-----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, GdmHOYVdWDxtXBVwnUqNdjE2dlaDPRTsMBr/LBnwZWe5FoQI4NtnOAP4Cw4hqFLh Tycp2dh8BjBNFvZ921c0mQ== 0000040730-01-500040.txt : 20010308 0000040730-01-500040.hdr.sgml : 20010308 ACCESSION NUMBER: 0000040730-01-500040 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010307 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: 10-K SEC ACT: SEC FILE NUMBER: 001-00143 FILM NUMBER: 1562404 BUSINESS ADDRESS: STREET 1: 300 RENAISSANCE CTR STREET 2: MAIL CODE: 482-C34-D71 CITY: DETROIT STATE: MI ZIP: 48265-3000 BUSINESS PHONE: 3135565000 MAIL ADDRESS: STREET 1: 300 RENAISSANCE CTR STREET 2: MAIL CODE: 482-C34-D71 CITY: DETROIT STATE: MI ZIP: 48265 10-K 1 dec0010k-030601.txt DECEMBER 31, 2000 10-K FOR GENERAL MOTORS CORP. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549-1004 FORM 10-K X ANNUAL REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT OF - --- 1934 For the fiscal year ended December 31, 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 -------------- Securities registered pursuant to Section 12(b) of the Act: Name of Each Exchange on Title of Each Class Which Registered - -------------------------------------------- ------------------------- Common, $1-2/3 par value (548,533,683 shares outstanding as of February 28, 2001) New York Stock Exchange, Inc. Class H Common, $0.10 par value (875,528,992 shares outstanding as of February 28, 2001) New York Stock Exchange, Inc. Preference, $0.10 par value, Series G 9.12% Depositary Shares, stated value $25 per share, dividends cumulative (5,015,410 depositary shares outstanding as of February 28, 2001) New York Stock Exchange, Inc. General Motors Capital Trust G 9.87% Trust Originated Preferred Securitiessm (TOPrSsm), Series G (5,221,123 shares outstanding as of February 28, 2001) New York Stock Exchange, Inc. Note: The $1-2/3 par value common stock of the Registrant is also listed for trading on: Chicago Stock Exchange, Inc. Chicago, Illinois Pacific Exchange, Inc. San Francisco, California Philadelphia Stock Exchange, Inc. Philadelphia, Pennsylvania Montreal Stock Exchange Montreal, Quebec, Canada Toronto Stock Exchange Toronto, Ontario, Canada Borse Frankfurt am Main Frankfurt on the Main, Germany Borse Dusseldorf Dusseldorf, Germany Bourse de Bruxelles Brussels, Belgium Courtiers en Valeurs Mobilieres Paris, France The London Stock Exchange London, England 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 . --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ( ) The aggregate market value (based upon the average of the highest and lowest sales prices on the Composite Tape on February 28, 2001) of General Motors Corporation $1-2/3 par value and GM Class H common stocks held by nonaffiliates on February 28, 2001 was approximately $29.5 billion and $19.7 billion, respectively. GM's Class H common stock is a "tracking stock" designed to provide holders with financial returns based on the financial performance of Hughes. However, in the event of a GM liquidation, insolvency or similar event, GM Class H stockholders would have no direct claim against the assets of Hughes. Rather, GM Class H stockholders would only have rights in the assets of GM as common stockholders of GM. We determine the earnings per share and the amounts available for the payment of dividends on the GM Class H common stock by a fraction which reflects the portion of Hughes' earnings that is allocated to the GM Class H common stock. We sometimes refer to this fraction as the "Class H fraction." The numerator and denominator of the Class H fraction are determined as follows: - The numerator of the Class H fraction is the weighted average number of shares of GM Class H common stock outstanding during the applicable period. - The denominator of the Class H fraction is the notional number of shares of GM Class H common stock which, if outstanding, would represent 100% of the tracking stock interest in the earnings of Hughes. We sometimes also refer to the denominator of the Class H fraction as the "Average Class H dividend base." It can be adjusted by the GM board of directors in specified circumstances, including to reflect contributions by GM to Hughes. Documents incorporated by reference are as follows: Part and Item Number of Form Document 10-K into Which Incorporated - -------- ---------------------------- General Motors Notice of Annual Meeting of Stockholders and Proxy Statement for the Annual Meeting of Stockholders to be held June 5, 2001 Part III, Items 10 through 13 - ------------------- sm "Trust Originated Preferred Securities" and "TOPrS" are service trademarks of Merrill Lynch & Co. COVER PAGE PART I GENERAL MOTORS CORPORATION AND SUBSIDIARIES THE CORPORATION General Motors Corporation, incorporated in 1916 under the laws of the State of Delaware, is hereinafter sometimes referred to as the "Registrant" or the "Corporation" and, together with its subsidiaries, is hereinafter sometimes referred to as "General Motors" or "GM." ITEM 1. Business General The following information is incorporated herein by reference to the indicated pages in Part II: Item Page(s) ---- ------- Wholesale Sales II-6 Employment and Payrolls II-10 Note 23 of Notes to the GM Consolidated Financial Statements (Segment Reporting) II-49 through II-52 GM presents separate supplemental consolidating statements of income and other financial information for the following businesses: (1) Automotive, Communications Services, and Other Operations and (2) Financing and Insurance Operations. GM participates in the automotive industry through the activities of its automotive business operating segment: General Motors 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). GMNA designs, manufactures, and markets vehicles primarily in North America under the following nameplates: Chevrolet, Pontiac, GMC, Oldsmobile, Buick, Cadillac, and Saturn. GME, GMLAAM, and GMAP meet the demands of customers outside North America with vehicles designed, manufactured, and marketed under the following nameplates: Opel, Vauxhall, Holden, Isuzu, Saab, Buick, Chevrolet, GMC, and Cadillac. GM's communications services relate to its Hughes Electronics Corporation subsidiary (Hughes) which includes digital entertainment, information and communications services, and satellite-based private business networks. GM's other operations includes the design, manufacturing and marketing of locomotives and heavy-duty transmissions, the elimination of intersegment transactions, certain non-segment specific revenues and expenditures, and certain corporate activities. GM's Financing and Insurance Operations primarily relate to General Motors Acceptance Corporation (GMAC). GMAC 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, commercial, vehicle, and homeowners' insurance, and asset-based lending. Substantially all automotive-related products are marketed through retail dealers and through distributors and jobbers in the United States, Canada, and Mexico, and through distributors and dealers overseas. At December 31, 2000, there were approximately 8,000 GM vehicle dealers in the United States, 840 in Canada, and 155 in Mexico. Additionally, there were a total of approximately 11,220 outlets overseas which include dealers and authorized sales, service, and parts outlets. Raw Materials and Services GM purchases materials, parts, supplies, freight transportation, energy, and other services from numerous unaffiliated firms. Interruptions in production or delivery of these goods or services could adversely affect GM. Backlog of Orders Shipments of GM automotive products are made as promptly as possible after receipt of firm sales orders; therefore, no significant backlog of unfilled orders accumulates. Hughes had a $6.7 billion and $9.2 billion backlog of commercial contracts relating to its telecommunications and space businesses at the end of 2000 and 1999, respectively. I-1 GENERAL MOTORS CORPORATION AND SUBSIDIARIES Competitive Position GM's principal competitors in passenger cars and trucks in the United States and Canada include Ford Motor Company, DaimlerChrysler Corporation, Toyota Corporation, Nissan Motor Corporation, Ltd., Honda Motor Company, Ltd., Mazda Motor Corporation, Mitsubishi Motors Corporation, Volkswagen A.G. (Volkswagen), Hyundai Motor Company, Ltd. (Hyundai), and Bayerische Motoren Werke AG (BMW). All but Volkswagen and Hyundai currently operate vehicle manufacturing facilities in the United States or Canada. Toyota and GM operate the New United Motor Manufacturing, Inc. facility in Fremont, California as a joint venture which currently builds passenger cars and light-duty trucks. Wholesale unit sales of GM passenger cars and trucks during the three years ended December 31, 2000 are summarized in Management's Discussion and Analysis of Financial Conditions and Results of Operations in Part II. Total industry new motor vehicle (passenger cars, trucks, and buses) registrations of domestic and foreign makes and GM's competitive position during the years ended December 31, 2000, 1999, and 1998, respectively, were as follows: 2000(1) 1999 1998 ---- ---- ---- (units in thousands) Total industry registrations In the United States 17,817 17,418 15,966 In Canada and Mexico 2,474 2,231 2,092 In other countries 36,583 35,933 34,687 ------ ------ ------ Total industry registrations - all countries 56,874 55,582 52,745 ====== ====== ====== 2000(1) 1999 1998 ---- ---- ---- (percent of total industry) GM's registrations In the United States 28% 29% 29% In Canada and Mexico 28 29 29 In other countries 8 8 9 Total GM's registrations - all countries 15 16 16 - ----------------- (1) Preliminary The above information on registrations of new cars, trucks, and buses was obtained from outside sources and that pertaining to GM's registrations includes units which are manufactured overseas by other companies and which are imported and sold by GM and affiliates. Research and Development In 2000, GM spent $6.6 billion for research, manufacturing engineering, product engineering, and development activities related primarily to the development of new products or services or the improvement of existing products or services, including activities related to vehicle emissions control, improved fuel economy, and the safety of persons using GM products. In addition, $278 million was spent for customer-sponsored activities. Comparably, $6.8 billion and $6.3 billion were spent on company-sponsored activities in 1999 and 1998, respectively, and $295 million and $717 million were spent on customer-sponsored activities in 1999 and 1998, respectively. Environmental Matters Automotive Emissions Control Both the federal and California governments currently impose stringent emission control requirements on motor vehicles sold in their respective jurisdictions. These requirements include pre-production testing of vehicles, testing of vehicles after assembly, the imposition of emission defect and performance warranties, and the obligation to recall and repair customer-owned vehicles determined to be non-compliant with emissions requirements. Both the U.S. Environmental Protection Agency (EPA) and the California Air Resources Board (CARB) continue to place great emphasis on compliance testing of customer-owned vehicles. Failure to comply with the emission standards or defective emission control hardware discovered during such testing can lead to substantial cost for General Motors related to emissions recalls. New CARB and federal requirements will increase the time and mileage periods over which manufacturers are responsible for a vehicle's emission performance. I-2 GENERAL MOTORS CORPORATION AND SUBSIDIARIES Automotive Emissions Control - (concluded) Both the EPA and the CARB emission requirements will become even more stringent in the future. A new tier of exhaust emission standards for cars and light-duty trucks, the "LEV II" standards, will begin phasing in for California vehicles in the 2004 model year. Similar federal "Tier 2" standards will also start in 2004. In addition, both CARB and EPA have adopted more stringent standards applicable to future heavy-duty trucks. The requirement that, for model years 2003 and later, 10% of cars and small light-duty trucks (up to 3,750 lbs. Loaded Vehicle Weight) sold in California must be zero emission vehicles (ZEVs), was modified by the LEV II rules to allow up to 6% of the 10% to be met using partial ZEV credits (PZEVs). In January 2001, CARB adopted additional changes to its ZEV requirements, including a variety of credit multipliers that would reduce the number of ZEVs and PZEVs required in the early years and increase the number of ZEVs and PZEVs required in the later years. Also, GM and six other major vehicle manufacturers signed Memorandums of Agreement (MOAs) with CARB to provide for a more market driven-introduction of ZEVs. The MOAs include provisions for an advanced battery ZEV demonstration program. General Motors is fulfilling this MOA commitment with its EV1 and S-10 Electric Pickup products equipped with nickel-metal hydride batteries. General Motors is also fulfilling its other MOA obligations which include a National LEV program, the capability to produce specified numbers of ZEVs as warranted by demand, and continued research and development of advanced batteries. The Clean Air Act permits states that have areas with air quality problems to adopt the California car and truck emission standards in lieu of the federal requirements and four states, New York, Massachusetts, Maine and Vermont, have done so. To provide states an alternative to the adoption of California standards, GM and other auto manufacturers began selling LEVs in the remaining 45 states in 2001, under the provisions of the National Low Emission Vehicle Program. In addition to the above-mentioned exhaust emission programs, onboard diagnostic (OBD) devices, used to diagnose problems with emission control systems, were required both federally and in California effective with the 1996 model year. This system has the potential of increasing warranty costs and the chance for recall. OBD requirements become more challenging each year as vehicles meet lower emission standards, and new diagnostics are required. New evaporative emission control requirements for cars and trucks began phasing in with the 1995 model year in California and the 1996 model year federally. Systems will need to be further modified to accommodate federal onboard refueling vapor recovery (ORVR) control standards. ORVR phases in on passenger cars in the 1998 through 2000 model years and will phase in on light-duty trucks in the 2001 through 2006 model years. Beginning with the 2004 model year, even more stringent evaporative emission standards apply in California, as well as federally. Starting in the 2001 model year, today's test procedure for exhaust emissions will become more complex with vehicles required to meet two additional test requirements: 1) measuring exhaust emissions over a new test cycle with the air conditioner operating; and 2) measuring exhaust emissions over a new high speed (80 mph) and high load cycle. Both of these requirements have the potential of adding hardware (and thus costs) to many vehicles. Industrial Environmental Control GM is subject to various laws relating to the protection of the environment including laws regulating air emissions, water discharges, waste management, and environmental cleanup. GM is in various stages of investigation or remediation for sites where contamination has been alleged and recorded a liability of $316 million at December 31, 2000 and $404 million at December 31, 1999 for worldwide environmental investigation and remediation as summarized below: . GM has been identified as a potentially responsible party at sites identified by the EPA and state regulatory agencies for investigation and remediation under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) and similar state statutes. GM voluntarily and actively participates in cleanup activity where such involvement is verified. The total liability for sites involving GM was estimated to be $97 million at December 31, 2000. This compares with $114 million at December 31, 1999. . For closed or closing plants owned by the Corporation, an estimated liability for environmental investigation and remediation is typically recognized at the time of the closure decision. Such liability, which is based on an environmental assessment of the plant property, was estimated at $74 million at December 31, 2000. This compares with $92 million at December 31, 1999. . GM is involved in investigation and remediation activities at additional locations worldwide with an estimated liability of approximately $145 million at December 31, 2000. This compares with $198 million at December 31, 1999. I-3 GENERAL MOTORS CORPORATION AND SUBSIDIARIES Industrial Environmental Control (concluded) The cost impact of the Clean Air Act Amendments under Title V is the annual emission fees of approximately $9 million per year. Additional programs under the Clean Air Act, including Hazardous Air Pollutant standards, and Compliance Assurance Monitoring and periodic monitoring requirements are estimated to cost $500 million to $700 million in aggregate through the year 2004. For the years ended December 31, 2000, 1999, and 1998, expenditures by GM in the U.S. for industrial environmental control facilities were $85 million, $71 million, and $78 million, respectively. The Corporation currently estimates that future expenditures for industrial environmental control facilities through 2004 will be approximately $216 million. Specific environmental expenses are difficult to isolate since expenditures may be made for more than one purpose, making precise classification difficult. Vehicular Noise Control Federal Truck Regulations preempt all state/local noise regulations for trucks over 10,000 lb Gross Vehicle Weight Rating (GVWR). All jurisdictions regulating noise levels of school buses which are built on medium-duty truck chassis have adopted standards compatible with Federal regulations for medium-duty trucks. Federal Truck Regulations contain label and owner's manual requirements. Passenger cars and light-duty trucks are subject to state and local motor vehicle noise regulations. The current standard for vehicles in these classes is 80 dB as measured at 50 feet. Future implementation of more stringent exhaust emission regulations and more stringent fuel economy regulations will require an assessment of increased costs of noise control. Safety Regulations & Consumer Information Expenditures to maintain and improve the operational safety, occupant protection, and vehicle theft deterrence capability of new GM models continue. These expenditures include amounts for the study of alternative approaches for meeting the needs of all three areas. GM continues to meet the government requirement for passive restraints by installing driver and passenger supplemental inflatable restraints (air bags) on all passenger cars and many light trucks and vans. Once permitted by federal regulatory changes to do so, GM introduced in 1998 and later models, less aggressive air bags in order to address concerns about inflation injuries, particularly to children and smaller adult passengers who are not properly positioned. GM continues to make available air bag on-off switches for those customers eligible to request them under the requirements of the National Highway Traffic Safety Administration (NHTSA) regulation allowing these devices. In 2000, the NHTSA adopted extensive modifications to Federal Motor Vehicle Safety Standard (FMVSS) 208, an occupant protection regulation. The amendment entails a substantial increase in the number of crash test configurations and test dummy occupant sizes for which certification compliance performance will be required beginning September 1, 2003. It also will add a large number of static air bag suppression or low risk deployment test requirements. A significant amount of engineering design and development is already underway, with more anticipated, for the advanced air bag systems this amendment requires. Dynamic side impact protection requirements apply to cars and certain light trucks and vans. Side structure and interior trim designs of future models will continue to be affected. Additional market pressure and future model design effects are likely regarding side impact performance as the federal government continues its consumer information side impact crash test program at elevated impact speeds. A new government requirement for vehicle interior impact protection continues to significantly affect upper body structure and interior trim designs of future model passenger cars and light trucks and vans. The phase-in for this rulemaking began on September 1, 1998, and will apply to all these vehicles by September 1, 2002. NHTSA has proposed changing the existing fuel system crash integrity requirements of FMVSS 301. The potentially significant changes, especially associated with the substantially increased rear impact crash test energy, would compel some undetermined redesign, cost, and weight increases for some of GM's vehicles. The new FMVSS 225 requirement for universal child restraint anchorages in motor vehicles continues to have significant mass and cost implications for many near-future GM vehicles. Unless ongoing auto industry actions can convince the NHTSA to modify certain FMVSS 225 test procedures and requirements, these implications will continue to affect many GM vehicles. I-4 GENERAL MOTORS CORPORATION AND SUBSIDIARIES Safety Regulations & Consumer Information (concluded) The expansion of vehicle parts marking, required by the passage of the Anti-Car Theft Act of 1992, affected approximately 22 passenger car assembly plants and 4 light-duty truck plants. For many of the affected plants, major expenditures were required for new label printer installations and additional stamping equipment. A recent opinion, favorable to the effectiveness of parts marking, by the U.S. Attorney General, threatens to expand the requirement to remaining unmarked low-theft vehicle lines. Eight additional vehicle lines and 4 additional assembly plants would be affected. The added cost would be approximately $6.00 per vehicle. The Transportation Recall Enhancement, Accountability and Documentation (TREAD) Act requires certain regulatory and consumer information actions by the NHTSA. Among other items, the agency must upgrade tire regulations, require a vehicle tire pressure warning system, and develop and implement a consumer information program for vehicle rollover resistance. Some undetermined redesign and cost implications likely will result following implementation of these changes. Automotive Fuel Economy The Energy Policy and Conservation Act passed in 1975 provided for production-weighted average fuel economy standards for passenger cars for 1978 and thereafter. Based on EPA combined city-highway test data, the GM 2000 model year domestic passenger car fleet is projected to attain a Corporate Average Fuel Economy (CAFE) of 27.9 miles per gallon (mpg) versus the standard of 27.5 mpg. The CAFE estimate for 2001 model year domestic passenger cars is projected at 28.4 mpg versus the standard of 27.5 mpg. For GM's imported passenger cars, 2000 model year CAFE is projected to be 25.4 mpg versus a standard of 27.5 mpg. The CAFE estimate for 2001 model year import passenger cars is 26.4 mpg versus the standard of 27.5 mpg. Projected shortfalls to the standard will be offset by credits from previous model years. Fuel economy standards for light-duty trucks became effective in 1979. General Motors' light truck CAFE fleet average for the 2000 model year is 21.0 mpg versus a standard of 20.7 mpg. GM's 2001 model year truck CAFE is projected at 20.6 mpg versus a standard of 20.7 mpg. Projected shortfalls to the standard will be offset by credits from future model years. GM's ability to meet increased CAFE standards is contingent on various future economic, consumer, legislative, and regulatory factors that GM cannot control and cannot predict with certainty. If GM could not comply with any new CAFE standards, GM could be subject to sizeable civil penalties and could have to close plants or severely restrict product offerings to remain in compliance. End of Life Vehicles During September 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. European Union member states are required to transform the concepts detailed in the directive into national law by March 2002. Under the directive, manufacturers are financially responsible for at least a portion of the cost of the take-back of vehicles put on the market as of July 2002 and all of the cost for all of the vehicles put on the market as of 2007. The laws developed in the individual local legislatures throughout Europe will have a significant impact on the amount ultimately paid by the manufacturers for this issue. GME is currently assessing the impact of this potential legislation on their results of operations and financial position. Seasonal Nature of Business In the automotive business, there are retail sales fluctuations of a seasonal nature, so that production varies from month to month. Certain changeovers occur throughout the year for reasons such as new market entries and new vehicle changes; however, the changeover period related to the annual new model introduction has traditionally occurred in the third quarter of each year. For this reason, third quarter operating results are, in general, less favorable than those in the other three quarters of the year, depending on the magnitude of the changeover needed to commence production of new models incorporating, for example, design modifications related to more fuel-efficient vehicle packaging, stricter government standards for safety and emission controls, and consumer-oriented improvements in performance, comfort, convenience, and style. I-5 GENERAL MOTORS CORPORATION AND SUBSIDIARIES Segment Reporting Data Operating segment and principal geographic area data for 2000, 1999, and 1998 are summarized in Note 23 to the GM Consolidated Financial Statements in Part II. * * * * * * The Registrant makes no attempt herein to predict the future trend of its business and earnings or the effect thereon of the results of changes in general economic, industrial, regulatory, and international conditions. ITEM 2. Properties The Corporation, excluding its Financing and Insurance Operations, has 194 locations operating in 33 states and 109 cities in the United States. Of these, 21 are engaged in the final assembly of GM cars and trucks; 43 are service parts operations responsible for distribution or warehousing; 6 major plants, offices, and research facilities relate to the operations of Hughes Electronics Corporation; and the remainder are offices or involved primarily in the testing of vehicles or the manufacturing of automotive components and power products. In addition, the Corporation has 20 locations in Canada and assembly, manufacturing, distribution, or warehousing operations in 51 other countries, including equity interests in associated companies which conduct assembly, manufacturing, or distribution operations. The major facilities outside the United States and Canada, which are principally vehicle manufacturing and assembly operations, are located in Germany, the United Kingdom, Brazil, Mexico, Australia, Belgium, Spain, China, Thailand, Argentina, Portugal, and Poland. Most facilities are owned by the Corporation or its subsidiaries. Leased properties consist primarily of warehouses and administration, engineering, and sales offices. The leases for warehouses generally provide for an initial period of five years and contain renewal options. Leases for sales offices are generally for shorter periods. Properties of the Registrant and its subsidiaries include facilities which, in the opinion of management, are suitable and adequate for the manufacture, assembly, and distribution of their products. Additional information regarding worldwide expenditures for plants and equipment is presented in Note 23 to the GM Consolidated Financial Statements in Part II. ITEM 3. Legal Proceedings (a)Material pending legal proceedings, other than ordinary routine litigation incidental to the business, to which the Corporation became, or was, a party during the year ended December 31, 2000, or subsequent thereto, but before the filing of this report are summarized below: Environmental Matters In 1998, GM sold its vehicle lighting products operation in Anderson, Indiana to Guide Corporation, but continued to own the land and buildings. More than a year later an incident occurred in which a significant amount of fish died in a 50-mile stretch of the White River from Anderson to south of Indianapolis. Federal and state agencies sued Guide Corporation and its subcontractor alleging that the incident was caused by a chemical release from the Guide operation. A citizen class action suit has also been filed against Guide and its subcontractor related to the same incident. GM is not named in any of those lawsuits and denies liability for this matter. On December 7, 2000 the federal and state agencies made a settlement demand in excess of $100,000 against Guide, Guide's parent, Guide's subcontractor and GM. * * * General Motors received Notices of Violation dated March 28, 2000 and July 5, 2000 from the Michigan Department of Environmental Quality ("MDEQ") alleging non-compliance with certain clean air regulations at the GM Service Parts Operations - Flint Processing Center. MDEQ representatives have indicated they are seeking fines or penalties in excess of $100,000. * * * I-6 GENERAL MOTORS CORPORATION AND SUBSIDIARIES Environmental Matters (concluded) General Motors received two Notices of Violation dated May 25, 2000 and August 23, 2000 from the MDEQ alleging non-compliance at the Lansing Craft Centre with certain clean air regulations. General Motors has received two additional Notices of Violation; one dated November 17, 2000 from the MDEQ and another dated October 27, 2000 from the U.S. Environmental Protection Agency. Government representatives have indicated they are seeking fines or penalties in excess of $100,000. * * * Others Matters Seven putative nationwide and statewide class actions are pending in state and federal courts alleging that the paint or paint application process used on some GM vehicles was defective due to the omissions of a surface layer primer. Generally, plaintiffs allege that GM's failure to disclose the alleged paint defects is a fraudulent omission and a violation of various states' consumer protection laws. Two federal court actions have been consolidated in a federal court in Chicago, Illinois for coordinated pretrial proceedings. No determination has been made that any cases may proceed as class actions. Christian Amedee and Louis Fuxan v. General Motors Corporation, et al, Civil District Court for the Parish of New Orleans, State of Louisiana filed March 24, 1995 and Cherise Miller et al. v. General Motors Corporation, United States District Court for the Northern District of Illinois, filed on April 8, 1998, are purported nationwide class actions. Eddie Glorioso v. General Motors Corporation and Scott Arnold v. General Motors Corporation, consolidated in Superior Court for the City and County of San Francisco, California, both filed in July 1998, are purported California statewide class actions. Scott Haverdink v. General Motors Corporation), Court of Common Pleas of Philadelphia County, Pennsylvania, filed on May 16, 1999, is a putative Pennsylvania statewide class action. Ernesto Bravo et al. v. General Motors Corporation et al., United States District Court for the Southern District of Texas, was amended on October 27, 2000, to allege a purported Texas statewide class action on behalf of owners and lessees of 1990 to 1997 vehicles painted without a surface layer primer and which subsequently experienced peeling paint. In Darryl Oshanek v. General Motors Corporation and General Motors of Canada, Limited, Supreme Court of British Columbia, Canada, filed on June 2, 1999, a putative class action on behalf of residents of British Columbia, on January 5, 2001, General Motors Corporation was dismissed as a defendant. Plaintiff has appealed. Five other courts have denied class certification of similar paint claims against other automobile manufacturers. GM intends to vigorously oppose class certification and defend these cases. * * * General Electric Capital Corporation ("GECC") and DIRECTV entered into a contract on July 31, 1995, in which GECC agreed to establish and manage a private label consumer credit program for consumer purchases of hardware and related DIRECTV programming. Under the contract, GECC also agreed to provide certain related services to DIRECTV, including credit risk scoring, billing and collections services. DIRECTV agreed to act as a surety for loans complying with the terms of the contract. Hughes guaranteed DIRECTV's performance under the contract. A complaint and counterclaim were filed by the parties in the U.S. District Court for the District of Connecticut concerning GECC's performance and DIRECTV's obligation to act as a surety. A trial commenced on June 12, 2000 with GECC presenting evidence to the jury for damages of $157 million. DIRECTV sought damages from GECC of $45 million. On July 21, 2000, the jury returned a verdict in favor of GECC and awarded contract damages 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 entered in GECC's favor was $181.5 million. Hughes and DIRECTV filed a notice of appeal on December 29, 2000. Hughes and DIRECTV believe that it is reasonably possible that the jury verdict will be overturned and a new trial granted. Although it is not possible to predict the result of any eventual appeal in this case, Hughes does not believe that the litigation will ultimately have a material adverse impact on Hughes. * * * I-7 GENERAL MOTORS CORPORATION AND SUBSIDIARIES Others Matters (continued) EchoStar Communications Corporation ("EchoStar") and others commenced an action in the U.S. District Court in Colorado on February 1, 2000 against DIRECTV, Hughes Network Systems and Thomson Consumer Electronics, Inc. seeking, among other things, injunctive relief and unspecified damages, including treble damages, in connection with allegations that the defendants have entered into agreements with retailers and program providers and engaged in other conduct that violates the antitrust laws and constitutes unfair competition. On March 13, 2000, DIRECTV filed a motion seeking a determination of the relevant market, which, if granted, would result in the dismissal of EchoStar's antitrust claims. Hughes and DIRECTV filed counterclaims against EchoStar on March 13, 2000, alleging that EchoStar tortiously interfered with DIRECTV's relationship with Kelly Broadcasting System, a provider of foreign-language programming, engaged in unfair business practices in connection with improper sales of network programming, misleading advertisements for National Football League games and EchoStar's "PRIMESTAR bounty program," and infringed on PRIMESTAR (R) trademarks. Although an amount of loss, if any, cannot be estimated at this time, an unfavorable outcome could be reached that could be material to Hughes' results of operations or financial position. DIRECTV believes that EchoStar's complaint is without merit and intends to vigorously defend against the allegations raised. * * * On September 7, 2000, a putative class action was commenced against DIRECTV, Inc., Thomson Consumer Electronics, Inc., Best Buy Co., Inc., Circuit City Stores, Inc. and Tandy Corporation, Inc. in the U.S. District 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. DIRECTV has moved to compel arbitration pursuant to the DIRECTV customer agreement or, in the alternative, to stay the case pending the resolution of relevant issues in the antitrust suit brought by EchoStar as described in the preceeding paragraph. Although an amount of loss, if any, cannot be estimated at this time, an unfavorable outcome could be reached that could be material to Hughes' results of operations or financial position. * * * On June 3, 1999, the National Rural Telecommunications Cooperative ("NRTC") filed a lawsuit against DIRECTV, Inc. and Hughes Communications Galaxy, Inc., which is referred to together in this description as "DIRECTV," in the U.S. District Court for the Central District of California, alleging that DIRECTV has breached the DBS Distribution Agreement with the NRTC. The DBS Distribution Agreement provides the NRTC with certain distribution rights, in certain specified portions of the United States, for a specified period of time, with respect to DIRECTV(R) programming delivered over 27 of the 32 frequencies at the 101(degrees) west longitude orbital location. The NRTC claims that DIRECTV has wrongfully deprived it of the exclusive right to distribute programming formerly provided by United States Satellite Broadcasting Company, Inc. ("USSB") over the other five frequencies at 101(degrees), and seeks recovery of related revenues from the date USSB was acquired by Hughes. DIRECTV denies that the NRTC is entitled to exclusive distribution rights to the former USSB programming because, among other things, the NRTC's exclusive distribution rights are limited to programming distributed over 27 of the 32 frequencies at 101(degrees). The NRTC also plead, in the alternative, the right to distribute former USSB programming on a non-exclusive basis, but stipulated to dismiss this claim without prejudice on August 25, 2000. DIRECTV maintains that the NRTC's right under the DBS Distribution Agreement is to market and sell the former USSB (R) programming as its non-exclusive sales agent and that NRTC is not entitled to the additional claimed revenues. DIRECTV intends to vigorously defend against the NRTC claims. DIRECTV also filed a counterclaim against the NRTC seeking a declaration of the parties' rights under the DBS Distribution Agreement. On August 26, 1999, the NRTC filed a second lawsuit in the U.S. District Court for the Central District of California against DIRECTV alleging that DIRECTV has breached the DBS Distribution Agreement. In this lawsuit, the NRTC is asking the Court to require DIRECTV to pay the NRTC a proportionate share of unspecified financial benefits that DIRECTV derives from programming providers and other third parties. DIRECTV denies that it owes any sums to the NRTC on account of the allegations in these matters and plans to vigorously defend itself against these claims or this claim. I-8 GENERAL MOTORS CORPORATION AND SUBSIDIARIES Others Matters (continued) Pegasus Satellite Television, Inc. ("Pegasus Satellite") and Golden Sky Systems, Inc. ("Golden Sky"), the two largest NRTC affiliates, filed an action on January 11, 2000 against DIRECTV in the U.S. District Court for the Central District of California. The plaintiffs alleged, among other things, that DIRECTV has interfered with their contractual relationship with the NRTC. The plaintiffs alleged that their rights and damages are derivative of the rights and damages asserted by the NRTC in its two cases against DIRECTV. The plaintiffs also alleged that DIRECTV interfered with their contractual relationships with manufacturers and distributors by preventing those parties from selling receiving equipment to the plaintiffs' dealers. On October 19, 2000, Golden Sky agreed to dismiss its equipment-related claims with prejudice. DIRECTV denies that it has wrongfully interfered with any of the plaintiffs' business relationships and will vigorously defend the lawsuit. A class action suit was filed in the U.S. District Court for the Central District of California against DIRECTV on behalf of the NRTC's participating members on February 29, 2000. The Court certified a class on December 29, 2000. The class asserted claims identical to the claims that were asserted by Pegasus Satellite and Golden Sky in their lawsuit against DIRECTV, described in the preceding paragraph. Similar to Golden Sky, however, the class has agreed to dismiss its equipment-related claims without prejudice. The U.S. District Court for the Central District of California has consolidated for purposes of discovery the NRTC, Pegasus Satellite and Golden Sky and class action lawsuits, but has not determined if the cases will be consolidated for trial. A trial date in February 2002 has been set in the first NRTC case. Although an amount of loss, if any, cannot be estimated at this time, an unfavorable outcome could be reached in the NRTC, Pegasus and class action litigation that could be material to Hughes' results of operations or financial position. * * * In connection with General Motors' 1997 spin-off of the defense electronics business of Hughes' predecessor as part of the Hughes restructuring transactions, and the subsequent merger of that business with Raytheon Company ("Raytheon"), the terms of the merger agreement provided processes for resolving disputes that might arise in connection with post-closing financial adjustments that were also called for by the terms of the merger agreement. These financial adjustments might require a cash payment from Raytheon to Hughes or vice versa. A dispute currently exists regarding the post-closing adjustments which Hughes and Raytheon have proposed to one another and related issues regarding the adequacy of disclosures made by Hughes to Raytheon in the period prior to consummation of the merger. Hughes and Raytheon are proceeding with the dispute resolution process. It is possible that the ultimate resolution of the post-closing financial adjustment and of related disclosure issues may result in Hughes making a payment to Raytheon that would be material to Hughes. However, the amount of any payment that either party might be required to make to the other cannot be determined at this time. Hughes intends to vigorously pursue resolution of the disputes through the arbitration processes, opposing the adjustments proposed by Raytheon, and seeking the payment from Raytheon that Hughes has proposed. * * * There is a pending grand jury investigation into whether Hughes should be accused of criminal violations of the United States 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 systems manufacturing businesses to The Boeing Company ("Boeing"). 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 systems manufacturing businesses. Hughes does not expect sanctions imposed by the Department of Justice or State Department, if any, to have a material adverse effect on Hughes. * * * I-9 GENERAL MOTORS CORPORATION AND SUBSIDIARIES Others Matters (concluded) On December 5, 2000, Personalized Media Communications, LLC ("PMC") and Pegasus Development Corporation ("Pegasus") filed suit in U. S. District Court for the District of Delaware against DIRECTV, Hughes, Thomson Consumer Electronics and Philips Electronics North American Corporation, alleging infringement of seven U.S. patents. Based on the successful defense by Hughes against an earlier action brought by PMC on one of the subject patents, Hughes expects that strong defenses of invalidity and non-infringement exist, in addition to numerous other defenses including license, laches and estoppel, Lanham Act violations, patent misuse and abuse of process. Hughes answered the complaint on January 21, 2001 raising these defenses and related counterclaims and intends to vigorously defend the lawsuit and pursue counterclaims against Pegasus and PMC. * * * Hughes Communications Galaxy, Inc. ("HCGI") filed a lawsuit on March 22, 1991 against the U.S. Government based upon the National Aeronautics and Space Administration's breach of contract to launch ten satellites on the Space Shuttle. The U.S. Court of Federal Claims granted HCGI's motion for summary judgment on the issue of liability on November 30, 1995. A trial was held on May 1, 1998 on the issue of damages. On June 30, 2000, a final judgment was entered in favor of HCGI in the amount of $103 million. On July 13, 2000, HCGI filed a notice to appeal the judgment with the U.S. Court of Appeals for the Federal Circuit and is requesting a greater amount than was previously awarded to HCGI. On August 4, 2000, the Government filed its cross appeal. As a result of the uncertainty regarding the outcome of this matter, no amount has been recorded in the consolidated financial statements to reflect the award. Final resolution of this issue could result in a gain that would be material to Hughes. * * * On July 9, 1999, a jury in a Los Angeles Superior Court in the matter of Anderson et. al v. General Motors Corporation, returned a verdict of $4.9 billion against General Motors in a product liability lawsuit involving a post-collision, fuel fed fire in a 1979 Chevrolet Malibu. The initial jury award consisted of $102 million in compensatory damages and $4.8 billion in punitive damages. After trial, the trial court reduced the punitive damages to $1.1 billion. GM will continue to vigorously 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 plaintiff's injuries. This matter now constitutes ordinary routine litigation incidental to the Corporation's business as to which reporting is no longer required. * * * (b)Previously reported legal proceedings which have been terminated, either during the year ended December 31, 2000, or subsequent thereto, but before the filing of this report are summarized below: As previously reported in December 1998, the Louisiana Department of Environmental Quality ("LDEQ") issued a Penalty Assessment to the Delphi Automotive plant in Monroe, Louisiana ("Delphi") for alleged air permit violations. On July 1, 1998 a Notice of Violation was issued by LDEQ to Delphi alleging that the volatile organic compound limits for calendar year 1997 were exceeded. Delphi was a division of GM when LDEQ brought the enforcement action. In October 1998 the Monroe plant was sold to a third party, under the terms of which GM retained responsibility for certain pre-sale environmental issues including the permit violations alleged by LDEQ. After challenging the 1998 Penalty Assessment, GM entered into a settlement with the LDEQ on December 20, 2000 in which it paid $12,400 without admitting liability. * * * Thirty-nine class actions were filed in state, federal and Canadian courts against the Corporation, claiming that the 1973-1987 model Chevrolet and GMC full-size pickup trucks are defective because their fuel tanks are mounted below the cab and outside the frame rails. A nationwide settlement was approved by a Louisiana trial court on December 19, 1996. Following an appeal, the settlement was again approved in January 20, 1999. GM appealed changes to the settlement made by the trial court after the time for appeal had run. On January 16, 2001, the Louisiana Court of Appeal ruled that the changes challenged by GM's appeal were improper. No further appeals were timely filed. It is now expected that the settlement will proceed and the remaining class actions against GM will be dismissed. * * * * * * I-10 GENERAL MOTORS CORPORATION AND SUBSIDIARIES ITEM 4. Submission of Matters to a Vote of Security Holders NONE ITEM 4A. Executive Officers of the Registrant The names and ages of all executive officers of the Registrant at February 28, 2001 and their positions and offices with the Registrant on that date are as follows: Name and (Age) Positions and Offices - -------------- --------------------- John F. Smith, Jr. (62) Chairman of the Board; Member, Investment Funds Committee Harry J. Pearce (58) Vice Chairman of the Board G. Richard Wagoner, Jr. (48) President and Chief Executive Officer John M. Devine (55) Vice Chairman and Chief Financial Officer Ronald L. Zarrella (51) Executive Vice President; President, GM North America John D. Finnegan (52) Executive Vice President; President, GMAC There are no family relationships, as defined, between any of the above executive officers, and there is no arrangement or understanding between any of the above executive officers and any other person pursuant to which he was selected as an officer. Each of the above executive officers was elected by the Board of Directors to hold office until the next annual election of officers and until his successor is elected and qualified or until his earlier resignation or removal. The Board of Directors elects the officers in conjunction with each annual meeting of the stockholders. I-11 GENERAL MOTORS CORPORATION AND SUBSIDIARIES ITEM 4A. Executive Officers of the Registrant - concluded Mr. John F. Smith, Jr. has been associated with General Motors since 1961. He was elected Executive Vice President in charge of International Operations in 1988. Effective August 1990, he was elected Vice Chairman of the Board of Directors. On April 6, 1992, Mr. Smith was elected President and Chief Operating Officer. Effective November 1992, he was elected Chief Executive Officer and President. He served as President until October 1998 and Chief Executive Officer until June 2000. On January 1, 1996, Mr. Smith became Chairman of the Board of Directors. Mr. Harry J. Pearce has been associated with General Motors since 1985. In May 1987, he was elected Vice President and General Counsel of General Motors. Effective November 1992, he was elected Executive Vice President of General Motors with responsibility for the Legal Staff, Industry-Government Relations, Environmental and Energy, Worldwide Economics, Electronic Data Systems Corporation and GM Hughes Electronics Corporation (now Hughes Electronics Corporation). In July 1994, he assumed responsibility for GM's Strategic Decision Center, Corporate Communications, Allison Transmission Division, Electro-Motive Division (now GM Locomotive Group), Corporate Relations, Worldwide Executive Compensation and Corporate Governance, and the Business Support Group. He remained General Counsel through August 1, 1994. Effective January 1996, Mr. Pearce was elected a director and became Vice Chairman of the Board of Directors and assumed responsibility for Information System Services. In 1997 he assumed responsibility for the Enterprise Activities Group and Global Human Resources and GM University. Mr. G. Richard Wagoner, Jr. has been associated with General Motors since 1977. He was elected Vice President in charge of finance for General Motors Europe in June 1989. In July 1991, he was elected President and Managing Director of General Motors do Brasil. Effective November 1992, he was elected Executive Vice President and Chief Financial Officer of General Motors. In July 1994, he was named President of North American Operations. In October 1998, he was elected a director, President and Chief Operating Officer of General Motors. Effective June 1, 2000, he was elected Chief Executive Officer. Mr. John M. Devine was named Vice Chairman and Chief Financial Officer of General Motors Corporation, effective January 1, 2001. He has responsibility for GM's Worldwide Financial Operations and GM Asset Management. He is a member of the GM Automotive Strategy Board and serves as its global process leader for finance. Mr. Devine was Chairman and Chief Executive Officer of Fluid Ventures, LLC, immediately prior to his GM appointment. He retired from Ford Motor Company in October 1999, after a 32 year career, as the company's Executive Vice President and Chief Financial Officer. Mr. Ronald L. Zarrella has been associated with General Motors since 1994. In December 1994, he was elected Vice President of General Motors and Group Executive in charge of GM's North American Vehicle Sales, Service and Marketing Group. In October 1998, he was elected Executive Vice President of General Motors and President of General Motors North America. Mr. John D. Finnegan has been associated with General Motors since 1976. In 1992, he was elected as Executive Vice President and Chief Financial Officer of General Motors Acceptance Corporation. During 1994, he added the responsibilities of Chairman and President of GMAC Mortgage Corporation. Effective December 1995, he was named Vice President and Treasurer of General Motors. In November 1997, he was elected Vice President and Group Executive of General Motors and President of General Motors Acceptance Corporation. Effective May 1999, he was elected Chairman of General Motors Acceptance Corporation and Executive Vice President of General Motors. I-12 PART II GENERAL MOTORS CORPORATION AND SUBSIDIARIES ITEM 5. Market for the Registrant's Common Equity and Related Stockholder Matters General Motors' (GM's) common stocks are listed on the stock exchanges specified on the cover page of this Form 10-K under the trading symbols (GM) and (GMH). GM's Dividend Policy is described in the Management's Discussion and Analysis (MD&A) in Part II. As of December 31, 2000, there were 464,399 holders of record of GM $1-2/3 par value common stock and 192,813 holders of record of GM Class H common stock. As of December 31, 1999, there were 499,809 holders of record of GM $1-2/3 par value common stock and 192,866 holders of record of GM Class H common stock. The following table sets forth the high and low sale prices of GM's common stocks as reported on the Composite Tape and the quarterly dividends declared for the last two years, not adjusted to account for the spin-off of Delphi which occurred during the second quarter of 1999. 2000 Quarters ---------------------------------------- 1st 2nd 3rd 4th Cash dividends per share of common stocks $1-2/3 par value $0.50 $0.50 $0.50 $0.50 Class H $- $- $- $- Price range of common stocks $1-2/3 par value (1): High $88.13 $94.63 $76.63 $68.25 Low $70.75 $57.25 $56.94 $48.44 Class H (1)(2): High $47.00 $41.58 $37.61 $38.00 Low $30.50 $27.33 $24.63 $21.33 1999 Quarters ---------------------------------------- 1st 2nd 3rd 4th Cash dividends per share of common stocks $1-2/3 par value $0.50 $0.50 $0.50 $0.50 Class H $- $- $- $- Price range of common stocks $1-2/3 par value (1): High $93.88 $94.88 $72.44 $79.06 Low $69.19 $61.06 $59.75 $60.69 Class H (1)(2): High $17.67 $21.29 $20.81 $32.54 Low $12.83 $16.31 $16.25 $18.65 (1)The principal market is the New York Stock Exchange, and prices are based on the Composite Tape. GM $1-2/3 par value common stock is also listed on the Chicago and Philadelphia stock exchanges and on the Pacific Exchange. (2)The stock prices have been adjusted to reflect the three-for-one stock split of the GM Class H common stock, in the form of a 200% stock dividend, paid on June 30, 2000. II-1 GENERAL MOTORS CORPORATION AND SUBSIDIARIES ITEM 6. Selected Financial Data (Unaudited) Years Ended December 31 ------------------------------------------ 2000 1999 1998 1997 1996 ---- ---- ---- ---- ---- (dollars in millions except per share amounts) Total net sales and revenues $184,632 $176,558 $155,445 $172,580 $158,281 ======= ======= ======= ======= ======= Income from continuing operations $4,452 $5,576 $3,049 $6,483 $4,100 Income (loss) from discontinued operations - 426 (93) 215 863 ----- ----- ----- ----- ----- Net income $4,452 $6,002 $2,956 $6,698 $4,963 ===== ===== ===== ===== ===== $1-2/3 par value common stock Basic earnings per share (EPS) from continuing operations $6.80 $8.70 $4.40 $8.52 $5.08 Basic earnings (losses) per share from discontinued operations $ - $0.66 $(0.14) $0.18 $0.98 Diluted EPS from continuing operations $6.68 $8.53 $4.32 $8.45 $5.04 Diluted earnings (losses) per share from discontinued operations $ - $0.65 $(0.14) $0.17 $0.98 Cash dividends declared per share $2.00 $2.00 $2.00 $2.00 $1.60 Class H common stock (1) (3) Basic EPS from continuing operations $ - $ - $ - $0.77 $0.61 Basic EPS from discontinued operations $ - $ - $ - $0.29 $0.35 Diluted EPS from continuing operations $ - $ - $ - $0.77 $0.61 Diluted EPS from discontinued operations $ - $ - $ - $0.29 $0.35 Cash dividends declared per share $ - $ - $ - $0.33 $0.32 Class H common stock (1) (4) Basic earnings (losses) per share from continuing operations $0.56 $(0.26) $0.23 $0.01 $ - Diluted earnings (losses) per share from continuing operations $0.55 $(0.26) $0.23 $0.01 $ - Cash dividends declared per share $ - $ - $ - $ - $ - Class E common stock Basic EPS from discontinued operations $ - $ - $ - $ - $0.04 Diluted EPS from discontinued operations $ - $ - $ - $ - $0.04 Cash dividends declared per share $ - $ - $ - $ - $0.30 Total assets $303,100 $274,730 $246,688 $221,767 $216,965 Long-term debt (2) $7,410 $7,415 $7,118 $5,669 $5,352 GM-obligated mandatorily redeemable preferred securities of subsidiary trusts $139 $218 $220 $222 $ - Stockholders' equity $30,175 $20,644 $15,052 $17,584 $23,413 - -------------------- Reference should be made to the notes to GM's consolidated financial statements and Management's Discussion and Analysis of Financial Condition and Results of Operations. (1)Adjusted to reflect the three-for-one stock split of the GM Class H common stock, in the form of a 200% stock dividend, paid on June 30, 2000. (2)Calculated from Automotive, Communications Services, and Other Operations only. (3)Prior to its recapitalization on December 17, 1997. (4)Subsequent to its recapitalization on December 17, 1997. * * * * * * II-2 GENERAL MOTORS CORPORATION AND SUBSIDIARIES ITEM 7. 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 Hughes Electronics Corporation (Hughes) consolidated financial statements and MD&A for the period ended December 31, 2000, included as Exhibit 99 to this GM Annual Report on Form 10-K for the period ended December 31, 2000, and related Hughes Annual Report on Form 10-K filed separately with the Securities and Exchange Commission (SEC); and the General Motors Acceptance Corporation (GMAC) Annual Report on Form 10-K for the period ended December 31, 2000, filed separately with the 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), 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, which includes activities relating to digital entertainment, information and communications services, and satellite-based private business networks; and - Other, which includes the design, manufacturing and marketing of locomotives and heavy-duty transmissions, the elimination of intersegment transactions, certain non-segment specific revenues and expenditures, and certain corporate activities. GM's reportable operating segments within its Financing and Insurance Operations business consist of GMAC and Other Financing, which includes financing entities operating in the U.S., Canada, Brazil, Germany, Sweden, and Mexico that are not associated with GMAC. 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 accounting principles generally accepted in the U.S. (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. II-3 GENERAL MOTORS CORPORATION AND SUBSIDIARIES RESULTS OF OPERATIONS For the year ended December 31, 2000, income from continuing operations for the Corporation was $4.5 billion, or $6.68 per share of GM $1-2/3 par value common stock, compared with $5.6 billion and $3.0 billion, or $8.53 and $4.32 per share of GM $1-2/3 par value common stock, for 1999 and 1998, respectively. Income from continuing operations includes the special items on an after-tax basis outlined below: Years Ended December 31, (dollars in millions except per share amounts) - ----------------------------------------------------------------------------------------- 2000 - -----------------------------------------------------------------------------------------
