Hughes, was 12.5% as of September 30, 2000. - 19 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES CASH FLOWS Automotive, Communications Services, and Other Operations --------------------------------------------------------- Net cash provided by operating activities was $9.1 billion during the nine months ended September 30, 2000 compared with $15.4 billion for the prior year period. The decrease in net cash provided by operating activities during the first nine months of 2000 was primarily the result of decreases in operating liabilities. These decreases were primarily related to an extension of payment terms in the first quarter of 1999, forgiveness of accounts payable owed to Delphi in 1999, and decreases in accrued and other liabilities in 1999 due to an increase in North America sales incentives and customer deposits related to increased volume in the Rental Car Program. Net cash used in investing activities amounted to $12.0 billion during the nine months ended September 30, 2000 compared with $11.5 billion in the prior year period. The increase in net cash used in investing activities during the first nine months of 2000 was primarily attributable to a $2.4 billion investment in Fiat S.p.A. (Fiat), a $1.0 billion cash equity injection in GMAC, and increased capital expenditures, partially offset by a decrease in investments in marketable securities and operating leases. Net cash provided by financing activities was $2.3 billion during the nine months ended September 30, 2000 compared with net cash used of $1.0 billion in the prior year period. The increase in cash provided by financing activities during the first nine months of 2000 was primarily due to proceeds from issuing common stock related to the $2.4 billion investment in Fiat and increases in loans payable, partially offset by the impact of the issuance of $1.5 billion of preference stock to America Online in 1999. Financing and Insurance Operations ---------------------------------- Net cash provided by operating activities totaled $4.7 billion and $9.9 billion during the nine months ended September 30, 2000 and 1999, respectively. The reduction in operating cash flow was primarily the result of a reduction in the proceeds from sales of mortgage loans and securities held for trading and an increase in miscellaneous assets and accounts receivable, partially offset by a decrease in the origination/purchases of mortgage loans. Net cash used for investing activities during the nine months ended September 30, 2000 totaled $14.0 billion, a $430 million increase compared to the same period last year. Net cash used increased primarily as a result of net increases in acquisitions of finance receivables, partially offset by increased proceeds from sales of finance receivables, a net decrease in acquisitions of operating leases, and a decrease in investments in companies. Net cash provided by financing activities during the nine months ended September 30, 2000 totaled $10.1 billion, compared with cash provided of $3.5 billion during the comparable 1999 period. The change was primarily the result of increases in short-term loans payable and a $1.0 billion cash equity injection from Automotive, Communications Services, and Other Operations, partially offset by a net decrease in long-term debt. Dividends Dividends may be paid on common stocks only when, as, and if declared by the GM Board in its sole discretion. GM's policy is to distribute dividends on its GM $1-2/3 par value common stock based on the outlook and indicated capital needs of the business. On August 1, 2000, the GM Board declared a quarterly cash dividend of $0.50 per share on GM $1-2/3 par value common stock, paid September 9, 2000, to holders of record as of August 11, 2000. The GM Board also declared a quarterly dividend on the Series G Depositary Shares of $0.57 per share, paid November 1, 2000, to holders of record on October 2, 2000. With respect to GM Class H common stock, the GM Board determined that it will not pay any cash dividends at this time in order to allow the earnings of Hughes to be retained for investment in its telecommunications and space businesses. A quarterly dividend of $8.7793 per share for the GM Series H 6.25% Automatically Convertible Preference Stock was paid November 1, 2000, to the holder of record on October 2, 2000. - 20 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES Employment and Payrolls Worldwide employment at September 30, (in thousands) 2000 1999 ---- ---- GMNA 212 219 GME 90 82 GMLAAM 24 23 GMAP 11 10 GMAC 27 27 Hughes 18 18 Other 13 12 --- --- Total employees 395 391 === === Three Months Ended Nine Months Ended September 30, September 30, ------------------- ------------------- 2000 1999 2000 1999 ----- ------ ----- ------ Worldwide payrolls - (in billions) $5.2 $5.5 $16.6 $16.5 === === ==== ==== New Accounting Standards In June 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and Hedging Activities. In June 2000, the FASB issued SFAS No. 138, which amends certain provisions of SFAS No. 133 to clarify four areas causing difficulties in implementation. The amendment included expanding the normal purchase and sale exemption for supply contracts, permitting the offsetting of certain intercompany foreign currency derivatives and thus reducing the number of third party derivatives, permitting hedge accounting for foreign-currency denominated assets and liabilities, and redefining interest rate risk to reduce sources of ineffectiveness. GM has appointed a team to implement SFAS No. 133 on a global basis for the Corporation. This team has been implementing a SFAS No. 133 compliant risk management information system, globally educating both financial and non-financial personnel, inventorying embedded derivatives and addressing various other SFAS No. 133 related issues. GM will adopt SFAS No. 133 and the corresponding amendments under SFAS No. 138 on January 1, 2001. The SFAS No. 133 team is currently determining the impact of SFAS No. 133 on GM's consolidated results of operations and financial position, however, there are still open issues that need to be addressed before the impact can be fully measurable. This statement should have no impact on GM's