Phase- Post out of Employment Capacity Satellite Adjusted Income Oldsmobile Benefits Reduction Businesses Income ----------------------------------------------------------------- GM Automotive GMNA $3,174 $(939) $(294) $ - $ - $4,407 GME (676) - - (419) - (257) GMLAAM 26 - - - - 26 GMAP (233) - - - - (233) ----- ------ ------ ----- ----- ----- Total GMA 2,291 (939) (294) (419) - 3,943 Hughes 829 - - - 1,132 (303) Other Automotive (281) - - - - (281) GMAC 1,602 - - - - 1,602 Other Financing 11 - - - - 11 ------ ------ ------ ------ ----- ------ Total GM $4,452 $(939) $(294) $(419) $1,132 $4,972 ===== === === === ===== ===== Earnings Per Share $6.68 $(1.59) $(0.50) $(0.71) $0.90 $8.58 ==== ==== ==== ==== ==== ====
1999 - ----------------------------------------------------------------------------------------- Post Hourly Employment Retiree Termination Wireless Adjusted Income Benefits Benefits Benefits Business Income ----------------------------------------------------------------- GM Automotive GMNA $4,857 $553 $(257) $(39) $ - $4,600 GME 423 - - - - 423 GMLAAM (81) - - - - (81) GMAP (218) - - - - (218) ----- ----- ----- ---- ------ ----- Total GMA 4,981 553 (257) (39) - 4,724 Hughes (270) - - - (165) (105) Other Automotive (669) - (151) (35) - (483) GMAC 1,527 - - (16) - 1,543 Other Financing 7 - - - - 7 ------- ----- ----- ---- ----- ----- Total GM $5,576 $553 $(408) $(90) $(165) $5,686 ===== === === == === ===== Earnings Per Share $8.53 $0.84 $(0.62) $(0.14) $(0.17) $8.62 ==== ==== ==== ==== ==== ====
1998 - -------------------------------------------------------------------------------------- Work Asset Schedule Termination Adjusted Income Impairments Modification Benefits Income ----------------------------------------------------------- GM Automotive GMNA $1,633 $(38) $- $(42) $1,713 GME 419 - (44) - 463 GMLAAM (175) (30) - (21) (124) GMAP (243) (97) - - (146) ----- ---- ---- ---- ----- Total GMA 1,634 (165) (44) (63) 1,906 Hughes 272 - - - 272 Other Automotive (279) - - - (279) GMAC 1,325 - - - 1,325 Other Financing 97 - - - 97 ------ ----- ---- ---- ----- Total GM $3,049 $(165) $(44) $(63) $3,321 ===== === == == ===== Earnings Per Share $4.32 $(0.24) $(0.06) $(0.10) $4.72 ==== ==== ==== ==== ====
II-4 GENERAL MOTORS CORPORATION AND SUBSIDIARIES The phase-out of Oldsmobile at GMNA represents the costs associated with GM's decision in the fourth quarter of 2000 to phase-out the Oldsmobile division as the current model lineup product lifecycles come to an end, or when the models are no longer economically viable. Included in the $939 million charge for the phase-out of Oldsmobile was $356 million related to underperforming assets and $583 million related to estimated future payments to dealers and others. Underperforming assets represent the write-down of impaired long-lived assets, principally tooling and equipment on operating leases, recorded pursuant to GM's policy for the evaluation of long-lived assets (see Note 2 to the GM consolidated financial statements). Estimated future payments to dealers and others represent transition assistance to be paid to Oldsmobile dealers and increased sales incentives on Oldsmobile vehicles in dealer inventory. The $294 million charge for postemployment benefits at GMNA was attributable to postemployment costs for termination and other postemployment benefits associated with the four North American manufacturing facilities slated for conversion and capacity reduction (Oklahoma City, Oklahoma; Delta Engine, Lansing, Michigan; Spring Hill, Tennessee; and Wilmington, Delaware) (see Note 3 to the GM consolidated financial statements). This action will reduce production capacity by approximately 376,000 engines per year and 127,000 vehicles per year. The capacity reduction at GME represents the costs associated with the reduction in production capacity, including the restructuring of Vauxhall Motors Limited's manufacturing operations in the UK. Included in the $419 million charge for capacity reduction was $231 million related to underperforming assets, $80 million related to cancellation charges to be paid to suppliers incurred as a result of certain GME restructuring actions, and $108 million related to early retirements and other separation programs. The charge for these programs primarily relates to approximately 2,000 employees at the Luton assembly plant. This action will reduce production capacity by approximately 270,000 vehicles per year. GM's net of tax cash requirements relating to the GMNA and GME charges are expected to total approximately $1.2 billion, with anticipated spending of approximately 90% through 2003. The $1.1 billion gain at Hughes was attributable to the sale of its satellite systems manufacturing businesses to The Boeing Company for $3.8 billion in cash. In 1999, the $553 million benefit for postemployment benefits was related to the reversal of a liability for benefits payable to excess U.S. hourly employees (see Note 3 to the GM consolidated financial statements). The $408 million charge for hourly retiree benefits was related to the benefit increase granted to hourly retirees in connection with the 1999 United Auto Workers (UAW) agreement. The $90 million charge for termination benefits was related to a U.S. salaried early retirement program (approximately 1,700 people elected participation in this program). The $165 million charge for the Hughes Wireless business was related to Hughes' decision to discontinue certain of its wireless manufacturing operations at Hughes Network Systems. In 1998, the $165 million charge for impairment represents the write-down of impaired tooling and other property, plant, and equipment (see Note 2 to the GM consolidated financial statements). The $44 million work schedule modification charge resulted from schedule modifications at Opel Belgium. The $63 million termination benefits charge represents voluntary early retirement and other separation programs affecting approximately 4,450 employees. Vehicle Unit Deliveries of Cars and Trucks - GMA
Years Ended December 31, ---------------------------------------------------------------------------------------------- 2000 1999 1998 --------------------------- ---------------------------- ---------------------------- GM as GM as GM as a % of a % of a % of Industry GM Industry Industry GM Industry Industry GM Industry ---------------------------- ---------------------------- ---------------------------- (units in thousands) United States Cars 8,857 2,532 28.6% 8,700 2,591 29.8% 8,141 2,456 30.2% Trucks 8,960 2,421 27.0% 8,718 2,426 27.8% 7,825 2,148 27.5% ------ ----- ------ ----- ------ ----- Total United States 17,817 4,953 27.8% 17,418 5,017 28.8% 15,966 4,604 28.8% Canada, Mexico, and Other 2,648 707 26.7% 2,562 683 26.7% 2,406 639 26.6% ------ ----- ------ ----- ------ ----- Total GMNA 20,465 5,660 27.7% 19,980 5,700 28.5% 18,372 5,243 28.5% GME 19,972 1,855 9.3% 20,219 1,970 9.7% 19,230 1,849 9.6% GMLAAM 3,708 603 16.3% 3,353 536 16.0% 4,179 654 15.6% GMAP 12,729 473 3.7% 12,030 468 3.9% 10,964 439 4.0% ------ ----- ------ ------ ------ ------ Total Worldwide 56,874 8,591 15.1% 55,582 8,674 15.6% 52,745 8,185 15.5%
II-5 GENERAL MOTORS CORPORATION AND SUBSIDIARIES Wholesale Sales Years Ended December 31, 2000 1999 1998 -------- -------- -------- (units in thousands) GMNA Cars 2,933 2,992 2,731 Trucks 2,842 2,882 2,340 ----- ----- ----- Total GMNA 5,775 5,874 5,071 ----- ----- ----- GME Cars 1,744 1,824 1,764 Trucks 135 144 118 ----- ----- ----- Total GME 1,879 1,968 1,882 ----- ----- ----- GMLAAM Cars 438 350 404 Trucks 196 173 248 --- --- --- Total GMLAAM 634 523 652 --- --- --- GMAP Cars 175 162 202 Trucks 283 259 217 --- --- --- Total GMAP 458 421 419 --- --- --- Total Worldwide 8,746 8,786 8,024 ===== ===== ===== GMA Financial Review GMA's income and margin adjusted to exclude special items (adjusted income and margin) was $3.9 billion and 2.7% for 2000, $4.7 billion and 3.2% for 1999, and $1.9 billion and 1.5% for 1998. The decrease in 2000 adjusted income and margin, compared with 1999, was primarily due to an increase in spending for product development activities, pricing pressures in North America and Europe, a decrease in wholesale sales volume, and unfavorable product mix, primarily in Europe. These unfavorable conditions were partially offset by cost structure improvements, primarily in North America. The improvement in 1999 adjusted income and margin, compared with 1998, was primarily due to improvement in the profitability of new vehicles, higher production volumes at GMNA compared with the prior year when work stoppages at two component plants in Flint, Michigan, halted production of wholesale units at 26 of 29 assembly plants in North America, and lower material costs. GMA's total net sales and revenues adjusted to exclude special items (adjusted total net sales and revenues) for 2000 were $148.1 billion, which represented an increase of $2.0 billion, compared with 1999. The increase in adjusted total net sales and revenues was largely due to growth initiatives, including OnStar and Service Parts Operations, which were partially offset by lower wholesale volumes, and unfavorable net price in North America and Europe. Net price 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. Adjusted total net sales and revenues for 1999 were $146.1 billion, which represented an increase of $17.0 billion compared with 1998. The increase was primarily due to increases in wholesale sales volumes as a result of the previously mentioned 1998 GMNA work stoppages. GMNA's adjusted income was $4.4 billion, $4.6 billion, and $1.7 billion for 2000, 1999, and 1998, respectively. The decrease in 2000 adjusted income from 1999 was primarily due to unfavorable net price and lower wholesale sales volumes. The decrease was partially offset by improvements in manufacturing costs due to performance efficiencies and material cost savings. Net price was unfavorable for 2000 at (0.7)% year-over-year. The improvement in GMNA adjusted income for 1999, compared with 1998, was primarily due to the 1998 work stoppages, higher wholesale sales volumes, improvement in the cost and profitability of new vehicles, lower material costs, and reduced warranty expense resulting from improved quality. This improvement was partially offset by increased manufacturing costs, launch costs associated with the new LeSabre, Impala, Monte Carlo, Saturn LS, DeVille, Aurora, Tahoe, Suburban, Yukon, and Yukon XL models, as well as increased engineering costs for further innovation in GM's portfolio. GME's adjusted loss was $257 million for 2000, compared with adjusted income of $423 million and $463 million for 1999 and 1998, respectively. The decrease in GME's 2000 adjusted income from 1999 was due to the weakening of the European industry, a shift in sales mix from larger, more profitable vehicles to the smaller, less profitable entries, a continued increase in competitive pricing pressure, and a decrease in wholesale sales volume which was further impacted by the reduced availability of the new II-6 GENERAL MOTORS CORPORATION AND SUBSIDIARIES GMA Financial Review (concluded) Corsa during the launch period. The decrease in GME's 1999 adjusted income from 1998 was primarily due to increased competitive pricing pressure and increased engineering expense associated with the model year 2000 mid-life cycle enhancements for the Vectra and Omega and the new model year 2001 Corsa. These decreases were partially offset by continued material cost improvements as a result of GM's global purchasing efforts, as well as improved manufacturing performance. During September 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. European Union member states are required to transform the concepts detailed in the directive into national law by March 2002. Under the directive, manufacturers are financially responsible for at least a portion of the cost of the take-back of vehicles put on the market as of July 2002 and all of the cost for all of the vehicles put on the market as of 2007. The laws developed in the individual local legislatures throughout Europe will have a significant impact on the amount ultimately paid by the manufacturers for this issue. GME is currently assessing the impact of this potential legislation on its results of operations and financial position. GMLAAM's adjusted income was $26 million for 2000 compared with adjusted losses of $81 million and $124 million for 1999 and 1998, respectively. The increase in 2000 adjusted income, compared with 1999, was primarily due to nominal price increases and an increase in wholesale sales volumes. This was partially offset by an increase in manufacturing costs and material costs. The decrease in 1999 adjusted loss, compared with 1998, was primarily due to nominal price increases and reduced structural costs (reducing employee and production costs), partially offset by lower industry volumes due to the economic crisis throughout Latin America, and increased material and freight costs driven by GM do Brasil's and its suppliers' exposure to hard currencies. GMAP's adjusted loss was $233 million for 2000 compared with adjusted losses of $218 million and $146 million for 1999 and 1998, respectively. The increase in 2000 adjusted loss, compared to 1999, was primarily due to increased equity losses at Isuzu which were partially offset by increased wholesale sales volumes. Increased adjusted losses for 1999 compared with 1998 were primarily due to start-up costs in the region and equity losses at Isuzu due to the economic downturn in Asia, partially offset by continued strong performance in Australia and earnings improvements at Shanghai GM. GMA's effective income tax rate on an adjusted basis was 30.9%, 31.7%, and 34.7% for 2000, 1999, and 1998, respectively. GMA's effective income tax rate on a reported basis was 26.6%, 32.0%, and 34.8% for 2000, 1999, and 1998, respectively. Hughes Financial Review Total adjusted net sales and revenues increased to $8.7 billion in 2000, compared with $7.6 billion in 1999 and $6.1 billion in 1998. The increase in adjusted net sales and revenues in 2000 compared with 1999 resulted from growth in the DIRECTV businesses from the addition of more than 2.0 million net new subscribers in the United States and Latin America since December 31, 1999. PanAmSat Corporation also contributed to the increase in adjusted net sales and revenues primarily due to increased revenues from outright sales and sales-type lease transactions executed during 2000. The increase in adjusted net sales and revenues from 1999 compared with 1998 resulted from the growth in the DIRECTV businesses due to the addition of slightly more than 1.7 million net new subscribers in the United States and Latin America since December 31, 1998, and added revenues from acquisitions of PRIMESTAR and United States Satellite Broadcasting Company, Inc., in mid-1999. Also contributing to the growth of 1999 revenues were increased sales of DIRECTV receiver equipment and a $155 million pre-tax gain that resulted from the settlement of a patent infringement case. The 1999 increase was partially offset by decreased revenues at the satellite systems manufacturing businesses, which was principally due to contract revenue adjustments and delayed revenue recognition that resulted from increased development costs and schedule delays on several new product lines, and decreased activity associated with a contract with ICO Global Communications. Hughes' adjusted loss was $303 million for 2000, compared with an adjusted loss of $105 million in 1999 and adjusted income of $272 million in 1998. The increase in 2000 adjusted loss, compared with 1999, was primarily due to higher marketing costs at the Direct-To-Home businesses, increased depreciation and amortization expense due to 1999 acquisitions and additions to satellites and property, as well as increased interest expense as a result of increased average outstanding borrowings throughout the year. The adjusted loss in 1999, compared with adjusted income in 1998, was a result of an $85 million decrease in interest income, a $105 million increase in interest expense, increased subscriber acquisition costs, and higher depreciation and amortization that resulted from 1999 acquisitions. 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 GM. GM's objective in this effort is to maximize the enterprise value of Hughes for the long-term benefit of the holders of GM's Class H common stock and GM $1-2/3 par value common stock through a structure that maintains the financial strength of GM. No assurance can be given that any transaction will be agreed upon with any party or that other conditions, including any stockholder or regulatory approvals will be satisfied. II-7 GENERAL MOTORS CORPORATION AND SUBSIDIARIES GMAC Financial Review GMAC's adjusted income was $1.6 billion, $1.5 billion, and $1.3 billion in 2000, 1999, and 1998, respectively. Income from automotive and other financing operations totaled $1.1 billion, $1.1 billion, and $1.0 billion in 2000, 1999, and 1998, respectively. In 2000, increased financing volumes and asset levels were offset by the negative impact from the higher level of market interest rates compared with 1999. The increase in 1999 from 1998 was due to increased financing volumes and reduced credit losses, partially offset by a higher effective tax rate. Income from insurance operations totaled $220 million, $210 million, and $226 million in 2000, 1999, and 1998, respectively. The increase in income from 1999 was primarily due to improved operating results and higher investment income and capital gains. The decrease in 1999 from 1998 was primarily attributable to pricing pressure in the personal lines insurance business. Income from mortgage operations totaled $327 million, $260 million, and $115 million in 2000, 1999, and 1998, respectively. The strong year-over-year performance reflects the benefit of strong international growth, lower cost of servicing, and increased mortgage originations during the second half of 1999. The unusually low earnings in 1998 were largely due to reduced mortgage asset values from higher prepayment levels. Financing revenue totaled $15.5 billion in 2000, compared with $13.8 billion and $12.7 billion for 1999 and 1998, respectively. These increases were mainly due to higher average retail, wholesale, and commercial and other loan receivable balances. LIQUIDITY AND CAPITAL RESOURCES Automotive, Communications Services, and Other Operations At December 31, 2000, cash, marketable securities, and $3.0 billion of assets of the Voluntary Employees' Beneficiary Association (VEBA) trust invested in fixed-income securities totaled $13.3 billion, compared with $14.4 billion at December 31, 1999. The decrease from December 31, 1999 was primarily due to decreased operating cash flows, GM's purchase of a 20% equity interest in Fuji Heavy Industries Ltd. for approximately $1.3 billion, a $1.0 billion cash equity injection in GMAC, and stock repurchases. These items were partially offset by the net cash proceeds from the sale of the Hughes' satellite systems manufacturing businesses to The Boeing Company and improvements in managed working capital. Total assets in the VEBA trust used to pre-fund part of GM's other postretirement benefits liability approximated $6.7 billion and $6.3 billion at December 31, 2000 and 1999, respectively. 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 $662 million at December 31, 2000, a decrease of $1.4 billion from the prior year. Long-term debt was $7.4 billion at December 31, 2000 and 1999, respectively. The ratio of long-term debt to long-term debt and GM's net assets of Automotive, Communications Services, and Other Operations was 30.8% and 42.3% at December 31, 2000 and 1999, respectively. 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 36.6% and 48.2% at December 31, 2000 and 1999, respectively. Financing and Insurance Operations At December 31, 2000, GMAC owned assets and serviced automotive receivables totaling $185.6 billion, compared with $162.3 billion at December 31, 1999. Total consolidated assets of GMAC at December 31, 2000 were $168.4 billion, compared with $148.8 billion at December 31, 1999. The increase over year-end 1999 was primarily the result of higher serviced retail receivables, commercial and other loan receivables, serviced wholesale receivables, other assets, factored receivables, mortgage lending receivables, mortgage servicing rights, mortgage loans held for investment and due and deferred from receivable sales, and receivables due from Automotive, Communications Services, and Other Operations. These increases were partially offset by a decline in operating lease assets. Consolidated automotive and commercial finance receivables serviced by GMAC, including sold receivables, totaled $112.5 billion and $97.0 billion at December 31, 2000 and 1999, respectively. This increase was primarily the result of a $7.4 billion increase in serviced retail receivables, a $4.9 billion increase in commercial and other loan receivables, and a $4.4 billion increase in serviced wholesale receivables. Continued GM-sponsored retail financing incentives contributed to the rise in serviced retail receivables. The increase in commercial and other loan receivables was primarily attributable to increases in secured notes as well as continued growth at Commercial Credit LLC and GMAC Business Credit LLC. The growth at Commercial Credit LLC was partially attributable to the acquisitions of the factoring businesses of Finova Capital Corporation and Banc of America during the third and fourth quarters of 2000. The increase in serviced wholesale loan receivables was due to higher dealer inventory levels, as well as an increase in penetration. II-8 GENERAL MOTORS CORPORATION AND SUBSIDIARIES Financing and Insurance Operations - (concluded) GMAC's liquidity, as well as its ability to profit from ongoing acquisition activity, is in large part dependent on its timely access to capital and the costs associated with raising funds in different segments of the capital markets. In this regard, GMAC regularly accesses the short-term, medium-term, and long-term debt markets, principally through commercial paper, notes, and underwritten transactions. At December 31, 2000, GMAC's total borrowings were $133.4 billion, compared with $121.2 billion at December 31, 1999. Approximately 81% of this debt represented funding for operations in the U.S. and the remaining 19% represented borrowings for operations in Canada (9%), the United Kingdom (3%), Germany (3%), and other countries (4%). GMAC's 2000 year-end ratio of total debt to total stockholder's equity was 9.5:1, compared with 10.9:1 at December 31, 1999. The higher year-to-year debt balances were principally used to fund increased asset levels. Total short-term debt outstanding at December 31, 2000 amounted to $56.9 billion, compared with $50.8 billion at December 31, 1999. Book Value Per Share Book value per share was determined based on the liquidation rights of the various classes of common stock. Book value per share of GM $1-2/3 par value common stock increased to $39.36 at December 31, 2000, from $27.02 at December 31, 1999. Book value per share of GM Class H common stock, adjusted to reflect the GM Class H common stock split, increased to $7.87 at December 31, 2000, from $5.40 at December 31, 1999. 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 adjusted to exclude special items, excluding Hughes, was 11.1% and 13.8% as of December 31, 2000 and 1999, respectively. Dividends Dividends may be paid on common stocks only when, as, and if declared by the GM Board in its sole discretion. The amount available for the payment of dividends on each class of common stock will be reduced on occasion by dividends paid on that class and will be adjusted on occasion for changes to the amount of surplus attributed to the class resulting from the repurchase or issuance of shares of that class. At December 31, 2000, the amount available for the payment of dividends on GM $1-2/3 par value and GM Class H common stocks was $9.8 billion and $19.7 billion, respectively. GM's policy is to distribute dividends on its $1-2/3 par value common stock based on the outlook and indicated capital needs of the business. Cash dividends per share of GM $1-2/3 par value common stock were $2.00 in 2000, 1999, and 1998. 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. The dividends per share for the GM Series H 6.25% Automatically Convertible Preference Stock were $35.1172 in 2000. The GM Board also paid dividends in 2000 on the Series D and Series G Depositary Shares of $0.99 and $2.28 per share, respectively. The Series D preference stock was redeemed on May 2, 2000, and as a result, the amount paid on that date to the Series D shareholders of record included accrued and unpaid dividends as part of the total redemption price. Euro Conversion On January 1, 1999, 11 of 15 member countries of the European Union established fixed conversion rates between their existing currencies and adopted the euro as their new common currency. The euro trades on currency exchanges and the legacy currencies remain legal tender in the participating countries for a transition period until January 1, 2002. Beginning on January 1, 2002, euro denominated bills and coins will be issued and legacy currencies will be withdrawn from circulation. The Corporation has reviewed and has made required modifications to applicable information technology systems and contracts based on the new currency. At December 31, 2000, the conversion to the euro has not resulted, nor is the remaining transition expected to result in any material adverse impact on GM's financial position and results of operations. II-9 GENERAL MOTORS CORPORATION AND SUBSIDIARIES Employment and Payrolls Worldwide employment at December 31, (in thousands) 2000 1999 1998(1) ---- ---- ---- GMNA 212 217 226 GME 89 91 (2) 94(2) GMLAAM 24 23 24 GMAP 11 10 10 GMAC 29 27 24 Hughes 9 18 15 Other 12 12 13 --- --- --- Total employees 386 398 406 === === === Worldwide payrolls - continuing operations (in billions) (3) $21.6 $21.8 $20.4 U.S. hourly payrolls (in billions) (4) $9.4 $10.0 $8.8 Average labor cost per active hour worked U.S. hourly $52.89 $50.51 $46.17 (1) Amounts have been adjusted to exclude Delphi employees. (2) Amounts have been adjusted to include SAAB employees. (3) Amounts have been adjusted to exclude Hughes' employees. (4) Includes employees "at work" (excludes laid-off employees receiving benefits). 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 amended certain provisions of SFAS No. 133. GM adopted SFAS No. 133, as amended, on January 1, 2001. GM will record a one-time after-tax charge to income for the initial adoption of SFAS No. 133 totaling $6 million, as well as an after-tax unrealized loss of $77 million to other comprehensive income as of January 1, 2001. The outcome of pending issues at the FASB and the Derivatives Implementation Group could impact the amount of the cumulative transition adjustment presented herein. 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 does not expect this statement to have a material impact on GM's results of operations and financial position. Forward-Looking Statements In this report, in reports subsequently filed by GM with the SEC on Forms 10-Q and 8-K, and in related comments by management of GM and Hughes, our use of the words "expect," "anticipate," "estimate," "forecast," "objective," "plan," "goal," and similar expressions is intended to identify forward-looking statements. While these statements represent our current judgment on what the future may hold, and we believe these judgments are reasonable, actual results may differ materially due to numerous important factors that are described below and other factors that may be described in subsequent reports which GM may file with the SEC on Forms 10-Q and 8-K: . 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). . 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. . 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. . Changes in the laws, regulations, policies, or other activities of governments, agencies, and similar organizations where such actions may affect the production, licensing, distribution, or sale of the Corporation's products, the cost thereof, or applicable tax rates. II-10 GENERAL MOTORS CORPORATION AND SUBSIDIARIES Forward-Looking Statements (concluded) . 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. . With respect to Hughes, additional risk factors include: economic conditions, product demand and market acceptance, government action, local political or economic developments in or affecting countries where Hughes has operations, ability to obtain export licenses, competition, ability to achieve cost reductions, technological risk, limitations on access to distribution channels, the success and timeliness of satellite launches, in-orbit performance of satellites, ability of customers to obtain financing, and Hughes' ability to access capital to maintain its financial flexibility. Additionally, the in-orbit satellites of Hughes and its 81% owned subsidiary, PanAmSat Corporation, are subject to the risk of failing prematurely due to, among other things, mechanical failure, collision with objects in space, or an inability to maintain proper orbit. Satellites are subject to the risk of launch delay and failure, destruction and damage while on the ground or during launch, and failure to become fully operational once launched. Delays in the production, or launch of a satellite, or the complete or partial loss of a satellite, in-orbit or during launch, could have a material adverse impact on the operation of Hughes' businesses. Hughes purchases in-orbit and launch insurance for its satellite fleet to mitigate the potential financial impact of in-orbit and launch failures. The insurance generally does not compensate for business interruption or loss of future revenues or customers. Certain of Hughes' insurance policies contain exclusions related to known anomalies and Hughes is self-insured for certain other satellites. Hughes has, in the past, experienced technical anomalies on some of its satellites. Service interruptions caused by these anomalies, depending on their severity, could result in claims by affected customers for termination of their transponder agreements, cancellation of other service contracts, or the loss of other customers. * * * * * * ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk GM is exposed to market risk from changes in foreign currency exchange rates, interest rates, and certain commodity and equity security prices. GM enters into a variety of foreign exchange, interest rate, and commodity forward contracts and options, primarily to maintain the desired level of exposure arising from these risks. A risk management control system is utilized to monitor foreign exchange, interest rate, commodity and equity price risks, and related hedge positions. A discussion of GM's accounting policies for derivative financial instruments is included in Note 1 to the GM consolidated financial statements. Further information on GM's exposure to market risk is included in Notes 19 and 20 to the GM consolidated financial statements. The following analyses provide quantitative information regarding GM's exposure to foreign currency exchange rate risk, interest rate risk, and commodity and equity price risk. GM uses a model to evaluate the sensitivity of the fair value of financial instruments with exposure to market risk that assumes instantaneous, parallel shifts in exchange rates, interest rate yield curves, and commodity and equity prices. For options and instruments with non-linear returns, models appropriate to the instrument are utilized to determine the impact of market shifts. There are certain shortcomings inherent in the sensitivity analyses presented, primarily due to the assumption that exchange rates change in a parallel fashion and that interest rates change instantaneously. In addition, the analyses are unable to reflect the complex market reactions that normally would arise from the market shifts modeled. Foreign Exchange Rate Risk GM has foreign currency exposures related to buying, selling, and financing in currencies other than the local currencies in which it operates. More specifically, GM is exposed to foreign currency risk related to the uncertainty to which future earnings or asset and liability values are exposed to as the result of operating cash flows and various financial instruments that are denominated in foreign currencies. At December 31, 2000 and 1999, the net fair value liability of financial instruments with exposure to foreign currency risk was approximately $13.6 billion and $11.2 billion, respectively. The potential loss in fair value for such financial instruments from a 10% adverse change in quoted foreign currency exchange rates would be approximately $1.2 billion and $1.0 billion for 2000 and 1999, respectively. II-11 GENERAL MOTORS CORPORATION AND SUBSIDIARIES Interest Rate Risk GM is subject to market risk from exposure to changes in interest rates due to its financing, investing, and cash management activities. More specifically, the Corporation is exposed to interest rate risk associated with long term debt and contracts to provide commercial and retail financing, retain mortgage servicing rights, and retain assets related to mortgage securitization. In addition, GM is exposed to prepayment risk associated with its capitalized mortgage servicing rights. This risk is managed with U.S. Treasury options and futures, which exposes GM to basis risk since the derivative instruments do not have identical characteristics to the underlying mortgage servicing rights. At December 31, 2000 and 1999, the net fair value liability of financial instruments held for purposes other than trading with exposure to interest rate risk was approximately $18.1 billion and $18.8 billion, respectively. The potential loss in fair value resulting from a 10% adverse shift in quoted interest rates would be approximately $385 million and $127 million for 2000 and 1999, respectively. At December 31, 2000 and 1999, the net fair value asset of financial instruments held for trading purposes with exposure to interest rate risk was approximately $3.2 billion and $2.7 billion, respectively. The potential loss in fair value resulting from a 10% adverse shift in quoted interest rates would be approximately $217 million and $39 million for 2000 and 1999, respectively. This analysis excludes GM's operating lease portfolio. A fair value change in the debt that funds this portfolio would potentially have a diametric impact on the fair value of the portfolio itself. As such, the overall impact to the fair value of financial instruments from a hypothetical change in interest rates may be overstated. Commodity Price Risk GM is exposed to changes in prices of commodities used in its Automotive business, primarily associated with various non-ferrous metals used in the manufacturing of automotive components. GM enters into commodity forward and option contracts to offset such exposure. At December 31, 2000 and 1999, the net fair value asset of such contracts was approximately $51 million and $151 million, respectively. The potential loss in fair value resulting from a 10% adverse change in the underlying commodity prices would be approximately $152 million and $210 million for 2000 and 1999, respectively. This amount excludes the offsetting impact of the price risk inherent in the physical purchase of the underlying commodities. Equity Price Risk GM is exposed to changes in prices of various available-for-sale equity securities in which it invests. At December 31, 2000 and 1999, the fair value of such investments was approximately $3.3 billion and $3.2 billion, respectively. The potential loss in fair value resulting from a 10% adverse change in equity prices would be approximately $330 million and $323 million for 2000 and 1999, respectively. * * * * * * II-12 RESPONSIBILITIES FOR CONSOLIDATED FINANCIAL STATEMENTS The following consolidated financial statements of General Motors Corporation and subsidiaries were prepared by management, which is responsible for their integrity and objectivity. The statements have been prepared in conformity with accounting principles generally accepted in the United States of America and, as such, include amounts based on judgments of management. Management is further responsible for maintaining internal control designed to provide reasonable assurance that the books and records reflect the transactions of the companies and that established policies and procedures are carefully followed. From a stockholder's point of view, perhaps the most important feature in internal control is that it is continually reviewed for effectiveness and is augmented by written policies and guidelines, the careful selection and training of qualified personnel, and a strong program of internal audit. Deloitte & Touche LLP, an independent auditing firm, is engaged to audit the consolidated financial statements of General Motors Corporation and subsidiaries and issue reports thereon. The audit is conducted in accordance with auditing standards generally accepted in the United States of America that comprehend the consideration of internal control and tests of transactions to the extent necessary to form an independent opinion on the financial statements prepared by management. The Independent Auditors' Report appears on the next page. The Board of Directors, through the Audit Committee (composed entirely of non-employee Directors), is responsible for assuring that management fulfills its responsibilities in the preparation of the consolidated financial statements. The Audit Committee annually recommends to the Board of Directors the selection of the independent auditors in advance of the Annual Meeting of Stockholders and submits the selection for ratification at the Meeting. In addition, the Audit Committee reviews the scope of the audits and the accounting principles being applied in financial reporting. The independent auditors, representatives of management, and the internal auditors meet regularly (separately and jointly) with the Audit Committee to review the activities of each, to ensure that each is properly discharging its responsibilities, and to assess the effectiveness of internal control. It is management's conclusion that internal control at December 31, 2000 provides reasonable assurance that the books and records reflect the transactions of the companies and that established policies and procedures are complied with. To ensure complete independence, Deloitte & Touche LLP has full and free access to meet with the Audit Committee, without management representatives present, to discuss the results of the audit, the adequacy of internal control, and the quality of financial reporting. /s/John F. Smith, Jr. /s/G. Richard Wagoner, Jr. /s/John M. Devine John F. Smith, Jr. G. Richard Wagoner, Jr. John M. Devine Chairman President and Vice Chairman and Chief Executive Officer Chief Financial Officer II-13 Independent Auditors' Report General Motors Corporation, its Directors, and Stockholders: We have audited the Consolidated Balance Sheets of General Motors Corporation and subsidiaries as of December 31, 2000 and 1999, and the related Consolidated Statements of Income, Cash Flows, and Stockholders' Equity for each of the three years in the period ended December 31, 2000. Our audits also included the financial statement schedule listed at Item 14. These financial statements and the financial statement schedule are the responsibility of the Corporation's management. Our responsibility is to express an opinion on these financial statements and the financial statement schedule based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the financial position of General Motors Corporation and subsidiaries at December 31, 2000 and 1999, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2000 in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. /s/DELOITTE & TOUCHE LLP DELOITTE & TOUCHE LLP Detroit, Michigan January 17, 2001 II-14 ITEM 8 CONSOLIDATED STATEMENTS OF INCOME Years Ended December 31, ---------------------------------- 2000 1999 1998 ---- ---- ---- (dollars in millions except per share amounts) GENERAL MOTORS CORPORATION AND SUBSIDIARIES Total net sales and revenues (Notes 1, 2, and 22) $184,632 $176,558 $155,445 -------- -------- -------- Cost of sales and other expenses (Notes 2, 3, and 22) 145,664 140,708 127,785 Selling, general, and administrative expenses 22,252 19,053 16,087 Interest expense (Note 13) 9,552 7,750 6,629 ------- ------- ------- Total costs and expenses 177,468 167,511 150,501 ------- ------- ------- Income from continuing operations before income taxes and minority interests 7,164 9,047 4,944 Income tax expense (Note 8) 2,393 3,118 1,636 Equity income/(loss) and minority interests (319) (353) (259) ----- ----- ----- Income from continuing operations 4,452 5,576 3,049 Income (loss) from discontinued operations (Note 1) - 426 (93) ----- ----- ----- Net income 4,452 6,002 2,956 Dividends on preference stocks (Note 17) (110) (80) (63) ----- ----- ----- Earnings attributable to common stocks $4,342 $5,922 $2,893 ===== ===== ===== Basic earnings (losses) per share attributable to common stocks (Note 18) $1-2/3 par value Continuing operations $6.80 $8.70 $4.40 Discontinued operations (Note 1) - 0.66 (0.14) ---- ---- ---- Earnings per share attributable to $1-2/3 par value $6.80 $9.36 $4.26 ==== ==== ==== Earnings per share attributable to Class H $0.56 $(0.26) $0.23 ==== ==== ==== Earnings (losses) per share attributable to common stocks assuming dilution (Note 18) $1-2/3 par value Continuing operations $6.68 $8.53 $4.32 Discontinued operations (Note 1) - 0.65 (0.14) ---- ---- ---- Earnings per share attributable to $1-2/3 par value $6.68 $9.18 $4.18 ==== ==== ==== Earnings per share attributable to Class H $0.55 $(0.26) $0.23 ==== ==== ==== Reference should be made to the notes to consolidated financial statements. II-15 CONSOLIDATED STATEMENTS OF INCOME - concluded Years Ended December 31, ---------------------------------- 2000 1999 1998 ---- ---- ---- (dollars in millions) AUTOMOTIVE, COMMUNICATIONS SERVICES, AND OTHER OPERATIONS Total net sales and revenues (Notes 1, 2, and 22) $160,627 $156,107 $137,161 -------- -------- -------- Cost of sales and other expenses (Notes 2, 3, and 22) 138,303 134,111 121,491 Selling, general, and administrative expenses 16,246 14,324 11,918 ------- ------- ------- Total costs and expenses 154,549 148,435 133,409 ------- ------- ------- Interest expense (Note 13) 815 828 786 Net expense from transactions with Financing and Insurance Operations (Note 1) 682 308 82 ------ ------ ------- Income from continuing operations before income taxes and minority interests 4,581 6,536 2,884 Income tax expense (Note 8) 1,443 2,167 1,018 Equity income/(loss) and minority interests (299) (327) (239) ----- ----- ----- Income from continuing operations 2,839 4,042 1,627 Income (loss) from discontinued operations (Note 1) - 426 (93) ----- ----- ----- Net income - Automotive, Communications Services, and Other Operations $2,839 $4,468 $1,534 ===== ===== ===== Years Ended December 31, ---------------------------------- 2000 1999 1998 ---- ---- ---- (dollars in millions) FINANCING AND INSURANCE OPERATIONS Total revenues $24,005 $20,451 $18,284 ------ ------ ------ Interest expense (Note 13) 8,737 6,922 5,843 Depreciation and amortization expense (Note 9) 5,982 5,445 4,920 Operating and other expenses 5,805 4,595 4,067 Provisions for financing and insurance losses (Notes 1 and 22) 1,580 1,286 1,476 ----- ----- ----- Total costs and expenses 22,104 18,248 16,306 ------ ------ ------ Net income from transactions with Automotive, Communications Services, and Other Operations (Note 1) (682) (308) (82) ----- ----- ----- Income before income taxes and minority interests 2,583 2,511 2,060 Income tax expense (Note 8) 950 951 618 Equity income/(loss) and minority interests (20) (26) (20) ----- ----- ----- Net income - Financing and Insurance Operations $1,613 $1,534 $1,422 ====== ====== ====== The above supplemental consolidating information is explained in Note 1, "Nature of Operations." Reference should be made to the notes to consolidated financial statements. II-16 CONSOLIDATED BALANCE SHEETS December 31, ------------------- GENERAL MOTORS CORPORATION AND SUBSIDIARIES 2000 1999 ---- ---- ASSETS (dollars in millions) Automotive, Communications Services, and Other Operations Cash and cash equivalents (Note 1) $9,119 $9,730 Marketable securities (Note 4) 1,161 1,698 ------- ------- Total cash and marketable securities 10,280 11,428 Accounts and notes receivable (less allowances) 5,835 5,093 Inventories (less allowances) (Note 6) 10,945 10,638 Equipment on operating leases (less accumulated depreciation) (Note 7) 5,699 5,744 Deferred income taxes and other current assets (Note 8) 8,388 9,006 ------- ------- Total current assets 41,147 41,909 Equity in net assets of nonconsolidated associates 3,497 1,711 Property - net (Note 9) 33,977 32,779 Intangible assets - net (Notes 1 and 10) 7,622 8,527 Deferred income taxes (Note 8) 14,870 15,277 Other assets (Note 11) 32,243 25,358 -------- -------- Total Automotive, Communications Services, and Other Operations assets 133,356 125,561 Financing and Insurance Operations Cash and cash equivalents (Note 1) 1,165 712 Investments in securities (Note 4) 9,595 9,110 Finance receivables - net (Note 5) 92,415 80,627 Investment in leases and other receivables (Note 7) 36,752 36,407 Other assets (Note 11) 27,846 21,312 Net receivable from Automotive, Communications Services, and Other Operations (Note 1) 1,971 1,001 ------- ------- Total Financing and Insurance Operations assets 169,744 149,169 ------- ------- Total assets $303,100 $274,730 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Automotive, Communications Services, and Other Operations Accounts payable (principally trade) $18,309 $17,254 Loans payable (Note 13) 2,208 1,991 Accrued expenses (Note 12) 33,252 32,854 Net payable to Financing and Insurance Operations (Note 1) 1,971 1,001 ------ ------ Total current liabilities 55,740 53,100 Long-term debt (Note 13) 7,410 7,415 Postretirement benefits other than pensions (Note 14) 34,306 34,166 Pensions (Note 14) 3,480 3,339 Other liabilities and deferred income taxes (Note 12) 15,768 17,426 ------- ------- Total Automotive, Communications Services, and Other Operations liabilities 116,704 115,446 Financing and Insurance Operations Accounts payable 7,416 4,262 Debt (Note 13) 135,037 122,282 Other liabilities and deferred income taxes (Note 12) 12,922 11,282 -------- -------- Total Financing and Insurance Operations liabilities 155,375 137,826 Minority interests 707 596 General Motors - obligated mandatorily redeemable preferred securities of subsidiary trusts holding solely junior subordinated debentures of General Motors (Note 16) Series D - 79 Series G 139 139 Stockholders' equity (Note 17) $1-2/3 par value common stock (issued, 548,181,757 and 619,412,233 shares) 914 1,033 Class H common stock (issued, 875,286,559 and 411,345,561 shares) 88 14 Capital surplus (principally additional paid-in capital) 21,020 13,794 Retained earnings 10,119 6,961 ------ ------ Subtotal 32,141 21,802 Accumulated foreign currency translation adjustments (2,502) (2,033) Net unrealized gains on securities 581 996 Minimum pension liability adjustment (45) (121) ------ ------ Accumulated other comprehensive loss (1,966) (1,158) ------ ------ Total stockholders' equity 30,175 20,644 ------- ------- Total liabilities and stockholders' equity $303,100 $274,730 ======= ======= Reference should be made to the notes to consolidated financial statements. II-17 CONSOLIDATED STATEMENTS OF CASH FLOWS
For The Years Ended December 31, ----------------------------------------------------------------------------------- 2000 1999 1998 ------------------------ ------------------------ ------------------------- Automotive, Financing Automotive, Financing Automotive, Financing Comm.Serv., and Comm.Serv., and Comm.Serv., and and Other Insurance and Other Insurance and Other Insurance ----------- --------- ----------- --------- ----------- --------- Cash flows from operating activities (dollars in millions) Income from continuing operations $2,839 $1,613 $4,042 $1,534 $1,627 $1,422 Adjustments to reconcile income from continuing operations to net cash provided by operating activities Depreciation and amortization expenses 7,429 5,982 6,873 5,445 6,227 4,920 Postretirement benefits other than pensions, net of payments and VEBA contributions 772 27 (1,057) 21 157 31 Pension expense, net of contributions 128 - (808) - 223 - Originations and purchases of mortgage loans - (51,202) - (53,006) - (54,433) Proceeds on sales of mortgage loans - 51,444 - 55,777 - 51,582 Originations and purchases of mortgage securities - (1,571) - (1,309) - (2,237) Proceeds on sales of mortgage securities - 994 - 1,545 - 849 Change in other investments and miscellaneous assets 1,154 (1,692) 522 (127) (162) 932 Change in other operating assets and liabilities (Note 1) 724 2,505 7,523 (23) 90 1,468 Other (2,175) 779 (951) 944 581 1,066 ------- ------ ------- -------- ------ ------ Net cash provided by operating activities $10,871 $8,879 $16,144 $10,801 $8,743 $5,600 ------- ------ ------- ------- ------ ------ Cash flows from investing activities Expenditures for property (9,200) (522) (7,061) (323) (7,952) (279) Investments in marketable securities - acquisitions (2,520) (24,599) (4,149) (21,257) (13,010) (21,152) Investments in marketable securities - liquidations 3,057 24,114 2,886 20,593 16,272 21,688 Mortgage servicing rights - acquisitions - (1,096) - (1,424) - (1,862) Mortgage servicing rights - liquidations - 12 - 35 - 80 Finance receivables - acquisitions - (214,666) - (186,379) - (155,613) Finance receivables - liquidations - 143,242 - 130,293 - 114,662 Proceeds from sales of finance receivables - 58,369 - 48,178 - 27,681 Operating leases - acquisitions (6,709) (15,174) (6,415) (16,750) (6,397) (17,128) Operating leases - liquidations 6,149 9,844 4,243 7,836 5,609 9,777 Investments in companies, net of cash acquired (4,302) (2,077) (2,706) (2,402) (971) (173) Net investing activity with Financing and Insurance Operations (1,069) - 75 - 338 - Other 3,281 93 (924) 732 (889) (242) ------ ------ ------ ------ ----- ------ Net cash used in investing activities (11,313) (22,460) (14,051) (20,868) (7,000) (22,561) ------ ------ ------ ------ ----- ------ Cash flows from financing activities Net increase (decrease) in loans payable 142 7,723 140 (2,500) (94) 8,280 Long-term debt - borrowings 5,279 22,414 9,090 26,471 2,937 21,098 Long-term debt - repayments (6,196) (16,196) (8,281) (13,078) (1,492) (11,377) Net financing activity with Automotive, Communications Services, and Other Operations - 1,069 - (75) - (338) Repurchases of common and preference stocks (1,613) - (3,870) - (3,089) - Proceeds from issuing common and preference stocks 2,792 - 2,090 - 343 - Cash dividends paid to stockholders (1,294) - (1,367) - (1,388) - ----- ------ ----- ------ ----- ------ Net cash (used in) provided by financing activities (890) 15,010 (2,198) 10,818 (2,783) 17,663 ----- ------ ----- ------ ----- ------ Effect of exchange rate changes on cash and cash equivalents (249) (6) (206) - 315 2 Net transactions with Automotive/ Financing Operations 970 (970) 185 (185) 1,135 (1,135) --- ---- --- ---- ----- ------ Net cash (used in) provided by continuing operations (611) 453 (126) 566 410 (431) Net cash provided by (used in) discontinued operations (Note 1) - - 128 - (378) - ----- ----- --- ----- --- ----- Net (decrease) increase in cash and cash equivalents (611) 453 2 566 32 (431) Cash and cash equivalents at beginning of the year 9,730 712 9,728 146 9,696 577 ----- ----- ----- ----- ----- ----- Cash and cash equivalents at end of the year $9,119 $1,165 $9,730 $712 $9,728 $146 ====== ====== ====== ==== ====== ====
Reference should be made to the notes to consolidated financial statements. II-18
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, and 1998 Accumulated Total Other Total Capital Capital Comprehensive Retained Comprehensive Stockholders' Stock Surplus Income Earnings Loss Equity ----- ------- ------ -------- ---- ------ (dollars in millions) Balance at January 1, 1998 $1,167 $15,369 $5,416 $(4,368) $17,584 Shares reacquired (75) (3,105) - - (3,180) Shares issued 12 397 - - 409 Comprehensive income: Net income - - $2,956 2,956 - 2,956 ----- Other comprehensive income (loss): Foreign currency translation adjustments - - (279) - - - Unrealized losses on securities - - (23) - - - Minimum pension liability adjustment - - (1,027) - - - ----- Other comprehensive loss - - (1,329) - (1,329) (1,329) ----- Comprehensive income - - $1,627 - - - ===== Cash dividends - - (1,388) - (1,388) ----- ------ ------ ----- ------- Balance at December 31, 1998 1,104 12,661 6,984 (5,697) 15,052 Shares reacquired (76) (3,794) - - (3,870) Shares issued 19 3,588 - - 3,607 Comprehensive income: Net income - - $6,002 6,002 - 6,002 ----- Other comprehensive income (loss): Foreign currency translation adjustments - - (944) - - - Unrealized gains on securities - - 515 - - - Minimum pension liability adjustment - - 4,968 - - - ----- Other comprehensive income - - 4,539 - 4,539 4,539 ----- Comprehensive income - - $10,541 - - - ====== Cash dividends - - (1,367) - (1,367) Delphi initial public offering (Note 1) - 1,244 - 1,244 Delphi spin-off (Note 1) - 95 (4,658) - (4,563) ----- ------ ------ ----- ------ Balance at December 31, 1999 1,047 13,794 6,961 (1,158) 20,644 Shares reacquired (184) (9,626) - - (9,810) Shares issued 139 16,852 - - 16,991 Comprehensive income: Net income - - $4,452 4,452 - 4,452 ----- Other comprehensive income (loss): Foreign currency translation adjustments - - (469) - - - Unrealized losses on securities - - (415) - - - Minimum pension liability adjustment - - 76 - - - ----- Other comprehensive loss - - (808) - (808) (808) ----- Comprehensive income - - $3,644 - - - ===== Cash dividends - - (1,294) - (1,294) ----- ------ ------ ----- ------ Balance at December 31, 2000 $1,002 $21,020 $10,119 $(1,966) $30,175 ===== ====== ====== ===== ====== Reference should be made to the notes to consolidated financial statements.