consolidated cash flows. In December 1999, the SEC issued Staff Accounting Bulletin (SAB) No. 101, Revenue Recognition in Financial Statements. This SAB provides guidance in applying generally accepted accounting principles to revenue recognition in financial statements. GM will comply with SAB 101 by the fourth quarter of 2000, as required. The adoption of SAB No. 101 is not expected to have a material impact on General Motor's consolidated financial statements. In September 2000, the FASB issued SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities - a replacement of FASB Statement No. 125. This statement is effective for transfers and servicing of financial assets and extinguishments of liabilities occurring after March 31, 2001, and is effective for the recognition and reclassification of collateral and disclosures relating to securitization transactions and collateral for fiscal years ending after December 15, 2000. Management is currently assessing the impact of this statement on GM's results of operations and financial position. * * * * * * * - 21 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES PART II ITEM 1. LEGAL PROCEEDINGS (a) Material pending proceedings, other than ordinary routine litigation incidental to the business, to which the Corporation became, or was, a party during the quarter ended September 30, 2000 or subsequent thereto, but before the filing of this report are summarized below: Environmental Matters General Motors received two Notices of Violation dated May 25, 2000 and August 23, 2000 from the Michigan Department of Environmental Quality alleging non-compliance at the Lansing Craft Centre with applicable clean air regulations. Enforcement officials stated during settlement negotiations that they expected to propose a penalty in excess of $100,000. General Motors is seeking to negotiate a resolution of this matter. * * * Other Matters As previously reported, there is a pending grand jury investigation into whether Hughes should be accused of criminal violations of the export control laws arising out of the participation of two of its employees on a committee formed to review the findings of Chinese engineers regarding the failure of a Long March rocket in China in 1996. Hughes is also subject to the authority of the 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 participating in government contracts. On October 6, 2000, Hughes completed the sale of its satellite manufacturing business to the Boeing Company. In that transaction, Hughes retained limited liability for certain possible fines and penalties and the financial consequences of debarment related to the business now owned by Boeing, should such sanctions be imposed by either the Department of Justice or State Department against the satellite manufacturing business. Hughes does not expect any sanctions imposed by the Department of Justice or State Department to have a material adverse effect on Hughes. * * * With respect to the previously reported action against DIRECTV filed by General Electric Capital Corporation (GECC), a trial commenced on June 12, 2000. GECC presented evidence to the jury of damages of $157 million; DIRECTV sought damages from GECC of $45 million. On July 21, 2000, the jury returned a verdict in GECC's favor in the amount of $133 million. The trial judge issued an order granting GECC $48.5 million in interest under Connecticut's offer-of-judgment statute. With this order, the total judgment to be entered in GECC's favor is $181.5 million. Hughes and DIRECTV plan to appeal. GM and Hughes do not believe that the litigation will ultimately have a material adverse impact on Hughes. * * * With respect to the previously reported action against the DIRECTV unit of Hughes filed by the National Rural Telecommunications Cooperative (NRTC) on June 3, 1999, NRTC stipulated on August 25, 2000 to dismiss without prejudices its claim seeking the right to distribute former United States Satellite Broadcasting Company, Inc. (USSB) programming services on a non-exclusive basis, however, the NRTC continues to pursue its claim for the right to distribute former USSB programming services on an exclusive basis and to recover revenues related thereto. * * * On September 7, 2000, a putative class action was commenced against DIRECTV, Inc., Thompson Consumer Electronics, Inc., Best Buy Co., Inc., Circuit City Stores, Inc. and Tandy Corporation, Inc. in federal court in Los Angeles. The named plaintiffs purport to represent a class of all consumers who purchased DIRECTV equipment and services at any time from March 1996 to September 1, 2000. The plaintiffs allege that the defendants have violated federal and California antitrust statutes by entering into agreements to exclude competition and force retailers to boycott competitors' products and services. The plaintiffs seek declaratory and injunctive relief, as well as unspecified damages, including treble damages. DIRECTV believes that the complaint is without merit and intends to vigorously defend against the allegations raised. * * * * * * - 22 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS (Including Those Incorporated by Reference). Exhibit Number Exhibit Name Page No. ------ ----------------------------------------------- -------- 99 Hughes Electronics Corporation Financial Statements and Management's Discussion and Analysis of Financial Condition and Results of Operations 24 27 Financial Data Schedule (Unaudited) (for Securities and Exchange Commission information only) (b) REPORTS ON FORM 8-K. Eight reports on Form 8-K, dated February 25, 2000 (filed September 27, 2000), March 13, 2000 (filed July 24, 2000), June 6, 2000 (filed July 18, 2000), July 25, 2000, August 16, 2000, August 24, 2000, September 14, 2000 and September 15, 2000 were filed during the quarter ended September 30, 2000 reporting matters under Item 5, Other Events and reporting certain agreements under Item 7, Financial Statements, Pro Forma Financial Information, and Exhibits. * * * * * * SIGNATURES 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 November 13, 2000 /s/Peter R. Bible ---------------------- ---------------------------------------- (Peter R. Bible, Chief Accounting Officer) - 23 -