II-19 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. Significant Accounting Policies Principles of Consolidation The consolidated financial statements include the accounts of General Motors Corporation (hereinafter referred to as the Corporation) and domestic and foreign subsidiaries that are more than 50% owned, principally General Motors Acceptance Corporation and Subsidiaries (GMAC) and Hughes Electronics Corporation and Subsidiaries (Hughes), (collectively referred to as "General Motors" or "GM"). General Motors' share of earnings or losses of associates, in which at least 20% of the voting securities is owned, is included in the consolidated operating results using the equity method of accounting, except for investments where GM is not able to exercise significant influence over the operating and financial decisions of the investee, in which case, the cost method of accounting is used. The financial data related to Delphi Automotive Systems Corporation (Delphi) is presented as discontinued operations for the periods ended December 31, 1999 and 1998. GM encourages reference to the GMAC Annual Report on Form 10-K for the period ended December 31, 2000, filed separately with the Securities and Exchange Commission, and the Hughes consolidated financial statements included as Exhibit 99 to this GM Annual Report on Form 10-K for the period ended December 31, 2000, and related Hughes Annual Report on Form 10-K filed separately with the Securities and Exchange Commission. Certain amounts for 1999 and 1998 have been reclassified to conform with the 2000 classifications. Nature of Operations GM presents separate supplemental consolidating statements of income and other 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. These transactions consist principally of borrowings and other financial services provided by Financing and Insurance Operations to Automotive, Communications Services, and Other Operations. Use of Estimates in the Preparation of the Financial Statements The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect amounts reported therein. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may differ from those estimates. Revenue Recognition Sales are generally recorded when products are shipped (when title and risks and rewards of ownership have passed), or when services are rendered to independent dealers or other third parties. Provisions for dealer sales incentives, allowances, and rebates are made at the time of vehicle sales. Incentives related to vehicles previously sold are recognized as reductions to sales when announced. Financing revenue is recorded over the terms of the receivables using the interest method. Income from operating lease assets is recognized on a straight-line basis over the scheduled lease term. Insurance premiums are earned on a basis related to coverage provided over the terms of the policies. Commission, premium taxes, and other costs incurred in acquiring new business are deferred and amortized over the terms of the related policies on the same basis as premiums are earned. The liability for losses and loss expenses includes a provision for unreported losses, based on past experience, net of the estimated salvage and subrogation recoverable. Product-Related Expenses Advertising and sales promotion, research and development, and other product-related costs are charged to expense as incurred. Provisions for estimated expenses related to product warranty are made at the time the products are sold. Advertising expense was $4.3 billion in 2000, $4.5 billion in 1999, and $3.7 billion in 1998. Research and development expense was $6.6 billion in 2000, $6.8 billion in 1999, and $6.3 billion in 1998. II-20 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued NOTE 1. Significant Accounting Policies (continued) Depreciation and Amortization Depreciation of real estate, plants and equipment is provided based on the estimated useful lives of property groups, generally using accelerated methods, which accumulate depreciation of approximately two-thirds of the depreciable cost during the first half of the estimated useful lives. Equipment on operating leases is depreciated on a straight-line basis over the term of the lease agreement. The difference between the net book value and the proceeds of sale or salvage on items disposed of is accounted for as a charge against or credit to the provision for depreciation. Expenditures for special tools are amortized over their estimated useful lives, primarily using the units of production method. Replacement of special tools for reasons other than changes in products is charged directly to cost of sales. Goodwill is amortized on a straight-line basis over periods ranging from 20 to 40 years. Internal-Use Software As of January 1, 1999, GM adopted Statement of Position 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use, which, on a prospective basis, revised the accounting for software development costs. Based on this accounting standard, certain internal-use software costs historically expensed are now capitalized once specific criteria are met and these costs are amortized on a straight-line basis over a three-year period. The adoption of this statement did not have a material impact on the Corporation's financial statements. Valuation of Long-Lived Assets GM periodically evaluates the carrying value of long-lived assets to be held and used and long-lived assets to be disposed of, including goodwill and other intangible assets, when events and circumstances warrant such a review. If the carrying value of a long-lived asset is considered impaired, a loss is recognized based on the amount by which the carrying value exceeds the fair market value of the long-lived asset for assets to be held and used, or the amount by which the carrying value exceeds the fair market value less cost to dispose for assets to be disposed. Fair market value is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risk involved. Foreign Currency Translation Foreign currency exchange transaction and translation losses on an after-tax basis included in consolidated net income in 2000, 1999, and 1998, pursuant to Statement of Financial Accounting Standards (SFAS) No. 52, Foreign Currency Translation, amounted to $100 million, $162 million, and $298 million, respectively. Stock-Based Compensation As permitted by SFAS No. 123, Accounting for Stock-Based Compensation, GM applies the recognition and measurement principles of Accounting Principles Board Opinion No. 25 to its stock options and other stock-based employee compensation awards. Cash and Cash Equivalents Cash equivalents are defined as short-term, highly liquid investments with original maturities of 90 days or less. Statement of Cash Flows Supplementary Information Years Ended December 31, ---------------------------- 2000 1999 1998 ---- ---- ---- (dollars in millions) Automotive, Communications Services, and Other Operations - ----------------------------------- Changes in other operating assets and liabilities were as follows: Accounts receivable $(625) $(659) $(80) Prepaid expenses and other deferred charges 66 (623) 217 Inventories (297) (66) (494) Accounts payable 1,254 5,606 1,249 Deferred taxes and income taxes payable (629) (160) (2,315) Accrued expenses and other liabilities 955 3,425 1,513 --- ----- ----- Total $724 $7,523 $90 === ===== == Cash paid for interest and income taxes was as follows: Interest $968 $526 $435 Income taxes $2,310 $2,166 $1,132 II-21 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued NOTE 1. Significant Accounting Policies (continued) Statement of Cash Flows Supplementary Information (concluded) During 2000, Automotive, Communications Services, and Other Operations made investments in companies, net of cash acquired of approximately $4.3 billion. This amount consists primarily of GM's purchase of a 20% equity interest in Fuji Heavy Industries Ltd. (Fuji) for approximately $1.3 billion and GM's acquisition of a 20% interest in Fiat Auto Holdings, B.V. (Fiat Auto) for $2.4 billion. In addition, Fiat S.p.A. purchased approximately 32 million shares of GM $1-2/3 par value common stock for $2.4 billion which is included in proceeds from issuing common and preference stocks. Years Ended December 31, ----------------------------- Financing and Insurance Operations 2000 1999 1998 - ---------------------------------- ---- ---- ---- (dollars in millions) Changes in other operating assets and liabilities were as follows: Other receivables $(726) $(269) $206 Other assets (29) (83) (36) Accounts payable 3,155 114 858 Deferred taxes and other liabilities 105 215 440 ----- --- ----- Total $2,505 $(23) $1,468 ===== == ===== Cash paid for interest and income taxes was as follows: Interest $8,511 $6,618 $5,695 Income taxes $475 $214 $138 Derivative Instruments GM is party to a variety of foreign exchange, interest rate, and commodity forward contracts and options entered into in connection with the management of its exposure to fluctuations in foreign exchange rates, interest rates, and certain commodity prices. These financial exposures are managed in accordance with corporate policies and procedures. Foreign exchange forward and option contracts are accounted for as hedges to the extent they are designated, and are effective, as hedges of firm foreign currency commitments. Additionally, certain foreign exchange option contracts receive hedge accounting treatment to the extent such contracts hedge certain anticipated foreign currency transactions. Gains and losses on such contracts are deferred and recognized with the related transactions. Gains and losses from interest rate swaps and options that are designated, and are effective, as hedges of underlying debt obligations are used to adjust interest expense recognized over the lives of the underlying debt agreements. Gains and losses from terminated hedge contracts are deferred and amortized over the remaining period of the original swap or the remaining term of the underlying exposure, whichever is shorter. Open interest rate contracts are reviewed regularly to ensure that they remain effective as hedges of interest rate exposure. GM also enters into commodity forward and option contracts. Since GM has the discretion to settle these transactions either in cash or by taking physical delivery, these contracts are not considered financial instruments for accounting purposes. Commodity forward contracts and options are accounted for as hedges to the extent they are designated, and are effective, as hedges of firm or anticipated commodity purchase contracts. Gains and losses on such contracts are deferred and recognized with the related transactions. Derivative instruments that do not qualify for hedge accounting treatment are marked to market and the related gains and losses are included in net income. New Accounting Standards In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. In June 2000, the FASB issued SFAS No. 138, which amended certain provisions of SFAS No. 133. GM adopted SFAS No. 133, as amended, on January 1, 2001. GM will record a one-time after-tax charge to income for the initial adoption of SFAS No. 133 totaling $6 million, as well as an after-tax unrealized loss of $77 million to other comprehensive income as of January 1, 2001. The outcome of pending issues at the FASB and the Derivatives Implementation Group could impact the amount of the cumulative transition adjustment presented herein. 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 does not expect this statement to have a material impact on GM's results of operations and financial position. II-22 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued NOTE 1. Significant Accounting Policies (concluded) Discontinued Operations On February 5, 1999, 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. In total, the complete separation of Delphi in the year ended December 31, 1999 resulted in a reduction to stockholders' equity of approximately $3.3 billion. The financial data related to GM's investment in Delphi through May 28, 1999 is classified as discontinued operations for the periods ended December 31, 1999 and 1998. Delphi net sales (including sales to GM) included in discontinued operations totaled $12.5 billion and $28.5 billion for the years ended December 31, 1999 and 1998, respectively. Income (loss) from Delphi discontinued operations of $426 million and $(93) million for the years ended December 31, 1999 and 1998, is reported net of income tax expense (benefit) of $314 million and $(173) million, respectively. NOTE 2. Asset Impairments GM periodically evaluates the carrying value of long-lived assets to be held and used and long-lived assets to be disposed of, when events and circumstances warrant such review. These evaluations and reviews are generally done in conjunction with the annual business planning cycle. In 2000, GM recorded pre-tax charges against income for asset impairments of $917 million ($587 million after-tax, or $0.99 per share of GM $1-2/3 par value common stock). GM did not record any such pre-tax charges against income in 1999. In 1998, GM recorded pre-tax charges against income of $122 million ($165 million after-tax, or $0.24 per share of GM $1-2/3 par value common stock). These charges are components of the following line items in the income statement: Years Ended December 31, ------------------------ 2000 1999 1998 ---- ---- ---- (dollars in millions) Total net sales and revenues $315 $ - $- Cost of sales and other expenses 602 - 122 --- -- --- Total $917 - $122 === == === In 2000, the pre-tax charges were comprised of $572 million ($356 million after-tax) for GM North America (GMNA), and $345 million ($231 million after-tax) for GM Europe (GME). The amount is related to the write-down of special tools and equipment on operating leases as a result of the phase-out of the Oldsmobile division as the current model lineup product lifecycles come to an end, or until the models are no longer economically viable, and the reduction in production capacity at GME, including the restructuring of Vauxhall Motors Limited's manufacturing operations in the U.K. In 1998, the pre-tax charges were comprised of $37 million ($38 million after-tax) for GMNA, $48 million ($30 million after-tax) for GM Latin America/Africa/Mid-East (GMLAAM), and $37 million ($97 million after-tax) for GM Asia Pacific (GMAP). The amount represents the write-down of certain tooling and other property, plant, and equipment that was determined to be impaired. NOTE 3. Postemployment Benefit Costs GM records liabilities for termination and other postemployment benefits to be paid pursuant to union or other contractual agreements in connection with closed plants in North America. GM reviews the adequacy and continuing need for these liabilities on an annual basis in conjunction with its year-end production and labor forecasts. Furthermore, GM reviews the reasonableness of these liabilities on a quarterly basis. In the fourth quarter of 2000, GM recognized postemployment benefits liabilities associated with reductions in production capacity and conversions at the following U.S. plants: Oklahoma City, Oklahoma; Delta Engine, Lansing, Michigan; Spring Hill, Tennessee; and Wilmington, Delaware. The 2000 charge relates to approximately 4,000 U.S. employees and increased cost of sales by $473 million ($294 million after-tax, or $0.50 per share of GM $1-2/3 par value common stock). II-23 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued NOTE 3. Postemployment Benefit Costs (concluded) In the fourth quarter of 1999, as a result of several factors, including the separation of Delphi from GM, a stronger than expected U.S. vehicle market, and changes to the National Labor Agreement between GM and the UAW, GM reversed postemployment benefits liabilities for employees at closed plants through an adjustment to cost of sales totaling approximately $892 million ($553 million after-tax, or $0.84 per share of GM $1-2/3 par value common stock). The 1999 adjustment of postemployment benefit costs reflects the decrease in the number of excess employees at December 31, 1999, as compared with December 31, 1998, as well as a shortened duration of benefit payments based on current redeployment assumptions. The liability for postemployment benefits as of December 31, 2000 totals approximately $665 million, with anticipated spending of approximately 86% over the next three years. The following tables summarize the activity from December 31, 1998 through December 31, 2000 for this liability (dollars in millions):
December 31, 1999 2000 Activity December 31, 2000 ------------------- --------------------------------- ------------------- Excess Interest Excess Plant Employees Balance Spending Accretion Adjustment Balance Employees ----- --------- ------- -------- --------- ---------- ------- --------- Buick City/ Flint V-6 403 $50 $(19) $3 $ - $34 313 Kalamazoo 459 43 (18) 2 - 27 289 Flint V-8 659 51 (46) 2 - 7 106 Van Nuys 366 96 (23) 5 - 78 329 Tarrytown 61 6 (2) - - 4 61 Framingham 91 16 (4) 1 - 13 37 Danville 16 4 (1) - - 3 7 Delta Engine - - - - 26 26 664 Oklahoma City - - - - 221 221 2,080 Spring Hill - - - - 107 107 444 Wilmington - - - - 119 119 879 Other 615 29 (3) - - 26 572 ----- ---- ---- --- --- --- --- Total 2,670 $295 $(116) $13 $473 $665 5,781 ===== === === == === === =====
December 31, 1998 1999 Activity December 31, 1999 ------------------- --------------------------------- ------------------- Excess Interest Excess Plant Employees Balance Spending Accretion Adjustment Balance Employees ----- --------- ------- -------- --------- ---------- ------- --------- Buick City/ Flint V-6 (1) 2,123 $537 $(56) $29 $(460) $50 403 Kalamazoo 1,254 229 (46) 12 (152) 43 459 Flint V-8 876 224 (30) 11 (154) 51 659 Van Nuys 396 156 (17) 8 (51) 96 366 Tarrytown 79 30 (4) 2 (22) 6 61 Framingham 99 21 (2) 1 (4) 16 91 Danville 47 18 (1) 1 (14) 4 16 Other 658 72 (12) 4 (35) 29 615 ------ ----- ---- --- ----- ---- ----- Total 5,532 $1,287 $(168) $68 $(892) $295 2,670 ===== ===== === == === === =====
(1)The reduction in excess employees at the Buick City assembly and Flint V-6 engine plants was a result of redeployment to other GM and Delphi plants (1,239) and retirement (481). NOTE 4. Marketable Securities Marketable securities held by GM are classified as available-for-sale, except for certain mortgage-related securities, which are classified as trading securities. Unrealized gains and losses, net of related income taxes, for available-for-sale securities are included as a separate component of stockholders' equity. Unrealized gains and losses for trading securities are included in income on a current basis. GM determines cost on the specific identification basis. II-24 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued NOTE 4. Marketable Securities (continued) Automotive, Communications Services, and Other Operations - --------------------------------------------------------- Investments in marketable securities were as follows (dollars in millions): December 31, 2000 -------------------------------------- Fair Unrealized Unrealized Cost Value Gains Losses ---- ----- ----- ------ Type of security Bonds, notes, and other securities United States government and agencies $90 $91 $ 1 $ - States and municipalities 9 9 - - Corporate debt securities and other 1,063 1,061 - 2 ----- ----- -- -- Total marketable securities $1,162 $1,161 $ 1 $ 2 ===== ===== == == December 31, 1999 --------------------------------------- Fair Unrealized Unrealized Cost Value Gains Losses ---- ----- ----- ------ Type of security Bonds, notes, and other securities United States government and agencies $533 $528 $- $5 States and municipalities 21 21 - - Corporate debt securities and other 1,154 1,149 1 6 ----- ----- - --- Total marketable securities $1,708 $1,698 $1 $11 ===== ===== = == Debt securities totaling $256 million mature within one year and $905 million mature after one through five years. Proceeds from sales of marketable securities totaled $1.3 billion in 2000, $2.0 billion in 1999, and $4.4 billion in 1998. The gross gains related to sales of marketable securities were $1 million, $21 million, and $17 million in 2000, 1999, and 1998, respectively. The gross losses related to sales of marketable securities were $12 million, $6 million, and $11 million in 2000, 1999, and 1998, respectively. Financing and Insurance Operations - ---------------------------------- Investments in securities were as follows (dollars in millions): December 31, 2000 -------------------------------------- Fair Unrealized Unrealized Cost Value Gains Losses ---- ----- ----- ------ Type of security Bonds, notes, and other securities United States government and agencies $556 $565 $10 $ 1 States and municipalities 1,492 1,567 81 6 Mortgage-backed securities 387 384 14 17 Corporate debt securities and other 2,520 2,506 47 61 ----- ----- --- -- Total debt securities available-for-sale 4,955 5,022 152 85 Mortgage-backed securities held for trading purposes 3,516 3,516 - - ----- ----- ----- ----- Total debt securities 8,471 8,538 152 85 Equity securities 766 1,057 395 104 ------ ----- --- --- Total investment in securities $9,237 $9,595 $547 $189 ===== ===== === === II-25 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued NOTE 4. Marketable Securities (concluded) Investments in securities were as follows (dollars in millions): December 31, 1999 -------------------------------------- Fair Unrealized Unrealized Cost Value Gains Losses ---- ----- ----- ------ Type of security Bonds, notes, and other securities United States government and agencies $488 $476 $- $12 States and municipalities 1,534 1,540 47 41 Mortgage-backed securities 480 453 10 37 Corporate debt securities and other 2,515 2,491 39 63 ----- ----- -- --- Total debt securities available-for-sale 5,017 4,960 96 153 Mortgage-backed securities held for trading purposes 2,889 2,889 - - ----- ----- --- --- Total debt securities 7,906 7,849 96 153 Equity securities 685 1,261 634 58 ------ ----- --- ---- Total investment in securities $8,591 $9,110 $730 $211 ===== ===== === === Debt securities available-for-sale totaling $891 million mature within one year, $2.1 billion mature after one through five years, $797 million mature after five years through 10 years, and $1.3 billion mature after 10 years. Proceeds from sales of marketable securities totaled $3.5 billion in 2000, $2.9 billion in 1999, and $3.6 billion in 1998. The gross gains related to sales of marketable securities were $315 million, $292 million, and $218 million in 2000, 1999, and 1998, respectively. The gross losses related to sales of marketable securities were $147 million, $126 million, and $49 million in 2000, 1999, and 1998, respectively. NOTE 5. Finance Receivables and Securitizations Finance Receivables - Net Finance receivables - net included the following (dollars in millions): December 31, ---------------------- 2000 1999 ---- ---- Retail $51,337 $46,036 Wholesale 26,993 23,987 Commercial 5,546 3,550 Leasing and lease financing 2,178 2,681 Term loans to dealers and others 12,565 9,640 ------ ------ Total finance receivables 98,619 85,894 Less - Unearned income (4,872) (4,153) Allowance for financing losses (1,332) (1,114) ------ ------ Total finance receivables - net $92,415 $80,627 ====== ====== Finance receivables that originated outside the U.S. are $21.4 billion and $20.8 billion at December 31, 2000 and 1999, respectively. The aggregate amount of total finance receivables maturing in each of the five years following December 31, 2000 is as follows: 2001-$52.5 billion; 2002-$18.1 billion; 2003-$14.9 billion; 2004-$7.3 billion; 2005-$3.8 billion; and 2006 and thereafter-$2.0 billion. Securitizations of Finance Receivables and Mortgage Loans The Corporation has sold retail finance receivables through special purpose subsidiaries with principal aggregating $5.2 billion in 2000, $5.1 billion in 1999, and $1.6 billion in 1998. These subsidiaries generally retain a subordinated investment of no greater than 6.25% of the total receivables pool and sell the remaining portion. Net pre-tax gains relating to such sales amounted to $14 million in 2000, $64 million in 1999, and $31 million in 1998. The Corporation's sold retail finance receivable servicing portfolio amounted to $7.0 billion and $5.6 billion at December 31, 2000 and 1999, respectively. II-26 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued NOTE 5. Finance Receivables and Securitizations (continued) Securitizations of Finance Receivables and Mortgage Loans (continued) The Corporation has sold wholesale receivables on a revolving basis resulting in decreases in wholesale outstandings of $10.0 billion and $8.4 billion at December 31, 2000 and 1999, respectively. The Corporation is committed to sell eligible wholesale receivables arising in certain dealer accounts. During the years 2000, 1999, and 1998, there were no gains recorded on the sale of wholesale receivables. Due to the short-term nature of wholesale receivables, the fair value of retained interests in wholesale securitizations is assumed to approximate cost. When the Corporation securitizes retail and wholesale receivables, it retains interest-only strips, all or a portion of senior and subordinated tranches, servicing rights, and cash reserve accounts, all of which are retained interests in the securitized receivables. Interest-only strip receivables, cash deposits, and other related amounts are generally restricted assets and subject to limited recourse provisions. With respect to retained servicing responsibilities, the Corporation receives annual servicing fees approximating 2.0% (for retail receivables) and 1.0% (for wholesale receivables) of the outstanding balance. Additionally, the Corporation receives the rights to future cash flows arising after the investors in the securitization trust have received their contracted return. During 2000, GM sold residential, commercial, and other mortgage loans in securitization transactions, generally retaining servicing responsibilities and, in some cases, subordinated interests. In 2000, 1999 and 1998, GM recognized pre-tax gains of $723 million, $603 million, and $320 million, respectively, on the securitization of residential and commercial mortgages. At December 31, 2000, total mortgage loans owned or securitized totaled $86.8 billion, of which $79.1 billion had been securitized, $5.8 billion was held for sale, and $1.9 billion was held for investment (see Note 11). At that date, mortgage loans owned or securitized which were 60 days or more past due, totaled $3.0 billion. The investors and the securitization trusts associated with the sales of finance receivables and mortgage loans have no recourse to GM's other assets for failure of debtors to pay when due. The Corporation's retained interests are subordinate to the investors' interests. Their fair value is subject to credit, prepayment, and interest rate risks on the transferred assets. The resulting gain or loss on securitization transactions is determined by allocating the carrying amount of the loans or finance receivables between the securities sold and the interests retained based on their relative fair value at the date of sale. Fair values are based on quoted market prices if available. Otherwise, the fair value of the retained interests is estimated based on the present value of expected future cash flows. Key economic assumptions used in measuring the fair value of retained interests at the date of the securitization, for securitizations completed during 2000, were as follows: Mortgage Loans Retail Finance ------------------------------ Receivables Residential Commercial -------------- ----------- ---------- Prepayment speed 1.2% to 1.7% 10.5% to 38.0% 0.0% to 68.0% Weighted-average life (in years) 1.4 to 1.7 1.7 to 6.3 2.6 to 10.4 Residual cash flows discounted at 9.5% to 12.0% 6.5% to 14.0% 12.7% to 34.0% Variable returns to transferees One month LIBOR Forward benchmark plus contractual interest rate yield curve spread ranging plus contractual spread from 7 to 9 basis points Expected credit losses used in measuring the fair value of retained interests in residential and commercial mortgage loans securitized during 2000 were 0.0% to 21.7% and 0.0% to 2.0%, respectively, at the date of securitization. II-27 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued NOTE 5. Finance Receivables and Securitizations (concluded) Securitization of Finance Receivables and Mortgage Loans (concluded) At December 31, 2000, key economic assumptions and the sensitivity of the current fair value of residual cash flows to immediate 10% and 20% adverse changes in those assumptions were as follows (dollars in millions): Mortgage Loans Retail Finance ------------------------------ Receivables Residential Commercial -------------- ----------- ---------- Carrying amount/fair value of retained interests $1,196 $2,368 $292 Prepayment speed (annual rate) 1.2% to 1.7% 12.7% to 38.9% 0.0% to 68.0% Reduction in fair value due to 10% adverse change $3 $160 $1 Reduction in fair value due to 20% adverse change $6 $313 $1 Residual cash flows discount rate (annual rate) 9.3% to 12.0% 6.5% to 13.9% 9.9% to 34.0% Reduction in fair value due to 10% adverse change $4 $89 $23 Reduction in fair value due to 20% adverse change $9 $168 $37 Variable returns to transferees Reduction in fair value due to 10% adverse change $4 $27 $ - Reduction in fair value due to 20% adverse change $7 $55 $ - Expected credit losses used in the calculation of the fair value of residual cash flows at December 31, 2000 for residential and commercial mortgage loans were 0.0% to 21.7% and 0.0% to 3.0%, respectively. An immediate 10% adverse change in these assumptions would reduce the fair value of such cash flows by $97 million and $2 million for residential and commercial mortgage loans, respectively. An immediate 20% adverse change in these assumptions would reduce the fair value of such cash flows by $191 million and $4 million for residential and commercial mortgage loans, respectively. These sensitivities are hypothetical and should be used with caution. As the figures indicate, changes in fair value based on a 10% variation in assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. Also, in this table, the effect of a variation in a particular assumption on the fair value of the retained interest is calculated without changing any other assumption. In reality, changes in one factor may result in changes in another (for example, increases in market interest rates may result in lower prepayments and increased credit losses), which might magnify or counteract the sensitivities. Further, these sensitivities show only the change in the asset balances and do not show any expected changes in the fair value instruments used to manage the interest rate and prepayment risks associated with these assets, as discussed in Note 19. The following summarizes cash flows received from (paid to) securitization trusts during the year ended December 31, 2000 (dollars in millions): Mortgage Loans Retail Finance ------------------------------ Receivables Residential Commercial --------------- ----------- ---------- Proceeds from new securitizations $3,717 $24,959 $2,476 Servicing fees received 190 212 13 Other cash flows received on retained interests 2,181 483 46 Pool buybacks and purchases of delinquent assets (530) (282) - Servicing advances (75) (616) (82) Repayments of servicing advances 66 586 74 Mortgage Servicing Rights The fair value of GM's mortgage servicing rights totaled $4.1 billion and $3.5 billion at December 31, 2000 and 1999, respectively. The key economic assumptions used in the calculation of such fair values are prepayment speeds and discount rates. At December 31, 2000, a prepayment speed of 13.6% and a discount rate of 10.6% were used in the calculation of fair value. At that date, an immediate 10% and 20% adverse change in the assumed prepayment speed would reduce the fair value of mortgage servicing rights by $135 million and $262 million, respectively. An immediate 10% and 20% adverse change in the assumed discount rate would reduce the fair value of mortgage servicing rights by $113 million and $218 million, respectively. These sensitivities are hypothetical and should be used with caution for reasons similar to those discussed above. II-28 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued NOTE 6. Inventories Inventories included the following for Automotive, Communications Services, and Other Operations (dollars in millions): December 31, ----------------- 2000 1999 ---- ---- Productive material, work in process, and supplies $5,555 $5,505 Finished product, service parts, etc. 7,319 7,023 ----- ------- Total inventories at FIFO 12,874 12,528 Less LIFO allowance 1,929 1,890 ----- ------- Total inventories (less allowances) $10,945 $10,638 ====== ====== Inventories are stated generally at cost, which is not in excess of market. The cost of approximately 90% of U.S. inventories is determined by the last-in, first-out (LIFO) method. Generally, the cost of all other inventories is determined by either the first-in, first-out (FIFO) or average cost methods. NOTE 7. Equipment on Operating Leases The Corporation has significant investments in the residual values of its leasing portfolios. The residual values represent the estimate of the values of the assets at the end of the lease contracts and are initially recorded based on appraisals and estimates. Realization of the residual values is dependent on the Corporation's future ability to market the vehicles under then prevailing market conditions. Management reviews residual values periodically to determine that recorded amounts are appropriate. Automotive, Communications Services, and Other Operations - --------------------------------------------------------- Equipment on operating leases and other assets was as follows (dollars in millions): December 31, ------------------ 2000 1999 ---- ---- Equipment on operating leases $11,268 $10,754 Less accumulated depreciation (1,335) (1,099) ------ ------ Net book value $9,933 $9,655 ====== ===== Current $5,699 $5,744 Noncurrent (Note 11) 4,234 3,911 ----- ----- Net book value $9,933 $9,655 ===== ===== Financing and Insurance Operations - ---------------------------------- Equipment on operating leases included in investment in leases and other receivables was as follows (dollars in millions): December 31, ------------------- 2000 1999 Equipment on operating leases $41,295 $41,522 Less accumulated depreciation (8,762) (8,336) ------- ------- Net book value $32,533 $33,186 ====== ====== The lease payments to be received related to equipment on operating leases maturing in each of the five years following December 31, 2000 are as follows: Automotive, Communications Services, and Other Operations - 2001-$2.1 billion; 2002-$580 million; 2003-$544 million; 2004-$505 million; and 2005 - $450 million. Financing and Insurance Operations - 2001-$7.2 billion; 2002-$4.7 billion; 2003-$1.7 billion; 2004-$171 million; and 2005 - $10 million. II-29 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued NOTE 8. Income Taxes Income from continuing operations before income taxes and minority interests included the following (dollars in millions): Years Ended December 31, ------------------------ 2000 1999 1998 ---- ---- ---- U.S. income $3,019 $4,156 $1,783 Foreign income 4,145 4,891 3,161 ----- ----- ----- Total $7,164 $9,047 $4,944 ===== ===== ===== The provision for income taxes was estimated as follows (dollars in millions): Years Ended December 31, ------------------------ 2000 1999 1998 ---- ---- ---- Income taxes estimated to be payable currently U.S. federal $45 $156 $83 Foreign 971 1,368 1,952 U.S. state and local 72 308 295 ------ ------ ------ Total payable currently 1,088 1,832 2,330 ----- ----- ----- Deferred income tax expense (credit) - net U.S. federal 742 1,008 354 Foreign 281 244 (852) U.S. state and local 282 34 (196) ----- ------ --- Total deferred 1,305 1,286 (694) ----- ----- ----- Total income taxes $2,393 $3,118 $1,636 ===== ===== ===== Annual tax provisions include amounts considered sufficient to pay assessments that may result from examination of prior year tax returns; however, the amount ultimately paid upon resolution of issues raised may differ materially from the amount accrued. Provisions are made for estimated U.S. and foreign income taxes, less available tax credits and deductions, which may be incurred on the remittance of the Corporation's share of subsidiaries' undistributed earnings not deemed to be permanently invested. Taxes have not been provided on foreign subsidiaries' earnings, which are deemed essentially permanently reinvested, of $13.4 billion at December 31, 2000, and $13.2 billion at December 31, 1999. Quantification of the deferred tax liability, if any, associated with permanently reinvested earnings is not practicable. A reconciliation of the provision for income taxes compared with the amounts at the U.S. federal statutory rate was as follows (dollars in millions): Years Ended December 31, ------------------------ 2000 1999 1998 ---- ---- ---- Tax at U.S. federal statutory income tax rate $2,507 $3,166 $1,730 Foreign rates other than 35% 78 (109) 1 Taxes on unremitted earnings of subsidiaries - 138 92 Tax credits (45) (207) (203) Subsidiary settlement of affirmative claim with IRS - - (92) Other adjustments (147) 130 108 ----- ----- ----- Total income tax $2,393 $3,118 $1,636 ===== ===== ===== Deferred income tax assets and liabilities for 2000 and 1999 reflect the impact of temporary differences between amounts of assets, liabilities, and equity for financial reporting purposes and the bases of such assets, liabilities, and equity as measured by tax laws as well as tax loss and tax credit carryforwards. II-30 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued NOTE 8. Income Taxes (concluded) Temporary differences and carryforwards that gave rise to deferred tax assets and liabilities included the following (dollars in millions): December 31, ------------------------------------------ 2000 1999 ---- ---- Deferred Tax Deferred Tax ------------ ------------ Assets Liabilities Assets Liabilities ------ ----------- ------ ----------- Postretirement benefits other than pensions $14,393 $ - $14,351 $ - Employee benefit plans 2,884 8,182 3,189 7,596 Policy and warranty reserves 2,405 - 2,471 - Sales and product reserves 2,547 - 2,587 - Depreciation and amortization 652 3,742 577 3,696 Tax carryforwards 3,202 - 3,184 - Lease transactions - 3,911 - 3,844 Miscellaneous foreign 4,150 1,372 3,233 887 Other 7,287 4,493 6,718 4,249 ------ ------ ------ ------ Subtotal 37,520 21,700 36,310 20,272 Valuation allowances (717) - (789) - ------ ------ ------ ------ Total deferred taxes $36,803 $21,700 $35,521 $20,272 ====== ====== ====== ====== Of the tax carryforwards, approximately 26% relates to the alternative minimum tax credit (which can be carried forward indefinitely) and approximately 18% relates to the U.S. state net operating loss carryforwards which will expire in the years 2001-2020 if not used. However, a substantial portion of the U.S. state net operating loss carryforwards will not expire until after the year 2005. The other tax credit carryforwards, consisting primarily of research and experimentation credits, will expire in the years 2004, 2011-2012, and 2018-2020 if not used. NOTE 9. Property - Net Property - net included the following for Automotive, Communications Services, and Other Operations (dollars in millions): Estimated December 31, Useful ---------------- Lives (Years) 2000 1999 ------------- ---- ---- Land - $924 $751 Buildings and land improvements 2-40 12,997 13,898 Machinery and equipment 3-30 40,900 41,341 Construction in progress - 4,664 3,787 ------- ------- Real estate, plants, and equipment 59,485 59,777 Less accumulated depreciation (32,875) (34,363) ------ ------ Real estate, plants, and equipment - net 26,610 25,414 Special tools - net 7,367 7,365 ------- ------- Total property - net $33,977 $32,779 ====== ====== Financing and Insurance Operations had net property of $1.4 billion and $496 million recorded in other assets at December 31, 2000 and 1999, respectively. II-31 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued NOTE 9. Property - Net (concluded) Depreciation and amortization expense was as follows (dollars in millions): Years Ended December 31, ----------------------------- 2000 1999 1998 ---- ---- ---- Automotive, Communications Services, and Other Operations Depreciation $4,368 $4,155 $3,772 Amortization of special tools 2,753 2,492 2,350 Amortization of intangible assets (Note 10) 308 226 105 ----- ----- ----- Total $7,429 $6,873 $6,227 ===== ===== ===== Financing and Insurance Operations Depreciation and amortization expense $5,982 $5,445 $4,920 ===== ===== ===== NOTE 10. Intangible Assets - Net Automotive, Communications Services, and Other Operations had net intangible assets of $7.6 billion and $8.5 billion at December 31, 2000 and December 31, 1999, respectively. Financing and Insurance Operations had net intangible assets of $3.2 billion and $2.9 billion recorded in other assets at December 31, 2000 and 1999, respectively. Intangible assets primarily consist of goodwill, which is the cost of acquired businesses in excess of the fair value of their identifiable net assets. NOTE 11. Other Assets Automotive, Communications Services, and Other Operations - --------------------------------------------------------- Other assets included the following (dollars in millions): December 31, -------------------- 2000 1999 ---- ---- Equipment on operating leases - noncurrent (Note 7) $4,234 $3,911 Notes receivable from Delphi - 1,538 Investments in equity securities (1) 4,666 1,970 U.S. prepaid pension assets (Note 14) 20,184 15,267 Other 3,159 2,672 ------ ------ Total other assets $32,243 $25,358 ====== ====== (1)The balance at December 31, 2000 includes GM's 20% interest in Fiat Auto of $2.4 billion. This investment is accounted for using the cost method of accounting. Amounts also include the fair value of investments in equity securities classified as available-for-sale for all periods presented. It is GM's intent to hold these securities for greater than one year. Balances include historical costs of $1.9 billion and $1.3 billion with unrealized gains of $495 million and $687 million and unrealized losses of $146 million and $36 million at December 31, 2000 and 1999, respectively. II-32 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued NOTE 11. Other Assets (concluded) Financing and Insurance Operations - ---------------------------------- Other assets included the following (dollars in millions): December 31, -------------------- 2000 1999 ---- ---- Mortgage servicing rights $3,985 $3,422 Real estate mortgage - held for sale 5,759 5,678 - held for investment 1,895 1,497 - lending receivables 2,960 1,801 Other mortgage - related assets 1,451 1,094 Receivables purchased from factored clients 2,291 765 Due and deferred from receivables sales 1,097 742 Rental car buybacks 826 712 Intangible assets 3,188 2,898 Other 4,394 2,703 ------ ------ Total other assets $27,846 $21,312 ====== ====== NOTE 12. Accrued Expenses, Other Liabilities, and Deferred Income Taxes Automotive, Communications Services, and Other Operations - --------------------------------------------------------- Accrued expenses, other liabilities, and deferred income taxes included the following (dollars in millions): December 31, ------------------- 2000 1999 ---- ---- Warranties, dealer and customer allowances, claims, and discounts $15,993 $15,284 Deferred revenue 9,974 9,504 Payrolls and employee benefits (excludes postemployment) 4,609 5,211 Unpaid losses under self-insurance programs 2,031 1,923 Taxes, other than income taxes 1,009 1,084 Interest 1,401 1,542 Income taxes 445 1,006 Deferred income taxes 2,430 2,926 Postemployment benefits (including extended disability benefits) 2,380 2,097 Other 8,748 9,703 ------ ------ Total accrued expenses, other liabilities, and deferred income taxes $49,020 $50,280 ======= ======= Financing and Insurance Operations - ---------------------------------- Other liabilities and deferred income taxes included the following (dollars in millions): December 31, -------------------- 2000 1999 ---- ---- Unpaid insurance losses, loss adjustment expenses, and unearned insurance premiums $3,870 $3,811 Postemployment benefits 761 722 Income taxes 571 439 Deferred income taxes 4,021 3,730 Interest 1,828 1,602 Other 1,871 978 ------ ------ Total other liabilities and deferred income taxes $12,922 $11,282 ====== ====== II-33 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued NOTE 13. Long-Term Debt and Loans Payable Automotive, Communications Services, and Other Operations - --------------------------------------------------------- Long-term debt and loans payable were as follows (dollars in millions): Weighted-Average Interest Rate December 31, ---------------- ----------------- 2000 1999 2000 1999 ---- ---- ---- ---- Long-term debt and loans payable Payable within one year Current portion of long-term debt 6.3% 6.3% $415 $681 Commercial paper (1) 5.8% 5.8% 519 405 All other 4.8% 4.8% 1,274 905 ----- ------ Total loans payable - - 2,208 1,991 Payable beyond one year 8.1% 8.9% 7,438 7,444 Unamortized discount (28) (29) ------ ------ Total long-term debt and loans payable $9,618 $9,406 (1) The weighted-average interest rates for commercial paper include the impact of interest rate swap agreements. Long-term debt payable beyond one year at December 31, 2000 included maturities as follows: 2002 - $426 million; 2003 - $715 million; 2004 - $454 million; 2005 - $799 million; 2006 and after - $5.0 billion. Amounts payable beyond one year after consideration of foreign currency swaps at December 31, 2000 included $1.5 billion in currencies other than the U.S. dollar, primarily the Swedish krona ($776 million), the Japanese yen ($435 million), the Brazilian real ($151 million), and the Canadian dollar ($64 million). At December 31, 2000 and 1999, long-term debt and loans payable for Automotive, Communications Services, and Other Operations included $8.3 billion and $7.4 billion, respectively, of obligations with fixed interest rates and $1.3 billion and $2.0 billion, respectively, of obligations with variable interest rates (predominantly LIBOR), after considering the impact of interest rate swap agreements. To achieve its desired balance between fixed and variable rate debt, GM has entered into interest rate swap and cap agreements. The notional amounts of such agreements as of December 31, 2000 for Automotive, Communications Services, and Other Operations were approximately $1.2 billion ($200 million pay variable and $1.0 billion pay fixed) and $90 million, respectively. The notional amounts of such agreements as of December 31, 1999 were approximately $600 million ($400 million pay variable and $200 million pay fixed), and $100 million, respectively. GM and its subsidiaries maintain substantial lines of credit with various banks that totaled $11.6 billion at December 31, 2000, of which $4.3 billion represented short-term credit facilities and $7.3 billion represented long-term credit facilities. At December 31, 1999, bank lines of credit totaled $9.6 billion, of which $3.9 billion represented short-term credit facilities and $5.7 billion represented long-term credit facilities. The unused short-term and long-term portions of the credit lines totaled $3.1 billion and $6.2 billion at December 31, 2000, compared with $3.5 billion and $4.8 billion at December 31, 1999. Certain bank lines of credit contain covenants with which the Corporation and applicable subsidiaries were in compliance during the year ended December 31, 2000. II-34 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued NOTE 13. Long-Term Debt and Loans Payable (concluded) Financing and Insurance Operations - ---------------------------------- Debt was as follows (dollars in millions): Weighted-Average Interest Rate December 31, ---------------- ---------------- 2000 1999 2000 1999 ---- ---- ---- ---- Debt Payable within one year Current portion of debt 6.5% 6.6% $18,603 $14,996 Commercial paper (1) 6.5% 5.8% 43,634 33,229 All other 4.6% 4.6% 14,506 18,727 Payable beyond one year 6.4% 6.3% 58,846 55,952 Unamortized discount (552) (622) ------- ------- Total debt $135,037 $122,282 ======= ======= - ----------------- (1) The weighted-average interest rates for commercial paper include the impact of interest rate swap agreements. Debt payable beyond one year at December 31, 2000 included maturities as follows: 2002 - $19.9 billion; 2003 - $14.1 billion; 2004 - $7.2 billion; 2005 - $5.9 billion; 2006 and after - $11.7 billion. Amounts payable beyond one year after consideration of foreign currency swaps at December 31, 2000 included $9.8 billion in currencies other than the U.S. dollar, primarily the Canadian dollar ($6.6 billion), the euro ($1.6 billion), the U.K. pound sterling ($738 million), and the Australian dollar ($573 million). At December 31, 2000 and 1999, debt for Financing and Insurance Operations included $86.1 billion and $78.3 billion, respectively, of obligations with fixed interest rates and $48.9 billion and $44.0 billion, respectively, of obligations with variable interest rates (predominantly LIBOR), after considering the impact of interest rate swap agreements. To achieve its desired balance between fixed and variable rate debt, GM has entered into interest rate swap, cap, and floor agreements. The notional amounts of such agreements as of December 31, 2000 for financing and insurance operations were approximately $35.2 billion ($24.0 billion pay variable and $11.2 billion pay fixed), $74 million, and $83 million, respectively. The notional amounts for interest rate swap, cap, and floor agreements as of December 31, 1999, were approximately $26.1 billion ($18.1 billion pay variable and $8.0 billion pay fixed), $483 million, and $93 million, respectively. GM's financing and insurance subsidiaries maintain substantial lines of credit with various banks that totaled $48.5 billion at December 31, 2000, of which $17.5 billion represented short-term credit facilities and $31.0 billion represented long-term credit facilities. At December 31, 1999, bank lines of credit totaled $46.9 billion, of which $16.8 billion represented short-term credit facilities and $30.1 billion represented long-term credit facilities. The unused short-term and long-term portions of the credit lines totaled $8.1 billion and $30.5 billion at December 31, 2000, compared with $6.3 billion and $29.3 billion at December 31, 1999. Certain bank lines of credit contain covenants with which the Corporation and applicable subsidiaries were in compliance during the year ended December 31, 2000. NOTE 14. Pensions and Other Postretirement Benefits GM has a number of defined benefit pension plans covering substantially all employees. Plans covering U.S. and Canadian represented employees generally provide benefits of negotiated, stated amounts for each year of service as well as significant supplemental benefits for employees who retire with 30 years of service before normal retirement age. The benefits provided by the plans covering U.S. and Canadian salaried employees and employees in certain foreign locations are generally based on years of service and salary history. GM also has certain nonqualified pension plans covering executives that are based on targeted wage replacement percentages and are unfunded. Pension plan assets are primarily invested in U.S. Government obligations, equity and fixed income securities, commingled pension trust funds, insurance contracts, and GM Class H common stock (valued at December 31, 2000 at $3.4 billion). II-35 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued NOTE 14. Pensions and Other Postretirement Benefits (continued) GM's funding policy with respect to its qualified pension plans is to contribute annually not less than the minimum required by applicable law and regulations. GM made pension contributions to the U.S. hourly and salary plans of $5.0 billion in 2000 (consisting entirely of GM Class H common stock contributed during the second quarter of 2000), $794 million in 1999, and $1.1 billion in 1998. In addition, GM made pension contributions to all other U.S. plans of $69 million, $67 million, and $51 million in 2000, 1999, and 1998, respectively. Additionally, GM maintains hourly and salary benefit plans that provide postretirement medical, dental, vision, and life insurance to most U.S. retirees and eligible dependents. The cost of such benefits is recognized in the consolidated financial statements during the period employees provide service to GM. Postretirement plan assets in GM's VEBA trust are invested primarily in fixed income securities and GM Class H common stock (valued at December 31, 2000 at $438 million). Certain of the Corporation's non-U.S. subsidiaries have postretirement plans, although most participants are covered by government-sponsored or administered programs. The cost of such programs generally is not significant to GM. II-36 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued NOTE 14. Pensions and Other Postretirement Benefits (continued)
U.S. Plans Non-U.S. Plans Pension Benefits Pension Benefits Other Benefits ---------------- ---------------- -------------- 2000 1999 2000 1999 2000 1999 ---- ---- ---- ---- ---- ---- Change in benefit obligations (dollars in millions) Benefit obligation at beginning of year $73,269 $76,963 $9,728 $10,283 $44,683 $47,346 Service cost 900 1,007 177 202 448 502 Interest cost 5,425 4,722 630 604 3,346 2,802 Plan participants' contributions 32 37 25 29 47 41 Amendments 5 5,326 3 381 (49) 4 Actuarial losses(gains) 4,269 (4,565) 251 (700) 4,392 32 Benefits paid (6,299) (5,636) (503) (511) (2,805) (2,368) Divestitures- Delphi Spin-Off - (4,652) - - - (3,590) Hughes' satellite systems (1,263) - - - - - Curtailment charges and other (207) 67 (400) (560) (173) (86) ------ ------ ----- ----- ------ ----- Benefit obligation at end of year 76,131 73,269 9,911 9,728 49,889 44,683 ------ ------ ----- ----- ------ ------ Change in plan assets Fair value of plan assets at beginning of year 80,462 75,007 7,062 5,976 6,291 4,574 Actual return on plan assets 634 13,582 821 965 421 207 Employer contributions 5,031 861 187 566 743 1,970 Plan participants' contributions 32 37 25 29 - - Benefits paid (6,299) (5,636) (386) (391) (731) (460) Divestitures- Delphi Spin-Off - (3,369) - - - - Hughes' satellite systems (1,841) - - - - - Settlement charges and other (153) (20) (312) (83) - - ------ ------ ----- ------ ----- ----- Fair value of plan assets at end of year 77,866 80,462 7,397 7,062 6,724 6,291 ------ ------ ----- ------ ----- ----- Funded status 1,735 7,193 (2,514) (2,666) (43,165) (38,392) Unrecognized actuarial loss(gain) 9,195 (2,463) 555 586 6,444 1,842 Unrecognized prior service cost 8,442 9,850 909 1,048 207 212 Unrecognized transition obligation (asset) 1 (47) 63 52 - - ------ ------ --- ---- ------ ------ Net amount recognized $19,373 $14,533 $(987) $(980)$(36,514) $(36,338) ====== ====== === === ====== ====== Amounts recognized in the consolidated balance sheets consist of: Prepaid benefit cost $20,184 $15,267 $1,676 $809 $ - $ - Accrued benefit liability (936) (815) (2,668) (2,612) (36,514) (36,338) Intangible asset 56 13 1 700 - - Accumulated other comprehensive income 69 68 4 123 - - ------ ------ --- --- ------ ------ Net amount recognized $19,373 $14,533 $(987) $(980)$(36,514) $(36,338) ====== ====== === === ====== ======
The projected benefit obligation, accumulated benefit obligation, and fair value of plan assets for the pension plans with accumulated benefit obligations in excess of plan assets were $4.0 billion, $3.4 billion, and $0, respectively, as of December 31, 2000, and $7.3 billion, $6.8 billion, and $3.5 billion, respectively, as of December 31, 1999.
U.S. Plans Non-U.S. Plans Pension Benefits Pension Benefits Other Benefits -------------------- ------------------- -------------------- 2000 1999 1998 2000 1999 1998 2000 1999 1998 ---- ---- ---- ---- ---- ---- ---- ---- ---- (dollars in millions) Components of expense Service cost $900 $1,007 $1,270 $177 $202 $214 $448 $502 $663 Interest cost 5,425 4,722 4,974 630 604 643 3,346 2,802 3,113 Expected return on plan assets (7,666) (6,726) (6,815) (578) (526) (516) (650) (377) (286) Amortization of prior service cost 1,416 926 1,173 97 99 99 (42) (104) (116) Amortization of transition asset (48) (37) (44) (17) (17) (17) - - - Recognized net actuarial loss 8 348 331 2 79 75 70 124 97 Curtailments, settlements, and other 235 2,351 207 24 22 48 - - - Discontinued operations - (2,349) (409) - - - - - (966) --- ----- --- --- --- --- ----- ----- ----- Net expense $270 $242 $687 $335 $463 $546 $3,172 $2,947 $2,505 === ==== === === === === ===== ===== =====
II-37 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued NOTE 14. Pensions and Other Postretirement Benefits (concluded)
U.S. Plans Non-U.S. Plans Pension Benefits Pension Benefits Other Benefits -------------------- ------------------- -------------------- 2000 1999 1998 2000 1999 1998 2000 1999 1998 ---- ---- ---- ---- ---- ---- ---- ---- ---- Weighted-average assumptions Discount rate 7.3% 7.8% 6.8% 7.1% 7.1% 6.4% 7.7% 7.7% 6.7% Expected return on plan assets 10.0% 10.0% 10.0% 9.0% 9.0% 9.2% 8.1% 8.3% 7.7% Rate of compensation increase 5.0% 5.0% 5.0% 4.0% 4.0% 3.5% 4.3% 4.4% 4.4%
For measurement purposes, an approximate 8.6% annual rate of increase in the per capita cost of covered health care benefits was assumed for 2001. The rate was assumed to decrease on a linear basis to 5.0% through 2007 and remain at that level thereafter. A one percentage point increase in the assumed health care trend rate would have increased the Accumulated Projected Benefit Obligation (APBO) by $5.2 billion at December 31, 2000 and increased the aggregate service and interest cost components of non-pension postretirement benefit expense for 2000 by $450 million. A one percentage point decrease would have decreased the APBO by $4.4 billion and decreased the aggregate service and interest cost components of non-pension postretirement benefit expense for 2000 by $375 million. NOTE 15. Commitments and Contingent Matters Commitments GM had the following minimum commitments under noncancelable operating leases having terms in excess of one year primarily for real property: 2001-$541 million; 2002-$484 million; 2003-$406 million; 2004-$319 million; 2005-$273 million, and $1.3 billion in 2006 and thereafter. Certain of the leases contain escalation clauses and renewal or purchase options. Rental expenses under operating leases were $861 million, $825 million, and $826 million in 2000, 1999, and 1998, respectively. GM sponsors a credit card program, entitled the GM Card program, that offers rebates that can be applied primarily against the purchase or lease of GM vehicles. The amount of rebates available to qualified cardholders at December 31, 2000 was $3.8 billion and $3.7 billion at December 31, 1999 and 1998, respectively. As part of a marketing agreement entered into with America Online, Inc. (AOL) on June 21, 1999, Hughes committed to increase its sales and marketing expenditures through 2002 by approximately $1.5 billion related to DirecPC/AOL-Plus, DIRECTV, DIRECTV/AOL TV, and DirecDuo. At December 31, 2000, Hughes' remaining commitment under this agreement was approximately $1.1 billion. Contingent Matters Litigation is subject to uncertainties and the outcome of individual litigated matters is not predictable with assurance. Various legal actions, governmental investigations, claims, and proceedings are pending against the Corporation, including those arising out of alleged product defects; employment-related matters; governmental regulations relating to safety, emissions, and fuel economy; product warranties; financial services; dealer, supplier, and other contractual relationships and environmental matters. In connection with the disposition by Hughes of its defense electronics business to Raytheon Company in 1997 and its satellite systems manufacturing businesses to The Boeing Company in 2000, there are disputes regarding the purchase price and other matters that may result in payments by Hughes to the acquiring companies that would be material to Hughes. GM has established reserves for matters in which losses are probable and can be reasonably estimated. Some of the matters may involve compensatory, punitive, or other treble damage claims, or demands for recall campaigns, environmental remediation programs, or sanctions, that if granted, could require the Corporation to pay damages or make other expenditures in amounts that could not be estimated at December 31, 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. II-38 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued NOTE 16. Preferred Securities of Subsidiary Trusts General Motors - Obligated Mandatorily Redeemable Preferred Securities of Subsidiary Trusts In July 1997, the General Motors Capital Trust D (Series D Trust) issued approximately $79 million of its 8.67% Trust Originated Preferred Securitiessm (TOPrSsm) Series D, (Series D Preferred Securities), in a one-for-one exchange for 3,055,255 of the outstanding GM Series D 7.92% Depositary Shares, each representing one-fourth of a share of GM Series D Preference Stock, $0.10 par value per share. In addition, the General Motors Capital Trust G (Series G Trust) issued approximately $143 million of its 9.87% TOPrS, Series G (Series G Preferred Securities), in a one-for-one exchange for 5,064,489 of the outstanding GM Series G 9.12% Depositary Shares, each representing one-fourth of a share of GM Series G Preference Stock, $0.10 par value per share. Concurrently with the exchanges and the related purchases by GM from the Series D and Series G Trusts (Trusts) of the common securities of such Trusts, which represent approximately 3% of the total assets of such Trusts, GM issued to the wholly-owned Trusts, as the Series D Trust's sole assets its 8.67% Junior Subordinated Deferrable Interest Debentures, Series D, due July 1, 2012 and as the Series G Trust's sole assets, its 9.87% Junior Subordinated Deferrable Interest Debentures, Series G, due July 1, 2012 (the "Series D Debentures" and "Series G Debentures" or collectively the "Debentures"), having aggregate principal amounts equal to the aggregate stated liquidation amounts of the Series D and Series G Preferred Securities and the related common securities, respectively ($79 million with respect to the Series D Debentures and $131 million with respect to the Series G Debentures). On May 2, 2000, GM redeemed the Series D Trust's sole assets causing the Series D Trust to redeem the approximately 3 million Series D Preferred Securities. The Series D Preferred Securities were redeemed at a price of $25 per share plus accrued and unpaid distributions of $0.01 per share. Also, on May 2, 2000, GM redeemed the approximately 3 million outstanding Series D 7.92% Depositary Shares. The Series D 7.92% Depositary Shares were redeemed at a price of $25 per share plus accrued and unpaid dividends of $0.18 per share. The securities together had a total face value of approximately $154 million. On April 2, 2001, GM will redeem 5,064,489 outstanding Series G 9.87% TOPrS. The Series G TOPrS will be redeemed at a price of $25 per security plus accrued and unpaid dividends of $0.42 per share, for a total redemption price of $25.42 per share. - --------------------- sm "Trust Originated Preferred Securities" and "TOPrS" are service trademarks of Merrill Lynch & Co. NOTE 17. Stockholders' Equity The following table presents changes in capital stock for the period from January 1, 1998 to December 31, 2000 (dollars in millions): Common Stocks ----------------------- Total Preference $1-2/3 Capital Stocks par value Class H Stock ---------- --------- ------- ------- Balance at January 1, 1998 $ 1 $1,156 $10 $1,167 Shares reacquired - (75) - (75) Shares issued - 11 1 12 -- ----- -- ----- Balance at December 31, 1998 1 1,092 11 1,104 Shares reacquired (1) (75) - (76) Shares issued - 16 3 19 -- ----- -- ----- Balance at December 31, 1999 - 1,033 14 1,047 Shares reacquired - (184) - (184) Shares issued - 65 74 139 -- ----- -- ----- Balance at December 31, 2000 $ - $914 $88 $1,002 == === == ===== II-39 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued NOTE 17. Stockholders' Equity (continued) Preference Stocks On June 24, 1999, as part of a strategic alliance with Hughes, AOL invested $1.5 billion in return for approximately 2.7 million shares of GM Series H 6.25% Automatically Convertible Preference Stock, par value $0.10 per share. This preference stock will automatically convert into GM Class H common stock in 2002, based upon a variable conversion factor linked to the GM Class H common stock price at the time of conversion, and accrues quarterly dividends at a rate of 6.25% per year. It may be converted earlier in certain limited circumstances. GM immediately invested the $1.5 billion received from AOL into shares of Hughes Series A Preferred Stock designed to correspond to the financial terms of the GM Series H 6.25% Automatically Convertible Preference Stock. Dividends on the Hughes Series A Preferred Stock are payable to GM quarterly at an annual rate of 6.25%. Upon conversion of the GM Series H 6.25% Automatically Convertible Preference Stock into GM Class H common stock, Hughes will redeem the Series A Preferred Stock through a cash payment to GM equal to the fair market value of GM Class H common stock issuable upon the conversion. Simultaneous with GM's receipt of the cash redemption proceeds, GM will make a capital contribution to Hughes of the same amount. Common Stocks 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 the 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 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 GM Class H common stock per share amounts and numbers of shares for all periods presented have been 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 were not changed. The voting and liquidation rights of GM $1-2/3 par value common stock are one vote per share and one liquidation unit per share. On July 24, 2000, Fiat S.p.A. purchased for $2.4 billion approximately 32 million shares of GM $1-2/3 par value common stock, or approximately 5.4% of GM's $1-2/3 par value common stock outstanding as of that date. The liquidation rights of the GM $1-2/3 par value and GM Class H common stocks are subject to certain adjustments if outstanding common stock is subdivided, by stock split or otherwise, or if shares of one class of common stock are issued as a dividend to holders of another class of common stock. 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 GM (which includes 100% of the stock of Hughes). The outstanding shares of GM Class H common stock may be recapitalized as shares of GM $1-2/3 par value common stock at any time after December 31, 2002, at the sole discretion of the GM Board, or automatically, if at any time the Corporation should sell, liquidate, or otherwise dispose of 80% or more of the business of Hughes, based on fair market value of the assets, both tangible and intangible, of Hughes as of the date that such proposed transaction is approved by the GM Board. In the event of any recapitalization, all outstanding shares of GM Class H common stock will automatically be converted into GM's $1-2/3 par value common stock at an exchange rate that would provide GM Class H common stockholders with that number of shares of GM $1-2/3 par value common stock that would have a value equal to 120% of the value of their GM Class H common stock, on such date. A recapitalization of the type described in the prior sentence would occur if any of the triggering events took place unless the holders of GM common stock (including the holders of GM $1-2/3 par value common stock and holders of the GM Class H common stock voting separately as individual classes) vote to approve an alternative proposal from the GM Board. II-40 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued NOTE 17. Stockholders' Equity (concluded) Other Comprehensive Income The changes in the components of other comprehensive income (loss) are reported net of income taxes, as follows (dollars in millions):
Years Ended December 31, --------------------------------------------------------------------------------------------------- 2000 1999 1998 ------------------------------ ------------------------------ --------------------------------- Pre-tax Tax Exp. Net Pre-tax Tax Exp. Net Pre-tax Tax Exp. Net Amount (Credit) Amount Amount (Credit) Amount Amount (Credit) Amount ------ ------ ------ ------ ------- ------ -------- ------- ------ Foreign currency translation adjustments $(741) $(272) $(469) $(1,519) $(575) $(944) $(280) $(1) $(279) Unrealized (loss) gain on securities: Unrealized holding (loss) gain (481) (179) (302) 998 372 626 38 (14) 52 Reclassification adjustment (175) (62) (113) (171) (60) (111) (115) (40) (75) ---- --- ---- ---- --- ---- ---- --- --- Net unrealized (loss) gain (656) (241) (415) 827 312 515 (77) (54) (23) ---- ---- ---- --- --- --- --- --- --- Minimum pension liability adjustment 118 42 76 7,980 3,012 4,968 (1,657) (630) (1,027) --- -- -- ----- ----- ----- ------ ---- ------ Other comprehensive (loss) income from continuing operations $(1,279) $(471) $(808) $7,288 $2,749 $4,539 $(2,014) $(685) $(1,329) ======= ===== ===== ====== ====== ====== ======= ===== =======
NOTE 18. 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. All GM Class H common stock per share amounts and numbers of shares for all periods presented have been adjusted to reflect the three-for-one stock split, in the form of a 200% stock dividend, paid on June 30, 2000. The attribution of earnings to each class of GM common stock was as follows (dollars in millions): Years Ended December 31, ---------------------------- 2000 1999 1998 ---- ---- ---- Earnings (losses) attributable to common stocks $1-2/3 par value Continuing operations $3,957 $5,592 $2,914 Discontinued operations - 426 (93) ----- ----- ----- Earnings attributable to $1-2/3 par value $3,957 $6,018 $2,821 ===== ===== ===== Earnings (losses) attributable to Class H $385 $(96) $72 === == == Earnings attributable to GM $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 (ASCNI) of Hughes for the respective period. Earnings (losses) attributable to GM Class H common stock represent the ASCNI of Hughes, excluding the effects of GM purchase accounting adjustments arising from GM's acquisition of Hughes Aircraft Company, reduced by the amount of dividends accrued on the Series A Preferred Stock of Hughes (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 earnings (losses) used for computation of the ASCNI of Hughes is 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 (681 million, 374 million, and 316 million for 2000, 1999, and 1998, 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 (the "Average Class H dividend base"). The Average Class H dividend base was 1.3 billion, 1.3 billion, and 1.2 billion during 2000, 1999, and 1998, respectively. Upon conversion of the GM Series H 6.25% Automatically Convertible Preference Stock into GM Class H common stock, and the redemption of Series A Preferred Stock and simultaneous capital contribution to Hughes, both the numerator and the denominator used in the computation of ASCNI will increase by the number of shares of the GM Class H common stock issued. II-41 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued NOTE 18. Earnings Per Share Attributable to Common Stocks (continued) In addition, the denominator used in determining the ASCNI of Hughes may be adjusted on occasion as deemed appropriate by the GM Board to reflect subdivisions or combinations of the GM Class H common stock, certain transfers of capital to or from Hughes, the contribution of shares of capital stock of GM to or for the benefit of Hughes employees, and the retirement of GM Class H common stock purchased by Hughes. The GM Board's discretion to make such adjustments is limited by criteria set forth in GM's Restated Certificate of Incorporation. Effective January 1, 1999, shares of GM Class H common stock delivered by GM in connection with the award of such shares to and the exercise of stock options by employees of Hughes increase the numerator and denominator of the fraction referred to above. Prior to January 1, 1999, there was no dilutive effect resulting from the assumed exercise of stock options, because the exercise of stock options did not affect the GM Class H common stock dividend base (denominator). On occasion, in anticipation of exercises of stock options, Hughes purchases GM Class H common stock from the open market. Upon purchase, these shares are retired and therefore decrease the numerator and denominator of the fraction referred to above. The reconciliation of the amounts used in the basic and diluted earnings per share computations for income from continuing operations was as follows (dollars 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 ------ ------ ------ ----- ------ ------ Year ended December 31, 2000 Income from continuing operations $4,016 $436 Less:Dividends on preference stocks 59 51 ----- ---- Basic EPS Income from continuing operations attributable to common stocks $3,957 582 $6.80 $385 681 $0.56 ==== ==== Effect of Dilutive Securities Assumed exercise of dilutive stock options (7) 9 7 27 ----- --- --- ---- Diluted EPS Adjusted income from continuing operations attributable to common stocks $3,950 591 $6.68 $392 708 $0.55 ===== === ==== === === ==== Year ended December 31, 1999 Income (loss) from continuing operations $5,657 $(81) Less:Dividends on preference stocks 65 15 ----- -- Basic EPS Income (loss) from continuing operations attributable to common stocks 5,592 643 $8.70 (96) 374 $(0.26) ==== ==== Effect of Dilutive Securities Assumed exercise of dilutive stock options - 12 - - ----- --- --- --- Diluted EPS Adjusted income (loss) from continuing operations attributable to common stocks $5,592 655 $8.53 $(96) 374 $(0.26) ===== === ==== == === ===== Year ended December 31, 1998 Income from continuing operations $2,977 $72 Less:Dividends on preference stocks 63 - ------ --- Basic EPS Income from continuing operations attributable to common stocks 2,914 663 $4.40 72 316 $0.23 ==== ==== Effect of Dilutive Securities Assumed exercise of dilutive stock options (3) 11 3 12 ----- --- --- --- Diluted EPS Adjusted income from continuing operations attributable to common stocks $2,911 674 $4.32 $75 328 $0.23 ===== === ==== == === ====
II-42 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued NOTE 19. Derivative Financial Instruments and Risk Management GM is a party to financial instruments with off-balance-sheet risk. These financial instruments are used in the normal course of business to manage exposure to fluctuations in interest rates and foreign exchange rates, and to meet the financing needs of its customers. The primary classes of derivatives used by GM are foreign exchange forward contracts and options, interest rate swaps and options, and forward contracts to purchase or sell mortgages or mortgage-backed securities. Those instruments involve, to varying degrees, market risk, as the instruments are subject to rate and price fluctuations, and elements of credit risk in the event a counterparty should default. Credit risk is managed through the approval and periodic monitoring of financially sound counterparties. Derivative transactions are used to hedge underlying business exposures. Market risk in these instruments is offset by opposite movements in the underlying exposure. Cash receipts or payments on these contracts normally occur at maturity, or for interest rate swap agreements, at periodic contractually defined intervals. Foreign Exchange Forward Contracts and Options GM is an international corporation with operations in over 50 countries and has foreign currency exposures at these operations related to buying, selling, and financing in currencies other than the local currency. GM's most significant foreign currency exposures relate to Canada, Mexico, Western European countries (primarily Germany, United Kingdom, Spain, Italy, Belgium, and France), Australia, Japan, and Brazil. The magnitude of these exposures significantly varies over time depending upon the strength of local automotive markets and sourcing decisions. GM uses derivative financial instruments to manage certain of its foreign exchange exposures, primarily through foreign exchange forward contracts and purchased and written foreign exchange options. These agreements primarily hedge cash flows such as debt, firm commitments, and anticipated transactions involving vehicles, components, fixed assets, and subsidiary dividends. At December 31, 2000 and 1999, the Automotive, Communications Services, and Other Operations held foreign exchange forward contracts and options of $6.2 billion and $4.5 billion, respectively. At December 31, 2000 and 1999, the Financing and Insurance Operations held foreign exchange forward contracts and options of $15.3 billion and $13.3 billion (including cross-currency swaps of $4.7 billion and $5.2 billion), respectively. The Automotive, Communications Services, and Other Operations had deferred hedging gains (losses) on outstanding foreign exchange forward contracts and options totaling $34 million and $(22) million at December 31, 2000 and 1999, respectively. The Financing and Insurance Operations had no deferred hedging gains on outstanding foreign exchange forward contracts and options (including cross-currency swaps) at December 31, 2000, compared with a deferred hedging gain of $1 million at December 31, 1999. The fair value of foreign exchange forward contracts (including cross-currency swaps) was determined by using current exchange rates. The fair value of foreign exchange options was estimated using pricing models with indicative quotes obtained for the market variables. Interest Rate Swaps and Options GM's financing and cash management activities subject it to market risk from exposure to changes in interest rates. GM has entered into various financial instrument transactions to maintain the desired level of exposure to the risk of interest rate fluctuations and to minimize interest expense. To achieve this objective, GM will at times use written options in the management of these exposures. At December 31, 2000 and 1999, the total notional amount of interest rate contracts with off-balance-sheet risk was $1.6 billion and $1.0 billion, respectively, for the Automotive, Communications Services, and Other Operations. At December 31, 2000 and 1999, the Financing and Insurance Operations held such agreements with off-balance-sheet risk with notional amounts totaling $44.3 billion and $33.4 billion, respectively. The Automotive, Communications Services, and Other Operations' net gains on interest rate swaps totaled approximately $6 million and $3 million at December 31, 2000 and 1999, respectively. Net (losses) gains on interest rate swaps for the Financing and Insurance Operations totaled approximately $(5) million and $45 million at December 31, 2000 and 1999, respectively. The fair value of interest rate swaps, including contracts with optionality, was estimated using pricing models based upon current market interest rates. Exchange traded options are valued at quoted market prices. Mortgage Contracts The Corporation has also entered into contracts to purchase and sell mortgages at specific future dates and has entered into certain exchange-traded futures and option contracts to reduce exposure to interest rate risk. At December 31, 2000 and 1999, commitments to sell mortgage loans and securities totaled $2.2 billion and $1.6 billion, respectively, and commitments to purchase or originate mortgage II-43 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued NOTE 19. Derivative Financial Instruments and Risk Management - concluded Mortgage Contracts (concluded) loans totaled $5.0 billion and $4.8 billion, respectively. Exchange-traded futures and option contracts, used to hedge mortgage loans held for sale, had notional values of $1.1 billion and $6.3 billion at December 31, 2000 and 1999, respectively. Gains and losses on derivatives, including exchange-traded futures and option contracts, used to hedge interest rate risk associated with rate-locked funding commitments and mortgage loans held for sale, are deferred and considered in the reporting of the underlying mortgages on a lower of cost or market basis. The notional values of derivatives used to hedge price and interest rate risk associated with mortgage-related securities totaled $11.8 billion and $7.5 billion at December 31, 2000 and 1999, respectively. Gains and losses associated with these instruments are recognized in income in the current period on a marked to market basis. Derivatives used to hedge mortgage servicing rights had notional values of $31.1 billion and $17.2 billion at December 31, 2000 and 1999, respectively. Gains and losses on such contracts are recorded as an adjustment to amortization expense. The fair value of mortgage contracts was estimated based upon the amount that would be received or paid to terminate the contracts based on market prices of similar financial instruments and current rates for mortgage loans. Book values and estimated fair values of financial instrument derivatives were as follows (dollars in millions): Fair Value of Open Contracts at December 31, ------------------------------------- 2000 1999 ---- ---- Asset Liability Asset Liability Position Position Position Position -------- -------- -------- -------- Automotive, Communications Services, and Other Operations Foreign exchange contracts (1) $111 $103 $30 $85 Interest rate contracts (2) $33 $3 $2 $18 Financing and Insurance Operations Foreign exchange contracts (3)(5) $239 $1,106 $386 $862 Interest rate contracts (4) $605 $633 $82 $586 Mortgage contracts (6) $446 $101 $105 $102 (1)The related asset (liability) recorded on the balance sheet totaled $14 million and $(15) million, at December 31, 2000 and 1999, respectively. (2)The related asset (liability) recorded on the balance sheet totaled $2 million and $(12) million, at December 31, 2000 and 1999, respectively. (3)The related (liability) recorded on the balance sheet totaled $(959) million and $(374) million, at December 31, 2000 and 1999, respectively. (4)The related asset recorded on the balance sheet totaled $114 million and $33 million, at December 31, 2000 and 1999, respectively. (5)Foreign exchange forward contracts included certain derivatives with both foreign exchange and interest rate exposures which had a fair value of $(613) million and $(368) million at December 31, 2000 and 1999, respectively. (6)The related asset recorded on the balance sheet totaled $266 million and $23 million, at December 31, 2000 and December 31, 1999, respectively. Credit Risk The financial instruments previously discussed contain an element of risk that the counterparties may be unable to meet the terms of the agreements. However, GM minimizes such risk exposure by limiting the counterparties to major international banks and financial institutions that meet established credit guidelines and by limiting the amount of its risk exposure with any one bank or financial institution. Management also reduces its credit risk for unused lines of credit by applying the same credit policies in making commitments as it does for extending loans. Management does not expect to incur any losses as a result of counterparty default. GM generally does not require or place collateral for these financial instruments, except for the lines of credit it extends. Because loans extended under these commitments are at market interest rates, there is no significant fair value position related to outstanding commitments. GM has business activities with customers, dealers, and associates around the world. The Corporation's receivables from, and guarantees to, such parties are well diversified, and when warranted, are secured by collateral. Consequently, in management's opinion, no significant concentration of credit risk exists for GM. II-44 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued NOTE 20. Fair Value of Financial Instruments The estimated fair value of financial instruments has been determined using available market information or other appropriate valuation methodologies. However, considerable judgment is required in interpreting market data to develop estimates of fair value; therefore, the estimates are not necessarily indicative of the amounts that could be realized or would be paid in a current market exchange. The effect of using different market assumptions and/or estimation methodologies may be material to the estimated fair value amounts. Book and estimated fair values of financial instruments, for which it is practicable to estimate fair value, were as follows (dollars in millions): December 31, ------------------------------------------ 2000 1999 ---- ---- Book Fair Book Fair Value Value Value Value ----- ----- ----- ----- Automotive, Communications Services, and Other Operations Assets Other assets (1) $3,269 $3,244 $4,450 $4,431 Liabilities Long-term debt (2) $7,410 $7,019 $7,415 $7,139 Other liabilities (1) $516 $548 $535 $559 Preferred securities of subsidiary trusts (3) (Note 16) $139 $136 $218 $206 Financing and Insurance Operations Assets Finance receivables - net (4) $91,853 $91,781 $80,287 $79,934 Other assets (1) $14,002 $14,054 $10,484 $10,509 Liabilities Debt (payable beyond one year) (2) $58,295 $57,863 $55,330 $53,936 (1) Other assets include various financial instruments (e.g., long-term receivables and certain investments) that have fair values based on discounted cash flows, market quotations, and other appropriate valuation techniques. The fair values of retained subordinated interests in trusts and excess servicing assets (net of deferred costs) were derived by discounting expected cash flows using current market rates. Estimated values of Industrial Development Bonds, included in other liabilities, were based on quoted market prices for the same or similar issues. (2) Long-term debt has an estimated fair value based on quoted market prices for the same or similar issues or based on the current rates offered to GM for debt of similar remaining maturities. (3) The fair value of the GM-obligated mandatorily redeemable preferred securities of subsidiary trusts (see Note 16) was determined based on quoted market prices. (4) The fair value was estimated by discounting the future cash flows using applicable spreads to approximate current rates applicable to each category of finance receivables. Due to their short-term nature, the book value approximates fair value for cash and marketable securities, accounts and notes receivable (less allowances), accounts payable (principally trade), Automotive, Communications Services, and Other Operations' loans payable and Financing and Insurance Operations' debt payable within one year for the periods ending December 31, 2000 and 1999. Refer to Note 19 for fair value of derivative financial instruments. II-45 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued NOTE 21. Stock Incentive Plans Stock-Based Compensation If compensation cost for stock options and other stock-based employee compensation awards had been determined based on the fair value at the grant date, consistent with the method prescribed by SFAS No. 123, GM's pro forma net income, earnings attributable to common stocks, and basic and diluted earnings per share attributable to common stocks would have been as follows (dollars in millions except per share amounts): 2000 1999 1998 ---- ---- ---- Net income - as reported $4,452 $6,002 $2,956 - pro forma $4,125 $5,788 $2,761 Earnings (losses) attributable to common stocks $1-2/3 - as reported $3,957 $6,018 $2,821 - pro forma $3,709 $5,823 $2,646 Class H - as reported $385 $(96) $72 - pro forma $306 $(115) $52 Basic earnings (losses) per share attributable to common stocks $1-2/3 - as reported $6.80 $9.36 $4.26 - pro forma $6.38 $9.06 $4.00 Class H - as reported $0.56 $(0.26) $0.23 - pro forma $0.45 $(0.31) $0.16 Diluted earnings (losses) per share attributable to common stocks $1-2/3 - as reported $6.68 $9.18 $4.18 - pro forma $6.26 $8.88 $3.92 Class H - as reported $0.55 $(0.26) $0.23 - pro forma $0.44 $(0.31) $0.16 The fair value of each option grant is estimated on the date of grant using the Black-Scholes option- pricing model with the following weighted-average assumptions: 2000 1999 1998 ------------------ ----------------- ----------------- GM Hughes GM GM Hughes GM GM Hughes GM SIP Plan SSOP SIP Plan SSOP SIP Plan SSOP --- ---- ---- --- ---- ---- --- ---- ---- Interest rate 6.4% 6.5% 6.5% 4.8% 5.2% 4.8% 5.2% 5.6% 5.2% Expected life (years) 5.0 6.9 5.0 5.0 7.0 5.0 5.0 6.2 5.0 Expected volatility 27.8% 42.1% 27.6% 27.9% 38.0% 27.9% 26.2% 32.8% 26.2% Dividend yield 2.7% - 2.7% 2.3% - 2.3% 3.6% - 3.6% The effects of the Delphi spin-off adjustment on the number of options and related exercise prices, as described below, are considered, under SFAS No. 123, to be modifications of the terms of the outstanding options. Accordingly, the pro forma disclosure includes compensation cost for the incremental fair value, under SFAS No. 123, resulting from such modifications. The pro forma amounts for compensation cost are not indicative of the effects on operating results for future periods. GM's stock incentive plans consist of the General Motors 1997 Stock Incentive Plan, formerly the General Motors Amended Stock Incentive Plan (the "GMSIP"), the Hughes Electronics Corporation Incentive Plan (the "Hughes Plan"), and the General Motors 1998 Salaried Stock Option Plan (the "GMSSOP"). The GMSIP and GMSSOP are administered by the Executive Compensation Committee of the GM Board. The Hughes Plan is administered by the Executive Compensation Committee of the Board of Directors of Hughes. Under the GMSIP, 60 million shares of GM $1-2/3 par value and 7.5 million shares of GM Class H common stocks may be granted from June 1, 1997 through May 31, 2002, of which approximately 27.2 million and 7.0 million were available for grants at December 31, 2000. Options granted prior to 1997 under the GMSIP generally are exercisable one-half after one year and one-half after two years from the dates of grant. Stock option grants awarded since 1997 vest ratably over three years from the date of grant. Option prices are 100% of fair market value on the dates of grant and the options generally expire 10 years from the dates of grant, subject to earlier termination under certain conditions. II-46 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued NOTE 21. Stock Incentive Plans - (continued) Under the Hughes Plan, Hughes may grant shares, rights, or options to acquire up to 232.8 million shares of GM Class H common stock through December 31, 2000, of which 106.7 million were available for grants at December 31, 2000. Option prices are 100% of fair market value on the dates of grant and the options generally vest over two to five years and expire 10 years from the dates of grant, subject to earlier termination under certain conditions. Under the GMSSOP, 50 million shares of GM $1-2/3 par value common stock may be granted from January 1, 1998 through December 31, 2007, of which approximately 38.0 million were available for grants at December 31, 2000. Stock options vest one year following the date of grant and are exercisable two years from the date of grant. Option prices are 100% of fair market value on the dates of grant and the options generally expire 10 years and two days from the dates of grant subject to earlier termination under certain conditions. In connection with the Delphi spin-off, the number of options and related exercise prices for outstanding options under the affected plans were adjusted to reflect the change in the fair market value of GM $1-2/3 par value common stock that resulted from this transaction. The number of shares under option and the exercise price were adjusted such that the aggregate intrinsic value of the options immediately before and immediately after the transaction remained unchanged. All Class H common stock share amounts and numbers of shares for all periods presented have been adjusted to reflect the three-for-one stock split in the form of a 200% stock dividend paid on June 30, 2000. II-47 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued NOTE 21. Stock Incentive Plans (concluded) Changes in the status of outstanding options were as follows:
GMSIP and GMSIP Hughes Plan GMSSOP $1-2/3 Par Value Common Class H Common $1-2/3 Par Value Common -------------------------------------------------------------------- Weighted- Weighted- Weighted Shares Average Shares Average Shares Average under Exercise under Exercise under Exercise Option Price Option Price Option Price - ------------------------------------------------------------------------------------- Options outstanding at January 1, 1998 32,366,657 $51.40 46,483,887 $9.57 - $ - - ------------------------------------------------------------------------------------- Granted 9,854,805 $56.14 12,703,860 $16.93 4,637,267 $56.00 Exercised 8,242,624 $44.08 6,165,504 $7.57 - $ - Terminated 454,558 $54.45 2,941,392 $10.65 341,644 $56.00 - ------------------------------------------------------------------------------------- Options outstanding at December 31, 1998 33,524,280 $50.72 50,080,851 $11.62 4,295,623 $56.00 - ------------------------------------------------------------------------------------- Granted 9,811,209 $85.79 15,277,260 $16.05 4,764,052 $85.97 Exercised 7,902,380 $46.04 10,798,119 $9.83 - $ - Terminated 3,198,739 $55.25 4,294,746 $13.49 2,285,969 $73.56 Delphi Spin-Off adjustment 6,774,777 $ - - $ - 1,288,914 $ - - ------------------------------------------------------------------------------------- Options outstanding at December 31, 1999 39,009,147 $51.30 50,265,246 $13.10 8,062,620 $58.73 - ------------------------------------------------------------------------------------- Granted 11,231,004 $74.14 35,641,517 $37.05 4,182,955 $75.50 Exercised 6,831,078 $42.95 6,545,206 $11.45 1,635,248 $46.59 Terminated 283,967 $64.48 11,249,673 $30.96 242,863 $63.46 - ------------------------------------------------------------------------------------- Options outstanding at December 31, 2000 43,125,106 $58.49 68,111,884 $22.76 10,367,464 $67.30 - ------------------------------------------------------------------------------------- Options exercisable at December 31, 2000 21,985,984 $47.57 29,640,511 $12.93 2,411,586 $46.59 - -------------------------------------------------------------------------------------
The following table summarizes information about GM's stock option plans at December 31, 2000:
Weighted-Average Range of Remaining Weighted-Avg. Weighted-Average Exercise Options Contractual Exercise Options Exercise Prices Outstanding Life (yrs.) Price Exercisable Price -------------------------------------------------------------------------------------------------- GMSIP $1-2/3 Par Value Common $13.00 to $39.99 2,480,534 3.1 $31.19 2,480,534 $31.19 40.00 to 49.99 18,377,123 6.0 $44.84 15,781,278 $44.55 50.00 to 83.50 22,267,449 8.6 $72.79 3,724,172 $71.29 -------------------------------------------------------------------------------------------------- $13.00 to $83.50 43,125,106 7.2 $58.49 21,985,984 $47.57 -------------------------------------------------------------------------------------------------- GMSIP and Hughes Plan Class H Common $3.00 to $8.99 2,486,235 3.6 $6.95 2,486,235 $6.95 9.00 to 16.99 30,482,236 6.9 $12.52 21,001,250 $12.05 17.00 to 24.99 6,686,826 7.5 $18.41 6,050,526 $18.27 25.00 to 32.99 2,600,900 9.7 $31.12 9,500 $28.57 33.00 to 41.50 25,855,687 9.3 $36.97 93,000 $41.06 -------------------------------------------------------------------------------------------------- $3.00 to $41.50 68,111,884 7.9 $22.76 29,640,511 $12.93 -------------------------------------------------------------------------------------------------- GMSSOP $1-2/3 Par Value Common $46.59 2,411,586 7.0 $46.59 2,411,586 $46.59 71.53 3,846,103 8.0 $71.53 - $ - 75.50 4,109,775 9.0 $75.50 - $ - -------------------------------------------------------------------------------------------------- $46.59 to $75.50 10,367,464 8.2 $67.30 2,411,586 $46.59 --------------------------------------------------------------------------------------------------
II-48 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued NOTE 22. Other Income and Other Expenses Other income (included in Total net sales and revenues) and other expenses (included in Cost of sales and other expenses) consisted of the following (dollars in millions): Years Ended December 31, ---------------------------- 2000 1999 1998 ---- ---- ---- Automotive, Communications Services, and Other Operations Other income Interest income $619 $769 $726 Rental car lease revenue 1,722 1,765 1,229 Gain on sale of Hughes' satellite systems (1) 2,036 - - Other 865 938 930 ----- ----- ------ Total other income $5,242 $3,472 $2,885 ===== ===== ===== Total other expenses $348 $503 $792 === === === (1)Represents the gain on the sale of Hughes' satellite systems manufacturing businesses to The Boeing Company for $3.8 billion in cash. Financing and Insurance Operations - ---------------------------------- Other income Interest income $1,794 $1,479 $1,379 Insurance premiums 1,394 1,339 1,426 Mortgage operations investment income and servicing fees 3,445 2,742 1,836 Other 870 157 58 ----- ----- ----- Total other income $7,503 $5,717 $4,699 ===== ===== ===== Other expenses Provision for financing losses $552 $404 $463 Insurance losses and loss adjustment expenses 1,028 882 1,013 ----- ------ ----- Total other expenses $1,580 $1,286 $1,476 ===== ===== ===== NOTE 23: Segment Reporting SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, established standards for reporting information about operating segments in financial statements. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance. GM's chief operating decision maker is the Chief Executive Officer. The operating segments are managed separately because each operating segment represents a strategic business unit that offers different products and serves different markets. GM's reportable operating segments within its Automotive, Communications Services, and Other Operations business consist of General Motors Automotive (GMA),(which is comprised of four regions: GMNA, GME, GMLAAM, GMAP), Hughes, and Other. GMNA designs, manufactures, and markets vehicles primarily in North America under the following nameplates: Chevrolet, Pontiac, GMC, Oldsmobile, Buick, Cadillac, and Saturn. GME, GMLAAM, and GMAP meet the demands of customers outside North America with vehicles designed, manufactured, and marketed under the following nameplates: Opel, Vauxhall, Holden, Isuzu, Saab, Buick, Chevrolet, GMC, and Cadillac. 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, certain non-segment specific revenues and expenditures, and certain corporate activities. GM's reportable operating segments within its Financing and Insurance Operations business consist of GMAC and Other. GMAC 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, commercial, vehicle and homeowners' insurance, and asset-based lending. The Financing and Insurance Operations' Other segment includes financing entities operating in the U.S., Canada, Brazil, Germany, Sweden, and Mexico which are not associated with GMAC. The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies except that the disaggregated financial results 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 purposes of assisting in making internal operating decisions. GM evaluates performance based on stand-alone operating segment net income and generally accounts for intersegment sales and transfers as if the sales or transfers were to third parties, that is, at current market prices. Revenues are attributed to geographic areas based on the location of the assets producing the revenues. II-49 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued NOTE 23. Segment Reporting (continued)
Total Other Total GMNA GME GMLAAM GMAP GMA Hughes Other Automotive GMAC Financing Financing ---- --- ------ ---- --- ------ ----- ---------- ---- --------- --------- (dollars in millions) 2000 Manufactured products sales and revenues: External customers $111,481 $23,815 $5,470 $2,999 $143,765 $8,514 $3,106 $155,385 $ - $ - $ - Intersegment (1,659) 1,040 184 435 - 34 (34) - - - - ------- ------- ------ ----- ------- ----- ------ ------- --- --- --- Total manufactured products 109,822 24,855 5,654 3,434 143,765 8,548 3,072 155,385 - - - Financing revenue - - - - - - - - 15,493 1,009 16,502 Other income 2,901 503 59 172 3,635 2,141 (534) 5,242 8,168 (665) 7,503 ------- ------ ----- ----- ------- ----- ----- ------ ------ ----- ------ Total net sales and revenues $112,723 $25,358 $5,713 $3,606 $147,400 $10,689 $2,538 $160,627 $23,661 $344 $24,005 ======= ====== ===== ===== ======= ====== ===== ======= ====== === ====== Depreciation and amortization $4,564 $1,357 $272 $107 $6,300 $996(b)(d) $133 $7,429 $5,505 $477 $5,982 Interest income $633 $403 $22 $13 $1,071 $106 $(558) $619 $2,231 $(437) $1,794 Interest expense $1,175 $408 $101 $4 $1,688 $218 $(1,091) $815 $8,295 $442 $8,737 Income tax expense (benefit) $1,218 $(209) $(122) $17 $904 $577 $(38) $1,443 $954 $(4) $950 (Losses) earnings of nonconsolidated associates $(74) $7 $69 $(195) $(193) $(142) $(1) $(336) $- $4 $4 Net income (loss) $3,174 $(676) $26 $(233) $2,291 $829(b)(d) $(281) $2,839 $1,602 $11 $1,613 Investments in nonconsolidated affiliates $780 $170 $436 $1,915 $3,301 $82 $114 $3,497 $982 $(982) $- Segment assets $90,502 $18,857 $4,166 $1,108 $114,633 $18,893 $(170) $133,356 $168,410 $1,334 $169,744 Expenditures for property $6,073 $1,517 $233 $168 $7,991 $993(c) $216 $9,200 $518 $4 $522 1999 Manufactured products sales and revenues: External customers $110,388 $24,646 $4,445 $2,706 $142,185 $7,325 $3,125 $152,635 $ - $ - $ - Intersegment (1,595) 1,025 234 336 - 16 (16) - - - - ------- ------ ----- ------ ------- ----- ----- ------ -- -- -- Total manufactured products 108,793 25,671 4,679 3,042 142,185 7,341 3,109 152,635 - - - Financing revenue - - - - - - - - 13,778 956 14,734 Other income 3,142 554 30 145 3,871 253 (652) 3,472 6,440 (723) 5,717 ------- ------ ----- ----- ------- ----- ----- ------- ------ --- ------ Total net sales and revenues $111,935 $26,225 $4,709 $3,187 $146,056 $7,594 $2,457 $156,107 $20,218 $233 $20,451 ======= ====== ===== ===== ======= ===== ===== ======= ====== === ====== Depreciation and amortization $4,457 $1,086 $228 $154 $5,925 $706 (b) $242 $6,873 $5,136 $309 $5,445 Interest income $929 $433 $45 $8 $1,415 $27 $(673) $769 $1,744 $(265) $1,479 Interest expense $1,223 $337 $95 $11 $1,666 $123 $(961) $828 $6,526 $396 $6,922 Income tax expense (benefit) $2,361 $220 $(156) $(7) $2,418 $(194) $(57) $2,167 $960 $(9) $951 (Losses) earnings of nonconsolidated associates $(30) $1 $45 $(149) $(133) $(189) $(3) $(325) $(1) $1 $ - Net income (loss) $4,857 $423 $(81) $(218) $4,981 $(270) (b) $(243)(a) $4,468 $1,527 $7 $1,534 Investments in nonconsolidated affiliates $539 $52 $332 $926 $1,849 $(11) $(127) $1,711 $2,257 $(2,257) $- Segment assets $82,851 $18,156 $4,102 $1,343 $106,452 $18,841 $268 $125,561 $148,789 $380 $149,169 Expenditures for property $4,604 $1,228 $358 $150 $6,340 $472 (c) $249 $7,061 $321 $2 $323
See notes on next page II-50 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued NOTE 23. Segment Reporting (continued)
Total Other Total GMNA GME GMLAAM GMAP GMA Hughes Other Automotive GMAC Financing Financing ---- --- ------ ---- --- ------ ----- ---------- ---- --------- --------- (dollars in millions) 1998 Manufactured products sales and revenues: External customers $91,771 $23,948 $7,150 $2,814 $125,683 $5,924 $2,669 $134,276 $ - $ - $ - Intersegment (1,450) 1,088 253 109 - 40 (40) - - - - ------ ------ ----- ----- ------- ----- ----- ------- -- -- -- Total manufactured products 90,321 25,036 7,403 2,923 125,683 5,964 2,629 134,276 - - - Financing revenue - - - - - - - - 12,731 854 13,585 Other income 2,296 804 150 121 3,371 131 (617) 2,885 5,183 (484) 4,699 ------ ------ ------ ------ ------- ------ ----- ------- ------ --- ------ Total net sales and revenues $92,617 $25,840 $7,553 $3,044 $129,054 $6,095 $2,012 $137,161 $17,914 $370 $18,284 ====== ====== ===== ===== ======= ===== ===== ======= ====== === ====== Depreciation and amortization $4,138 $1,102 $366 $95 $5,701 $434(b) $92 $6,227 $4,812 $108 $4,920 Interest income $537 $544 $116 $9 $1,206 $112 $(592) $726 $1,524 $(145) $1,379 Interest expense $939 $433 $92 $7 $1,471 $18 $(703) $786 $5,787 $56 $5,843 Income tax expense (benefit) $787 $319 $(213) $9 $902 $(45) $161 $1,018 $612 $6 $618 Earnings (losses) of nonconsolidated associates $14 $(14) $102 $(152) $(50) $(128) $(61) $(239) $ - $ - $ - Net income (loss) $1,633 $419 $(175) $(243) $1,634 $272(b) $(372)(a) $1,534 $1,325 $97 $1,422 Investments in nonconsolidated affiliates $414 $262 $445 $395 $1,516 $41 $(607) $950 $557 $(557) $ - Segment assets $65,765 $18,440 $5,548 $1,557 $91,310 $13,008 $10,276 $114,594 $131,760 $334 $132,094 Expenditures for property $5,464 $1,205 $534 $197 $7,400 $344(c) $208 $7,952 $279 $ - $279
(a)Other includes income (loss) from discontinued operations related to Delphi of $426 million and $(93) million for the years ended December 31, 1999 and 1998, respectively. (b)The amount reported for Hughes excludes amortization of GM purchase accounting adjustments related to GM's acquisition of Hughes Aircraft Company of approximately $16 million ($3 million related to PanAmSat and $13 million related to the satellite systems manufacturing businesses prior to its sale to Boeing on October 6, 2000), $21 million and $21 million for 2000, 1999, and 1998, respectively. (c)Excludes satellite expenditures totaling $766 million, $789 million, and $797 million in 2000, 1999, and 1998, respectively. Also excludes expenditures related to the early buy-out of satellite sale-leasebacks totaling $0, $370 million, and $156 million in 2000, 1999, and 1998, respectively. (d)The amount reported for Hughes includes the write-off of approximately $329 million of unamortized goodwill related to the satellite systems manufacturing businesses at the time of the sale to Boeing. II-51 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued NOTE 23. Segment Reporting (concluded) Information concerning principal geographic areas was as follows (dollars in millions): 2000 1999 1998 ----------------- ----------------- --------------- Net Sales Net Sales Net Sales & Net & Net & Net Revenues Property Revenues Property Revenues Property -------- -------- -------- -------- -------- --------- North America United States $136,399 $22,798 $130,073 $20,634 $105,672 $19,454 Canada and Mexico 13,986 3,687 12,661 3,760 11,009 2,358 -------- ------- -------- ------- ------- ------ Total North America 150,385 26,485 142,734 24,394 116,681 21,812 Europe France 1,986 139 2,130 151 2,042 186 Germany 6,582 2,687 8,968 2,912 10,567 3,349 Spain 1,650 709 2,001 542 1,966 422 United Kingdom 5,035 834 5,390 1,070 5,379 1,192 Other 11,935 2,397 9,407 1,635 9,679 1,748 ------ ----- ------- ----- ------- ----- Total Europe 27,188 6,766 27,896 6,310 29,633 6,897 Latin America Brazil 3,395 1,047 2,830 1,409 4,773 1,879 Other Latin America 1,843 380 1,686 403 2,909 409 ----- ----- ----- ----- ----- ----- Total Latin America 5,238 1,427 4,516 1,812 7,682 2,288 All Other 1,821 698 1,412 759 1,449 1,611 -------- ------- -------- -------- -------- ------- Total $184,632 $35,376 $176,558 $33,275 $155,445 $32,608 ======= ====== ======= ====== ======= ====== * * * * * * * * II-52 GENERAL MOTORS CORPORATION AND SUBSIDIARIES Selected Quarterly Data (Unaudited) 2000 Quarters -------------------------------------- 1st 2nd 3rd 4th (1) --- --- --- --- (dollars in millions except per share amounts) Total net sales and revenues $46,858 $48,743 $42,690 $46,341 ====== ====== ====== ====== Income before income taxes and minority interests $2,632 $2,835 $1,266 $431 Income tax expense 783 929 436 245 Minority interests 2 2 (2) 11 Losses of nonconsolidated associates (68) (157) 1 (108) ----- ------ ----- ----- Net income 1,783 1,751 829 89 Dividends on preference stocks (29) (27) (27) (27) ---- ------ ----- -- Earnings attributable to common stocks $1,754 $1,724 $802 $62 ===== ===== === == Earnings (losses) attributable to $1-2/3 par value $1,786 $1,762 $878 (635) (Losses) earnings attributable to Class H $(32) $(38) $(76) $697 Basic earnings (losses) per share attributable to $1-2/3 par value $2.88 $2.99 $1.57 $(1.14) Basic (losses) earnings per share attributable to Class H (2) $(0.08) $(0.07) $(0.09) $0.80 Average number of shares of common stocks outstanding - basic (in millions) $1-2/3 par value 620 590 559 559 Class H (2) 413 563 874 875 Diluted earnings (losses) per share attributable to $1-2/3 par value $2.80 $2.93 $1.55 $(1.16) Diluted (losses) earnings per share attributable to Class H (2) $(0.08) $(0.07) $(0.09) $0.76 Average number of shares of common stocks outstanding - diluted (in millions) $1-2/3 par value 637 602 567 559 Class H (2) 413 563 874 962 II-53 GENERAL MOTORS CORPORATION AND SUBSIDIARIES SUPPLEMENTARY INFORMATION - continued Selected Quarterly Data (Unaudited) - continued (1) Fourth quarter 2000 results include: a $939 million after-tax charge for the phase-out of Oldsmobile; an after-tax charge of $294 million related to postemployment costs for termination and other postemployment benefits associated with the four North American manufacturing facilities slated for conversion and capacity reduction (see Note 3 to the GM consolidated financial statements); a $419 million after-tax charge related to the reduction in production capacity at GME, including the restructuring of Vauxhall Motors Limited's manufacturing operations in the UK; and a $1.1 billion after-tax gain at Hughes related to the sale of its satellite systems manufacturing businesses to The Boeing Company for $3.8 billion in cash. (2) Adjusted to reflect the three-for-one stock split of the GM Class H common stock, in the form of a 200% stock dividend, paid on June 30, 2000. II-54 GENERAL MOTORS CORPORATION AND SUBSIDIARIES SUPPLEMENTARY INFORMATION - continued Selected Quarterly Data (Unaudited) - continued 1999 Quarters -------------------------------------- 1st 2nd 3rd 4th (1) --- --- --- --- (dollars in millions except per share amounts) Total net sales and revenues $42,435 $45,067 $42,794 $46,262 ====== ====== ====== ====== Income from continuing operations before income taxes and minority interests $2,940 $2,784 $1,518 $1,805 Income tax expense 1,029 956 553 580 Minority interests (14) (7) (7) - Losses of nonconsolidated associates (77) (87) (81) (80) ----- ----- ----- ----- Income from continuing operations 1,820 1,734 877 1,145 Income from discontinued operations 242 184 - - ----- ----- ----- ----- Net income 2,062 1,918 877 1,145 Dividends on preference stocks (16) (7) (28) (29) ----- ----- ---- ----- Earnings attributable to common stocks $2,046 $1,911 $849 $1,116 ===== ===== === ===== Earnings (losses) attributable to common stocks $1-2/3 par value Continuing operations $1,783 $1,754 $866 $1,196 Discontinued operations 242 184 - - ----- ----- --- ----- Earnings attributable to $1-2/3 par value $2,025 $1,938 $866 $1,196 ===== ===== === ===== Earnings (losses) attributable to Class H $21 $(27) $(17) $(80) == == == == Basic earnings (losses) per share attributable to common stocks $1-2/3 par value Continuing operations $2.73 $2.71 $1.35 $1.90 Discontinued operations 0.37 0.28 - - ---- ---- ---- ----- Earnings per share attributable to $1-2/3 par value $3.10 $2.99 $1.35 $1.90 ==== ==== ==== ==== Earnings (losses) per share attributable to Class H (2) $0.07 $(0.08) $(0.04) $(0.19) ==== ==== ==== ==== Average number of shares of common stocks outstanding - basic (in millions) $1-2/3 par value 654 648 641 630 Class H (2) 319 363 405 409 Earnings (losses) per share attributable to common stocks assuming dilution $1-2/3 par value Continuing operations $2.68 $2.66 $1.33 $1.86 Discontinued operations 0.36 0.28 - - ---- ---- ---- ---- Earnings per share attributable to $1-2/3 par value $3.04 $2.94 $1.33 $1.86 ==== ==== ==== ==== Earnings (losses) per share attributable to Class H (2) $0.06 $(0.08) $(0.04) $(0.19) ==== ==== ==== ==== Average number of shares of common stocks outstanding - diluted (in millions) $1-2/3 par value 667 660 652 643 Class H (2) 335 363 405 409 II-55 GENERAL MOTORS CORPORATION AND SUBSIDIARIES SUPPLEMENTARY INFORMATION - continued Selected Quarterly Data (Unaudited) - continued (1) Fourth quarter 1999 results included: an after-tax charge of $553 million for postemployment benefits related to the reversal of a liability for benefits payable to excess U.S. hourly employees (see Note 3 to the GM consolidated financial statements); an after-tax charge of $408 million for hourly retiree benefits related to the benefit increase granted to hourly retirees in connection with the 1999 United Auto Workers (UAW) agreement; a $90 million after-tax charge for termination benefits related to a U.S. salaried early retirement program; and an after-tax charge of $165 million related to Hughes' decision to discontinue certain of its wireless manufacturing operations. (2) Adjusted to reflect the three-for-one stock split of the GM Class H common stock, in the form of a 200% stock dividend, paid on June 30, 2000. II-56 GENERAL MOTORS CORPORATION AND SUBSIDIARIES ITEM 9. Changes in and disagreements with accountants on accounting and financial disclosure None II-57 PART III GENERAL MOTORS CORPORATION AND SUBSIDIARIES ITEMS 10, 11, 12, AND 13 Information required by Part III (Items 10, 11, 12, and 13) of this Form 10-K is incorporated by reference from General Motors Corporation's definitive Proxy Statement for its 2001 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission, pursuant to Regulation 14A, not later than 120 days after the end of the fiscal year, all of which information is hereby incorporated by reference in, and made part of, this Form 10-K, except that the information required by Item 10 with respect to executive officers of the Registrant is included in Item 4A of Part I of this report. III-1 PART IV GENERAL MOTORS CORPORATION AND SUBSIDIARIES ITEM 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K Page Number ------- (a) 1. All Financial Statements See Part II 2. Financial Statement Schedule II - Allowances for the Years Ended December 31, 2000, 1999, and 1998 IV-3 3. Exhibits (Including Those Incorporated by Reference) Exhibit Number - ------- (3)(a) Restated Certificate of Incorporation, as amended, filed as Exhibit 3(i) to the Current Report on Form 8-K of General Motors Corporation dated June 6, 2000, and Amendment to Article Fourth of the Certificate of Incorporation - Division III - Preference Stock, by reason of the Certificates of Designations filed with the Secretary of State of the State of Delaware on September 14, 1987 and the Certificate of Decrease filed with the Secretary of State of the State of Delaware on September 29, 1987 (pertaining to the Six Series of Preference Stock contributed to the General Motors pension trusts), incorporated by reference to Exhibit 19 to the Quarterly Report on Form 10-Q of General Motors Corporation for the quarter ended June 30, 1990 in the Form SE of General Motors Corporation dated August 6, 1990; as further amended by the Certificate of Designations filed with the Secretary of State of the State of Delaware on June 28, 1991 (pertaining to Series A Conversion Preference Stock), incorporated by reference to Exhibit 4(a) to Form S-8 Registration Statement No. 33-43744 in the Form SE of General Motors Corporation dated November 1, 1991; as further amended by the Certificate of Designations filed with the Secretary of State of the State of Delaware on December 9, 1991 (pertaining to Series B 9-1/8% Preference Stock), incorporated by reference to Exhibit 4(a) to Form S-3 Registration Statement No. 33-45216 in the Form SE of General Motors Corporation dated January 27, 1992; as further amended by the Certificate of Designations filed with the Secretary of State of the State of Delaware on February 14, 1992 (pertaining to Series C Convertible Preference Stock), incorporated by reference to Exhibit (3)(a) to the Annual Report on Form 10-K of General Motors Corporation for the year ended December 31, 1991 in the Form SE of General Motors Corporation dated March 20, 1992; as further amended by the Certificate of Designations filed with the Secretary of State of the State of Delaware on July 15, 1992 (pertaining to Series D 7.92% Preference Stock), incorporated by reference to Exhibit 3(a)(2) to the Quarterly Report on Form 10-Q of General Motors Corporation for the quarter ended June 30, 1992 in the Form SE of General Motors Corporation dated August 10, 1992; as further amended by the Certificate of Designations filed with the Secretary of State of the State of Delaware on December 15, 1992 (pertaining to Series G 9.12% Preference Stock), incorporated by reference to Exhibit 4(a) to Form S-3 Registration Statement No. 33-49309 in the Form SE of General Motors Corporation dated January 25, 1993; and as further amended by the Certificate of Designations filed with the Secretary of State of the State of Delaware on June 24, 1999 (pertaining to Series H 6.25% Automatically Convertible Preference Stock), incorporated by reference to Exhibit 4(a) to Form S-8 Registration Statement No. 333-31846 in the Form SE of General Motors Corporation dated March 6, 2000. N/A (3)(b) By-Laws, of General Motors Corporation, as amended, incorporated by reference to Exhibit 3(ii) to the Current Report on Form 8-K of General Motors Corporation dated March 2, 1998; as further amended, incorporated by reference to Exhibit 3(ii) to the Current Reports on Form 8-K of General Motors Corporation dated June 24, 1999, August 2, 1999, March 6, 2000, June 6, 2000, and October 3, 2000. N/A (4)(a) Form of Indenture relating to the $500,000,000 8-1/8% Debentures Due April 15, 2016 dated as of April 1, 1986 between General Motors Corporation and Citibank, N.A., Trustee, incorporated by reference to Exhibit 4 to Amendment No. 1 to Form S-3 Registration Statement No. 33-4452 and resolutions adopted by the Special Committee on April 15, 1986, incorporated by reference to Exhibit 4(a) to the Current Report on Form 8-K of General Motors Corporation dated April 24, 1986. N/A IV-1 GENERAL MOTORS CORPORATION AND SUBSIDIARIES PART IV - continued ITEM 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K (continued) Exhibit Page Number Number - ------- ------ (4)(b) Form of Indenture relating to the $700,000,000 9-5/8% Notes Due December 1, 2000 and the $1,400,000,000 Medium-Term Note Program dated as of November 15, 1990 between General Motors Corporation and Citibank, N.A., Trustee,incorporated by reference to Exhibit 4(a) to Form S-3 Registration Statement No. 33-37737. N/A (4)(c) Form of Indenture relating to the $377,377,000 7.75% Debentures Due March 15, 2036 dated as of December 7, 1995 between General Motors Corporation and Citibank, N.A., Trustee, filed as Exhibit 4(a) to Amendment No. 1 to Form S-3 Registration Statement No. 33-64229. N/A (4)(d) Instruments defining the rights of holders of nonregistered debt of the Registrant have been omitted from this exhibit index because the amount of debt authorized under any such instrument does not exceed 10% of the total assets of the Registrant and its subsidiaries. The Registrant agrees to furnish a copy of any such instrument to the Commission upon request. N/A (4)(e)(ii)Amended and Restated Declaration of Trust of General Motors Capital Trust G, incorporated by reference to Exhibit 4(c)(ii) to the Current Report on Form 8-K of General Motors Corporation dated July 1, 1997. N/A (4)(f)(i) Indenture between General Motors Corporation and Wilmington Trust Company, incorporated by reference to Exhibit 4(d)(i) to the Current Report on Form 8-K of General Motors Corporation dated July 1, 1997. N/A (4)(f)(iii)Second Supplemental Indenture between General Motors Corporation and Wilmington Trust Company With Respect To The Series G Junior Subordinated Debentures, incorporated by reference to Exhibit 4(d)(iii) to the Current Report on Form 8-K of General Motors Corporation dated July 1, 1997. N/A (4)(g)(ii)Series G Preferred Securities Guarantee Agreement, General Motors Capital Trust G, incorporated by reference to Exhibit 4(g)(ii) to the Current Report on Form 8-K of General Motors Corporation dated July 1, 1997. N/A (10)(a)** General Motors 1997 Annual Incentive Plan, incorporated by reference to Exhibit B to the Proxy Statement of General Motors Corporation dated April 16,1997. N/A (10)(b)** General Motors 1997 Stock Incentive Plan, incorporated by reference to Exhibit B to the Proxy Statement of General Motors Corporation dated April 16, 1997. N/A (10)(c)** General Motors 1997 Performance Achievement Plan, incorporated by reference to Exhibit B to the Proxy Statement of General Motors Corporation dated April 16, 1997. N/A (10)(d)** Non-Employee Director Long-Term Stock Incentive Plan, incorporated by reference to Exhibit A to the Proxy Statement of General Motors Corporation dated April 16, 1997. N/A (10)(e) Employment Contract with John M. Devine dated December 12, 2000. IV-6 (12) Computation of Ratios of Earnings to Fixed Charges for the Years Ended December 31, 2000, 1999, and 1998. IV-11 (21) Subsidiaries of the Registrant as of December 31, 2000 IV-12 (23) Consent of Independent Auditors IV-18 (99) Hughes Electronics Corporation Financial Statements and Management's Discussion and Analysis of Financial Condition and Results of Operations IV-19 * The registrant hereby undertakes to furnish supplementally a copy of any omitted schedule or other attachment to the Securities and Exchange Commission upon request. ** Required to be filed as an exhibit pursuant to Item 14(c) of Form 10-K. (b) Reports on Form 8-K Nine reports on Form 8-K, dated September 28, 2000 (filed October 2, 2000), October 3, 2000, November 1, 2000 (2), November 20, 2000, December 1, 2000, December 7, 2000, December 12, 2000, and December 13, 2000 were filed during the quarter ended December 31, 2000 reporting matters under Item 5, Other Events, reporting certain agreements under Item 7, Financial Statements, Pro Forma Financial Information, and Exhibits, and reporting matters under Item 9, Regulation FD Disclosure. Subsequently, one report on Form 8-K, dated October 3, 2000 was filed on January 17, 2001 reporting matters under Item 5, Other Events. IV-2 GENERAL MOTORS CORPORATION AND SUBSIDIARIES SCHEDULE II - ALLOWANCES
Additions Additions Balance at charged to charged to beginning costs and other Balance at Description of year expenses accounts Deductions end of year - ----------- -------- -------- -------- ---------- ----------- (dollars in millions) For the Year Ended December 31, 2000 Allowances Deducted from Assets Finance receivables (unearned income) $4,153 $ - $3,942 $3,223 $4,872 Allowance for credit losses 1,114 552 169(a) 503(b) 1,332 Accounts and notes receivable (for doubtful receivables) 301 173 44(a) 277(b) 241 Inventories (principally for obsolescence of service parts) 364 - - 64(c) 300 Other investments and miscellaneous assets (receivables and other) 5 - 1 - 6 Miscellaneous allowances (mortgage and other) 225 35 1 75 186 ------ ---- ------- ------- ------ Total Allowances Deducted from Assets $6,162 $760 $4,157 $4,142 $6,937 ===== === ===== ===== ===== For the Year Ended December 31, 1999 Allowances Deducted from Assets Finance receivables (unearned income) $4,027 $ - $3,411 $3,285 $4,153 Allowance for credit losses 1,021 404 109(a) 420(b) 1,114 Accounts and notes receivable (for doubtful receivables) 309 75 29(a) 112(b) 301 Inventories (principally for obsolescence of service parts) 257 107(c) - - 364 Other investments and miscellaneous assets (receivables and other) 14 - - 9 5 Miscellaneous allowances (mortgage and other) 252 54 1 82 225 ----- --- ----- ----- ----- Total Allowances Deducted from Assets $5,880 $640 $3,550 $3,908 $6,162 ===== === ===== ===== ===== For the Year Ended December 31, 1998 Allowances Deducted from Assets Finance receivables (unearned income) $3,516 $ - $3,288 $2,777 $4,027 Allowance for credit losses 903 463 96(a) 441(b) 1,021 Accounts and notes receivable (for doubtful receivables) 161 208 19(a) 79(b) 309 Inventories (principally for obsolescence of service parts) 258 - - 1(c) 257 Other investments and miscellaneous assets (receivables and other) 13 - 1 - 14 Miscellaneous allowances (mortgage and other) 202 52 113 115 252 ----- --- ----- ----- ----- Total Allowances Deducted from Assets $5,053 $723 $3,517 $3,413 $5,880 ===== === ===== ===== =====
Notes:(a) Primarily reflects the recovery of accounts previously written-off. (b) Accounts written off. (c) Represents net change of inventory allowances. Reference should be made to the notes to the GM consolidated financial statements. IV-3 GENERAL MOTORS CORPORATION AND SUBSIDIARIES SIGNATURES Pursuant to the requirements of Section 13 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: March 5, 2001 By /s/JOHN F. SMITH, JR. ---------------------------------- (John F. Smith, Jr. Chairman of the Board of Directors) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on this 5th day of March 2001 by the following persons on behalf of the Registrant and in the capacities indicated. Signature Title - -------------------------- ---------------------------------- /s/JOHN F. SMITH, JR. Chairman of the Board of Directors - --------------------- (John F. Smith, Jr.) /s/HARRY J. PEARCE Vice Chairman of the Board of - ------------------ Directors (Harry J. Pearce) /s/G. RICHARD WAGONER, JR. President and Chief Executive - ------------------------- Officer (G. Richard Wagoner, Jr.) /s/JOHN M. DEVINE Vice Chairman and ) - ----------------- Chief Financial Officer ) (John M. Devine) ) )Principal )Financial /s/ERIC A. FELDSTEIN Vice President and Treasurer)Officers - -------------------- ) (Eric A. Feldstein) ) ) /s/WALLACE W. CREEK Controller ) - ------------------- ) (Wallace W. Creek) )Principal )Accounting /s/PETER R. BIBLE Assistant Controller and )Officers - ----------------- Chief Accounting Officer ) (Peter R. Bible) ) IV-4 GENERAL MOTORS CORPORATION AND SUBSIDIARIES SIGNATURES - concluded Signature Title --------- ----- /s/PERCY BARNEVIK Director - ----------------- (Percy Barnevik) /s/JOHN H. BRYAN Director - ---------------- (John H. Bryan) /s/THOMAS E. EVERHART Director - --------------------- (Thomas E. Everhart) /s/GEORGE M. C. FISHER Director - ---------------------- (George M. C. Fisher) /s/NOBUYUKI IDEI Director - ---------------- (Nobuyuki Idei) /s/KAREN KATEN Director - -------------- (Karen Katen) /s/J. WILLARD MARRIOTT, JR. Director - --------------------------- (J. Willard Marriott, Jr.) /s/ECKHARD PFEIFFER Director - ------------------- (Eckhard Pfeiffer) /s/LLOYD D. WARD Director - ---------------- (Lloyd D. Ward) /s/DENNIS WEATHERSTONE Director - ---------------------- (Dennis Weatherstone) IV-5 EX-10 2 exhibit10e10k-030601.txt MANAGEMENT CONTRACT FOR JOHN DEVINE EXHIBIT 10(e) December 5, 2000 Mr. John M. Devine 2020 W. Valley Bloomfield Hills, MI 48304 Dear John: This is to document the make-whole package you will receive from General Motors Corporation (GM) if you accept our offer of employment for the position of Vice Chairman and Chief Financial Officer of GM. On or before December 31, 2000, you will receive a sign-on payment based on the December 13, 2000 value of your former employer's stock, to compensate for the loss of your unvested stock option grant, 1998-2000 LTIP grant, restricted stock units, and applicable dividend equivalent payments provided by your previous employer. We will also make you whole on the loss of certain other benefits provided by your previous employer which we have previously identified. To compensate you for the loss of your deferred compensation account from your previous employer, you will receive a fully vested credit to GM's deferred compensation program, equal to the balance of such account shown on the most recent account statement received from your previous employer. To compensate you for the loss of your non-qualified pension benefit from your prior employer, during your employment with GM and thereafter, you (and in the event of your death, your surviving spouse) will be entitled to receive such non-qualified pension benefits, less any pension benefits paid from any non-qualified plan of your previous employer. Unless deferred, these payments will be made monthly. You will be granted options under GM's Stock Incentive Plan to purchase 300,000 shares of the GM's $1-2/3 par value common stock. The exercise price for these options will be the average of the high and low trading price of $1-2/3 par value common stock on December 13, 2000. These options will vest 20% per year beginning on the first anniversary of the grant date. As we discussed, our obligation to pay the deferred compensation and non-qualified pension benefits described above and your rights under the option grant described above, will terminate in their entirety in the event you violate any confidentiality or non-competition commitments to, or act at any time in a manner inimical to the best interests of, General Motors. Lastly, any of the items specified herein shall be reduced to the extent you receive a similar payment from your previous employer. Again, I am very pleased about the prospect of you joining the General Motors executive team. If you have any questions on this make-whole package, please do not hesitate to call me or Greg Lau on 313/665-3021. Sincerely, /s/ Rick Wagoner G. R. Wagoner, Jr. Attachment IV-6 December 5, 2000 Mr. John M. Devine 2020 W. Valley Bloomfield Hills, MI 48304 Dear John: I am extremely pleased to confirm our offer of employment to you, which will remain open until 5:00 p.m. eastern time on December 13, 2000. If you accept our offer, your employment with General Motors Corporation will commence on December 13, 2000 and you will assume the positions of Vice Chairman and Chief Financial Officer of the Company effective January 1, 2001. You will be located at our headquarters office in Detroit, Michigan and report to me as the Chief Executive Officer of the Company. Please indicate your acceptance by signing below and returning the original to me. Your starting base salary will be the same as that of the Company's current Vice Chairman as of the date of this letter. Your base salary will be reviewed periodically by the Executive Compensation Committee of the Board of Directors (the "Executive Compensation Committee") and, based on that review, may be adjusted. Your annual cash bonus will be dependent upon corporate performance relative to the performance matrices approved by the Executive Compensation Committee, but in no case will your bonus be less than $1,500,000 for 2001 and $1,000,000 for 2002. You will be eligible to defer salary and/or bonus payments, to the extent permitted under the Company's deferred compensation program. You will be eligible to participate in the Company's Stock Incentive Plan, Stock Performance Program and Net Margin Grant Program. Your stock option target for 2001 will be commensurate with the Vice Chairman position, with one-third of the grant vesting on each of the three annual anniversaries following the grant date. Your target share-value under the Stock Performance Program (the "SPP") for the 1999-2001 cycle and for the 2000-2002 and 2001-2003 cycles will be commensurate with those of the Vice Chairman position. Awards under the SPP are delivered in shares at the end of a three-year period. Under the Net Margin Program, you will receive a one-time stock grant of 19,228 shares of $1-2/3 par value common stock if the Company meets its net margin goal (based on a four quarter rolling average) within the performance period of October 1, 2000 to December 31, 2003. You will also receive a special grant of approximately 200,000 restricted stock units, based on the average of the high and low trading price of $1-2/3 par value common stock on December 13, 2000. Provided you meet certain performance goals, as established by the Executive Compensation Committee after consultation with you, these restricted stock units will vest 10% on each of the first five anniversaries of your date of hire, with the balance vesting and becoming payable to you 18 months after your retirement date, if you retire after the fifth anniversary of your date of hire. Each quarter, you will receive a dividend equivalent payment in cash based on the number of your unvested restricted stock units. You will be granted a special stock option grant with respect to 200,000 shares under the Company's Stock Incentive Plan on December 13, 2000. This option grant will vest 20% per year beginning on the first anniversary of the grant date, and the exercise price will be the average of the high and low trading price of $1-2/3 par value common stock on December 13, 2000. IV-7 Mr. John M. Devine Page Two December 5, 2000 You will participate in the Supplemental Executive Retirement Program ("SERP"), and, after you have completed five years of service, you will be eligible for benefits beginning at the later of age 61, or when you retire. Pension benefits are related to the number of years you work for General Motors and the higher of the regular SERP formula (based on final average base salary) or the alternate SERP formula (based on final average base salary plus bonus). Prior to December 13, 2005, in the event your employment is terminated by the Company for reasons other than your willful misconduct, fraud, or conviction of a felony, you will be provided an amount of severance pay equal to two years' (or, if less than two years, the time period from the termination of your employment to December 13, 2005, rounded to the nearest whole month) base salary and target bonus. In addition, for a period of two years (or, until December 13, 2005, if less than two years), you will continue to vest in the stock option grant described in the make-whole letter from me to you of even date herewith and any annual option awards granted to you, pursuant to the vesting schedule of those awards; and for the period through December 13, 2004, will continue to vest in the special restricted stock unit grant described above. This continued vesting does not apply to the special stock option grant or to any period beyond December 13, 2004, with respect to the special restricted stock unit grant described above. Any options vested at the time of your termination, or in which you become vested during the two years (or until December 13, 2005, if applicable) following your termination, shall remain exercisable for the remainder of their original ten-year term. In addition, in the event your employment terminates as described in this paragraph, the Company will continue to pay the premium on the endorsement split-dollar life insurance provided by the Company, to the extent necessary so that the coverage provided under that policy plus coverage from any policy maintained by your previous employer, is equal to the coverage under the policy provided by your prior employer. Your benefits under any other awards, plans or programs shall be determined as of the date of termination of employment. All severance benefits will be provided contingent upon you agreeing to execute a release of claims acceptable to the Company, your continued compliance with your confidentiality and non-competition covenants with the Company and your not acting at any time in a manner inimical to the best interests of the Company. In the event you execute a release of claims pursuant to this paragraph, the Company will provide you with a release of claims as to all facts known by the Company at the time the release is given, except to the extent the Company reserves its rights as to specific facts identified at the time the release is given. Your entitlement to the severance benefits will not be affected solely because the Company reserves its rights with respect to any such facts. You will be entitled to the Company's standard package of benefits and perquisites available to executives at your level. Your participation in these plans, as well as any other compensation or benefits plans referenced above or in the make-whole letter from me to you of even date herewith, will be controlled by the terms of those plans. You will be offered a change in control agreement in the event the Company extends change in control or similar agreements to its senior executive officers. IV-8 Mr. John M. Devine Page Three December 5, 2000 As a condition of your acceptance of our offer of employment, you will be required to execute the attached Compensation Statement. Also, please note that executives at your level are expected under the Company's ownership guidelines, to achieve (within five years of hire) a level of ownership equal to five times base salary. John, I am excited about the prospect of your joining our team, and confident that together we will succeed. Please feel free to call with any questions you may have. Sincerely, /s/ Rick Wagoner G. R. Wagoner, Jr. AGREED AND ACCEPTED BY: /s/ John M. Devine - ------------------------------------ John M. Devine 12/12/00 - ------------------------------------ Date IV-9 COMPENSATION STATEMENT Commencing: December 13, 2000 I agree I am classified as an exempt employee for purposes of the Fair Labor Standards Act, and the salary provided to me pursuant to the letter agreement of even date herewith will be my total salary during each monthly period in which GM continues it in effect for all hours worked, including overtime. I acknowledge that I will become aware of trade secrets or other confidential and/or proprietary information concerning GM, the disclosure of which will cause irreparable harm to the Corporation. I agree that I will not disclose to any person or entity any such trade secret, confidential and/or proprietary information and, upon termination of my employment with GM, I shall return all documents or other materials containing such information to GM. I also acknowledge that I will not disclose to GM or its employees any trade secrets or other confidential and/or proprietary information of any prior employer without the specific written authorization of the prior employer. I represent that I am not subject to any agreements that would preclude my employment with GM. For a period of one year immediately following my termination of employment with GM or any of its subsidiaries for any reason, I will not, without the prior written consent of the GM Chief Executive Officer, engage in or perform any services of a similar nature to those I performed at GM for any other corporation or business engaged in the design, manufacture, development, promotion, sale, or financing of automobiles or trucks within North America, Latin America, Asia, Australia, or Europe in competition with GM, any of its subsidiaries or affiliates, or any joint ventures to which GM or any of its subsidiaries or affiliates is a party. If the terms of this paragraph are found by a court to be unenforceable due to the duration, products or territory covered, such court shall be authorized to interpret these terms in a manner that makes the paragraph enforceable within that particular jurisdiction. This Statement reaffirms that my employment is from month-to-month on a calendar month basis and I acknowledge that except as provided in the letter agreements of even date herewith, GM retains the right in its discretion to increase or decrease my compensation. The parties agree Michigan law applies to this Compensation Statement even if I am employed outside the state. I agree that my job responsibilities with GM and a significant portion of my compensation as more fully described in the letter agreements of even date herewith are consideration for the confidentiality and non-compete agreements noted above. No modification or amendment of this Compensation Statement will be effective unless it is in writing and signed by both parties. /s/ John M. Devine /s/ G. Richard Wagoner, Jr - ------------------------------------ ------------------------------------- Employee General Motors Corporation 12/12/00 12/5/00 - ------------------------------ -------------------------------- Date Date IV-10 EX-12 3 exhibit1210k-030601.txt COMPUTATION OF RATIOS EXHIBIT 12 GENERAL MOTORS CORPORATION AND SUBSIDIARIES COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES Years Ended December 31, ---------------------------------- 2000 1999 1998 ---------- ---------- ---------- (dollars in millions) Income from continuing operations $4,452 $5,576 $3,049 Income taxes 2,393 3,118 1,636 Losses of nonconsolidated associates 332 325 239 Minority interests (13) 28 20 Amortization of capitalized interest 69 66 68 ------- ------- ------- Income from continuing operations before income taxes, undistributed income of associates, and capitalized interest 7,233 9,113 5,012 ----- ----- ----- Fixed charges included in income from continuing operations Interest and related charges on debt 9,475 7,642 6,441 Portion of rentals deemed to be interest 341 284 251 ------ ------ ------ Total fixed charges included in income from continuing operations 9,816 7,926 6,692 ----- ----- ----- Earnings available for fixed charges $17,049 $17,039 $11,704 ====== ====== ====== Fixed charges Fixed charges included in income from continuing operations $9,816 $7,926 $6,692 Interest capitalized in the period 137 95 110 ----- ----- ----- Total fixed charges $9,953 $8,021 $6,802 ===== ===== ===== Ratios of earnings to fixed charges 1.71 2.12 1.72 ==== ==== ==== IV-11 EX-21 4 exhibit2110k-030601.txt GENERAL MOTOR'S SUBSIDIARIES EXHIBIT 21 GENERAL MOTORS CORPORATION AND SUBSIDIARIES SUBSIDIARIES OF THE REGISTRANT AS OF DECEMBER 31, 2000 Subsidiary companies of the Registrant are listed below. State or Sovereign Power Name of Subsidiary of Incorporation Subsidiaries included in the Registrant's consolidated financial statements Adam Opel Aktiengesellschaft................................. Germany Adam Opel Unterstuetzungskasse GmbH........................ Germany Alpha Trans Grundbesitz - und Vermogensverwaltungs GmbH.... Germany Autohaus am Nordring GmbH, Berlin.......................... Germany Carus Grundstucks-Vermietungsgesellschaft mbH & Co. Object Kuno 65 KG........................................ Germany Carus Grundstucks-Vermietungsgesellschaft mbH & Co. Object Leo 40 KG......................................... Germany Edmund Becker und Co. AG................................... Germany GM Europe GmbH............................................. Germany General Motors CIS......................................... Russia General Motors GmbH & Co. OHG.............................. Germany General Motors Poland Spolka, zo.o......................... Poland Opel-Automobilwerk Eisenach-PKW GmbH....................... Germany Opel Bank GmbH............................................. Germany Opel Leasing GmbH & Co. OHG*............................. Germany Opel Leasing Verwaltungs GmbH............................ Germany OPEL Guangzhou Precision Machining Co. Ltd................. China Opel Hellas, S.A........................................... Greece Opel Hungary Consulting Service Limited Liability Company.. Hungary Opel International GmbH.................................... France Opel Live GmbH............................................. Germany Opel Performance Center GmbH............................... Germany Opel Polen GmbH............................................ Germany Opel Polska Sp. z oo....................................... Poland Opel Restrukturierungsgesellschaft mbH..................... Germany Opel Southeast Europe Automotive Distribution Limited Liability Company........................................ Hungary Opel Turkiye Limited Sirketi............................... Turkey Saginaw Deutschland GmbH................................... Germany Aisin GM Allison Co., Ltd.................................... Japan Annunciata Corporation....................................... Delaware Argonaut Holdings, Inc....................................... Delaware Auto Lease Payment Corporation............................... Cayman Islands North American New Cars, Inc............................... Delaware Automotive Air Charter, Inc.................................. Delaware Chevrolet Sociedad Anonima de Ahorro para Fines Determinados. Argentina Controladora General Motors, S.A. de C.V. ................... Mexico Electro-Motive de Mexico, S.A. de C. V. ................... Mexico General Motors de Mexico, S. de R.L. de C.V. .............. Mexico GMAC Holding S.A. de C.V................................... Mexico Sistemas Para Automotores de Mexico, S.A. de C.V. ......... Mexico Convesco Vehicle Sales GmbH.................................. Germany Dealership Liquidations, Inc................................. Delaware Electro-Motive Maintenance Operations Pty Ltd. .............. Australia EL-MO Leasing II Corporation................................. Delaware Edmun, Inc................................................. Canada El-Mo-Mex, Inc............................................... Delaware EMD Holding Corporation...................................... Delaware Environmental Corporate Remediation Company, Inc............. Delaware GM Automotive Services Belgium............................... Belgium GM Auto Receivables Co. ..................................... Delaware GM Automotive (UK) Limited................................... England GM Credit AB................................................. Sweden GMC Truck Motors Development Corporation..................... Delaware * Joint Venture Partnership IV-12 GENERAL MOTORS CORPORATION AND SUBSIDIARIES State or Sovereign Power Name of Subsidiary of Incorporation GM-DI Leasing Corporation.................................... Delaware GM-Fiat Worldwide Purchasing Opel Hungary Limited Liability Company.................................................... Hungary GM Imports & Trading Ltd..................................... Bermuda GM International Sales Ltd................................. Cayman Islands GM Ovonic L.L.C.............................................. Michigan Ovonic Energy Products, Inc................................ Michigan GM Plats (Proprietary ) Limited.............................. South Africa General International Limited................................ Bermuda General Motors Acceptance Corporation........................ Delaware AccuTel, Inc............................................... Delaware Autofinanciamiento GMAC, S.A. de C.V....................... Mexico Bankruptcy Solutions, Inc.................................. Delaware Basic Credit Holding Company, L.L.C........................ Delaware Nuvell Credit Corporation................................ Delaware Nuvell Financial Services Corp........................... Delaware Capital Auto Receivables, Inc. ............................ Delaware Car Care Plan Canada Corporation........................... Canada General Acceptance (Thailand) Ltd.*........................ Thailand GMAC, a.s. ................................................ Czech Republic GMAC Arrendamiento S.A. de C.V............................. Mexico GMAC, Australia (Finance) Limited.......................... Australia GMAC Banque................................................ France Opel Bank Hungary Reszrenytarsasag....................... Hungary GMAC Business Credit, L.L.C................................ Delaware GMAC Comercial Automotriz Chile S.A. ...................... Chile GMAC Automotriz Limitada................................. Chile GMAC Commercial Corporation................................ Delaware GMAC Commercial Credit LLC................................. New York Commercial Credit Land One LLC........................... New York Commercial Credit Land Two LLC........................... New York Commercial Credit Land Three LLC......................... New York GMAC Commercial Credit Corporation-Canada/Societe De Credit Commercial GMAC-Canada................................... Canada G.M.A.C. Comercio e Aluguer de Veiculos, Lta............... Portugal GMAC Compania Financiera S.A............................... Argentina GMAC del Ecuador S.A....................................... Ecuador GMAC d.o.o................................................. Croatia GMAC d.o.o................................................. Slovenia GMAC Insurance Holdings, Inc............................... Delaware CoverageOne, Inc......................................... Delaware CoverageOne Purchasing Group, Inc........................ Michigan GMAC RE Corp............................................. Delaware GMAC Risk Services, Inc,................................. Delaware GMAC Securities Corporation, Inc......................... Delaware GMAC Service Agreement Corporation....................... Michigan GM Motor Club, Inc....................................... North Carolina Integon Corporation...................................... Delaware Motors Insurance Corporation ............................ Michigan MRP Service Agreement Corporation........................ Michigan Trinity General Agency, Inc.............................. Texas GMAC International Corporation............................. Delaware GMAC International Finance B.V............................. Netherlands GMAC Italia Leasing S.p.A. ................................ Italy GMAC Lease B.V............................................. Netherlands GMAC Leasing Corporation .................................. Delaware Patlan Corporation ...................................... Delaware GMAC Mexicana, S.A. de C.V. Sociedad Financiera de Objeto Limitado Filial.......................................... Mexico GMAC Mortgage Group, Inc................................... Michigan GMAC Commercial Holding Corp............................. Nevada GMAC Mortgage Holdings, Inc. ............................ Delaware * Joint Venture Partnership IV-13 GENERAL MOTORS CORPORATION AND SUBSIDIARIES State or Sovereign Power Name of Subsidiary of Incorporation GMAC Residential Holding Corp............................ Nevada GMAC RF, INC. ........................................... Michigan Residential Money Centers, Inc........................... Delaware GMAC Sverige AB............................................ Sweden GMAC Taiwan, Inc........................................... Delaware Standard Leasing Motors.................................. Taiwan GMAC - TCFC Finance Limited................................ India General Motors Acceptance Corporation, Australia........... Delaware Holden National Leasing Limited.......................... Australia General Motors Acceptance Corporation of Canada, Limited... Canada Canadian Securitized Auto Receivables Corporation........ Canada GMAC Leaseco Limited..................................... Canada General Motors Acceptance Corporation, Colombia S.A. ...... Delaware G.M.A.C. Financiera de Colombia S.A. Compania de Financiamiento Comercial............................... Colombia General Motors Acceptance Corporation, Continental......... Delaware GMAC Finansiering A/S.................................... Denmark GM Finance HB............................................ Sweden General Motors Acceptance Corporation Hungary Commercial Limited Liability Company................................ Hungary General Motors Acceptance Corporation Italia S.p.A. ....... Italy General Motors Acceptance Corporation Nederland N.V. ...... Netherlands GMAC Espana, Sociedad Anonima de Financiacion, E.F.C..... Spain General Motors Acceptance Corporation, North America....... Delaware General Motors Acceptance Corporation (N.Z.) Limited....... New Zealand General Motors Acceptance Corporation de Portugal - Servicos Financeiros, S.A................................ Portugal General Motors Acceptance Corporation, South America....... Delaware General Motors Acceptance Corporation de Venezuela, C.A.. Venezuela Servicios, Representacion y Asesoramiento de Personal Persoserv S.A.......................................... Ecuador General Motors Acceptance Corporation Suisse S.A. ......... Switzerland Lease Auto Receivables, Inc................................ Delaware Master Lease Austria GmbH.................................. Germany On:Line Finance Holdings Limited........................... England Arros Finance Limited.................................... England Carl Company Limited..................................... England Gemma Engineering Limited................................ England Hero Finance Limited..................................... England On:Auto Finance Limited.................................. England On:Fleet Limited......................................... England On Guard Insurance Services Limited...................... England On:Line Finance ......................................... England On Servicing Limited..................................... England Opel Bank, S.A.*........................................... Poland OPEL Bankgesellschaft m.b.H................................ Austria Opel Leasing Holding Gesellscshaft m.b.H. ................. Austria OPEL Leasinggesellschaft, m.b.H.......................... Austria P.T. GMAC Lippo Finance*................................... Indonesia Servicios GMAC S.A. de C.V................................. Mexico Universal Warranty Corporation............................. Michigan Wholesale Auto Receivables Corporation..................... Delaware General Motors de Argentina S.A.............................. Argentina General Motors Asia, Inc. ................................... Delaware GM Autoworld Korea Company, Ltd............................ Japan General Motors Asia Pacific (Pte) Ltd........................ Singapore General Motors Asia Pacific Holdings, LLC.................... Delaware General Motors Automobiles Philippines, Inc.................. Philippines General Motors do Brasil Ltda. .............................. Brazil Banco General Motors S.A................................... Brazil Brazauto Industria e Comercio Ltda......................... Cayman Islands Brazauto Trading (Cayman) Limited.......................... Cayman Islands * Joint Venture Partnership IV-14 GENERAL MOTORS CORPORATION AND SUBSIDIARIES State or Sovereign Power Name of Subsidiary of Incorporation Compass Investimentos e Participacoes Ltda................. Brazil Consorcio Nacional GM Ltda................................. Brazil GM Factoring Sociedade de Fomento Comercial Ltda. ......... Brazil General Motors of Canada Limited............................. Canada MOWG Motorwagenfabrik AG................................... Switzerland General Motors Chile S.A., Industria Automotriz.............. Chile General Motors China, Inc. .................................. Delaware General Motors Warehousing and Trading (Shanghai) Co. Ltd.. China General Motors (China) Investment Company Limited.......... China General Motors Colmotores, S.A............................... Colombia General Motors Commercial Corporation........................ Delaware General Motors del Ecuador S.A............................... Ecuador General Motors (Europe) AG................................... Switzerland General Motors Export Corporation............................ Delaware General Motors Foreign Sales Corporation..................... Virgin Islands General Motors Finance (Barbados) Ltd...................... Barbados General Motors Global Industries Co. Ltd. ................... Taiwan General Motors Holding Espana, S.A........................... Spain Opel Espana de Automoviles, S.A............................ Spain General Motors Holdings (U.K.)............................... England General International (UK) Limited......................... England General Motors Acceptance Corporation (U.K.) plc........... England IBC Vehicles Limited....................................... England Millbrook Land and Co. Ltd. ............................... England Millbrook Pension Management Ltd........................... England Millbrook Proving Ground Ltd. ............................. England VHC Sub-Holdings (UK)...................................... England Vauxhall Motors (Finance) Plc............................ England Vauxhall Motors Limited.................................. England General Motors India Limited................................. India General Motors Indonesia, Inc. .............................. Delaware General Motors Interamerica Corporation...................... Delaware General Motors International Operations, Inc. ............... Delaware General Motors Investment Management Corporation............. Delaware General Motors Investment Services Company N.V. ............. Belgium General Motors Japan Ltd. ................................... Japan General Motors Kenya Limited................................. Kenya General Motors Korea, Inc.................................... Delaware GM Korea Co., Ltd.......................................... Korea GM Locomotive Group India Private Limited.................... India General Motors Nederland B.V. ............................... Netherlands Allison Transmission Europe B.V. .......................... Netherlands General Motors Yugoslavia, d.o.o. ......................... Yugoslavia Opel C&S spol. s.r.o. ..................................... Czech Republic Opel Nederland B.V. ....................................... Netherlands General Motors Nordiska AB................................... Sweden General Motors Overseas Corporation.......................... Delaware GMOC Administrative Services Corporation................... Delaware GMOC Australia Pty. Ltd. .................................. Australia General Motors Overseas Commercial Vehicle Corporation..... Delaware General Motors Venezolana, C.A. ........................... Venezuela Holden Ltd................................................. Australia General Motors-Holden's Sales Pty Limited................ Australia Lidlington Engineering Company, Ltd. ...................... Delaware Truck and Bus Engineering U.K., Limited.................... Delaware General Motors Overseas Distribution Corporation............. Delaware GMODC Finance N.V. ........................................ Netherlands Antilles General Motors Peru S.A. .................................... Peru General Motors Receivables Corporation....................... Delaware General Motors (Thailand) Ltd. .............................. Thailand General Motors Trust Company................................. New Hampshire General Motors Uruguay, S.A. ................................ Uruguay General Motors U.S. Trading Corp. ........................... Nevada IV-15 GENERAL MOTORS CORPORATION AND SUBSIDIARIES State or Sovereign Power Name of Subsidiary of Incorporation Hughes Electronics Corporation............................... Delaware DIRECTV Broadband, Inc..................................... Delaware DIRECTV Global, Inc........................................ Delaware DIRECTV Global Digital Media, Inc........................ Delaware DIRECTV Enterprises, Inc................................... Delaware DIRECTV Customer Services, Inc........................... Delaware DIRECTV, Inc............................................. California DIRECTV Merchandising, Inc............................... Delaware DIRECTV Operations, Inc.................................. California USSB II, Inc............................................. Minnesota First HNS Mauritius , Ltd.................................. Mauritius Kellerton Corporation.................................... Virgin Islands HNS-Clairtel CP, Inc....................................... Delaware HNS-India, Inc............................................. Delaware HNS-Mauritius Holdings................................... Mauritius HNS India Private Limited (India).......................... India HNS-India VSAT, Inc........................................ Delaware HNS-Shanghai, Inc.......................................... Delaware Shanghai Hughes Network Systems Co., Ltd................. China Hughes Aircraft Holdings Canada Ltd........................ England Hughes do Brasil Electronics e Comunicacoes S.A............ Brazil Hughes Electronics Foreign Sales Corporation............... Barbados Hughes Electronics International Corporation............... Delaware Hughes Electronics Realty, Inc............................. Delaware Hughes Electronics Systems International................... California Hughes Foreign Sales Corporation........................... Virgin Islands Hughes Global Services, Inc................................ Delaware Hughes Investment Management Company....................... California Hughes Network Systems Europe S.r.L........................ Italy Hughes Network Systems France S.a.r.L...................... France Hughes Network Systems International Service Company....... Delaware Hughes Network Systems Limited............................. England HOT Telecommunications, N.V.............................. Netherlands Hughes Telecommunications & Space Company.................. Delaware Hughes Communications, Inc............................... California Hughes International de Mexico, S.A. de C.V. .............. Mexico HNS de Mexico, S.A. de C.V............................... Mexico Hughes-Avicom International, Inc........................... California Interactive Distance Learning, Inc......................... Delaware One Touch Systems, Inc................................... California MDP, Ltd. ................................................. California XMC Holdings, Ltd........................................ California P.T. Hughes Network Systems Co., Ltd....................... Indonesia Holden New Zealand Limited................................... New Zealand General Motors New Zealand Pensions Limited................ New Zealand IBC Pension Trustees Limited................................. England IBC Vehicles (Distribution) Limited.......................... England Jennings Motors, Inc......................................... Delaware Metal Casting Technology, INC................................ Delaware Motors Enterprise, Inc....................................... Delaware Motors Holding San Fernando Valley, Inc...................... Delaware Multiple Dealerships Holdings of Albany, Inc................. Delaware GMRH Kansas City, Inc...................................... Delaware GMRH Philadelphia, Inc..................................... Delaware GMRH Pittsburgh, Inc....................................... Delaware GMRH Seattle, Inc.......................................... Delaware GMRH St. Louis, Inc........................................ Delaware GMRHLA, Inc................................................ Delaware Omnibus BB Transportes, S. A................................. Ecuador OnStar Corporation........................................... Delaware Opel Austria GmbH............................................ Austria Opel Belgium N.V. ........................................... Belgium IV-16 GENERAL MOTORS CORPORATION AND SUBSIDIARIES State or Sovereign Power Name of Subsidiary of Incorporation Opel Ireland Limited......................................... Ireland Opel Italia S.p.A............................................ Italy Opel Norge AS................................................ Norway Opel Oy...................................................... Finland Opel Portugal - Comerico e Industria de Veiculos S.A......... Portugal Opel Suisse S.A. ............................................ Switzerland GM-Saab Communication GmbH................................. Switzerland Premier Investment Group, Inc................................ Delaware PT General Motors Indonesia.................................. Indonesia Radiadores Richard, S.A...................................... Argentina Renaissance Center Management Company........................ Michigan Riverfront Development Corporation........................... Delaware Riverfront Holdings, Inc..................................... Delaware Saab Automobile AB........................................... Sweden Saab Financial Auto Receivables Corp. III.................. Delaware Saab Cars USA, Inc........................................... Connecticut Saab Financial Services Corp................................. Delaware Saab Opel Sverige AB......................................... Sweden Saturn Corporation........................................... Delaware Saturn County Bond Corporation............................... Delaware WRE, Inc..................................................... Michigan Grand Pointe Holdings, Inc. ............................... Michigan 316 directly or indirectly owned subsidiaries Companies not included in the Registrant's consolidated financial statements, for which no financial statements are submitted: 23 other directly or indirectly owned domestic and foreign subsidiaries 8 active subsidiaries 15 inactive subsidiaries 13 fifty-percent owned companies and 46 less than fifty-percent owned companies the investments in which are accounted for by the equity method. In addition, the Registrant owns 100% of the voting control of the following companies: 287 dealerships, including certain dealerships operating under dealership assistance plans, engaged in retail distribution of General Motors products 210 dealerships operating in the United States 77 dealerships operating in foreign countries The number of dealerships operating under dealership assistance plans decreased by a net of 15 during 2000. Companies not shown by name, if considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary. During 2000, there were changes in the number of subsidiaries and companies of the Registrant, as follows: 5 directly and 99 indirectly owned domestic subsidiaries, and 6 directly and 58 indirectly owned foreign subsidiaries were organized or acquired. 36 indirectly owned domestic subsidiaries, and 9 indirectly owned foreign subsidiaries were dissolved, sold, or spun-off. 1 foreign 50% owned company was organized or acquired. A less than 50% interest was acquired in 10 companies, while interests in 2 domestic and 1 foreign 50% owned companies and 1 domestic less than 50% owned companies were terminated. 2 indirectly owned domestic and 6 indirectly owned foreign subsidiaries went from 50% owned to greater than 50% owned. 1 indirectly owned foreign subsidiary went from 100% owned to 50% owned. 1 foreign company was moved to less than 50% owned. 4 domestic and 4 foreign companies were moved from inactive to over 51% owned. 1 domestic and 2 foreign companies were removed from inactive list and 4 foreign companies were added to the active list. 1 domestic and 3 foreign companies moved from GMAC owned to GMC owned. There were 27 company name changes in domestic and foreign subsidiaries. * * * * * * * IV-17 EX-23 5 exhibit2310k-030601.txt INDEPENDENT AUDITOR'S CONSENT (D&T) EXHIBIT 23 GENERAL MOTORS CORPORATION AND SUBSIDIARIES CONSENT OF INDEPENDENT AUDITORS The Board of Directors General Motors Corporation: We consent to the incorporation by reference of our report on page II-14 dated January 17, 2001 and of our report on page IV-40 dated January 16, 2001 appearing in this Annual Report on Form 10-K of General Motors Corporation for the year ended December 31, 2000, in the following Registration Statements: Registration Form Statement No. Description - ---- ------------- ------------ S-3 333-13797 General Motors Corporation Debt Securities S-3 333-61613 General Motors Corporation Debt Securities S-3 33-47343 General Motors Corporation $1-2/3 Par Value Common (Post-Effective Stock Amendment No. 1) S-3 33-49035 General Motors Corporation $1-2/3 Par Value Common (Amendment No. 1) Stock S-3 33-56671 General Motors Corporation $1-2/3 Par Value Common (Amendment No. 1) Stock S-3 33-49309 General Motors Corporation Dividend Reinvestment Plan S-3 333-45104 General Motors Corporation $1-2/3 Par Value Common Stock S-8 333-47198 The General Motors Personal Savings Plan for Hourly-Rate Employees in the United States S-8 333-90097 General Motors Stock Incentive Plan S-8 333-47204 General Motors Savings-Stock Purchase Program for Salaried Employees in the United States S-8 333-76441 The Hughes Non-Bargaining Employees Thrift and Savings Plan The Hughes Bargaining Employees Thrift and Savings Plan S-8 333-47202 The GMAC Mortgage Group Savings Incentive Plan (formerly GMAC Mortgage Corporation Savings Incentive Plan) S-8 333-90087 Hughes Electronics Corporation Incentive Plan S-8 333-47200 Saturn Individual Savings Plan for Represented Members S-8 333-17937 Saturn Personal Choices Savings Plan for Non-Represented Members S-8 333-44957 General Motors 1998 Stock Option Plan S-8 333-66653 ASEC Manufacturing Savings Plan S-8 333-31846 General Motors Deferred Compensation Plan for Executive Employees S-8 333-55118 The GMAC Insurance Personal Lines Retirement Savings Plan S-8 333-55122 The Holden Employee Share Ownership Plan /s/DELOITTE & TOUCHE LLP DELOITTE & TOUCHE LLP Detroit, Michigan March 6, 2001 IV-18 EX-99 6 exhibit9910k-030601.txt HUGHES ELECTRONICS CORPORATION INFORMATION EXHIBIT 99 HUGHES ELECTRONICS CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31, ---------------------------- 2000 1999 1998 -------- -------- -------- (Dollars in Millions) Consolidated Statements of Operations Data: Total revenues.................................. $7,287.6 $5,560.3 $3,480.6 Total operating costs and expenses.............. 7,641.7 5,974.8 3,521.7 -------- -------- -------- Operating loss.................................. (354.1) (414.5) (41.1) Other expenses, net............................. (461.5) (245.5) (62.1) Income tax benefit.............................. (406.1) (236.9) (142.3) Minority interests in net losses of subsidiaries................................... 54.1 32.0 24.4 -------- -------- -------- Income (loss) from continuing operations before cumulative effect of accounting change......... (355.4) (391.1) 63.5 Income from discontinued operations, net of taxes.......................................... 36.1 99.8 196.4 Gain on sale of discontinued operations, net of taxes.......................................... 1,132.3 -- -- Cumulative effect of accounting change, net of taxes.......................................... -- -- (9.2) -------- -------- -------- Net income (loss)............................... 813.0 (291.3) 250.7 Adjustment to exclude the effect of GM purchase accounting..................................... 16.9 21.0 21.0 Preferred stock dividends....................... (97.0) (50.9) -- -------- -------- -------- Earnings (Loss) Used for Computation of Available Separate Consolidated Net Income (Loss)......................................... $ 732.9 $ (321.2) $ 271.7 ======== ======== ========
- -------- Certain prior year amounts have been reclassified to conform to the 2000 presentation. IV-19 HUGHES ELECTRONICS CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) SELECTED SEGMENT DATA
Years Ended December 31, ------------------------------- 2000 1999 1998 --------- --------- --------- (Dollars in Millions) Direct-To-Home Broadcast Total Revenues................................ $ 5,238.0 $ 3,785.0 $ 1,816.1 Operating Loss................................ (557.9) (289.6) (225.8) EBITDA(1)..................................... (24.5) 22.4 (123.5) Depreciation and Amortization................. 533.4 312.0 102.3 Segment Assets................................ 10,473.4 9,056.6 2,190.4 Capital Expenditures.......................... 913.5 516.9 230.8 Satellite Services Total Revenues................................ $ 1,023.6 $ 810.6 $ 767.3 Operating Profit.............................. 356.6 338.3 318.3 Operating Profit Margin....................... 34.8% 41.7% 41.5% EBITDA(1)..................................... $ 694.0 $ 618.8 $ 553.3 EBITDA Margin(1).............................. 67.8% 76.3% 72.1% Depreciation and Amortization................. $ 337.4 $ 280.5 $ 235.0 Segment Assets................................ 6,178.4 5,984.7 5,890.5 Capital Expenditures.......................... 449.5 956.4 921.7 Network Systems Total Revenues................................ $ 1,409.8 $ 1,384.7 $ 1,076.7 Operating Profit (Loss)....................... (63.5) (234.1) 7.1 EBITDA(1)..................................... 0.1 (156.7) 74.0 Depreciation and Amortization................. 63.6 77.4 66.9 Segment Assets................................ 1,789.9 1,167.3 1,299.0 Capital Expenditures.......................... 369.5 175.0 40.0 Eliminations and Other Total Revenues................................ $ (383.8) $ (420.0) $ (179.5) Operating Loss................................ (89.3) (229.1) (140.7) EBITDA(1)..................................... (75.6) (220.1) (131.8) Depreciation and Amortization................. 13.7 9.0 8.9 Segment Assets................................ 837.6 2,388.4 3,237.5 Capital Expenditures.......................... (16.4) 17.0 136.3 Total Total Revenues................................ $ 7,287.6 $ 5,560.3 $ 3,480.6 Operating Loss................................ (354.1) (414.5) (41.1) EBITDA(1)..................................... 594.0 264.4 372.0 EBITDA Margin(1).............................. 8.2% 4.8% 10.7% Depreciation and Amortization................. $ 948.1 $ 678.9 $ 413.1 Total Assets.................................. 19,279.3 18,597.0 12,617.4 Capital Expenditures.......................... 1,716.1 1,665.3 1,328.8
- -------- Certain prior year amounts have been reclassified to conform to the 2000 presentation. (1) EBITDA is defined as operating profit (loss), plus depreciation and amortization. EBITDA is not presented as an alternative measure of operating results or cash flow from operations, as determined in accordance with generally accepted accounting principles. Hughes management believes it is a meaningful measure of performance and is commonly used by other communications, entertainment and media service providers. EBITDA does not give effect to cash used for debt service requirements and thus does not reflect funds available for investment in the business of Hughes, dividends or other discretionary uses. EBITDA margin is calculated by dividing EBITDA by total revenues. EBITDA and EBITDA margin as presented herein may not be comparable to similarly titled measures reported by other companies. IV-20 HUGHES ELECTRONICS CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) The following discussion excludes purchase accounting adjustments related to General Motors' acquisition of Hughes. This Annual Report may contain certain statements that Hughes believes are, or may be considered to be, "forward-looking statements," within the meaning of various provisions of the Securities Act of 1933 and of the Securities Exchange Act of 1934. These forward-looking statements generally can be identified by use of statements that include phrases such as we "believe," "expect," "anticipate," "intend," "plan," "foresee" or other similar words or phrases. Similarly, statements that describe our objectives, plans or goals also are forward-looking statements. All of these forward-looking statements are subject to certain risks and uncertainties that could cause Hughes' actual results to differ materially from those contemplated by the relevant forward- looking statement. The principal important risk factors which could cause actual performance and future actions to differ materially from forward- looking statements made herein include economic conditions, product demand and market acceptance, government action, local political or economic developments in or affecting countries where Hughes has operations, ability to obtain export licenses, competition, ability to achieve cost reductions, ability to timely perform material contracts, technological risk, limitations on access to distribution channels, the success and timeliness of satellite launches, in-orbit performance of satellites, ability of customers to obtain financing, Hughes' ability to access capital to maintain its financial flexibility and the effects of any strategic transactions involving Hughes that GM may enter into as noted below. Additionally, the in-orbit satellites of Hughes and its 81% owned subsidiary, PanAmSat Corporation, are subject to the risk of failing prematurely due to, among other things, mechanical failure, collision with objects in space or an inability to maintain proper orbit. Satellites are subject to the risk of launch delay and failure, destruction and damage while on the ground or during launch and failure to become fully operational once launched. Delays in the production or launch of a satellite or the complete or partial loss of a satellite, in-orbit or during launch, could have a material adverse impact on the operation of Hughes' businesses. With respect to both in-orbit and launch problems, insurance carried by Hughes and PanAmSat generally does not compensate for business interruption or loss of future revenues or customers. Hughes has, in the past, experienced technical anomalies on some of its satellites. Service interruptions caused by these anomalies, depending on their severity, could result in claims by affected customers for termination of their transponder agreements, cancellation of other service contracts or the loss of other customers. Readers are urged to consider these factors carefully in evaluating the forward-looking statements. The forward-looking statements included in this Annual Report are made only as of the date of this Annual Report and Hughes undertakes no obligation to publicly update these forward-looking statements to reflect subsequent events or circumstances. Due to rapid consolidation in the media and telecommunications industries, General Motors Corporation ("GM"), which is the parent company of Hughes, has announced that it is now considering alternative strategic transactions involving Hughes and other participants in those industries. Any such transaction might involve the separation of Hughes from GM. GM's objective in this effort is to maximize the enterprise value of Hughes for the long-term benefit of the holders of GM's Class H common stock and GM $1 2/3 par value common stock through a structure that maintains the financial strength of GM. No assurance can be given that any transaction will be agreed upon with any party or that other conditions, including any stockholder or regulatory approvals will be satisfied. 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. As a result, the numbers of shares of GM Class H common stock presented for all periods have been adjusted to reflect the stock split, unless otherwise noted. IV-21 HUGHES ELECTRONICS CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) General Business Overview The continuing operations of Hughes are comprised of the following segments: Direct-To-Home Broadcast, Satellite Services and Network Systems. The satellite systems manufacturing businesses ("Satellite Businesses"), which Hughes sold to The Boeing Company ("Boeing") on October 6, 2000, are reported as discontinued operations for all years presented. This transaction is discussed more fully below in "Liquidity and Capital Resources--Acquisitions, Investments and Divestitures." The Direct-To-Home Broadcast segment consists primarily of the United States and Latin America DIRECTV businesses, which provide digital multi- channel entertainment services. The DIRECTV U.S. operations were significantly affected during 1999 with Hughes' acquisition of the direct broadcast satellite medium-power business of PRIMESTAR in April 1999 and Hughes' acquisition of United States Satellite Broadcasting Company, Inc. ("USSB"), a provider of premium subscription programming services, in May 1999. DIRECTV transitioned a total of about 1.5 million of the 2.3 million PRIMESTAR subscribers acquired through the shut-down of the business at September 30, 2000. As a result of the USSB acquisition, Hughes acquired the rights to distribute 25 channels of video programming, including premium networks such as HBO(R), Showtime(R), Cinemax(R) and The Movie Channel(R), which are now being offered to DIRECTV's subscribers. The results of operations for PRIMESTAR and USSB have been included in Hughes' financial information since their dates of acquisition. See Note 17 to the consolidated financial statements and "Liquidity and Capital Resources--Acquisitions, Investments and Divestitures," below, for further discussion of these transactions. In the fourth quarter of 1999, DIRECTV U.S. began providing local broadcast network services to its subscribers and as of December 31, 2000 was offering those services in 41 U.S. markets representing over 60 million households or 60% of television households. The Latin America DIRECTV businesses are comprised of DIRECTV Latin America, LLC ("DLA"), Hughes' 77.8% owned subsidiary that provides DIRECTV services in Latin America and the Caribbean Basin; SurFin Ltd. ("SurFin"), a company 75% owned by Hughes, that provides financing of subscriber receiver equipment to certain DLA operating companies; Grupo Galaxy Mexicana, S.R.L. de C.V. ("GGM"), the exclusive distributor of DIRECTV in Mexico, which was acquired by Hughes in February 1999; and Galaxy Brasil, Ltda. ("GLB"), the exclusive distributor of DIRECTV in Brazil, which was acquired by DLA in July 1999. The results of operations for SurFin, GGM, and GLB have been included in Hughes' financial information since their dates of acquisition. See Note 17 to the consolidated financial statements and "Liquidity and Capital Resources-- Acquisitions, Investments and Divestitures," below, for further discussion of these transactions. Also included as part of the non-operating results of the Direct-To-Home Broadcast segment is DIRECTV Japan Management, Inc., DIRECTV Japan, Inc., and certain related companies (collectively "DIRECTV Japan"), Hughes affiliates that provided DIRECTV services in Japan. On March 1, 2000, Hughes announced that DIRECTV Japan's operations would be discontinued. DIRECTV Japan ceased broadcasting on September 30, 2000. See Note 17 to the consolidated financial statements and "Liquidity and Capital Resources--Acquisitions, Investments and Divestitures," below, for further discussion. The Satellite Services segment consists of PanAmSat, Hughes' 81% owned subsidiary. PanAmSat provides satellite services to its customers primarily through long-term operating lease contracts for the full or partial use of satellite transponder capacity. During the first quarter of 2000, PanAmSat introduced NET-36(TM) to provide satellite-based Internet broadcast services. These services leverage PanAmSat's fleet of satellites to ensure that high- speed Internet subscribers receive digital and streaming media using PanAmSat satellites and servers while avoiding Internet congestion that would otherwise diminish video fidelity. PanAmSat expects to begin generating revenues from the service in 2001. IV-22 HUGHES ELECTRONICS CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) The Network Systems segment consists of Hughes Network Systems ("HNS"), which is a provider of satellite-based private business networks and broadband Internet access, and a supplier of DIRECTV(TM) receiving equipment (set-top boxes and dishes). In the fourth quarter of 2000, HNS added two-way capabilities to its nationwide high-speed satellite Internet service, DirecPC(R). Offering "always-on" capability, the new two-way high-speed satellite service allows consumers, who have purchased the necessary hardware and service, to completely bypass the dial-up telephone network when accessing the Internet. In January 2000, Hughes announced the discontinuation of its mobile cellular and narrowband local loop product lines at HNS. As a result of this decision, HNS recorded a fourth quarter 1999 pre-tax charge to continuing operations of $272.1 million. The charge represents the write-off of receivables and inventories, licenses, software and equipment with no alternative use. Satellite Fleet Hughes had a fleet of 25 satellites, five owned by DIRECTV and 20 owned and operated by PanAmSat. Hughes' satellite fleet was expanded in the first quarter of 2000 with PanAmSat's launch and commencement of service of the Galaxy XR satellite for Alaska's General Communications, Inc., Disney and other customers. In the second quarter of 2000, PanAmSat commenced service of the Galaxy XI satellite, which provides expansion and backup services for PanAmSat's Galaxy(R) cable neighborhood customers, and successfully launched Galaxy IV-R, a replacement satellite for Galaxy IV. In the third quarter of 2000, PanAmSat successfully launched PAS-9, which delivers premium broadcast, Internet and data services throughout North and South America, the Caribbean and Europe. In the fourth quarter of 2000, PanAmSat successfully launched PAS-1R, which offers expanded and enhanced video and data broadcasting as well as broadband Internet services throughout the Americas, the Caribbean, Europe and Africa. Also during 2000, PanAmSat completed the planned retirement of its SBS-4 and SBS-5 satellites. PanAmSat expects to add additional satellites as part of its comprehensive satellite expansion and restoration plan. The additional satellites are intended to meet the expected demand for additional satellite capacity, replace capacity affected by satellite anomalies, and provide added backup to existing capacity. In connection with this plan, five satellites have been successfully launched, with an additional three satellites now under construction. Two of these satellites will be launched in 2001 and one in 2002. DIRECTV U.S.' 4S satellite, a high-power spot-beam satellite, is currently under construction and is expected to be launched in October 2001. DIRECTV expects to use DIRECTV 4S to provide additional capacity for new local channel service or other new services beginning in 2002. Also, the DIRECTV 5 satellite, a high-power satellite acquired from Tempo Satellite, Inc., is expected to be launched in mid-2001 as a replacement to DIRECTV 6, which will then serve as a back-up. Results of Operations 2000 compared to 1999 Overall Revenues. Revenues increased 31.1% to $7,287.6 million in 2000 compared with $5,560.3 million in 1999. The increased revenues resulted primarily from the Direct-To-Home Broadcast segment, which reported $1,453.0 million of higher revenues over 1999, and the Satellite Services segment, which reported $213.0 million of additional revenues from 1999. The higher revenues from the Direct-To-Home Broadcast segment resulted from the addition of about 2.3 million net new subscribers in the United States and Latin America since December 31, 1999 and added revenues from the PRIMESTAR By DIRECTV and premium channel services. The higher revenues from the Satellite Services segment resulted primarily from outright sales and sales-type lease transactions executed during 2000. IV-23 HUGHES ELECTRONICS CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Operating Costs and Expenses. Operating costs and expenses increased to $7,641.7 million in 2000 from $5,974.8 million in 1999. Broadcast programming and other costs increased by $773.8 million during 2000 due to higher costs at the Direct-To-Home Broadcast segment, resulting from the increase in subscribers and added costs for the premium channel services, and costs associated with the outright sales and sales-type leases at the Satellite Services segment. Costs of products sold decreased by $146.5 million in 2000 from 1999 mainly due to higher 1999 costs, which included a write-off of $91.5 million of inventory associated with the discontinuation of certain narrowband wireless product lines and the completion of several contracts at the Network Systems segment. Selling, general and administrative expenses increased by $770.4 million in 2000 from 1999 due primarily to higher marketing costs at the Direct-To-Home Broadcast segment resulting from increased subscriber growth in both the United States and Latin America, partially offset by a 1999 charge of $180.6 million at the Network Systems segment resulting from the write-off of receivables, licenses and equipment associated with the discontinuation of certain narrowband wireless product lines. Depreciation and amortization increased by $269.2 million in 2000 over 1999 due primarily to 1999 acquisitions, discussed more fully in "Liquidity and Capital Resources-- Acquisitions, Investments and Divestitures." EBITDA. EBITDA is defined as operating profit (loss), plus depreciation and amortization. EBITDA is not presented as an alternative measure of operating results or cash flow from operations, as determined in accordance with generally accepted accounting principles. Hughes management believes it is a meaningful measure of performance and is commonly used by other communications, entertainment and media service providers. EBITDA does not give effect to cash used for debt service requirements and thus does not reflect funds available for investment in the business of Hughes, dividends or other discretionary uses. EBITDA margin is calculated by dividing EBITDA by total revenues. EBITDA and EBITDA margin as presented herein may not be comparable to similarly titled measures reported by other companies. EBITDA for 2000 was $594.0 million and EBITDA margin was 8.2%, compared to EBITDA of $264.4 million and EBITDA margin of 4.8% for 1999. The large change resulted from the Network Systems segment, which experienced slightly positive EBITDA in 2000 compared to a large negative EBITDA in 1999 due to the $272.1 million charge in 1999 associated with the discontinuation of certain narrowband wireless product lines; higher EBITDA at the Satellite Services segment due to the increased outright sales and sale-type lease activity; partially offset by the Direct-To-Home Broadcast segment's EBITDA loss in 2000 compared to positive EBITDA for 1999 that resulted from increased losses at DIRECTV Latin America. The higher EBITDA margin in 2000 was mainly attributable to the 1999 EBITDA margin being negatively affected by the charge for the discontinuation of certain narrowband wireless product lines. The EBITDA margin for 2000 was negatively affected by increased losses at the Direct-To-Home Broadcast segment and lower margins associated with the Satellite Service segment's outright sales and sales-type leases. Operating Loss. Hughes' operating loss was $354.1 million in 2000, compared to $414.5 million in 1999. This decrease resulted from the improvement in EBITDA, which more than offset increased depreciation and amortization expense. Interest Income and Expense. Interest income increased to $49.3 million in 2000 compared to $27.0 million in 1999 due to an increase in cash and cash equivalents that resulted from the sale of the Satellite Businesses. Interest expense increased to $218.2 million in 2000 from $122.7 million in 1999. This increase primarily resulted from higher average outstanding borrowings and a full year of interest expense associated with liabilities for above-market programming contracts assumed in the acquisitions of PRIMESTAR and USSB. Changes in cash and cash equivalents and debt are discussed in more detail below under "Liquidity and Capital Resources." Other, Net. Other, net increased to a net expense of $292.6 million in 2000 from a net expense of $149.8 million in 1999. The net expense in 2000 included $164.2 million of equity method losses and $128.4 million of costs related to the exit of the DIRECTV Japan business, which is discussed below in IV-24 HUGHES ELECTRONICS CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) "Liquidity and Capital Resources--Acquisitions, Investments and Divestitures." The net expense for 1999 included $189.2 million of equity method losses offset by a gain of $39.4 million from the sale of Hughes Software Systems Private Limited ("HSS") securities. The change in equity method losses in 2000 compared to 1999 resulted from lower losses at DIRECTV Japan due to the shutdown of the business at September 30, 2000. Income Taxes. Hughes recognized a tax benefit of $406.1 million in 2000 compared to $236.9 million in 1999. The 2000 tax benefit reflects the tax benefit associated with the write-off of Hughes' historical investment in DIRECTV Japan and the higher pre-tax losses compared to 1999. Loss from Continuing Operations. Hughes reported a loss from continuing operations of $355.4 million in 2000, compared to $391.1 million in 1999. Discontinued Operations. Revenues for the Satellite Businesses decreased to $1,669.3 million in 2000 from $2,240.7 million in 1999. Revenues, excluding intercompany transactions, were $1,260.1 million in 2000 compared to $1,780.4 million in 1999. The 1999 results include a full year of revenues, while 2000 only includes revenues through October 6, 2000, the date of sale. The Satellite Businesses reported operating profit of $87.6 million in 2000 compared to $152.5 million in 1999. Operating profit, excluding intercompany transactions, amounted to $59.3 million in 2000 compared to $142.7 million in 1999. The 1999 results included a one-time pre-tax charge of $178.0 million before intercompany transactions and $125.0 million after intercompany transactions that resulted from increased development costs and schedule delays on several new product lines, a one-time pre-tax charge of $81.0 million resulting from the termination of a customer contract and decreased activity associated with ICO Global Communications (Operations) Ltd. ("ICO"), partially offset by a $154.6 million pre-tax gain related to the settlement of a patent infringement case. Additionally, the 1999 results include a full year of operating results, while 2000 only includes operating results through October 6, 2000, the date of sale. Income from discontinued operations, net of taxes, was $36.1 million in 2000 compared to $99.8 million in 1999. Accounting Change. In September 1999, the Financial Accounting Standards Board ("FASB") issued Emerging Issues Task Force Issue 99-10 ("EITF 99-10"), Percentage Used to Determine the Amount of Equity Method Losses. EITF 99-10 addresses the percentage of ownership that should be used to compute equity method losses when the investment has been reduced to zero and the investor holds other securities of the investee. EITF 99-10 requires that equity method losses should not be recognized solely on the percentage of common stock owned; rather, an entity-wide approach should be adopted. Under such an approach, equity method losses must be recognized based on the ownership level that includes other equity securities (e.g., preferred stock) and loans/advances to the investee or based on the change in the investor's claim on the investee's book value. Hughes adopted EITF 99-10 during the third quarter of 1999 which resulted in Hughes recording a higher percentage of DIRECTV Japan's losses subsequent to the effective date of September 23, 1999. The unfavorable impact of adopting EITF 99-10 was $39.0 million after-tax. Direct-To-Home Broadcast Segment Direct-To-Home Broadcast segment revenues increased 38.4% to $5,238.0 million in 2000 from $3,785.0 million in 1999. The Direct-To-Home Broadcast segment had negative EBITDA of $24.5 million in 2000 compared with positive EBITDA of $22.4 million in 1999. The operating loss for the segment increased to $557.9 million in 2000 from $289.6 million in 1999. United States. The DIRECTV U.S. businesses were the biggest contributors to the segment's revenue growth with revenues of $4,694 million in 2000, a 38% increase over 1999 revenues of $3,405 million. The large increase in revenues resulted primarily from an increased number of DIRECTV subscribers and added revenues from PRIMESTAR By DIRECTV and premium channel services. As of December 31, 2000, high-power IV-25 HUGHES ELECTRONICS CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) DIRECTV subscribers totaled approximately 9.5 million compared to about 6.7 million at December 31, 1999. In addition to the high-power subscribers, there were also 1.3 million PRIMESTAR By DIRECTV medium-power subscribers at December 31, 1999. The large increase in high-power subscribers resulted from the addition of about 1.8 million net new subscribers to the DIRECTV service in 2000, a 14% growth rate over the 1.6 million net new subscribers added in 1999, and the conversion of about 1 million PRIMESTAR By DIRECTV medium-power subscribers to the high-power DIRECTV service in 2000. DIRECTV shut down the PRIMESTAR By DIRECTV medium-power service on September 30, 2000. Average monthly programming revenue per subscriber for the high-power business was $59 and $58 at December 31, 2000 and 1999, respectively. EBITDA was $151 million in 2000 compared to $150 million in 1999. The operating loss in 2000 for the DIRECTV U.S. businesses was $244 million compared to $99 million in 1999. The slight increase in EBITDA was due to the increased revenues discussed above offset by increased subscriber acquisition and programming costs associated with the record subscriber growth. The increased operating loss was principally due to increased amortization of goodwill and intangibles that resulted from the PRIMESTAR and USSB acquisitions. Latin America. Revenues for the Latin America DIRECTV businesses increased 72% to $541 million in 2000 from $315 million in 1999. The increase in revenues reflects an increase in subscribers and the consolidation of the GLB business. Subscribers grew to 1.3 million at December 31, 2000 compared to 0.8 million in 1999. Latin America DIRECTV added 501,000 net new subscribers in 2000, a 56.6% increase over the 320,000 net new subscribers added in 1999. Average monthly programming revenue per subscriber was $36 for 2000 and 1999. EBITDA was a negative $171 million in 2000 compared to negative EDITDA of $106 million in 1999. The change in EBITDA resulted primarily from a full year of GLB losses in 2000 and higher marketing costs associated with the record subscriber growth, partially offset by the increased revenues discussed above. The Latin America DIRECTV businesses incurred an operating loss of $309 million in 2000 compared to an operating loss of $169 million in 1999. The increased operating loss resulted from the decline in EBITDA and higher depreciation of fixed assets and a full year of goodwill amortization that resulted from the GLB transaction. Satellite Services Segment Revenues for the Satellite Services segment in 2000 increased 26.3% to $1,023.6 million from $810.6 million in 1999. This increase was primarily due to increased revenues associated with outright sales and sales-type lease transactions executed during 2000. Revenues associated with outright sales and sales-type leases of transponders were $243.3 million for 2000 as compared to $23.1 million for 1999. Revenues from operating leases of transponders, satellite services and other were 76.2% of total 2000 revenues and decreased by 0.9% to $780.3 million from $787.5 million in 1999. EBITDA in 2000 was $694.0 million, a 12.2% increase over EBITDA of $618.8 million in 1999. The higher EBITDA was due to the increased revenues discussed above, partially offset by an increase in direct operating and selling, general and administrative expenses that resulted from the continued satellite fleet expansion and costs associated with the NET-36 initiative. EBITDA margin for 2000 was 67.8% compared to 76.3% in 1999. The decline in EBITDA margin was due to lower margins associated with the increased outright sales and sales- type lease transactions and the higher direct operating and selling, general and administrative expenses. Excluding the outright sales and sales-type lease transactions, EBITDA for 2000 was $536.5 million or 68.8% of corresponding revenues. Operating profit was $356.6 million for 2000, an increase of $18.3 million over 1999. The higher operating profit resulted from the increase in EBITDA partially offset by higher depreciation expense related to additional satellites placed into service since 1999. Backlog for the Satellite Services segment, which consists primarily of operating leases on satellite transponders, was about $6.0 billion in 2000 compared to about $6.1 billion in 1999. IV-26 HUGHES ELECTRONICS CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Network Systems Segment Revenues for the Network Systems segment increased 1.8% to $1,409.8 million in 2000 from $1,384.7 million in 1999. The increase in revenues primarily resulted from greater shipments of DIRECTV receiver equipment, which totaled about 3.0 million units in 2000, compared to about 2.1 million units in 1999. This increase in revenues was partially offset by lower revenues from the discontinuation of certain narrowband wireless product lines and lower manufacturing subsidies on DIRECTV receiver equipment. The Network Systems segment reported EBITDA of $0.1 million for 2000 compared to negative EBITDA of $156.7 million in 1999. The Network Systems segment had an operating loss of $63.5 million in 2000 compared to $234.1 million in 1999. The 1999 results included a $272.1 million charge for the discontinuation of certain narrowband wireless product lines. Excluding this charge, the Network Systems segment recorded 1999 EBITDA of $115.4 million and operating profit of $38.0 million. The change in EBITDA and operating results in 2000 from 1999, excluding the $272.1 million charge, resulted from the lower manufacturing subsidies and increased costs associated with the upcoming launch of new DirecPC services, including AOL Plus Powered by DirecPC. Backlog for the Network Systems segment, which consists primarily of private business networks and satellite-based mobile telephony equipment orders, was about $1.2 billion in 2000 compared to about $1.0 billion in 1999. Eliminations and Other The elimination of revenues decreased to $383.8 million in 2000 from $420.0 million in 1999 due primarily to the termination of manufacturing subsidies paid by DIRECTV to HNS during the third quarter of 2000 and decreased intercompany revenues due to the sale of Hughes' Satellite Businesses. Operating losses from "eliminations and other" decreased to $89.3 million in 2000 from $229.1 million in 1999 due primarily to decreased corporate expenditures, primarily for employee benefits, and lower margins on intercompany sales. 1999 compared to 1998 Overall Revenues. Revenues increased 59.8% to $5,560.3 million in 1999 from $3,480.6 million in 1998. The Direct-To-Home Broadcast segment was the primary contributor to the increase in revenues resulting from record subscriber growth in both the U.S. and Latin America DIRECTV businesses and from additional revenues for the U.S. DIRECTV businesses from the PRIMESTAR and USSB acquisitions. Also contributing to the increase in revenues were increased sales of DIRECTV receiver equipment at the Network Systems segment. Operating Costs and Expenses. Operating costs and expenses increased to $5,974.8 million in 1999 from $3,521.7 million in 1998. Broadcast programming and other costs increased $827.6 million during 1999 due primarily to the added costs for the PRIMESTAR By DIRECTV and premium channel services. Cost of products sold increased $343.6 million in 1999 from 1998 due to the increased sales of DIRECTV receiver equipment discussed above and the write-off of $91.5 million of inventory associated with the discontinued wireless product lines at the Network Systems segment. Selling, general and administrative expenses increased by $1,016.1 million in 1999 from 1998 due primarily to increased costs at the Direct-To-Home Broadcast segment for subscriber acquisition costs and added costs for the PRIMESTAR By DIRECTV business and a charge of $180.6 million at the Network Systems segment resulting from the write-off of receivables, licenses and equipment associated with the discontinued wireless product lines. Depreciation and amortization increased $265.8 million in 1999 over 1998 IV-27 HUGHES ELECTRONICS CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) due primarily to added goodwill, intangibles and property, plant and equipment resulting from acquisitions and additions to PanAmSat's satellite fleet. EBITDA decreased to $264.4 million in 1999 from $372.0 million in 1998. The decrease was attributable to charges incurred at the Network Systems segment which included the $272.1 million charge related to the discontinued wireless product lines and a provision of $34.5 million for estimated losses associated with the bankruptcy filings of two Network Systems segment customers. These declines were offset by an increase in EBITDA of $145.9 million at the Direct- To-Home Broadcast segment and $65.5 million at the Satellite Services segment. Operating Loss. Hughes' operating loss was $414.5 million in 1999 compared to $41.1 million in 1998. The increased operating loss resulted from the decrease in EBITDA, discussed above, and higher depreciation and amortization at the Direct-To-Home Broadcast segment resulting primarily from goodwill from recent acquisitions. Interest Income and Expense. Interest income decreased to $27.0 million in 1999 compared to $112.3 million in 1998. This change resulted from a decline in cash and cash equivalents. Interest expense increased to $122.7 million in 1999 from $17.5 million in 1998. The increase in interest expense resulted from an increase in debt and interest associated with liabilities for above- market programming contracts assumed in the acquisitions of PRIMESTAR and USSB. The changes in cash and cash equivalents and debt are discussed in more detail below under "Liquidity and Capital Resources." Other, Net. Other, net declined to a net expense of $149.8 million in 1999 from a net expense of $156.9 million in 1998. Other, net for 1999 included losses from equity method investments of $189.2 million of which $134.9 million related to DIRECTV Japan, offset by the gain of $39.4 million from the sale of securities in the HSS initial public offering. Other, net for 1998 included losses from equity method investments of $128.3 million, of which $83.2 million related to DIRECTV Japan, and a write-down of about $35.7 million for investments in two companies that filed for bankruptcy. Income Taxes. Hughes recognized an income tax benefit of $236.9 million in 1999 compared to $142.3 million in 1998. The higher tax benefit in 1999 resulted primarily from higher losses from continuing operations. The income tax benefit in 1998 included a favorable adjustment relating to an agreement with the Internal Revenue Service regarding the treatment of research and experimentation credits for the years 1983 through 1995. Income (Loss) From Continuing Operations. Hughes reported a loss from continuing operations in 1999 of $391.1 million compared with 1998 income from continuing operations of $63.5 million. Discontinued Operations. Revenues for the Satellite Businesses decreased to $2,240.7 million for 1999 from revenues of $2,820.4 million for 1998. Revenues, excluding intercompany transactions, were $1,780.4 million for 1999 and $2,483.3 million for 1998. The decrease in revenues was principally due to contract revenue adjustments and delayed revenue recognition that resulted from increased development costs and schedule delays on several new product lines and decreased activity associated with the contract with ICO. The Satellite Businesses reported an operating profit of $152.5 million for 1999 compared to operating profit of $285.0 million for 1998. The reported operating profit, excluding intercompany transactions, amounted to $142.7 million for 1999 compared to operating profit of $294.0 million for 1998. The 1999 operating profit included a pre-tax charge of $125.0 million, after intercompany transactions, that resulted from increased development costs and schedule delays on several new product lines, a one-time pre-tax charge of $81.0 million resulting from the termination of a customer contract and decreased activity associated with a contract with ICO, partially offset by a $154.6 million pre-tax gain related to the settlement of a patent infringement case. IV-28 HUGHES ELECTRONICS CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Hughes had maintained a lawsuit against the U.S. government since September 1973 regarding the U.S. government's infringement and use of a Hughes patent covering "Velocity Control and Orientation of a Spin Stabilized Body," principally satellites (the "Williams patent"). On April 7, 1998, the U.S. Court of Appeals for the Federal Circuit reaffirmed earlier decisions in the Williams patent case, including an award of $114.0 million in damages, plus interest. In March 1999, Hughes received a payment from the U.S. government as a final settlement of the suit and as a result, recognized as income from discontinued operations a pre-tax gain of $154.6 million. Accounting Change. In 1998, Hughes adopted American Institute of Certified Public Accountants Statement of Position ("SOP") 98-5, Reporting on the Costs of Start-Up Activities. SOP 98-5 required that all start-up costs previously capitalized be written off and recognized as a cumulative effect of accounting change, net of taxes, as of the beginning of the year of adoption. On a prospective basis, these types of costs are required to be expensed as incurred. The unfavorable cumulative effect of this accounting change at January 1, 1998 was $9.2 million after-tax. Direct-To-Home Broadcast Segment Revenues for the Direct-To-Home Broadcast segment more than doubled to $3,785.0 million in 1999 from $1,816.1 million in 1998. Operating losses increased to $289.6 million in 1999 from $225.8 million in 1998 while EBITDA increased to $22.4 million in 1999 from negative $123.5 million in 1998. United States. The DIRECTV U.S. businesses reported revenues of $3,405 million in 1999, more than twice the reported revenues of $1,604 million in 1998. The increase in revenues resulted from an increase in subscribers for the high-power business and added revenues from PRIMESTAR By DIRECTV and premium channel services. Subscribers for the high-power DIRECTV business increased by 2.2 million subscribers (1.6 million excluding PRIMESTAR conversions and incremental subscribers from USSB) during 1999 to 6.7 million subscribers at the end of 1999. Including PRIMESTAR By DIRECTV subscribers there were over 8 million subscribers at the end of 1999. Average monthly revenue per subscriber for the high-power business increased to $58 at December 31, 1999 from $46 at December 31, 1998. This increase resulted primarily from the addition of the premium channel services in April 1999. EBITDA was $150 million in 1999 compared to negative $18 million in 1998. The change in EBITDA resulted from the increased revenues that were partially offset by increased subscriber acquisition costs and added operating costs from the PRIMESTAR By DIRECTV and premium channel services. The DIRECTV U.S. businesses reported an operating loss of $99 million in 1999 compared to $100 million in 1998. The decreased operating loss resulted from increased EBITDA which was generally offset by increased depreciation and amortization that resulted from the PRIMESTAR and USSB acquisitions. Latin America. Revenues for the Latin America DIRECTV businesses increased 82% to $315 million in 1999 from $173 million in 1998. The increase in revenues reflects an increase in subscribers and the consolidation of the GGM, GLB and SurFin businesses. Subscribers grew to 0.8 million at the end of 1999 from 0.5 million at the end of 1998. Average monthly revenue per subscriber decreased to $36 in 1999 from $41 in 1998. The decline in average revenue per subscriber resulted from currency devaluations in Brazil. EBITDA was negative $106 million in 1999 compared to negative $93 million in 1998. The change in EBITDA resulted primarily from additional losses from the consolidation of GGM and GLB. The Latin America DIRECTV businesses incurred an operating loss of $169 million in 1999 compared to $113 million in 1998. The increased operating loss resulted from the decline in EBITDA and higher depreciation and amortization that resulted from the GGM, GLB and SurFin transactions. IV-29 HUGHES ELECTRONICS CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Satellite Services Segment Revenues for the Satellite Services segment increased to $810.6 million in 1999 from $767.3 million in 1998. This increase was primarily due to increased operating lease revenues, partially offset by a decrease in sales and sales- type lease revenues. Operating lease revenues, which reflect long-term satellite service agreements from which PanAmSat derives revenues over the duration of the contract, were 97.2% of total 1999 revenues and increased by 6.9% to $787.5 million from $736.7 million in 1998. Total sales and sales-type lease revenues were $23.1 million for 1999 compared to $30.6 million for 1998. EBITDA was $618.8 million in 1999 compared to $553.3 million in 1998. The increase was principally due to higher revenue that resulted from the commencement of new service agreements on additional satellites placed into service in 1999 and lower leaseback expense resulting from the exercise of certain early buy-out opportunities under sale-leaseback agreements during 1999. Operating profit was $338.3 million in 1999, an increase of $20.0 million over 1998. The increase resulted from the higher EBITDA in 1999 offset by increased depreciation expense resulting from increased capital from additions to the satellite fleet. Backlog for the Satellite Services segment, which consists primarily of operating leases on satellite transponders, was about $6.1 billion in 1999 compared to about $6.3 billion in 1998. Network Systems Segment Revenues for the Network Systems segment increased 28.6% to $1,384.7 million in 1999 from $1,076.7 million in 1998. The higher revenues resulted from greater shipments of DIRECTV receiver equipment. Shipments of DIRECTV receiver equipment totaled about 2.1 million units in 1999 compared to about 0.7 million units in 1998. The Network Systems segment reported negative EBITDA of $156.7 million in 1999 compared to EBITDA of $74.0 million in 1998. The Network Systems segment incurred an operating loss of $234.1 million in 1999 compared to operating profit of $7.1 million in 1998. The decline in EBITDA and operating profit resulted from the $272.1 million charge related to the discontinuation of the wireless product lines, offset in part by the increased sales of DIRECTV receiver equipment. Backlog for the Network Systems segment, which consists primarily of private business networks and satellite-based mobile telephony equipment orders, was about $1.0 billion in 1999 compared to about $1.3 billion in 1998. Eliminations and Other The elimination of revenues increased to $420.0 million in 1999 from $179.5 million in 1998 due primarily to increased manufacturing subsidies received by the Network Systems segment from the DIRECTV businesses which resulted from the increased DIRECTV receiver equipment shipments. Operating losses for "eliminations and other" increased to $229.1 million in 1999 from $140.7 million in 1998. The increase was primarily due to increases in eliminations of intercompany profit and corporate expenditures. The increased intercompany profit elimination resulted from the increased intercompany sales noted above and increased corporate expenditures resulted primarily from higher pension and other employee costs. Liquidity and Capital Resources Cash and cash equivalents were $1,508.1 million at December 31, 2000 compared to $238.2 million at December 31, 1999. The increase in cash resulted primarily from cash proceeds received from the sale of the Satellite Businesses, partially offset by cash used for capital expenditures and the repayment of debt. IV-30 HUGHES ELECTRONICS CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Cash provided by operating activities was $1,090.7 million in 2000 compared to $379.5 million in 1999 and $612.1 million in 1998. The change in 2000 compared from 1999 resulted from $552.7 million of lower cash requirements for the change in operating assets and liabilities and a $158.5 million of higher income from continuing operations excluding non-cash adjustments, such as depreciation and amortization, equity losses on unconsolidated subsidiaries and the loss resulting from the discontinuation of the wireless product lines. The change in 1999 from 1998 resulted primarily from increased cash requirements for working capital, offset by increased income from continuing operations excluding non-cash adjustments. Cash provided by (used in) investing activities was $2,210.8 million in 2000 compared to $(3,941.8) million in 1999 and $(2,128.5) million in 1998. The increase in 2000 from 1999 reflects the proceeds received from the sale of the Satellite Businesses and a decrease in investment in companies, compared to 1999. The decrease in 1999 from 1998 reflects the higher investment in companies primarily related to the acquisitions of PRIMESTAR and the related Tempo Satellite assets, USSB, SurFin, GGM and GLB. The 1999 decrease is also due to investments in DIRECTV Japan convertible bonds, the early buy-out of satellite sale-leasebacks at PanAmSat and increased expenditures for property, compared to 1998. Cash provided by (used in) financing activities was $(849.6) million in 2000 compared to $2,577.5 million in 1999 and $(63.6) million in 1998. Financing activities in 2000 reflect the repayment of debt and payment of preferred stock dividends to GM. Financing activities in 1999 reflect increased borrowings and proceeds from the issuance of preferred stock. Financing activities in 1998 include the payment to GM for the post-closing price adjustment stemming from the transfer of Delco Electronics Corporation to GM in 1997, offset by net long-term borrowings. Cash provided by (used in) discontinued operations was $(1,182.0) million in 2000 compared to $(119.0) million in 1999 and $138.3 million in 1998. The increase in cash used in 2000 from 1999 was primarily due to $1.1 billion of taxes associated with the sale of the Satellite Businesses. The decrease in 1999 from 1998 was due to increased working capital requirements, increased development costs, the termination of a customer contract and decreased activity associated with the ICO contract. Liquidity Measurement. As a measure of liquidity, the current ratio (ratio of current assets to current liabilities) at December 31, 2000 and 1999 was 1.54 and 1.46, respectively. Working capital increased by $246.9 million to $1,462.8 million at December 31, 2000 from $1,215.9 million at December 31, 1999. The change in working capital resulted primarily from about $2.8 billion of after-tax proceeds received from the sale of the Satellite Businesses, partially offset by the repayment of about $0.8 billion of net borrowings and $1.7 billion of capital expenditures for property and satellites. Property and Satellites. Property, net of accumulated depreciation, increased $484.8 million to $1,707.8 million in 2000 from $1,223.0 million in 1999. The increase in property resulted primarily from capital expenditures of about $939.0 million, partially offset by depreciation. The increase in capital expenditures for property of $432.6 million in 2000 over 1999 was primarily due to an increase in subscriber leased DIRECTV receiver equipment used for the conversion of PRIMESTAR subscribers and to support subscriber growth in Latin America. Satellites, net of accumulated depreciation, increased $322.7 million to $4,230.0 million in 2000 from $3,907.3 million in 1999. The increase in satellites resulted primarily from capital expenditures of $777.1 million for the construction of satellites, mostly offset by depreciation of $299.3 million and a write-off of $128.3 million resulting from the failure of PanAmSat's Galaxy VII satellite, which was fully insured. Satellite capital expenditures in 1999 included $789.4 million for the construction of satellites and $369.5 million for the early buy-out of satellite sale-leasebacks. Total capital expenditures increased to $1,716.1 million in 2000 from $1,665.3 million in 1999. IV-31 HUGHES ELECTRONICS CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Common Stock Dividend Policy and Use of Cash. Dividends may be paid on the GM Class H common stock only when, as, and if declared by GM's Board of Directors in its sole discretion. As of December 31, 2000, the amount available for the payment of dividends by GM to holders of GM Class H common stock was $19.7 billion. The GM Board has not paid, and does not currently intend to pay in the foreseeable future, cash dividends on its Class H common stock. Similarly, Hughes has not paid dividends on its common stock to GM and does not currently intend to do so in the foreseeable future. Future Hughes earnings, if any, are expected to be retained for the development of the businesses of Hughes. Hughes expects to have cash requirements in 2001 of about $2.6 billion primarily due to capital expenditures for satellites and property and planned increases in subscriber acquisition costs for the Direct-To-Home businesses. In addition, Hughes expects to increase its investment in affiliated companies. These cash requirements are expected to be funded from a combination of existing cash balances, cash provided from operations, amounts available under credit facilities, and additional borrowings and equity offerings, as needed. Debt and Credit Facilities, General. Hughes utilized a portion of the proceeds from the sale of its Satellite Businesses to repay about $1.8 billion of outstanding debt in the fourth quarter of 2000. The outstanding debt balances that were repaid consisted of $250.0 million under Hughes' 364-day facility, $339.4 million in commercial paper, $750.0 million under Hughes' multi-year facility and $500.0 million of floating rate notes. Notes Payable. In October 1999, Hughes issued $500.0 million of floating rate notes to a group of institutional investors in a private placement. The notes were repaid on October 23, 2000. PanAmSat issued five, seven, ten and thirty-year fixed rate notes totaling $750.0 million in January 1998. The outstanding principal balances and interest rates for these notes as of December 31, 2000 were $200 million at 6.0%, $275 million at 6.125%, $150 million at 6.375% and $125 million at $6.875%, respectively. Principal on the notes is payable at maturity, while interest is payable semi-annually. In July 1999, in connection with the early buy-out of satellite sale- leasebacks, PanAmSat assumed $124.1 million of variable rate notes of which $67.7 million was outstanding at December 31, 2000. The weighted average interest rate on the notes was 7.06% at December 31, 2000. The notes mature on various dates through January 2, 2002. Revolving Credit Facilities. As of December 31, 2000, Hughes had a $750.0 million multi-year unsecured revolving credit facility. Borrowings under the facility bear interest based on a spread to the then-prevailing London Interbank Offer Rate ("LIBOR"). The multi-year credit facility provides for a commitment of $750.0 million through December 5, 2002. The facility also provides backup capacity for Hughes' $1.0 billion commercial paper program. Commercial paper outstanding under the program bears interest at various rates, based on market rates prevailing at the time each commercial paper instrument is placed. No amounts were outstanding under the multi-year credit facility or commercial paper program at December 31, 2000. Throughout 2000 Hughes also had outstanding borrowings under a $350.0 million 364-day facility, which expired on November 22, 2000. Borrowings under the facility bore interest at various rates, based on a spread to then- prevailing LIBOR. In October 2000, Hughes repaid the outstanding borrowings under this facility. During 2000, Hughes had available a $500.0 million bridge facility that provided additional backup capacity for Hughes $1.0 billion commercial paper program. There were no outstanding borrowings on the bridge facility during 2000. In October 2000, Hughes elected to terminate the bridge facility, as provided for under the terms of the agreement. PanAmSat maintains a $500.0 million multi-year revolving credit facility that provides for short-term and long-term borrowings and a $500.0 million commercial paper program. Borrowings under the credit facility bear interest at a rate equal to LIBOR plus a spread based on PanAmSat's credit rating. The multi-year revolving credit facility provides for a commitment through December 24, 2002. IV-32 HUGHES ELECTRONICS CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Borrowings under the credit facility and commercial paper program are limited to $500.0 million in the aggregate. No amounts were outstanding under either the multi-year revolving credit facility or the commercial paper program at December 31, 2000. At December 31, 2000, SurFin, had a total of $464.9 million outstanding under unsecured revolving credit facilities of $400.0 million and $150.0 million that expire in June 2002 and September 2003, respectively. Borrowings under the credit facilities bear interest at various rates based on LIBOR plus an indicated spread. The weighted average interest rate on these borrowings was 7.58% at December 31, 2000. Other short-term and long-term debt outstanding at December 31, 2000 included $19.4 million of notes bearing fixed rates of interest of 9.61% to 11.11% and $14.6 million of variable rate notes, bearing a weighted average interest rate of 11.87%. Principal on the fixed rate notes is payable in varying amounts at maturity from November 2001 to April 2007. Principal on the variable rate notes is payable in varying amounts at maturity in April and May 2002. On January 5, 2001, DLA entered into a $500 million revolving credit facility. This facility provides for a commitment through the earlier of eighteen months or the date of receipt of the cash proceeds from the issuance of any debt or equity security of DLA. Borrowings under the credit facility bear interest at a rate based on LIBOR plus an indicated spread. As of March 5, 2001, DLA had $333 million outstanding under the revolving credit facility. Hughes has filed a shelf registration statement with the Securities and Exchange Commission with respect to an issuance of up to $2.0 billion of debt securities from time to time. No amounts have been issued as of December 31, 2000. Acquisitions, Investments and Divestitures. Acquisitions and Investments. On January 1, 2001, DLA acquired from Bavaria S.A. an additional 14.2% ownership interest in Galaxy Entretenimiento de Colombia ("GEC"), a DLA local operating company located in Colombia. As a result of the transaction, Hughes' ownership interest in GEC increased from 44.2% to 55.2%. The purchase price consisted of prior capital contributions of $4.4 million made by DLA during 2000 on behalf of Bavaria S.A. The increased ownership in GEC will result in its consolidation from January 1, 2001. On December 21, 2000, Hughes entered into an agreement and plan of merger with Telocity Delaware, Inc. ("Telocity") under which Hughes has agreed to acquire all outstanding shares of Telocity at a price of $2.15 per share in cash for a total purchase price of $177 million, and has agreed to provide Telocity with up to $20 million of interim financing. The transaction is expected to be completed during the second quarter of 2001. In April 2000, DLA acquired a 37.5% ownership interest in GEC from Carvajal S.A. that increased Hughes' ownership interest from 15% to 44.2%. The purchase price consisted of $6.7 million in cash and notes payable. On July 28, 1999, DLA acquired GLB, the exclusive distributor of DIRECTV services in Brazil, from Tevecap S.A. for approximately $114.0 million plus the assumption of debt. In connection with the transaction, Tevecap also sold its 10% equity interest in DLA to Hughes and Darlene Investments, LLC, which increased Hughes' ownership interest in DLA to 77.8%. As part of the transaction, Hughes also increased its ownership interest in SurFin from 59.1% to 75%. The total consideration paid in the transactions amounted to approximately $101.1 million. On May 20, 1999, Hughes acquired by merger all of the outstanding capital stock of USSB, a provider of premium subscription television programming via the digital broadcasting system that it shared with DIRECTV. The total consideration of approximately $1.6 billion paid in July 1999, consisted of approximately $0.4 billion in cash and 22.6 million shares of GM Class H common stock (prior to giving effect to the stock split during 2000). On April 28, 1999, Hughes completed the acquisition of PRIMESTAR's 2.3 million subscriber medium-power direct-to-home satellite business. The purchase price consisted of $1.1 billion in cash and 4.9 million shares of GM Class H common stock (prior to giving effect to the stock split during 2000), for a total purchase price of $1.3 billion. As part of the acquisition of IV-33 HUGHES ELECTRONICS CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) PRIMESTAR, Hughes also purchased the high-power satellite assets, which consisted of an in-orbit satellite and a satellite that had not yet been launched, and related orbital frequencies of Tempo Satellite Inc., a wholly- owned subsidiary of TCI Satellite Entertainment Inc., for $500 million in cash. Hughes agreed, in connection with its acquisition of PRIMESTAR, to exit the medium-power business prior to May 1, 2001. Hughes formulated a detailed exit plan during the second quarter of 1999 and immediately began to migrate the medium-power customers to DIRECTV's high-power platform. Accordingly, Hughes accrued exit costs of $150 million in determining the purchase price allocated to the net assets acquired. The principal components of such exit costs include penalties to terminate assumed contracts and costs to remove medium- power equipment from customer premises. Since DIRECTV's acquisition of PRIMESTAR, DIRECTV converted a total of approximately 1.5 million customers to its high power service. The PRIMESTAR By DIRECTV service ceased operations, as planned, on September 30, 2000. The amount of accrued exit costs remaining at December 31, 2000 and 1999 was $25.9 million and $123.9 million, respectively, which primarily represents the remaining obligation on certain contracts. In February 1999, Hughes acquired an additional ownership interest in GGM, a Latin America local operating company which is the exclusive distributor of DIRECTV in Mexico, from Grupo MVS, S.R.L. de C.V. ("Grupo MVS"). As a result, Hughes' equity ownership represents 49% of the voting equity and all of the non-voting equity of GGM. In October 1998, Hughes acquired from Grupo MVS an additional 10% interest in DLA, increasing Hughes' ownership interest to 70%. Hughes also acquired an additional 19.8% interest in SurFin, a company providing financing of subscriber receiver equipment for certain local operating companies located in Latin America and Mexico, increasing Hughes' ownership percentage from 39.3% to 59.1%. The aggregate purchase price for these transactions was $197.0 million in cash. The financial information included herein reflect the acquisitions discussed above from their respective dates of acquisition. The acquisitions were accounted for by the purchase method of accounting and, accordingly, the purchase price has been allocated to the assets acquired and the liabilities assumed based on the estimated fair values at the date of acquisition. The excess of the purchase price over the estimated fair values of the net assets acquired has been recorded as goodwill, resulting in a goodwill addition of $3,612.4 million for the year ended December 31, 1999. Divestitures. On October 6, 2000, Hughes completed the sale of its Satellite Businesses for $3.75 billion in cash, plus the estimated book value of the closing net assets of the businesses sold in excess of a target amount. The transaction resulted in the recognition of a pre-tax gain of $2,036.0 million, or $1,132.3 million after-tax. The purchase price is subject to adjustment based upon the final closing net assets and is discussed in Note 20 to the consolidated financial statements. In a separate, but related transaction, Hughes also sold to Boeing its 50% interest in HRL Laboratories LLC ("HRL") for $38.5 million, which represented the net book value of HRL at October 6, 2000. During September 2000, Hughes Tele.com (India) Limited sold new common shares in a public offering in India. As a result of this transaction, Hughes' equity interest was reduced from 44.7% to 29.2%. Due to the nature of the transaction, Hughes recorded a $23.3 million increase in capital stock and additional paid-in capital. On March 1, 2000, Hughes announced that the operations of DIRECTV Japan would be discontinued. Pursuant to an agreement with Japan Digital Broadcasting Services Inc. (now named Sky Perfect Communications, Inc. or "Sky Perfect"), qualified subscribers to the DIRECTV Japan service were offered the opportunity to migrate to the Sky Perfect service, for which DIRECTV Japan was paid a commission for each subscriber who actually migrated and Hughes acquired a 6.6% interest in Sky Perfect. As a result, Hughes wrote-off its net investment in DIRECTV Japan of $164.6 million and accrued exit costs of $403.7 million and IV-34 HUGHES ELECTRONICS CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) involuntary termination benefits of $14.5 million. Accrued exit costs consist of claims arising out of contracts with dealers, manufacturers, programmers and others, satellite transponder and facility and equipment leases, subscriber migration and termination costs, and professional service fees and other. The write-off and accrual were partially offset by the difference between the cost of the Sky Perfect shares acquired and the estimated fair value of the shares ($428.8 million), as determined by an independent appraisal, and by $40.2 million for anticipated contributions from other DIRECTV Japan shareholders. The net effect of the transaction was a charge to "other, net" of $170.6 million at March 31, 2000. During 2000, $193.9 million and $8.3 million were paid related to accrued exit costs and involuntary termination benefits, respectively. During the second quarter of 2000, $62.4 million of payments were received from the other DIRECTV Japan shareholders, resulting in a credit adjustment of $22.2 million to "other, net". In the fourth quarter of 2000, $106.6 million of accrued exit costs were reversed and $0.6 million of involuntary termination benefits were added, resulting in a net credit adjustment to "other, net" of $106.0 million. The adjustments made to the exit cost accrual were primarily attributable to earlier than anticipated cessation of the DIRECTV Japan broadcasting service, greater than anticipated commission payments for subscriber migration and settlements of various contracts and claims. The amounts remaining for accrued exit costs and involuntary termination benefits were $103.2 million and $6.8 million, respectively, at December 31, 2000. DIRECTV Japan employed approximately 290 personnel as of March 31, 2000, of which 244 were terminated during the year. The remaining employees at December 31, 2000 will be terminated during the first half of 2001. In the fourth quarter of 2000, Sky Perfect completed an initial public offering, at which date the fair value of Hughes' interest (diluted by the public offering to approximately 5.3%) in Sky Perfect was approximately $343 million. At December 31, 2000, the market value of Hughes' investment further declined to $159 million. Based on analysis of recent investment research regarding Sky Perfect, Hughes determined that a portion of the decline was "other than temporary," resulting in a charge to "other, net" and a write down of the investment of $86.0 million. The portion of the decline not considered "other than temporary," which amounted to $183.4 million, pre-tax, was recorded as a mark-to-market adjustment to other comprehensive income for the year ended December 31, 2000. On January 13, 2000, Hughes announced the discontinuation of its mobile cellular and narrowband local loop product lines at HNS. As a result of this decision, Hughes recorded a fourth quarter 1999 pre-tax charge to continuing operations of $272.1 million. The charge represents the write-off of receivables and inventories, licenses, software and equipment with no alternative use. New Accounting Standard. Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended by SFAS No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities, is effective for the Company as of January 1, 2001. SFAS No. 133 requires that all derivative instruments be recorded on the balance sheet at their fair value. Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as a hedge and the type of transaction. Adoption of these new accounting standards will result in an unfavorable cumulative effect of accounting change of approximately $8.7 million after-tax charge on January 1, 2001. This standard will have no impact on Hughes' consolidated cash flows. IV-35 HUGHES ELECTRONICS CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Commitments and Contingencies In connection with the sale by Hughes of the Satellite Businesses to Boeing, it is possible that Hughes may be required to make a cash payment to Boeing as an adjustment to the purchase price based upon the terms of the stock purchase agreement. Although Hughes believes it has adequately provided for such an adjustment, the total amount of any such adjustment cannot be determined at this time. Additionally, as part of the sale, Hughes retained limited liability for certain possible fines and penalties and the financial consequences of debarment associated with potential criminal violations of U.S. export control laws, which are currently being investigated, related to the businesses now owned by Boeing, should such sanctions be imposed by either the Department of Justice or State Department against the Satellite Businesses. Hughes does not expect any sanctions imposed to have a material adverse effect on Hughes' operations or financial position. Hughes may be required to make a cash payment to, or may receive a cash payment from, Raytheon in connection with the merger of the defense electronics business of Hughes with Raytheon in 1997. The amount of any such cash payment to or from Raytheon, if any, is not determinable at this time. Hughes purchases in-orbit and launch insurance for its satellite fleet to mitigate the potential financial impact of in-orbit and launch failures. The insurance generally does not compensate for business interruption or loss of future revenues or customers. Certain of Hughes' insurance policies contain exclusions related to known anomalies and Hughes is self-insured for certain other satellites. The portion of the book value of satellites that were self- insured or with coverage exclusions amounted to $519.5 million at December 31, 2000. At December 31, 2000, minimum future commitments under noncancelable operating leases having lease terms in excess of one year are primarily for real property and aggregated $106.6 million, payable as follows: $29.9 million in 2001, $23.7 million in 2002, $17.8 million in 2003, $13.6 million in 2004, $16.4 million in 2005 and $5.2 million thereafter. Certain of these leases contain escalation clauses and renewal or purchase options. Rental expenses under operating leases, net of sublease rental income, were $55.9 million in 2000, $58.5 million in 1999 and $82.7 million in 1998. Hughes is contingently liable under standby letters of credit and bonds in the amount of $59.1 million at December 31, 2000. In Hughes' past experience, no material claims have been made against these financial instruments. In addition, at December 31, 2000, Hughes has guaranteed up to $340.7 million of bank debt, including $85.0 million related to Motient Corporation. Of the bank debt guaranteed, $85.0 million matures in March 2003 and $55.4 million matures in September 2007. The remaining $200.3 million is related to DIRECTV Latin America and SurFin guarantees of non-consolidated local operating company debt and is due in variable amounts over the next five years. In connection with the direct-to-home broadcast businesses, Hughes has commitments related to certain programming agreements which are variable based upon the number of underlying subscribers and market penetration rates. Minimum payments over the terms of applicable contracts are anticipated to be approximately $1.3 billion. As part of a marketing agreement entered into with America Online, Inc. ("AOL") on June 21, 1999, Hughes committed to increase its sales and marketing expenditures over the next three years by approximately $1.5 billion relating to DirecPC(R)/AOL-Plus, DIRECTV(R), DIRECTV(TM)/AOL TV and DirecDuo(TM). At December 31, 2000, Hughes' remaining commitment under this agreement was approximately $1.1 billion. See Note 20 to the consolidated financial statements for further discussion of the above matters and various legal proceedings and claims that could be material, individually or in the aggregate, to Hughes' continuing operations or financial position. IV-36 HUGHES ELECTRONICS CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) Security Ratings Hughes' current long-term credit ratings are Baa2 and BBB-, with its short- term credit and commercial paper ratings at P-2 and A-3, as rated by Moody's Investor Services and Standard and Poor's Rating Services, respectively. On September 21, 2000, subsequent to the announcement that GM was exploring strategic alternatives involving Hughes, S&P re-affirmed its BBB- and A-3 debt ratings for Hughes and revised its outlook from positive to developing. Previously, in January 2000, subsequent to the announced sale of Hughes' Satellite Businesses, Moody's and S&P each affirmed their respective debt ratings for Hughes. At that time, Moody's maintained its negative outlook but ended its review for possible downgrade while S&P revised its outlook to positive from negative. Debt ratings by the various rating agencies reflect each agency's opinion of the ability of issuers to repay debt obligations as they come due. With respect to Moody's, the Baa2 rating for senior debt indicates adequate likelihood of interest and principal payment and principal security. The P-2 short-term rating, the second highest rating available, indicates that the issuer has a strong ability for repayment relative to other issuers. For S&P, the BBB- rating indicates the issuer has adequate capacity to pay interest and repay principal. In general, lower ratings result in higher borrowing costs. A security rating is not a recommendation to buy, sell, or hold securities and may be subject to revision or withdrawal at any time by the assigning rating organization. Each rating should be evaluated independently of any other rating. Market Risk Disclosure The following discussion and the estimated amounts generated from the sensitivity analyses referred to below include forward-looking statements of market risk which assume for analytical purposes that certain adverse market conditions may occur. Actual future market conditions may differ materially from such assumptions because the amounts noted below are the result of analyses used for the purpose of assessing possible risks and the mitigation thereof. Accordingly, the forward-looking statements should not be considered projections by Hughes of future events or losses. General Hughes' cash flows and earnings are subject to fluctuations resulting from changes in foreign currency exchange rates, interest rates and changes in the market value of its equity investments. Hughes manages its exposure to these market risks through internally established policies and procedures and, when deemed appropriate, through the use of derivative financial instruments. Hughes' policy is to not enter into speculative derivative instruments for profit or execute derivative instrument contracts for which there are no underlying exposures. Hughes does not use financial instruments for trading purposes and is not a party to any leveraged derivatives. Foreign Currency Risk Hughes generally conducts its business in U.S. dollars with some business conducted in a variety of foreign currencies and therefore is exposed to fluctuations in foreign currency exchange rates. Hughes' objective in managing its exposure to foreign currency changes is to reduce earnings and cash flow volatility associated with foreign exchange rate fluctuations. Accordingly, Hughes enters into foreign exchange contracts to mitigate risks associated with future foreign currency firm commitments. Foreign exchange contracts are legal agreements between two parties to purchase and sell a foreign currency, for a price specified at the contract date, with delivery and settlement in the future. The impact of a hypothetical 10% adverse change in exchange rates on the fair values of foreign exchange contracts and foreign currency denominated assets and liabilities would be less than $3.5 million, net of taxes at both December 31, 2000 and December 31, 1999. IV-37 HUGHES ELECTRONICS CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS (concluded) Investments Hughes maintains investments in publicly-traded common stock of unaffiliated companies and is therefore subject to equity price risk. These investments are classified as available-for-sale and, consequently, are reflected in Hughes' consolidated balance sheets at fair value with unrealized gains or losses, net of taxes, recorded as part of accumulated other comprehensive income (loss), a separate component of stockholder's equity. Declines in market value that are judged to be "other than temporary" are charged to "other, net" in the Consolidated Statements of Operations and Available Separate Consolidated Net Income (Loss). At December 31, 2000, the fair values of the investments in such common stock were $973.9 million compared to $976.0 million at December 31, 1999. The investments were valued at the market closing prices at December 31, 2000. No actions have been taken by Hughes to hedge this market risk exposure. A 10% decline in the market price of these investments would cause the fair value of the investments in common stock to decrease by $97.4 million and $97.6 million at December 31, 2000 and 1999, respectively. Interest Rate Risk Hughes is subject to interest rate risk related to its outstanding debt of $1.3 billion at December 31, 2000 and $2.1 billion at December 31, 1999. As of December 31, 2000, debt consisted of PanAmSat's fixed-rate borrowings of $750.0 million, SurFin's variable rate borrowings of $464.9 million and various other floating and fixed rate borrowings. Hughes is subject to fluctuating interest rates which may adversely impact its results of operations and cash flows for its variable rate bank borrowings. Fluctuations in interest rates may also adversely effect the market value of Hughes' fixed- rate borrowings. At December 31, 2000, outstanding borrowings bore interest at rates ranging from 6.00% to 11.87%. The potential fair value loss resulting from a hypothetical 10% decrease in interest rates related to Hughes' outstanding debt would be approximately $25.4 million and $29.0 million at December 31, 2000 and 1999, respectively. Credit Risk Hughes is exposed to credit risk in the event of non-performance by the counterparties to its foreign exchange contracts. While Hughes believes this risk is remote, credit risk is managed through the periodic monitoring and approval of financially sound counterparties. IV-38 HUGHES ELECTRONICS CORPORATION RESPONSIBILITIES FOR FINANCIAL STATEMENTS The following consolidated financial statements of Hughes Electronics Corporation were prepared by management, which is responsible for their integrity and objectivity. The statements have been prepared in conformity with accounting principles generally accepted in the United States of America and, as such, include amounts based on judgments of management. Management is further responsible for maintaining internal control designed to provide reasonable assurance that the books and records reflect the transactions of the company and that established policies and procedures are carefully followed. Perhaps the most important feature in internal control is that it is continually reviewed for effectiveness and is augmented by written policies and guidelines, the careful selection and training of qualified personnel and a strong program of internal audit. Deloitte & Touche LLP, an independent auditing firm, is engaged to audit the consolidated financial statements of Hughes Electronics Corporation and issue reports thereon. The audit is conducted in accordance with auditing standards generally accepted in the United States of America that comprehend the consideration of internal control and tests of transactions to the extent necessary to form an independent opinion on the consolidated financial statements prepared by management. The Independent Auditors' Report appears on page IV-40. The Board of Directors, through its Audit Committee, is responsible for assuring that management fulfills its responsibilities in the preparation of the consolidated financial statements and engaging the independent auditors. The Audit Committee reviews the scope of the audits and the accounting principles being applied in financial reporting. The independent auditors, representatives of management, and the internal auditors meet regularly (separately and jointly) with the Audit Committee to review the activities of each, to ensure that each is properly discharging its responsibilities and to assess the effectiveness of internal control. It is management's conclusion that internal control at December 31, 2000 provides reasonable assurance that the books and records reflect the transactions of the company and that established policies and procedures are complied with. To ensure complete independence, Deloitte & Touche LLP has full and free access to meet with the Audit Committee, without management representatives present, to discuss the results of the audit, the adequacy of internal control, and the quality of financial reporting. /s/ Michael T. Smith /s/ Roxanne S. Austin Michael T. Smith Roxanne S. Austin Chairman of the Board and Chief Senior Vice President and Chief Executive Officer Financial Officer
IV-39 HUGHES ELECTRONICS CORPORATION INDEPENDENT AUDITORS' REPORT To the Board of Directors of Hughes Electronics Corporation: We have audited the accompanying Consolidated Balance Sheets of Hughes Electronics Corporation as of December 31, 2000 and 1999, and the related Consolidated Statements of Operations and Available Separate Consolidated Net Income (Loss), Consolidated Statements of Changes in Stockholder's Equity and Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 2000. These financial statements are the responsibility of Hughes Electronics Corporation's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the financial position of Hughes Electronics Corporation at December 31, 2000 and 1999, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2000 in conformity with accounting principles generally accepted in the United States of America. As discussed in Note 2 to the accompanying financial statements, effective January 1, 1998, Hughes Electronics Corporation changed its method of accounting for costs of start-up activities by adopting American Institute of Certified Public Accountants Statement of Position 98-5, Reporting on the Costs of Start-Up Activities. /s/ Deloitte & Touche LLP - ------------------------------------- DELOITTE & TOUCHE LLP Los Angeles, California January 16, 2001 IV-40 HUGHES ELECTRONICS CORPORATION CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTATY DATA CONSOLIDATED STATEMENTS OF OPERATIONS AND AVAILABLE SEPARATE CONSOLIDATED NET INCOME (LOSS)
Years Ended December 31, ---------------------------- 2000 1999 1998 -------- -------- -------- (Dollars in Millions) Revenues Direct broadcast, leasing and other services.. $6,262.2 $4,550.8 $2,640.2 Product sales................................. 1,025.4 1,009.5 840.4 -------- -------- -------- Total Revenues.............................. 7,287.6 5,560.3 3,480.6 -------- -------- -------- Operating Costs and Expenses Broadcast programming and other costs......... 2,812.8 2,039.0 1,211.4 Cost of products sold......................... 815.1 961.6 618.0 Selling, general and administrative expenses.. 3,065.7 2,295.3 1,279.2 Depreciation and amortization................. 948.1 678.9 413.1 -------- -------- -------- Total Operating Costs and Expenses.......... 7,641.7 5,974.8 3,521.7 -------- -------- -------- Operating Loss.................................. (354.1) (414.5) (41.1) Interest income................................. 49.3 27.0 112.3 Interest expense................................ (218.2) (122.7) (17.5) Other, net...................................... (292.6) (149.8) (156.9) -------- -------- -------- Loss From Continuing Operations Before Income Taxes, Minority Interests and Cumulative Effect of Accounting Change........................... (815.6) (660.0) (103.2) Income tax benefit.............................. (406.1) (236.9) (142.3) Minority interests in net losses of subsidiaries................................... 54.1 32.0 24.4 -------- -------- -------- Income (Loss) from continuing operations before cumulative effect of accounting change......... (355.4) (391.1) 63.5 Income from discontinued operations, net of taxes.......................................... 36.1 99.8 196.4 Gain on sale of discontinued operations, net of taxes.......................................... 1,132.3 -- -- -------- -------- -------- Income (Loss) before cumulative effect of accounting change.............................. 813.0 (291.3) 259.9 Cumulative effect of accounting change, net of taxes.......................................... -- -- (9.2) -------- -------- -------- Net Income (Loss)............................... 813.0 (291.3) 250.7 Adjustment to exclude the effect of GM purchase accounting .................................... 16.9 21.0 21.0 -------- -------- -------- Earnings (Loss) excluding the effect of GM purchase accounting adjustment................. 829.9 (270.3) 271.7 Preferred stock dividends....................... (97.0) (50.9) -- -------- -------- -------- Earnings (Loss) Used for Computation of Available Separate Consolidated Net Income (Loss)......................................... $ 732.9 $ (321.2) $ 271.7 ======== ======== ======== Available Separate Consolidated Net Income (Loss)......................................... Average number of shares of General Motors Class H Common Stock outstanding (in millions) (Numerator).................................... 681.2 374.1 315.9 Average Class H dividend base (in millions) (Denominator).................................. 1,297.0 1,255.5 1,199.7 Available Separate Consolidated Net Income (Loss)......................................... $ 384.9 $ (95.7) $ 71.5 ======== ======== ========
- -------- Reference should be made to the Notes to the Consolidated Financial Statements. IV-41 HUGHES ELECTRONICS CORPORATION CONSOLIDATED BALANCE SHEETS
December 31, -------------------- 2000 1999 --------- --------- (Dollars in Millions) ASSETS ------ Current Assets Cash and cash equivalents.............................. $ 1,508.1 $ 238.2 Accounts and notes receivable, net of allowances of $88.3 and $92.9....................................... 1,253.0 960.9 Contracts in process................................... 186.0 155.8 Inventories............................................ 338.0 236.1 Net assets of discontinued operations.................. -- 1,224.6 Deferred income taxes.................................. 89.9 254.3 Prepaid expenses and other............................. 778.7 788.1 --------- --------- Total Current Assets............................... 4,153.7 3,858.0 Satellites, net.......................................... 4,230.0 3,907.3 Property, net............................................ 1,707.8 1,223.0 Net Investment in Sales-type Leases...................... 221.1 146.1 Intangible Assets, net................................... 7,151.3 7,406.0 Investments and Other Assets............................. 1,815.4 2,056.6 --------- --------- Total Assets....................................... $19,279.3 $18,597.0 ========= ========= LIABILITIES AND STOCKHOLDER'S EQUITY ------------------------------------ Current Liabilities Accounts payable....................................... $ 1,224.2 $ 1,062.2 Deferred revenues...................................... 137.6 130.5 Short-term borrowings and current portion of long-term debt.................................................. 24.6 555.4 Accrued liabilities and other.......................... 1,304.5 894.0 --------- --------- Total Current Liabilities.......................... 2,690.9 2,642.1 --------- --------- Long-Term Debt........................................... 1,292.0 1,586.0 Other Liabilities and Deferred Credits................... 1,647.3 1,454.2 Deferred Income Taxes.................................... 769.3 689.1 Commitments and Contingencies Minority Interests....................................... 553.7 544.3 Stockholder's Equity Capital stock and additional paid-in capital........... 9,973.8 9,809.5 Preferred stock........................................ 1,495.7 1,487.5 Retained earnings (deficit)............................ 631.6 (84.4) --------- --------- Subtotal Stockholder's Equity............................ 12,101.1 11,212.6 --------- --------- Accumulated Other Comprehensive Income (Loss) Minimum pension liability adjustment................. (16.1) (7.3) Accumulated unrealized gains on securities........... 257.0 466.0 Accumulated foreign currency translation adjustments......................................... (15.9) 10.0 --------- --------- Accumulated other comprehensive income............... 225.0 468.7 --------- --------- Total Stockholder's Equity......................... 12,326.1 11,681.3 --------- --------- Total Liabilities and Stockholder's Equity......... $19,279.3 $18,597.0 ========= =========
- -------- Reference should be made to the Notes to the Consolidated Financial Statements. IV-42 HUGHES ELECTRONICS CORPORATION CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
Capital Stock and Accumulated Additional Retained Other Total Paid-In Preferred Earnings Comprehensive Stockholder's Comprehensive Capital Stock (Deficit) Income (Loss) Equity Income (Loss) ------------- --------- --------- ------------- ------------- ------------- (Dollars in Millions) Balance at December 31, 1997................... $8,322.8 $ 7.1 $ 10.3 $ 8,340.2 Net Income.............. 250.7 250.7 $ 250.7 Delco post-closing price adjustment............. (199.7) (199.7) Tax benefit from exercise of GM Class H common stock options... 23.0 23.0 Minimum pension liability adjustment... (0.5) (0.5) (0.5) Foreign currency translation adjustments............ 3.8 3.8 3.8 Unrealized gains on securities: Unrealized holding gains................. 1.8 1.8 1.8 Less: reclassification adjustment for gains included in net income................ (7.1) (7.1) (7.1) ------- Comprehensive income.... $ 248.7 -------- -------- ------- ------- --------- ======= Balance at December 31, 1998................... 8,146.1 257.8 8.3 8,412.2 Net Loss................ (291.3) (291.3) $(291.3) Preferred stock......... $1,487.5 (2.5) 1,485.0 Preferred stock dividends.............. (48.4) (48.4) GM Class H common stock acquired by Hughes and retired by GM.......... (11.1) (11.1) Stock options exercised.............. 114.4 114.4 Shares issued in connection with acquisitions........... 1,506.7 1,506.7 Tax benefit from exercise of GM Class H common stock options... 53.4 53.4 Minimum pension liability adjustment... (0.5) (0.5) (0.5) Foreign currency translation adjustments............ 11.0 11.0 11.0 Unrealized gains on securities............. 449.9 449.9 449.9 ------- Comprehensive income.... $ 169.1 -------- -------- ------- ------- --------- ======= Balance at December 31, 1999................... 9,809.5 1,487.5 (84.4) 468.7 11,681.3 Net Income.............. 813.0 813.0 $ 813.0 Preferred stock......... 8.2 (3.2) 5.0 Preferred stock dividends.............. (93.8) (93.8) Stock options exercised.............. 78.4 78.4 Tax benefit from exercise of GM Class H common stock options... 62.3 62.3 Other................... 23.6 23.6 Minimum pension liability adjustment... (8.8) (8.8) (8.8) Foreign currency translation adjustments............ (25.9) (25.9) (25.9) Unrealized loss on securities............. (209.0) (209.0) (209.0) ------- Comprehensive income.... $ 569.3 -------- -------- ------- ------- --------- ======= Balance at December 31, 2000................... $9,973.8 $1,495.7 $ 631.6 $ 225.0 $12,326.1 ======== ======== ======= ======= =========
- -------- Reference should be made to the Notes to the Consolidated Financial Statements. IV-43 HUGHES ELECTRONICS CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, ------------------------------- 2000 1999 1998 --------- --------- --------- (Dollars in Millions) Cash Flows from Operating Activities Income (Loss) from continuing operations before cumulative effect of accounting change...................................... $ (355.4) $ (391.1) $ 63.5 Adjustments to reconcile income (loss) from continuing operations before cumulative effect of accounting change to net cash provided by operating activities Depreciation and amortization.............. 948.1 678.9 413.1 Equity losses from unconsolidated affiliates................................ 164.2 189.2 128.3 Amortization of gains on sale-leasebacks... -- (10.8) (36.2) Net gain on sale of investments and businesses sold........................... -- (30.0) (13.7) Net loss on discontinuation of wireless product lines............................. -- 272.1 -- Net loss on discontinuation of DIRECTV Japan business and write down of Sky Perfect investment........................ 128.4 -- -- Gross profit on sales and sales-type leases.................................... (136.4) -- -- Net (gain) loss on disposal of assets...... 14.6 2.7 -- Deferred income taxes and other............ 377.1 271.1 99.6 Change in other operating assets and liabilities Accounts and notes receivable............ (164.4) 35.0 (49.4) Inventories.............................. (101.9) (38.7) 12.9 Prepaid expenses and other............... 5.3 (494.0) (91.6) Accounts payable......................... 162.0 101.4 224.0 Accrued liabilities and other............ (132.1) 59.6 (19.0) Other.................................... 181.2 (265.9) (119.4) --------- --------- --------- Net Cash Provided by Operating Activities............................ 1,090.7 379.5 612.1 --------- --------- --------- Cash Flows from Investing Activities Investment in companies, net of cash acquired.................................... (181.2) (2,443.7) (1,231.0) Investment in convertible bonds.............. -- (244.7) -- Expenditures for property.................... (939.0) (506.4) (243.9) Increase in satellites....................... (777.1) (789.4) (929.4) Early buy-out of satellites under sale and leaseback................................... -- (245.4) (155.5) Proceeds from disposal of property........... 31.6 15.8 20.0 Proceeds from sale of subsidiaries and investments................................. 4,040.3 -- 12.4 Proceeds from insurance claims............... 36.2 272.0 398.9 --------- --------- --------- Net Cash Provided by (Used in) Investing Activities.................. 2,210.8 (3,941.8) (2,128.5) --------- --------- --------- Cash Flows from Financing Activities Net increase (decrease) in notes and loans payable..................................... (496.6) 343.0 -- Long-term debt borrowings.................... 5,262.2 8,165.6 1,165.2 Repayment of long-term debt.................. (5,591.5) (7,494.4) (1,024.1) Net proceeds from issuance of preferred stock....................................... -- 1,485.0 -- Stock options exercised...................... 70.1 114.4 -- Purchase and retirement of GM Class H common stock....................................... -- (11.1) -- Preferred stock dividends paid to General Motors...................................... (93.8) (25.0) -- Payment to General Motors for Delco post- closing price adjustment.................... -- -- (204.7) --------- --------- --------- Net Cash Provided by (Used in) Financing Activities.................. (849.6) 2,577.5 (63.6) --------- --------- --------- Net cash provided by (used in) continuing operations.................................. 2,451.9 (984.8) (1,580.0) Net cash provided by (used in) discontinued operations.................................. (1,182.0) (119.0) 138.3 --------- --------- --------- Net increase (decrease) in cash and cash equivalents................................. 1,269.9 (1,103.8) (1,441.7) Cash and cash equivalents at beginning of the year........................... 238.2 1,342.0 2,783.7 --------- --------- --------- Cash and cash equivalents at end of the year.................................. $ 1,508.1 $ 238.2 $ 1,342.0 ========= ========= =========
- -------- Reference should be made to the Notes to the Consolidated Financial Statements. IV-44 HUGHES ELECTRONICS CORPORATION NOTES TO FINANCIAL STATEMENTS Note 1: Basis of Presentation and Description of Business Hughes Electronics Corporation ("Hughes Electronics" or "Hughes") is a wholly owned subsidiary of General Motors Corporation ("GM"). The GM Class H common stock tracks the financial performance of Hughes, consisting principally of its direct-to-home broadcast, satellite services, network systems and the satellite systems manufacturing businesses ("Satellite Businesses"). Hughes is a leading provider of digital entertainment, information and communication services and satellite-based private business networks. Hughes is the world's leading digital multi-channel entertainment service provider with its programming distribution service known as DIRECTV(R), which was introduced in the U.S. in 1994 and was the first high-powered, all digital, direct-to-home television distribution service in North America. DIRECTV began service in Latin America in 1996. Hughes is also the owner and operator of the largest commercial satellite fleet in the world through its 81% owned subsidiary, PanAmSat. Hughes is also a leading provider of broadband services and products, including satellite wireless communications ground equipment and business communications services. Hughes' equipment and services are applied in, among other things, data, video and audio transmission, cable and network television distribution, private business networks, digital cellular communications and direct-to-home satellite broadcast distribution of television programming. Revenues, operating costs and expenses, and other non-operating results for the discontinued operations of the Satellite Businesses which were sold to The Boeing Company ("Boeing") on October 6, 2000 are excluded from Hughes' results from continuing operations for all periods presented herein. Alternatively, the financial results are presented in Hughes' Consolidated Statements of Operations and Available Separate Consolidated Net Income (Loss) in a single line item entitled "Income from discontinued operations, net of taxes," the related assets and liabilities are presented in the Consolidated Balance Sheets at December 31, 1999 in a single line item entitled "Net assets of discontinued operations" and the net cash flows are presented in the Consolidated Statements of Cash Flows as "Net cash provided by (used in) discontinued operations." See further discussion in Note 17. The accompanying consolidated financial statements include the applicable portion of intangible assets, including goodwill, and related amortization resulting from purchase accounting adjustments associated with GM's purchase of Hughes in 1985, with certain amounts allocated to the Satellite Businesses. Note 2: Summary of Significant Accounting Policies Principles of Consolidation The accompanying financial statements are presented on a consolidated basis and include the accounts of Hughes and its domestic and foreign subsidiaries that are more than 50% owned or controlled by Hughes. Use of Estimates in the Preparation of the Consolidated Financial Statements The preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect amounts reported therein. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be based upon amounts which differ from those estimates. Revenue Recognition Revenues are generated from sales of direct-to-home broadcast subscriptions, and the sale of transponder capacity and related services through outright sales, sales-type leases and operating lease contracts, and sales of communications equipment and services. IV-45 HUGHES ELECTRONICS CORPORATION NOTES TO FINANCIAL STATEMENTS (continued) Sales are generally recognized as products are shipped or services are rendered. Direct-to-home subscription revenues and pay-per-view services are recognized when programming is viewed by subscribers. Programming payments received from subscribers in advance of viewing are recorded as deferred revenues until earned. Satellite transponder lease contracts qualifying for capital lease treatment (typically based on the term of the lease) are accounted for as sales-type leases, with revenues recognized equal to the net present value of the future minimum lease payments. Upon entering into a sales-type lease, the cost basis of the transponder is charged to cost of products sold. The portion of each periodic lease payment deemed to be attributable to interest income is recognized in each respective period. Contracts for sales of transponders typically include telemetry, tracking and control ("TT&C") service agreements. Revenues related to TT&C service agreements are recognized as the services are performed. Transponder and other lease contracts that do not qualify as sales-type leases are accounted for as operating leases. Operating lease revenues are recognized on a straight-line basis over the respective lease term. Differences between operating lease payments received and revenues recognized are deferred and included in accounts and notes receivable or investments and other assets. A small percentage of revenues are derived from long-term contracts for the sale of large wireless communications systems. Sales under long-term contracts are recognized primarily using the percentage-of-completion (cost-to-cost) method of accounting. Under this method, sales are recorded equivalent to costs incurred plus a portion of the profit expected to be realized, determined based on the ratio of costs incurred to estimated total costs at completion. Profits expected to be realized on long-term contracts are based on estimates of total sales value and costs at completion. These estimates are reviewed and revised periodically throughout the lives of the contracts, and adjustments to profits resulting from such revisions are recorded in the accounting period in which the revisions are made. Estimated losses on contracts are recorded in the period in which they are identified. Hughes has from time to time entered into agreements for the sale and leaseback of certain of its satellite transponders. However, as a result of early buy-out transactions described in Note 4, no obligations under sale- leaseback agreements remain at December 31, 2000. Prior to the completion of the early buy-out transactions, the leasebacks were classified as operating leases and, therefore, the capitalized cost and associated depreciation related to satellite transponders sold were not included in the accompanying consolidated financial statements. Gains resulting from the sale and leaseback transactions were deferred and amortized over the leaseback period. Leaseback expense was recorded using the straight-line method over the term of the lease, net of amortization of the deferred gains. Differences between operating leaseback payments made and expense recognized were deferred and included in other liabilities and deferred credits. Cash Flows Cash equivalents consist of highly liquid investments purchased with original maturities of three months or less. Net cash from operating activities includes cash payments made for interest of $312.9 million, $174.6 million and $53.2 million in 2000, 1999 and 1998, respectively. Net cash refunds received by Hughes for prior year income taxes amounted to $290.5 million, $197.2 million and $59.9 million in 2000, 1999 and 1998, respectively. Contracts in Process Contracts in process are stated at costs incurred plus estimated profit, less amounts billed to customers and advances and progress payments applied. Engineering, tooling, manufacturing, and applicable overhead costs, including administrative, research and development and selling expenses, are charged to costs and expenses when incurred. Amounts billed under retainage provisions IV-46 HUGHES ELECTRONICS CORPORATION NOTES TO FINANCIAL STATEMENTS (continued) of contracts are not significant, and substantially all amounts are collectible within one year. Advances offset against contract related receivables amounted to $93.0 million and $114.5 million at December 31, 2000 and 1999, respectively. Inventories Inventories are stated at the lower of cost or market principally using the average cost method.
Major Classes of Inventories 2000 1999 ---------------------------- ---------- ---------- (Dollars in Millions) Productive material and supplies...................... $ 89.5 $ 59.1 Work in process....................................... 128.3 67.0 Finished goods........................................ 120.2 110.0 ---------- ---------- Total............................................... $ 338.0 $ 236.1 ========== ==========
Property, Satellites and Depreciation Property and satellites are carried at cost. Satellite costs include construction costs, launch costs, launch insurance and capitalized interest. Capitalized satellite costs represent the costs of successful satellite launches. The proportionate cost of a satellite, net of depreciation and insurance proceeds, is written off in the period a full or partial loss of the satellite occurs. Depreciation is computed generally using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized over the lesser of the life of the asset or term of the lease. Intangible Assets Goodwill, which represents the excess of the cost over the net tangible and identifiable intangible assets of acquired businesses, and intangible assets are amortized using the straight-line method over periods not exceeding 40 years. Software Development Costs Other assets include certain software development costs capitalized in accordance with Statement of Financial Accounting Standards ("SFAS") No. 86, Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed. Capitalized software development costs at December 31, 2000 and 1999, net of accumulated amortization of $125.2 million and $98.7 million, respectively, totaled $74.5 million and $70.4 million. The software is amortized using the greater of the units of revenue method or the straight- line method over its estimated useful life, not in excess of five years. Software program reviews are conducted to ensure that capitalized software development costs are properly treated and costs associated with programs that are not generating revenues are appropriately written off. Valuation of Long-Lived Assets Hughes periodically evaluates the carrying value of long-lived assets to be held and used, including goodwill and other intangible assets, when events and circumstances warrant such a review. The carrying value of a long-lived asset is considered impaired when the anticipated undiscounted cash flow from such asset is separately identifiable and is less than its carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the long-lived asset. Fair value is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risk involved. Losses on long-lived assets to be disposed of are determined in a similar manner, except that fair values are reduced for the cost of disposal. IV-47 HUGHES ELECTRONICS CORPORATION NOTES TO FINANCIAL STATEMENTS (continued) Foreign Currency Some of Hughes' foreign operations have determined the local currency to be their functional currency. Accordingly, these foreign entities translate assets and liabilities from their local currencies to U.S. dollars using year- end exchange rates while income and expense accounts are translated at the average rates in effect during the year. The resulting translation adjustment is recorded as part of accumulated other comprehensive income (loss), a separate component of stockholder's equity. Gains and losses resulting from remeasurement into the functional currency of transactions denominated in non- functional currencies are recognized in earnings. Net foreign currency transaction gains and losses included in operations were not material for all years presented. Financial Instruments and Investments Hughes maintains investments in equity securities of unaffiliated companies. Marketable equity securities are considered available-for-sale and carried at current fair value with unrealized gains or losses, net of taxes, reported as part of accumulated other comprehensive income (loss), a separate component of stockholder's equity. Declines in market value that are judged to be "other than temporary" are charged to "other, net." Fair value is determined by market quotes, when available, or by management estimate. Non- marketable equity securities are carried at cost. Investments in which Hughes owns at least 20% of the voting securities or has significant influence are accounted for under the equity method of accounting. Equity method investments are recorded at cost and adjusted for the appropriate share of the net earnings or losses of the investee. Investee losses are recorded up to the amount of the investment plus advances and loans made to the investee, and financial guarantees made on behalf of the investee. Market values of financial instruments, other than debt and derivative instruments, are based upon management estimates. Market values of debt and derivative instruments are determined by quotes from financial institutions. The carrying value of cash and cash equivalents, accounts and notes receivable, investments and other assets, accounts payable, amounts included in accrued liabilities and other meeting the definition of a financial instrument and debt approximated fair value at December 31, 2000 and 1999. Hughes' derivative contracts primarily consist of foreign exchange contracts. Hughes enters into these contracts to reduce its exposure to fluctuations in foreign exchange rates. Foreign exchange contracts are accounted for as hedges to the extent they are designated as, and are effective as, hedges of firm foreign currency commitments. Gains and losses on foreign exchange contracts designated as hedges of firm foreign currency commitments are recognized in income in the same period as gains and losses on the underlying transactions are recognized. Stock Compensation Hughes issues stock options to employees with grant prices equal to the fair value of the underlying security at the date of grant. No compensation cost has been recognized for options in accordance with the provisions of Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees. See Note 12 for information regarding the pro forma effect on earnings of recognizing compensation cost based on the estimated fair value of the stock options granted, as required by SFAS No. 123, Accounting for Stock-Based Compensation. Compensation related to stock awards is recognized ratably over the vesting period and, where required, periodically adjusted to reflect changes in the stock price of the underlying security. Product and Service Related Expenses Advertising and research and development costs are expensed as incurred. Advertising expenses were $108.3 million in 2000, $115.8 million in 1999 and $130.0 million in 1998. Expenditures for research and development were $129.3 million in 2000, $98.8 million in 1999 and $92.6 million in 1998. IV-48 HUGHES ELECTRONICS CORPORATION NOTES TO FINANCIAL STATEMENTS (continued) Market Concentrations and Credit Risk Hughes provides services and extends credit to a number of wireless communications equipment customers and to a large number of direct-to-home consumers. Management monitors its exposure to credit losses and maintains allowances for anticipated losses. Accounting Changes In September 1999, the Financial Accounting Standards Board ("FASB") issued Emerging Issues Task Force Issue 99-10 ("EITF 99-10"), Percentage Used to Determine the Amount of Equity Method Losses. EITF 99-10 addresses the percentage of ownership that should be used to compute equity method losses when the investment has been reduced to zero and the investor holds other securities of the investee. EITF 99-10 requires that equity method losses should not be recognized solely on the percentage of common stock owned; rather, an entity-wide approach should be adopted. Under such an approach, equity method losses must be recognized based on the ownership level that includes other equity securities (e.g., preferred stock) and loans/advances to the investee or based on the change in the investor's claim on the investee's book value. Hughes adopted EITF 99-10 during the third quarter of 1999 which resulted in Hughes recording a higher percentage of DIRECTV Japan's losses subsequent to the effective date of September 23, 1999. The unfavorable impact of adopting EITF 99-10 was $39.0 million after-tax. In 1998, Hughes adopted American Institute of Certified Public Accountants Statement of Position ("SOP") 98-5, Reporting on the Costs of Start-Up Activities. SOP 98-5 required that all start-up costs previously capitalized be written off and recognized as a cumulative effect of accounting change, net of taxes, as of the beginning of the year of adoption. On a prospective basis, these types of costs are required to be expensed as incurred. The unfavorable cumulative effect of this accounting change at January 1, 1998 was $9.2 million after-tax. New Accounting Standard SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended by SFAS No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities, is effective for the Company as of January 1, 2001. SFAS No. 133 requires that all derivative instruments be recorded on the balance sheet at their fair value. Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as a hedge and the type of transaction. Adoption of these new accounting standards will result in an unfavorable cumulative effect of accounting change of approximately $8.7 million after-tax on January 1, 2001. Reclassifications Certain prior year amounts have been reclassified to conform to the 2000 presentation. IV-49 HUGHES ELECTRONICS CORPORATION NOTES TO FINANCIAL STATEMENTS (continued) Note 3: Property and Satellites, Net
Estimated Useful Lives (years) 2000 1999 ------------ -------- -------- (Dollars in Millions) Land and improvements........................ 7-25 $ 45.5 $ 51.4 Buildings and leasehold improvements......... 2-30 189.1 197.0 Machinery and equipment...................... 3-10 1,105.4 795.2 Customer leased set-top boxes................ 4-7 778.3 333.1 Furniture, fixtures and office machines...... 3-13 109.7 92.3 Construction in progress..................... -- 386.0 363.4 -------- -------- Total........................................ 2,614.0 1,832.4 Less accumulated depreciation................ 906.2 609.4 -------- -------- Property, net................................ $1,707.8 $1,223.0 ======== ======== Satellites................................... 12-16 $5,263.8 $4,683.1 Less accumulated depreciation................ 1,033.8 775.8 -------- -------- Satellites, net.............................. $4,230.0 $3,907.3 ======== ========
Hughes capitalized interest of $82.4 million, $65.1 million and $55.3 million during 2000, 1999 and 1998, respectively, as part of the cost of its satellites under construction. Note 4: Leasing Activities Future minimum payments due from customers under sales-type leases and related service agreements, and noncancelable satellite transponder operating leases as of December 31, 2000 are as follows:
Sales-Type Leases ------------------ Minimum Service Lease Agreement Operating Payments Payments Leases -------- --------- --------- (Dollars in Millions) 2001............................................ $ 48.0 $ 4.6 $ 618.4 2002............................................ 48.2 4.6 579.6 2003............................................ 48.2 4.6 544.4 2004............................................ 45.9 4.3 504.7 2005............................................ 37.5 3.4 450.4 Thereafter...................................... 154.8 6.4 2,048.7 ------ ----- -------- Total......................................... $382.6 $27.9 $4,746.2 ====== ===== ========
The components of the net investment in sales-type leases are as follows:
2000 1999 ---------- ---------- (Dollars in Millions) Total minimum lease payments......................... $ 382.6 $ 249.0 Less unearned interest income and allowance for doubtful accounts................................... 136.5 81.1 ---------- ---------- Total net investment in sales-type leases............ 246.1 167.9 Less current portion................................. 25.0 21.8 ---------- ---------- Total.............................................. $ 221.1 $ 146.1 ========== ==========
IV-50 HUGHES ELECTRONICS CORPORATION NOTES TO FINANCIAL STATEMENTS (continued) In 1996 and 1992, Hughes entered into sale-leaseback agreements for certain satellite transponders with other companies, including General Motors Acceptance Corporation ("GMAC"), a subsidiary of GM. Deferred gains from these sale-leaseback agreements are amortized over the expected term of the leaseback period. In 1998, PanAmSat exercised certain early buy-out options and repurchased a portion of the leased transponders for a total payment of $155.5 million. In 1999, PanAmSat exercised early buy-out options for the remaining transponders for $245.4 million in cash and $124.1 million of assumed debt. As a result of the above transactions, no deferred amounts remain outstanding. Note 5: Intangible Assets At December 31, 2000 and 1999, Hughes had $6,443.9 million and $6,642.3 million, respectively, of goodwill, net of accumulated amortization. Goodwill is amortized over 10 to 40 years. Hughes also had, net of accumulated amortization, $707.4 million and $763.7 million of intangible assets at December 31, 2000 and 1999, respectively, which are amortized over 2 to 40 years. Intangible assets consist mainly of Federal Communications Commission licenses, customer lists and dealer networks. Note 6: Investments Investments in marketable equity securities stated at current fair value and classified as available-for-sale totaled $973.9 million and $976.0 million at December 31, 2000 and 1999, respectively. Accumulated unrealized holding gains, net of taxes, recorded as part of accumulated other comprehensive income (loss), a separate component of stockholder's equity, were $257.0 million and $466.0 million as of December 31, 2000 and 1999, respectively. Aggregate investments in affiliated companies, including advances and loans, accounted for under the equity method at December 31, 2000 and 1999, amounted to $121.1 million and $317.4 million, respectively. Note 7: Accrued Liabilities and Other
2000 1999 -------- ------ (Dollars in Millions) Payroll and other compensation............................. $ 231.0 $157.2 Provision for consumer finance and rebate programs......... 125.6 107.3 Exit costs and other liabilities related to discontinued businesses................................................ 386.5 123.9 Programming contract liabilities........................... 90.7 82.6 Other...................................................... 470.7 423.0 -------- ------ Total.................................................... $1,304.5 $894.0 ======== ======
Included in other liabilities and deferred credits are long-term programming contract liabilities which totaled $536.6 million and $627.1 million at December 31, 2000 and December 31, 1999, respectively. IV-51 HUGHES ELECTRONICS CORPORATION NOTES TO FINANCIAL STATEMENTS (continued) Note 8: Short-Term Borrowings and Long-Term Debt Short-Term Borrowings and Current Portion of Long-Term Debt
Interest Rates at December 31, 2000 2000 1999 ------------ ---------- ----------- (Dollars in Millions) Floating rate notes, net of unamortized discount............................... $ 498.9 Other short-term borrowings............. 10.00% $ 3.4 -- Current portion of long-term debt....... 7.06% 21.2 56.5 ---------- ----------- Total short-term borrowings and current portion of long-term debt.... $ 24.6 $ 555.4 ========== ===========
Long-Term Debt
Interest Rates at December 31, 2000 2000 1999 ----------------- -------- -------- (Dollars in Millions) Notes payable........................... 6.00%- 7.06% $ 817.7 $ 874.1 Revolving credit facilities............. 7.45%- 9.50% 464.9 727.9 Other debt.............................. 9.61%- 11.87% 30.6 40.5 -------- -------- Total debt.............................. 1,313.2 1,642.5 Less current portion.................... 21.2 56.5 -------- -------- Total long-term debt.................. $1,292.0 $1,586.0 ======== ========
Notes Payable. In October 1999, Hughes issued $500.0 million of floating rate notes to a group of institutional investors in a private placement. The notes were repaid on October 23, 2000. PanAmSat issued five, seven, ten and thirty-year fixed rate notes totaling $750.0 million in January 1998. The outstanding principal balances for these notes as of December 31, 2000 were $200 million, $275 million, $150 million and $125 million, respectively. Principal on the notes is payable at maturity, while interest is payable semi-annually. In July 1999, in connection with the early buy-out of satellite sale- leasebacks, PanAmSat assumed $124.1 million of variable rate notes of which $67.7 million was outstanding at December 31, 2000. The notes mature on various dates through January 2, 2002. Revolving Credit Facilities. As of December 31, 2000, Hughes had a $750.0 million multi-year unsecured revolving credit facility. Borrowings under the facility bear interest based on a spread to the then-prevailing London Interbank Offer Rate ("LIBOR"). The multi-year credit facility provides for a commitment of $750.0 million through December 5, 2002. The facility also provides backup capacity for Hughes' $1.0 billion commercial paper program. Commercial paper outstanding under the program bears interest at various rates, based on market rates prevailing at the time each commercial paper instrument is placed. No amounts were outstanding under the multi-year credit facility or commercial paper program at December 31, 2000. Throughout 2000 Hughes also had outstanding borrowings under a $350.0 million 364-day facility, which expired on November 22, 2000. Borrowings under the facility bore interest at various rates, based on a spread to then- prevailing LIBOR. In October 2000, Hughes repaid the outstanding borrowings under this facility. During 2000, Hughes had available a $500.0 million bridge facility that provided additional backup capacity for Hughes $1.0 billion commercial paper program. There were no outstanding borrowings on the bridge facility during 2000. In October 2000, Hughes elected to terminate the bridge facility, as provided for under the terms of the agreement. IV-52 HUGHES ELECTRONICS CORPORATION NOTES TO FINANCIAL STATEMENTS (continued) Hughes' $750.0 million multi-year unsecured revolving credit facility contains covenants that Hughes must comply with. The covenants require Hughes to maintain a minimum level of consolidated net worth and not exceed certain specified ratios. At December 31, 2000, Hughes was in compliance with all such covenants. PanAmSat maintains a $500.0 million multi-year revolving credit facility that provides for short-term and long-term borrowings and a $500.0 million commercial paper program. Borrowings under the credit facility bear interest at a rate equal to LIBOR plus a spread based on PanAmSat's credit rating. The multi-year revolving credit facility provides for a commitment through December 24, 2002. Borrowings under the credit facility and commercial paper program are limited to $500.0 million in the aggregate. No amounts were outstanding under either the multi-year revolving credit facility or the commercial paper program at December 31, 2000. At December 31, 2000, Hughes' 75% owned subsidiary, SurFin Ltd. ("SurFin"), a company that provides financing of subscriber receiver equipment to certain DIRECTV Latin America operating companies, had a total of $464.9 million outstanding under unsecured revolving credit facilities of $400.0 million and $150.0 million that expire in June 2002 and September 2003, respectively. Borrowings under the credit facilities bear interest at various rates of interest based on the LIBOR plus an indicated spread. Other. Other short-term and long-term debt outstanding at December 31, 2000 included $19.4 million of notes bearing fixed rates of interest and $14.6 million of variable rate notes. Principal on the fixed rate notes is payable in varying amounts at maturity from November 2001 to April 2007. Principal on the variable rate notes is payable in varying amounts at maturity in April and May 2002. The aggregate maturities of long-term debt for the five years subsequent to December 31, 2000 are $21.2 million in 2001, $399.8 million in 2002, $326.2 million in 2003, none in 2004, $275.0 million in 2005 and $291.0 in 2006 and thereafter. Note 9: Income Taxes The income tax benefit is based on reported loss from continuing operations before income taxes, minority interests and cumulative effect of accounting change. Deferred income tax assets and liabilities reflect the impact of temporary differences between the amounts of assets and liabilities recognized for financial reporting purposes and such amounts recognized for tax purposes, as measured by applying currently enacted tax laws. Hughes and its domestic subsidiaries join with GM in filing a consolidated U.S. federal income tax return. The portion of the consolidated income tax liability or receivable recorded by Hughes is generally equivalent to the amount that would have been recorded on a separate return basis. IV-53 HUGHES ELECTRONICS CORPORATION NOTES TO FINANCIAL STATEMENTS (continued) The income tax benefit consisted of the following:
2000 1999 1998 ------- ------- ------- (Dollars in Millions) Taxes currently payable (refundable): U.S. federal................................... $(757.9) $(406.5) $(201.9) Foreign........................................ 31.6 30.1 15.9 State and local................................ (52.0) (24.2) (36.5) ------- ------- ------- Total........................................ (778.3) (400.6) (222.5) ------- ------- ------- Deferred tax liabilities (assets): U.S. federal................................... 361.0 185.0 50.8 State and local................................ 11.2 (21.3) 29.4 ------- ------- ------- Total........................................ 372.2 163.7 80.2 ------- ------- ------- Total income tax benefit..................... $(406.1) $(236.9) $(142.3) ======= ======= =======
Loss from continuing operations before income taxes, minority interests and cumulative effect of accounting change included the following components:
2000 1999 1998 ------- ------- ------- (Dollars in Millions) U.S. loss......................................... $(752.2) $(519.0) $ (10.2) Foreign loss...................................... (63.4) (141.0) (93.0) ------- ------- ------- Total......................................... $(815.6) $(660.0) $(103.2) ======= ======= =======
The combined income tax benefit was different than the amount computed using the U.S. federal statutory income tax rate for the reasons set forth in the following table:
2000 1999 1998 ------- ------- ------- (Dollars in Millions) Expected refund at U.S. federal statutory income tax rate....................................... $(285.4) $(231.0) $ (36.1) Research and experimentation tax benefits and resolution of tax contingencies................ (80.9) (78.9) (172.9) Foreign sales corporation tax benefit........... (32.8) (13.6) (15.6) U.S. state and local income taxes............... (26.6) (29.5) (4.6) DIRECTV Japan and other equity method investees...................................... (81.2) 60.3 36.7 Minority interests in losses of partnership..... 27.8 19.0 19.3 Non-deductible goodwill amortization............ 40.3 31.0 20.0 Foreign taxes, net of credits................... 31.6 2.8 2.0 Other........................................... 1.1 3.0 8.9 ------- ------- ------- Total income tax benefit...................... $(406.1) $(236.9) $(142.3) ======= ======= =======
IV-54 HUGHES ELECTRONICS CORPORATION NOTES TO FINANCIAL STATEMENTS (continued) Temporary differences and carryforwards which gave rise to deferred tax assets and liabilities at December 31 were as follows:
2000 1999 --------------------- --------------------- Deferred Deferred Deferred Deferred Tax Tax Tax Tax Assets Liabilities Assets Liabilities -------- ----------- -------- ----------- (Dollars in Millions) Accruals and advances............. $ 233.3 $ 106.1 Customer deposits, rebates and commissions...................... 137.9 $ 185.1 44.1 $ 114.1 State taxes....................... 29.4 -- 27.9 -- Gain on PanAmSat merger........... -- 181.2 -- 186.3 Satellite launch insurance costs.. -- 148.3 -- 121.3 Depreciation and amortization..... -- 834.3 -- 560.5 Net operating loss and tax credit carryforwards.................... 244.7 -- 287.3 -- Programming contract liabilities.. 251.0 -- 285.0 -- Unrealized gains on securities.... -- 176.6 -- 318.6 Write-off related to wireless product lines.................... -- -- 95.9 -- Other............................. 145.7 97.0 204.4 100.7 -------- -------- -------- -------- Subtotal.......................... 1,042.0 1,622.5 1,050.7 1,401.5 Valuation allowance............... (98.9) -- (84.0) -- -------- -------- -------- -------- Total deferred taxes............ $ 943.1 $1,622.5 $ 966.7 $1,401.5 ======== ======== ======== ========
No income tax provision has been made for the portion of undistributed earnings of foreign subsidiaries deemed permanently reinvested that amounted to approximately $56.8 million and $29.7 million at December 31, 2000 and 1999, respectively. Repatriation of all accumulated earnings would have resulted in tax liabilities of $19.9 million in 2000 and $10.4 million in 1999. At December 31, 2000, Hughes has $98.9 million of deferred tax assets relating to foreign operating loss carryforwards expiring in varying amounts between 2001 and 2005. A valuation allowance was provided for all foreign operating loss carryforwards. At December 31, 2000, Hughes has $24.2 million of foreign tax credits which will expire in 2006. At December 31, 2000, a Hughes subsidiary has $46.0 million of alternative minimum tax credits generated in separate filing years, which can be carried forward indefinitely. At December 31, 2000, Hughes' subsidiaries have $75.6 million of deferred tax assets relating to federal net operating loss carryforwards which will expire in varying amounts between 2009 and 2018. Hughes has an agreement with Raytheon Company ("Raytheon") which governs Hughes' rights and obligations with respect to U.S. federal and state income taxes for all periods prior to the spin-off and merger of Hughes' defense electronics business with Raytheon in 1997. Hughes is responsible for any income taxes pertaining to those periods prior to the merger, including any additional income taxes resulting from U.S. federal and state tax audits, and is entitled to any U.S. federal and state income tax refunds relating to those years. Hughes also has an agreement with Boeing which governs Hughes' rights and obligations with respect to U.S. federal and state income taxes for all periods prior to the sale of Hughes' Satellite Businesses. Hughes is responsible for any income taxes pertaining to those periods prior to the sale, including any additional income taxes resulting from U.S. federal and state tax audits, and is entitled to any U.S. federal and state income tax refunds relating to those years. The U.S. federal income tax returns of Hughes have been examined through 1994. All years prior to 1986 are closed. Issues relating to the years 1986 through 1994 are being contested through various stages of administrative appeal. The Internal Revenue Service ("IRS") is currently examining Hughes' U.S. federal tax returns for years 1995 through 1997. Management believes IV-55 HUGHES ELECTRONICS CORPORATION NOTES TO FINANCIAL STATEMENTS (continued) that adequate provision has been made for any adjustment which might be assessed for open years. Hughes reached an agreement with the IRS regarding a claim for refund of U.S. federal income taxes related to the treatment of research and experimentation costs for the years 1983 through 1995. Hughes recorded a total of $172.9 million of research and experimentation tax benefits during 1998, a substantial portion of which related to the above noted agreement with the IRS and covered prior years. Taxes receivable from GM at December 31, 2000 and 1999 , respectively, were approximately $175.0 million and $610.6 million of which $100.0 million and $290.8 million, respectively, are included in prepaid expenses and other in the consolidated balance sheets. Note 10: Retirement Programs and Other Postretirement Benefits Substantially all of Hughes' employees participate in Hughes' contributory and non-contributory defined benefit retirement plans. Benefits are based on years of service and compensation earned during a specified period of time before retirement. Additionally, an unfunded, nonqualified pension plan covers certain employees. Hughes also maintains a program for eligible retirees to participate in health care and life insurance benefits generally until they reach age 65. Qualified employees who elected to participate in the Hughes contributory defined benefit pension plans may become eligible for these health care and life insurance benefits if they retire from Hughes between the ages of 55 and 65. IV-56 HUGHES ELECTRONICS CORPORATION NOTES TO FINANCIAL STATEMENTS (continued) The components of the pension benefit obligation and the other postretirement benefit obligation, as well as the net benefit obligation recognized in the consolidated balance sheets, are shown below:
Other Pension Postretirement Benefits Benefits -------------- ---------------- 2000 1999 2000 1999 ------ ------ ------- ------- (Dollars in Millions) Change in Benefit Obligation Net benefit obligation at beginning of year.. $317.7 $341.8 $ 22.8 $ 24.7 Service cost................................. 14.7 14.5 0.6 0.6 Interest cost................................ 30.4 23.9 2.7 1.5 Plan participants' contributions............. 2.3 3.0 -- -- Actuarial (gain) loss........................ 61.2 (31.3) 8.1 (2.7) Benefits paid................................ (22.8) (34.2) (4.0) (1.3) ------ ------ ------- ------- Net benefit obligation at end of year........ 403.5 317.7 30.2 22.8 ------ ------ ------- ------- Change in Plan Assets Fair value of plan assets at beginning of year........................................ 390.1 346.6 -- -- Actual return on plan assets................. 99.8 69.6 -- -- Employer contributions....................... 8.0 3.0 4.0 1.3 Plan participants' contributions............. 2.3 3.0 -- -- Benefits paid................................ (22.8) (34.2) (4.0) (1.3) Transfers.................................... 0.1 2.1 -- -- ------ ------ ------- ------- Fair value of plan assets at end of year..... 477.5 390.1 -- -- ------ ------ ------- ------- Funded status at end of year................. 74.0 72.4 (30.2) (22.8) Unamortized amount resulting from changes in plan provisions........................ 0.9 (0.4) -- -- Unamortized net amount resulting from changes in plan experience and actuarial assumptions............................... (62.1) (38.7) (4.5) (1.4) ------ ------ ------- ------- Net amount recognized at end of year..... $ 12.8 $ 33.3 $ (34.7) $ (24.2) ====== ====== ======= ======= Amounts recognized in the consolidated balance sheets consist of: Prepaid benefit cost....................... $ 29.4 $ 43.0 Accrued benefit cost....................... (46.7) (24.6) $ (34.7) $ (24.2) Intangible asset........................... 3.0 2.6 -- -- Deferred tax assets........................ 11.0 5.0 -- -- Accumulated other comprehensive loss....... 16.1 7.3 -- -- ------ ------ ------- ------- Net amount recognized at end of year..... $ 12.8 $ 33.3 $ (34.7) $ (24.2) ====== ====== ======= =======
Included in the pension plan assets at December 31, 2000 and 1999 is GM Class H common stock of $0.5 million and $0.6 million, respectively. Included at December 31, 1999 are GM $1 2/3 common stock of $0.3 million and GMAC bonds of $0.5 million.
Other Pension Postretirement Benefits Benefits ---------- ---------------- 2000 1999 2000 1999 ---- ---- ------- ------- Weighted-average assumptions as of December 31 Discount rate.................................... 7.75% 7.75% 7.50% 7.50% Expected return on plan assets................... 9.50% 9.50% N/A N/A Rate of compensation increase.................... 5.00% 5.00% N/A N/A
For measurement purposes, an 8.5% annual rate of increase per capita cost of covered health care benefits was assumed for 2001. The rate was assumed to decrease gradually 0.5% per year to 6.0% in 2006. IV-57 HUGHES ELECTRONICS CORPORATION NOTES TO FINANCIAL STATEMENTS (continued)
Other Postretirement Pension Benefits Benefits ---------------------- --------------- 2000 1999 1998 2000 1999 1998 ------ ------ ------ ---- ---- ----- (Dollars in Millions) Components of net periodic benefit cost Benefits earned during the year....... $ 14.7 $ 14.5 $ 13.6 $0.6 $0.6 $ 0.5 Interest accrued on benefits earned in prior years.......................... 30.4 23.9 22.5 2.7 1.5 1.2 Expected return on assets............. (37.9) (28.5) (26.3) -- -- -- Amortization components Asset at date of adoption........... -- -- (2.7) -- -- -- Amount resulting from changes in plan provisions.................... 0.1 0.4 0.4 -- -- -- Net amount resulting from changes in plan experience and actuarial assumptions........................ 3.6 4.7 2.7 0.8 -- (0.1) ------ ------ ------ ---- ---- ----- Net periodic benefit cost......... $ 10.9 $ 15.0 $ 10.2 $4.1 $2.1 $ 1.6 ====== ====== ====== ==== ==== =====
The projected benefit obligation and accumulated benefit obligation for the pension plans with accumulated benefit obligations in excess of plan assets were $57.2 million and $46.7 million, respectively, as of December 31, 2000 and $52.9 million and $42.4 million, respectively, as of December 31, 1999. The pension plans with accumulated benefit obligations in excess of plan assets do not have any underlying assets. A one-percentage point change in assumed health care cost trend rates would have the following effects:
1-Percentage 1-Percentage Point Increase Point Decrease -------------- -------------- (Dollars in Millions) Effect on total of service and interest cost components................................. $1.1 $(1.0) Effect on postretirement benefit obligation................................. 2.3 (2.1)
Hughes maintains 401(k) plans for qualified employees. A portion of employee contributions are matched by Hughes and amounted to $15.1 million, $12.5 million and $10.6 million in 2000, 1999 and 1998, respectively. Hughes has disclosed certain amounts associated with estimated future postretirement benefits other than pensions and characterized such amounts as "other postretirement benefit obligation." Notwithstanding the recording of such amounts and the use of these terms, Hughes does not admit or otherwise acknowledge that such amounts or existing postretirement benefit plans of Hughes (other than pensions) represent legally enforceable liabilities of Hughes. Note 11: Stockholder's Equity GM holds all of the outstanding common stock of Hughes, which consists of 200 shares of $0.01 par value common stock. IV-58 HUGHES ELECTRONICS CORPORATION NOTES TO FINANCIAL STATEMENTS (continued) The following represents changes in the components of accumulated other comprehensive income (loss), net of taxes, as of December 31:
2000 1999 1998 -------------------------- ----------------------- ----------------------- Tax Pre- Tax Pre- Tax Pre-tax (Credit) Net tax (Credit) Net tax (Credit) Net Amount Expense Amount Amount Expense Amount Amount Expense Amount ------- -------- ------- ------ -------- ------ ------ -------- ------ (Dollars in Millions) Minimum pension liability adjustments.. $ (14.8) $ (6.0) $ (8.8) $ (0.8) $ (0.3) $ (0.5) $ (0.8) $(0.3) $(0.5) Foreign currency translation adjustments............ $ (25.9) -- $ (25.9) $ 11.0 -- $ 11.0 $ 3.8 -- $ 3.8 Unrealized gains (losses) on securities............. $(351.0) $(142.0) $(209.0) $767.3 $317.4 $449.9 $ 3.0 $ 1.2 $ 1.8 Reclassification adjustment for gains included in net income................. -- -- -- -- -- -- $(11.8) $(4.7) $(7.1)
Note 12: Incentive Plans Under the Hughes Electronics Corporation Incentive Plan ("the Plan"), as approved by the GM Board of Directors in 1999, shares, rights or options to acquire up to 233 million shares of GM Class H common stock on a cumulative basis were authorized for grant, of which 107 million shares were available at December 31, 2000 subject to GM Executive Compensation Committee approval. The GM Executive Compensation Committee may grant options and other rights to acquire shares of GM Class H common stock under the provisions of the Plan. The option price is equal to 100% of the fair market value of GM Class H common stock on the date the options are granted. These nonqualified options generally vest over two to five years, expire ten years from date of grant and are subject to earlier termination under certain conditions. Changes in the status of outstanding options were as follows:
Shares Under Weighted-Average Option Exercise Price ----------- ---------------- GM Class H Common Stock Outstanding at December 31, 1997............... 41,884,845 $ 9.69 Granted........................................ 12,541,575 17.01 Exercised...................................... (4,518,723) 7.74 Terminated..................................... (2,811,537) 10.60 ----------- ------ Outstanding at December 31, 1998............... 47,096,160 $11.77 Granted........................................ 15,012,825 16.08 Exercised...................................... (10,308,171) 9.95 Terminated..................................... (4,294,746) 13.49 ----------- ------ Outstanding at December 31, 1999............... 47,506,068 $13.28 Granted........................................ 35,538,026 37.06 Exercised...................................... (5,718,726) 11.88 Terminated..................................... (10,976,113) 31.47 ----------- ------ Outstanding at December 31, 2000............... 66,349,255 $23.04 =========== ======
IV-59 HUGHES ELECTRONICS CORPORATION NOTES TO FINANCIAL STATEMENTS (continued) The following table summarizes information about the Plan stock options outstanding at December 31, 2000:
Options Outstanding Options Exercisable --------------------------------- --------------------- Weighted- Average Remaining Weighted- Weighted- Contractual Average Average Number Life Exercise Number Exercise Range of Exercise Prices Outstanding (years) Price Exercisable Price ------------------------ ----------- ----------- --------- ----------- --------- $ 3.00 to $ 8.99........ 1,993,734 3.6 $ 6.95 1,993,734 $ 6.95 9.00 to 16.99........ 29,315,599 6.9 12.53 20,064,718 12.06 17.00 to 24.99........ 6,686,826 7.5 18.41 6,050,526 18.27 25.00 to 32.99........ 2,600,900 9.7 31.12 9,500 28.57 33.00 to 41.99........ 25,752,196 9.3 36.98 93,000 41.06 ---------- ---------- $ 3.00 to $41.99........ 66,349,255 7.9 $23.04 28,211,478 $13.07 ========== ==========
On May 5, 1997, PanAmSat adopted a stock option incentive plan with terms similar to the Plan. As of December 31, 2000, PanAmSat had 4,123,070 options outstanding to purchase its common stock with exercise prices ranging from $29.00 per share to $63.25 per share. The options vest ratably over three to four years and have a remaining life ranging from six years to ten years. At December 31, 2000, 1,086,915 options were exercisable at a weighted average exercise price of $35.08. The PanAmSat options have been considered in the following pro forma analysis. The following table presents pro forma information as if Hughes recorded compensation cost using the fair value of issued options on their grant date, as required by SFAS No. 123, Accounting for Stock Based Compensation:
2000 1999 1998 ------ ------- ------ (Dollars in Millions) Earnings (loss) used for computation of available separate consolidated net income (loss) as reported...................................... $732.9 $(321.2) $271.7 pro forma........................................ 585.3 (384.9) 186.7
The pro forma amounts for compensation cost are not indicative of the effects on operating results for future periods. The following table presents the estimated weighted-average fair value of options granted under the Plan using the Black-Scholes valuation model and the assumptions used in the calculations (for 1998, stock volatility was estimated based upon a three-year average derived from a study of a Hughes determined peer group):
2000 1999 1998 ------ ------ ------ Estimated fair value per option granted.............. $20.39 $ 8.01 $ 7.59 Average exercise price per option granted............ 37.06 16.08 17.01 Expected stock volatility............................ 42.1% 38.0% 32.8% Risk-free interest rate.............................. 6.5% 5.2% 5.6% Expected option life (in years)...................... 6.9 7.0 6.2
IV-60 HUGHES ELECTRONICS CORPORATION NOTES TO FINANCIAL STATEMENTS (continued) Note 13: Other Income and Expenses
2000 1999 1998 ------- ------- ------- (Dollars in Millions) Equity losses from unconsolidated affiliates..... $(164.2) $(189.2) $(128.3) Net loss on discontinuation of DIRECTV Japan business and write down of Sky Perfect investment...................................... (128.4) -- -- Gain from sale of common stock of an affiliate... -- 39.4 -- Other............................................ -- -- (28.6) ------- ------- ------- Total other, net............................... $(292.6) $(149.8) $(156.9) ======= ======= =======
Equity losses from unconsolidated affiliates at December 31, 2000 are primarily comprised of losses at DIRECTV Japan, Hughes Ispat Limited, of which Hughes owns 45%, and Galaxy Entertainment de Venezuela, C.A., of which Hughes owns 20%. Note 14: Related-Party Transactions In the ordinary course of its operations, Hughes provides telecommunications services and sells electronic components to, and purchases sub-components from, related parties. The following table summarizes significant related-party transactions:
2000 1999 1998 ----- ----- ----- (Dollars in Millions) Revenues................................................... $33.4 $46.5 $40.5 Costs and expenses......................................... 27.0 35.2 29.0
Note 15: Available Separate Consolidated Net Income (Loss) GM Class H common stock is a "tracking stock" of GM designed to provide holders with financial returns based on the financial performance of Hughes. 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 GM (which includes 100% of the stock of Hughes). Amounts available for the payment of dividends on GM Class H common stock are based on the Available Separate Consolidated Net Income (Loss) ("ASCNI") of Hughes. The ASCNI of Hughes is determined quarterly and is equal to the available separate consolidated net income (loss) of Hughes, excluding the effects of the GM purchase accounting adjustment arising from GM's acquisition of Hughes and reduced by the effects of preferred stock dividends paid and/or payable to GM (earnings (loss) used for computation of ASCNI), 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 period (681.2 million, 374.1 million and 315.9 million during 2000, 1999 and 1998, 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 100% of the tracking stock interest in the earnings of Hughes (Average Class H dividend base). The Average Class H dividend base was 1,297.0 million during 2000, 1,255.5 million during 1999 and 1,199.7 million during 1998. In addition, the denominator used in determining the ASCNI of Hughes may be adjusted from time-to-time as deemed appropriate by the GM Board to reflect subdivisions or combinations of the GM Class H common stock, certain transfers of capital to or from Hughes, the contribution of shares of capital stock of GM to or for the benefit of Hughes employees and the retirement of GM Class H common stock purchased by Hughes. The GM Board's discretion to make such adjustments is limited by criteria set forth in GM's Restated Certificate of Incorporation. IV-61 HUGHES ELECTRONICS CORPORATION NOTES TO FINANCIAL STATEMENTS (continued) 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 (prior to giving effect to the stock split during 2000) of GM Class H common stock. In addition, on June 12, 2000, GM contributed approximately 54 million shares (prior to giving effect to the stock split during 2000) and approximately 7 million shares (prior to the stock split during 2000) of GM Class H common stock to its U.S. Hourly-Rate Employees Pension Plan and VEBA trust, respectively. 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. As a result, the numbers of shares of GM Class H common stock presented for all periods have been adjusted to reflect the stock split, unless otherwise noted. Effective January 1, 1999, shares of Class H common stock delivered by GM in connection with the award of such shares to and the exercise of stock options by employees of Hughes increases the numerator and denominator of the fraction referred to above. Prior to January 1, 1999, the exercise of stock options did not affect the GM Class H dividend base (denominator). From time to time, in anticipation of exercises of stock options, Hughes purchases Class H common stock on the open market. Upon purchase, these shares are retired and therefore decrease the numerator and denominator of the fraction referred to above. Note 16: Hughes Series A Preferred Stock On June 24, 1999, as part of a strategic alliance with Hughes, America Online, Inc. ("AOL") invested $1.5 billion in shares of GM Series H preference stock. The GM Series H preference stock will automatically convert on June 24, 2002 into GM Class H common stock based upon a variable conversion factor linked to the GM Class H common stock price at the time of conversion, and accrues quarterly dividends at a rate of 6.25% per year. It may be converted earlier in certain limited circumstances. GM immediately invested the $1.5 billion received from AOL in shares of Hughes Series A Preferred Stock designed to correspond to the financial terms of the GM Series H preference stock. Dividends on the Hughes Series A Preferred Stock are payable to GM quarterly at an annual rate of 6.25%. The underwriting discount on the Hughes Series A Preferred Stock is amortized over three years. Upon conversion of the GM Series H preference stock into GM Class H common stock, Hughes will redeem the Hughes Series A Preferred Stock through a cash payment to GM equal to the fair market value of the GM Class H common stock issuable upon the conversion. Simultaneous with GM's receipt of the cash redemption proceeds, GM will make a capital contribution to Hughes of the same amount. Note 17: Acquisitions, Investments and Divestitures Acquisitions and Investments On January 1, 2001, DIRECTV Latin America, LLC ("DLA"), which operates the Latin America DIRECTV business, acquired from Bavaria S.A. an additional 14.2% ownership interest in Galaxy Entretenimiento de Colombia ("GEC"), a DLA local operating company located in Colombia. As a result of the transaction, Hughes' ownership interest in GEC increased from 44.2% to 55.2%. The purchase price consisted of prior capital contributions of $4.4 million made by DLA during 2000 on behalf of Bavaria S.A. The increased ownership in GEC will result in its consolidation from January 1, 2001. On December 21, 2000, Hughes entered into an agreement and plan of merger with Telocity Delaware, Inc. ("Telocity") under which Hughes has agreed to acquire all outstanding shares of Telocity at a price of $2.15 per share in cash for a total purchase price of $177 million, and has agreed to provide Telocity with up to $20 million of interim financing. The transaction is expected to be completed during the second quarter of 2001. In April 2000, DLA acquired a 37.5% ownership interest in GEC from Carvajal S.A. that increased Hughes' ownership interest from 15% to 44.2%. The purchase price consisted of $6.7 million in cash and notes payable. IV-62 HUGHES ELECTRONICS CORPORATION NOTES TO FINANCIAL STATEMENTS (continued) On July 28, 1999, DLA, acquired Galaxy Brasil, Ltda. ("GLB"), the exclusive distributor of DIRECTV services in Brazil, from Tevecap S.A. for approximately $114.0 million plus the assumption of debt. In connection with the transaction, Tevecap also sold its 10% equity interest in DLA to Hughes and Darlene Investments, LLC, which increased Hughes' ownership interest in DLA to 77.8%. As part of the transaction, Hughes also increased its ownership interest in SurFin from 59.1% to 75%. The total consideration paid in the transactions amounted to approximately $101.1 million. On May 20, 1999, Hughes acquired by merger all of the outstanding capital stock of United States Satellite Broadcasting Company, Inc. ("USSB"), a provider of premium subscription television programming. The total consideration of approximately $1.6 billion paid in July 1999, consisted of approximately $0.4 billion in cash and 22.6 million shares of GM Class H common stock (prior to giving effect to the stock split during 2000). On April 28, 1999, Hughes completed the acquisition of PRIMESTAR's 2.3 million subscriber medium-power direct-to-home satellite business. The purchase price consisted of $1.1 billion in cash and 4.9 million shares of GM Class H common stock (prior to giving effect to the stock split during 2000), for a total purchase price of $1.3 billion. As part of the acquisition of PRIMESTAR, Hughes also purchased the high-power satellite assets, which consisted of an in-orbit satellite and a satellite that had not yet been launched, and related orbital frequencies of Tempo Satellite Inc., a wholly owned subsidiary of TCI Satellite Entertainment Inc, for $500 million in cash. Hughes agreed, in connection with its acquisition of PRIMESTAR, to exit the medium-power business prior to May 1, 2001. Hughes formulated a detailed exit plan during the second quarter of 1999 and immediately began to migrate the medium-power customers to DIRECTV's high-power platform. Accordingly, Hughes accrued exit costs of $150 million in determining the purchase price allocated to the net assets acquired. The principal components of such exit costs include penalties to terminate assumed contracts and costs to remove medium- power equipment from customer premises. Since DIRECTV's acquisition of PRIMESTAR, DIRECTV converted a total of approximately 1.5 million customers to its high power service. The PRIMESTAR By DIRECTV service ceased operations, as planned, on September 30, 2000. The amount of accrued exit costs remaining at December 31, 2000 and 1999 was $25.9 million and $123.9 million, respectively, which primarily represents the remaining obligation on certain contracts. In February 1999, Hughes acquired an additional ownership interest in GGM, a Latin America local operating company which is the exclusive distributor of DIRECTV in Mexico, from Grupo MVS, S.R.L. de C.V. ("Grupo MVS"). As a result, Hughes' equity ownership represents 49% of the voting equity and all of the non-voting equity of GGM. In October 1998, Hughes acquired from Grupo MVS an additional 10% interest in DLA, increasing Hughes' ownership interest to 70%. Hughes also acquired an additional 19.8% interest in SurFin, increasing Hughes' ownership percentage from 39.3% to 59.1%. The aggregate purchase price for these transactions was $197.0 million in cash. In May 1998, Hughes purchased an additional 9.5% interest in PanAmSat for $851.4 million in cash, increasing its ownership interest in PanAmSat to 81.0%. The financial information included herein reflect acquisitions from their respective dates of acquisition. The acquisitions were accounted for by the purchase method of accounting and, accordingly, the purchase price has been allocated to the assets acquired and the liabilities assumed based on the estimated fair values at the date of acquisition. The excess of the purchase price over the estimated fair values of the net assets acquired has been recorded as goodwill, resulting in a goodwill addition of $3,612.4 million for the year ended December 31, 1999. The following selected unaudited pro forma information is being provided to present a summary of the combined results of Hughes and USSB and PRIMESTAR for 1999 and 1998 as if the acquisitions had occurred as of the beginning of the respective periods, giving effect to purchase accounting adjustments. The pro IV-63 HUGHES ELECTRONICS CORPORATION NOTES TO FINANCIAL STATEMENTS (continued) forma data presents only significant transactions, is presented for informational purposes only and may not necessarily reflect the results of operations of Hughes had these companies operated as part of Hughes for each of the periods presented, nor are they necessarily indicative of the results of future operations. The pro forma information excludes the effect of non-recurring charges.
1999 1998 -------- -------- (Dollars in Millions) Total revenues.......................................... $6,350.3 $5,318.6 Income (loss) before cumulative effect of accounting change................................................. (297.1) 160.0 Net income (loss)....................................... (297.1) 150.8 Pro forma available separate consolidated net income (loss)................................................. (103.1) 53.4
Divestitures On October 6, 2000, Hughes completed the sale of its Satellite Businesses for $3.75 billion in cash, plus the estimated book value of the closing net assets of the businesses sold in excess of a target amount. The transaction resulted in the recognition of a pre-tax gain of $2,036.0 million, or $1,132.3 million after-tax. Included in this gain is a net after-tax curtailment loss of $42 million related to pension and other postretirement benefit plan assets and liabilities associated with the Satellite Businesses. The purchase price is subject to adjustment based upon the final closing net assets as discussed in Note 20. Summarized financial information for the discontinued operations follows:
2000 1999 1998 -------- -------- -------- (Dollars in Millions) Revenues (excluding intercompany transactions)................................. $1,260.1 $1,780.4 $2,483.3 Income tax provision........................... 23.2 42.9 97.6 Net income..................................... 36.1 99.8 196.4
In a separate, but related transaction, Hughes also sold to Boeing its 50% interest in HRL Laboratories LLC ("HRL") for $38.5 million, which represented the net book value of HRL at October 6, 2000. During September 2000, Hughes Tele.com (India) Limited sold new common shares in a public offering in India. As a result of this transaction, Hughes' equity interest was reduced from 44.7% to 29.2%. Due to the nature of the transaction, Hughes recorded a $23.3 million increase in capital stock and additional paid-in capital. On March 1, 2000, Hughes announced that the operations of DIRECTV Japan Management, Inc., DIRECTV Japan, Inc., and certain related companies (collectively "DIRECTV Japan") would be discontinued. Pursuant to an agreement with Japan Digital Broadcasting Services Inc. (now named Sky Perfect Communications, Inc. or "Sky Perfect"), qualified subscribers to the DIRECTV Japan service were offered the opportunity to migrate to the Sky Perfect service, for which DIRECTV Japan was paid a commission for each subscriber who actually migrated and Hughes acquired a 6.6% interest in Sky Perfect. As a result, Hughes wrote-off its net investment in DIRECTV Japan of $164.6 million and accrued exit costs of $403.7 million and involuntary termination benefits of $14.5 million. Accrued exit costs consist of claims arising out of contracts with dealers, manufacturers, programmers and others, satellite transponder and facility and equipment leases, subscriber migration and termination costs, and professional service fees and other. The write-off and accrual were partially offset by the difference between the cost of the Sky Perfect shares acquired and the estimated fair value of the shares ($428.8 million), as determined by an independent appraisal, and by $40.2 million for anticipated contributions from other DIRECTV Japan shareholders. The net effect of the transaction was a charge to "other, net" of $170.6 million at March 31, 2000. IV-64 HUGHES ELECTRONICS CORPORATION NOTES TO FINANCIAL STATEMENTS (continued) During 2000, $193.9 million and $8.3 million were paid related to accrued exit costs and involuntary termination benefits, respectively. During the second quarter of 2000, $62.4 million of payments were received from the other DIRECTV Japan shareholders, resulting in a credit adjustment of $22.2 million to "other, net". In the fourth quarter of 2000, $106.6 million of accrued exit costs were reversed and $0.6 million of involuntary termination benefits were added, resulting in a net credit adjustment to "other, net" of $106.0 million. The adjustments made to the exit cost accrual were primarily attributable to earlier than anticipated cessation of the DIRECTV Japan broadcasting service, greater than anticipated commission payments for subscriber migration and settlements of various contracts and claims. The amounts remaining for accrued exit costs and involuntary termination benefits were $103.2 million and $6.8 million, respectively, at December 31, 2000. DIRECTV Japan employed approximately 290 personnel as of March 31, 2000, of which 244 were terminated during the year. The remaining employees at December 31, 2000 will be terminated during the first half of 2001. In the fourth quarter of 2000, Sky Perfect completed an initial public offering, at which date the fair value of Hughes' interest (diluted by the public offering to approximately 5.3%) in Sky Perfect was approximately $343 million. At December 31, 2000, the market value of Hughes' investment further declined to $159 million. Based on analysis of recent investment research regarding Sky Perfect, Hughes determined that a portion of the decline was "other than temporary", resulting in a charge to "other, net" and a write down of the investment of $86.0 million. The portion of the decline not considered "other than temporary", which amounted to $183.4 million, pre-tax, was recorded as a mark-to-market adjustment to other comprehensive income for the year ended December 31, 2000. On January 13, 2000, Hughes announced the discontinuation of its mobile cellular and narrowband local loop product lines at Hughes Network Systems. As a result of this decision, Hughes recorded a fourth quarter 1999 pre-tax charge to continuing operations of $272.1 million. The charge represents the write-off of receivables and inventories, licenses, software and equipment with no alternative use. Note 18: Derivative Financial Instruments and Risk Management In the normal course of business, Hughes enters into transactions that expose it to risks associated with foreign exchange rates. Hughes utilizes derivative instruments in an effort to mitigate these risks. Hughes' policy is to not enter into speculative derivative instruments for profit or execute derivative instrument contracts for which there are no underlying exposures. Instruments used as hedges must be effective at reducing the risk associated with the exposure being hedged and designated as a hedge at the inception of the contract. Accordingly, changes in market values of hedge instruments are highly correlated with changes in market values of the underlying transactions, both at the inception of the hedge and over the life of the hedge contract. Hughes primarily uses foreign exchange contracts to hedge firm commitments denominated in foreign currencies. Foreign exchange contracts are legal agreements between two parties to purchase and sell a foreign currency, for a price specified at the contract date, with delivery and settlement in the future. The total notional amounts of contracts afforded hedge accounting treatment at December 31, 2000 and 1999 were not significant. Hughes is exposed to credit risk in the event of non-performance by the counterparties to its foreign exchange contracts. While Hughes believes this risk is remote, credit risk is managed through the periodic monitoring and approval of financially sound counterparties. IV-65 HUGHES ELECTRONICS CORPORATION NOTES TO FINANCIAL STATEMENTS (continued) Note 19: Segment Reporting Hughes' segments, which are differentiated by their products and services, include Direct-To-Home Broadcast, Satellite Services, and Network Systems. Direct-To-Home Broadcast is engaged in acquiring, promoting, selling and/or distributing digital entertainment programming via satellite to residential and commercial customers. Satellite Services is engaged in the selling, leasing and operating of satellite transponders and providing services for cable television systems, news companies, Internet service providers and private business networks. The Network Systems segment is a provider of satellite-based private business networks and broadband Internet access, and a supplier of DIRECTV receiving equipment (set-top boxes and dishes). Other includes the corporate office and other entities. Selected information for Hughes' operating segments are reported as follows:
Direct- To-Home Satellite Network Broadcast Services Systems Other Eliminations Total --------- --------- -------- -------- ------------ --------- (Dollars in Millions) 2000 External Revenues....... $ 5,208.6 $ 880.2 $1,176.7 $ 22.1 -- $ 7,287.6 Intersegment Revenues... 29.4 143.4 233.1 5.2 $ (411.1) -- --------- -------- -------- -------- --------- --------- Total Revenues.......... $ 5,238.0 $1,023.6 $1,409.8 $ 27.3 $ (411.1) $ 7,287.6 --------- -------- -------- -------- --------- --------- Operating Profit (Loss)................. $ (557.9) $ 356.6 $ (63.5) $ (67.9) $ (21.4) $ (354.1) Depreciation and Amortization........... 533.4 337.4 63.6 21.2 (7.5) 948.1 Intangibles, net........ 4,139.9 2,303.6 41.6 666.2 -- 7,151.3 Segment Assets.......... 10,473.4 6,178.4 1,789.9 8,990.5 (8,152.9) 19,279.3 Capital Expenditures.... 913.5 449.5 369.5 0.6 (17.0) 1,716.1 --------- -------- -------- -------- --------- --------- 1999 External Revenues....... $ 3,781.7 $ 673.6 $1,091.7 $ 13.3 -- $ 5,560.3 Intersegment Revenues... 3.3 137.0 293.0 2.5 $ (435.8) -- --------- -------- -------- -------- --------- --------- Total Revenues.......... $ 3,785.0 $ 810.6 $1,384.7 $ 15.8 $ (435.8) $ 5,560.3 --------- -------- -------- -------- --------- --------- Operating Profit (Loss)................. $ (289.6) $ 338.3 $ (234.1) $ (126.0) $ (103.1) $ (414.5) Depreciation and Amortization........... 312.0 280.5 77.4 20.8 (11.8) 678.9 Intangibles, net........ 4,308.5 2,368.6 46.9 682.0 -- 7,406.0 Segment Assets.......... 9,056.6 5,984.7 1,167.3 2,765.9 (377.5) 18,597.0 Capital Expenditures.... 516.9 956.4 175.0 30.0 (13.0) 1,665.3 --------- -------- -------- -------- --------- --------- 1998 External Revenues....... $ 1,813.7 $ 643.8 $1,000.6 $ 22.5 -- $ 3,480.6 Intersegment Revenues... 2.4 123.5 76.1 1.4 $ (203.4) -- --------- -------- -------- -------- --------- --------- Total Revenues.......... $ 1,816.1 $ 767.3 $1,076.7 $ 23.9 $ (203.4) $ 3,480.6 --------- -------- -------- -------- --------- --------- Operating Profit (Loss)................. $ (225.8) $ 318.3 $ 7.1 $ (107.6) $ (33.1) $ (41.1) Depreciation and Amortization........... 102.3 235.0 66.9 13.9 (5.0) 413.1 Intangibles, net........ -- 2,433.5 53.6 698.8 -- 3,185.9 Segment Assets.......... 2,190.4 5,890.5 1,299.0 3,470.6 (233.1) 12,617.4 Capital Expenditures.... 230.8 921.7 40.0 3.3 133.0 1,328.8 --------- -------- -------- -------- --------- ---------
IV-66 HUGHES ELECTRONICS CORPORATION NOTES TO FINANCIAL STATEMENTS (continued) The following table presents revenues earned from customers located in different geographic areas. Property is grouped by its physical location. All satellites are reported as United States assets.
2000 1999 1998 ------------------- ------------------- ------------------- Net Net Net Total Property & Total Property & Total Property & Revenues Satellites Revenues Satellites Revenues Satellites -------- ---------- -------- ---------- -------- ---------- (Dollars in Millions) North America United States......... $6,008.2 $5,577.3 $4,407.9 $4,891.8 $2,645.6 $3,830.6 Canada and Mexico..... 198.8 89.3 114.6 51.8 56.9 2.0 -------- -------- -------- -------- -------- -------- Total North America............ 6,207.0 5,666.6 4,522.5 4,943.6 2,702.5 3,832.6 -------- -------- -------- -------- -------- -------- Europe United Kingdom........ 114.7 5.6 175.2 10.5 111.3 14.1 Other................. 19.7 0.4 47.6 0.2 61.2 0.3 -------- -------- -------- -------- -------- -------- Total Europe........ 134.4 6.0 222.8 10.7 172.5 14.4 -------- -------- -------- -------- -------- -------- South America and the Caribbean Brazil................ 285.4 234.3 157.7 151.1 150.9 4.6 Other................. 282.3 12.1 245.3 9.8 104.2 11.1 -------- -------- -------- -------- -------- -------- Total South America and the Caribbean.. 567.7 246.4 403.0 160.9 255.1 15.7 -------- -------- -------- -------- -------- -------- Asia Japan................. 34.5 0.6 103.6 0.7 67.5 0.5 India................. 81.1 16.4 85.1 12.4 79.9 14.7 China................. 35.1 0.7 27.7 1.2 63.4 1.7 Other................. 139.4 0.9 108.5 0.5 65.5 0.6 -------- -------- -------- -------- -------- -------- Total Asia.......... 290.1 18.6 324.9 14.8 276.3 17.5 -------- -------- -------- -------- -------- -------- Total Middle East....... 14.0 -- 11.9 -- 20.0 -- Total Africa............ 74.4 0.2 75.2 0.3 54.2 0.3 -------- -------- -------- -------- -------- -------- Total............... $7,287.6 $5,937.8 $5,560.3 $5,130.3 $3,480.6 $3,880.5 ======== ======== ======== ======== ======== ========
Note 20: Commitments and Contingencies In connection with the sale by Hughes of the Satellite Businesses to Boeing, the terms of the stock purchase agreement provide for an adjustment to the purchase price based upon the final closing net assets of the Satellite Businesses compared to the estimated closing net assets. The stock purchase agreement also provides a process for resolving any disputes that might arise in connection with the final determination of the final closing net assets. Boeing recently submitted proposed changes to the closing net assets, which Hughes is currently reviewing. It is possible that the ultimate resolution of these proposed changes may result in Hughes making a cash payment to Boeing that would be material to Hughes. Although Hughes believes it has adequately provided for an adjustment to the purchase price, the total amount of any such adjustment cannot be determined at this time. Additionally, as part of the sale of the Satellite Businesses, Hughes retained limited liability for certain possible fines and penalties and the financial consequences of debarment associated with potential criminal violations of U.S. export control laws, which are currently being investigated, related to the businesses now owned by Boeing, should such sanctions be imposed by either the Department of Justice or State Department against the Satellite Businesses. Hughes does not expect any sanctions imposed to have a material adverse effect on its consolidated financial statements. IV-67 HUGHES ELECTRONICS CORPORATION NOTES TO FINANCIAL STATEMENTS (continued) In connection with the 1997 spin-off of Hughes defense electronics business and the subsequent merger of that business with Raytheon, the terms of the merger agreement provided processes for resolving disputes that might arise in connection with post-closing financial adjustments that were also called for by the terms of the merger agreement. These financial adjustments might require a cash payment from Raytheon to Hughes or vice versa. A dispute currently exists regarding the post-closing adjustments which Hughes and Raytheon have proposed to one another and related issues regarding the adequacy of disclosures made by Hughes to Raytheon in the period prior to consummation of the merger. Hughes and Raytheon are proceeding with the dispute resolution process. It is possible that the ultimate resolution of the post-closing financial adjustment and of related disclosure issues may result in Hughes making a payment to Raytheon that would be material to Hughes. However, the amount of any payment that either party might be required to make to the other cannot be determined at this time. Hughes intends to vigorously pursue resolution of the disputes through the arbitration processes, opposing the adjustments proposed by Raytheon, and seeking the payment from Raytheon that Hughes has proposed. General Electric Capital Corporation ("GECC") and DIRECTV entered into a contract on July 31, 1995, in which GECC agreed to establish and manage a private label consumer credit program for consumer purchases of hardware and related DIRECTV programming. Under the contract, GECC also agreed to provide certain related services to DIRECTV, including credit risk scoring, billing and collections services. DIRECTV agreed to act as a surety for loans complying with the terms of the contract. Hughes guaranteed DIRECTV's performance under the contract. A complaint and counterclaim were filed by the parties in the U.S. District Court for the District of Connecticut concerning GECC's performance and DIRECTV's obligation to act as a surety. A trial commenced on June 12, 2000 with GECC presenting evidence to the jury for damages of $157 million. DIRECTV sought damages from GECC of $45 million. On July 21, 2000, the jury returned a verdict in favor of GECC and awarded contract damages in the amount of $133.0 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 entered in GECC's favor was $181.5 million. Hughes and DIRECTV filed a notice of appeal on December 29, 2000. Hughes and DIRECTV believe that it is reasonably possible that the jury verdict will be overturned and a new trial granted. Although it is not possible to predict the result of any eventual appeal in this case, Hughes does not believe that the litigation will ultimately have a material adverse impact on Hughes' consolidated financial statements. Hughes Communications Galaxy, Inc. ("HCGI") filed a lawsuit on March 22, 1991 against the U.S. Government based upon the National Aeronautics and Space Administration's breach of contract to launch ten satellites on the Space Shuttle. The U.S. Court of Federal Claims granted HCGI's motion for summary judgment on the issue of liability on November 30, 1995. A trial was held on May 1, 1998 on the issue of damages. On June 30, 2000, a final judgment was entered in favor of HCGI in the amount of $103 million. On July 13, 2000, HCGI filed a notice to appeal the judgment with the U.S. Court of Appeals for the Federal Circuit and is requesting a greater amount than was previously awarded to HCGI. On August 4, 2000, the Government filed its cross appeal. As a result of the uncertainty regarding the outcome of this matter, no amount has been recorded in the consolidated financial statements to reflect the award. Final resolution of this issue could result in a gain that would be material to Hughes. Litigation is subject to uncertainties and the outcome of individual litigated matters is not predictable with assurance. In addition to the above items, various legal actions, claims, and proceedings are pending against Hughes, including those arising out of alleged breaches of contractual relationships; antitrust and patent infringement matters; and other items arising in the ordinary course of business. Hughes has established reserves for matters in which losses are probable and can be reasonably estimated. Some of the matters may involve compensatory, punitive, or other treble damage claims, or sanctions, that if granted, could require Hughes to pay damages or make other expenditures in amounts that could not be estimated at December 31, 2000. After discussion with counsel, it is the opinion of management that such liability is not expected to have a material adverse effect on Hughes' consolidated financial statements. IV-68 HUGHES ELECTRONICS CORPORATION NOTES TO FINANCIAL STATEMENTS (concluded) Hughes purchases in-orbit and launch insurance for its satellite fleet to mitigate the potential financial impact of in-orbit and launch failures. The insurance generally does not compensate for business interruption or loss of future revenues or customers. Certain of Hughes' insurance policies contain exclusions related to known anomalies and Hughes is self-insured for certain other satellites. The portion of the book value of satellites that were self- insured or with coverage exclusions amounted to $519.5 million at December 31, 2000. At December 31, 2000, minimum future commitments under noncancelable operating leases having lease terms in excess of one year are primarily for real property and aggregated $141.0 million, payable as follows: $31.2 million in 2001, $26.0 million in 2002, $20.2 million in 2003, $15.9 million in 2004, $19.1 million in 2005 and $28.6 million thereafter. Certain of these leases contain escalation clauses and renewal or purchase options. Rental expenses under operating leases, net of sublease rental income, were $55.9 million in 2000, $58.5 million in 1999 and $82.7 million in 1998. Hughes is contingently liable under standby letters of credit and bonds in the amount of $59.1 million at December 31, 2000. In Hughes' past experience, no material claims have been made against these financial instruments. In addition, at December 31, 2000, Hughes has guaranteed up to $340.7 million of bank debt, including $85.0 million related to Motient Corporation. Of the bank debt guaranteed, $85.0 million matures in March 2003 and $55.4 million matures in September 2007. The remaining $200.3 million is related to DIRECTV Latin America and SurFin guarantees of non-consolidated local operating company debt and is due in varying amounts over the next five years. In connection with the Direct-To-Home Broadcast businesses, Hughes has commitments related to certain programming agreements which are variable based upon the number of underlying subscribers and market penetration rates. Minimum payments over the terms of applicable contracts are anticipated to be approximately $1.3 billion. As part of a marketing agreement entered into with AOL on June 21, 1999, Hughes committed to increase its sales and marketing expenditures over the next three years by approximately $1.5 billion relating to DirecPC(R)/AOL- Plus, DIRECTV(R), DIRECTV(TM)/AOL TV and DirecDuo(TM). At December 31, 2000, Hughes' remaining commitment under this agreement was approximately $1.1 billion. * * * IV-69 HUGHES ELECTRONICS CORPORATION SUPPLEMENTAL INFORMATION
Selected Quarterly Data (Unaudited) 1st 2nd 3rd 4th - ----------------------------------- -------- -------- -------- -------- (Dollars in Millions Except Per Share Amounts) 2000 Quarters Revenues............................... $1,703.1 $1,837.0 $1,688.5 $2,059.0 -------- -------- -------- -------- Loss from continuing operations before income taxes and minority interests... $ (337.7) $ (141.8) $ (201.7) $ (134.4) Income tax benefit..................... (221.8) (54.8) (77.8) (51.7) Minority interests in net losses of subsidiaries.......................... 7.6 4.5 19.6 22.4 Income (loss) from discontinued operations............................ 26.4 13.4 10.5 (14.2) Gain on sale of discontinued operations, net of taxes.............. -- -- -- 1,132.3 -------- -------- -------- -------- Net income (loss)...................... (81.9) (69.1) (93.8) 1,057.8 Earnings (loss) used for computation of available separate consolidated net income (loss)......................... $ (101.3) $ (87.9) $ (112.6) $1,034.7 ======== ======== ======== ======== Average number of shares of General Motors Class H common stock outstanding (in millions) (Numerator)........................... 413.4 562.7 873.9 874.9 Average Class H dividend base (in millions) (Denominator)............... 1,294.5 1,297.0 1,297.8 1,298.7 Available separate consolidated net income (loss)......................... $ (32.4) $ (38.1) $ (75.8) $ 697.1 Stock price range of General Motors Class H common stock High................................. $ 47.00 $ 41.58 $ 37.61 $ 38.00 Low.................................. $ 30.50 $ 27.33 $ 24.63 $ 21.33 1999 Quarters Revenues............................... $ 918.4 $1,316.1 $1,627.8 $1,698.0 -------- -------- -------- -------- Loss from continuing operations before income taxes and minority interests... $ (31.0) $ (70.8) $ (87.4) $ (470.8) Income tax benefit..................... (13.4) (9.5) (36.8) (177.2) Minority interests in net losses of subsidiaries.......................... 6.5 6.8 8.8 9.9 Income (loss) from discontinued operations............................ 84.1 (43.1) 6.9 51.9 -------- -------- -------- -------- Net income (loss)...................... 73.0 (97.6) (34.9) (231.8) Earnings (loss) used for computation of available separate consolidated net income (loss)......................... $ 78.3 $ (93.9) $ (54.3) $ (251.3) ======== ======== ======== ======== Average number of shares of General Motors Class H common stock outstanding (in millions) (Numerator)........................... 318.9 363.0 405.3 408.9 Average Class H dividend base (in millions) (Denominator)............... 1,200.6 1,244.7 1,286.7 1,290.3 Available separate consolidated net income (loss)......................... $ 20.8 $ (27.4) $ (17.1) $ (79.6) Stock price range of General Motors Class H common stock High................................. $ 17.67 $ 21.29 $ 20.81 $ 32.54 Low.................................. $ 12.83 $ 16.31 $ 16.25 $ 18.65
IV-70 * * * * * * -----END PRIVACY-ENHANCED MESSAGE-----