-----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, RXveM6bM5DeWz0vTTW6OUxMjD0ZGWEK6g0m3MdqYThtJpDRlJR0mDfXeKHXFMgmM XQSFgrv3L2sa7jl6bTVueQ== 0000040730-02-000076.txt : 20021015 0000040730-02-000076.hdr.sgml : 20021014 20021015143310 ACCESSION NUMBER: 0000040730-02-000076 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20021014 ITEM INFORMATION: Other events FILED AS OF DATE: 20021015 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GENERAL MOTORS CORP CENTRAL INDEX KEY: 0000040730 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLES & PASSENGER CAR BODIES [3711] IRS NUMBER: 380572515 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-00143 FILM NUMBER: 02788991 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: 48265-3000 8-K 1 gm3q02earnings.txt GENERAL MOTORS CORP. THIRD QUARTER 2002 EARNINGS SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549-1004 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported) October 14, 2002 ---------------- GENERAL MOTORS CORPORATION ----------------------------------------------------- (Exact name of registrant as specified in its charter) STATE OF DELAWARE 1-143 38-0572515 - ---------------------------- ----------------------- ------------------- (State or other jurisdiction (Commission File Number) (I.R.S. Employer of incorporation) Identification No.) 300 Renaissance Center, Detroit, Michigan 48265-3000 - -------------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (313)-556-5000 -------------- - 1 - ITEM 5. OTHER EVENTS On October 15, 2002, a news release was issued on the subject of third quarter consolidated earnings for General Motors Corporation (GM). The news release did not include certain financial statements, related footnotes and certain other financial information that will be filed with the Securities and Exchange Commission as part of GM's Quarterly Report on Form 10-Q. The following is the third quarter earnings release for GM, and their subsidiary Hughes Electronics Corporation's (Hughes) earnings release dated October 14, 2002. - GM EARNED $696 MILLION, OR $1.24 PER SHARE, EXCLUDING SPECIAL ITEMS AND HUGHES - NET LOSS TOTALS $804 MILLION, OR $1.42 PER SHARE, INCLUDING HUGHES AND SPECIAL ITEMS - STRONG CASH FLOW AND MARKET SHARE PERFORMANCE - 2002 EARNINGS ESTIMATED AT $6.75 PER SHARE, UP FROM $6.50 DETROIT - General Motors Corp. (NYSE: GM, GMH) today reported that earnings in the third quarter of 2002, excluding special items and Hughes, totaled $696 million, or $1.24 diluted earnings per share of GM $1-2/3 par value common stock, an improvement of more than 30 percent compared with the same period last year. The increase was primarily driven by strong market performance and aggressive cost reductions at GM North America (GMNA), and continuing strength at General Motors Acceptance Corp. (GMAC). The results compare with income of $527 million, or $0.94 per share, in the third quarter of 2001, excluding Hughes and special items. Including Hughes and special items, GM had a reported net loss of $804 million, or $1.42 diluted earnings per share, compared with a loss of $368 million, or $0.41 per share, in the third quarter of 2001. The third-quarter-2002 results include special items totaling an unfavorable $1.42 billion, or $2.62 per share. This includes an unfavorable $1.37 billion after-tax ($2.2 billion pretax) non-cash impairment write-down of GM's investment in Fiat Auto Holdings, B.V., resulting from the completion of the previously announced study of GM's original $2.4 billion carrying value for that investment; an unfavorable $116 million after-tax ($186 million pretax) net charge related to post-employment benefits and asset write-downs as a result of changes in GMNA's production footprint -- primarily costs associated with the transfer of commercial truck production from Janesville, Wis., to Flint, Mich.; and a favorable $68 million after-tax ($109 million pretax) net gain at Hughes primarily resulting from the sale of equity interests. Special items in the third quarter of 2001 totaled an unfavorable $753 million, or $1.26 per share. GM financial results described throughout the remainder of this release exclude special items unless otherwise noted (see Highlights). "The strong performance by GM North America and GMAC demonstrate our ability to produce improved results despite a difficult pricing environment," said GM Chairman Jack Smith. "A steady stream of successful products and a rigorous cost focus continue to move us in the right direction," said GM President and Chief Executive Officer Rick Wagoner. "We're designing winning cars and trucks, producing them efficiently, and maintaining our leadership position in the market. Our operations in North America are running very well, and we're striving for the same level of performance in other regions. We continue to face challenges, but our strong operating performance is the key to addressing them." - 2 - GM's net liquidity, excluding GMAC and Hughes, increased approximately $700 million from June 30, 2002, to $3.3 billion at Sept. 30, 2002. Automotive operations generated about $600 million of cash flow during the quarter. On that same basis, cash, marketable securities, and assets of the Voluntary Employees' Beneficiary Association (VEBA) trust invested in short-term fixed-income securities increased to $18.2 billion at Sept. 30, 2002, from $17.6 billion at June 30, 2002. Debt, excluding GMAC and Hughes, decreased slightly to $14.9 billion at the end of the third quarter of 2002, compared with $15.0 billion at June 30, 2002. Strong cash generation is vital to meet the challenges posed by weak returns in the equity markets and the increasing cost of employee benefits that continue to adversely affect GM's balance sheet. GM disclosed today that through the first nine months of 2002 the return on assets held in the U.S. hourly and salaried employee pension funds was approximately negative 10 percent. During this same period, the overall U.S. equities market declined more than 25 percent, as measured by the major stock indices. The fund performance year to date, combined with other factors, is expected to result in a significant increase in the unfunded status of the pension funds and an increase in 2003 pension expense. GM AUTOMOTIVE OPERATIONS GM's global automotive operations earned $345 million in the third quarter of 2002, an increase of more than 60 percent compared with the $212 million earned in the prior-year period. Income at GM North America (GMNA) increased more than 14 percent in the third quarter of 2002 to $510 million, compared with $445 million earned in the year-ago period. Production volume increased 5.6 percent. The pricing environment continued to be challenging, with net price retention totaling a negative 2.2 percent in the third quarter of 2002. Strong cost performance more than offset the pricing pressures. Continuing the trend so far this year, GM's overall U.S. market share increased again in the third quarter of 2002, with this year's 28.0 percent share up 0.3 points versus the same quarter last year. Retail market share continued to show strong growth. Trucks accounted for about 57 percent of total sales in the third quarter, compared with 53 percent in the same period last year. "The improved vehicle sales and increased share were the result of excellent consumer acceptance of our new cars and trucks, combined with a focus on being competitive in the marketplace," Wagoner said. "As we continue to leverage our global resources and bring out more new and exciting products, we plan to remain the market leader globally and in North America, and improve our position in other regions." Major product enhancements introduced in the third quarter include the restyled Chevrolet Silverado and GMC Sierra, and updated versions of Chevrolet Cavaliers, Pontiac Sunfires, and Saturn L series. They follow the introduction earlier this year of extended versions of the popular Chevy TrailBlazer and GMC Envoy, along with the all-new HUMMER H2. Coming to market later this year and in 2003 are the Saturn ION sedan and coupe, all-new versions of the Saab 9-3 sedan and convertible, the Chevy SSR, the Pontiac Grand Prix, the Chevy Malibu, the Cadillac XLR luxury high-performance roadster, the Cadillac SRX crossover vehicle, the Buick Rainier sport utility vehicle, and the Opel Vectra Signum, Vectra Wagon, and the new Meriva monocab in Europe. - 3 - GM Europe (GME) reported a loss of $180 million in the third quarter of 2002, an improvement from the $287 million loss in the year-ago period. Compared with the same period last year, the significant progress in reducing material and structural costs more than offset a decline in vehicle sales and costs associated with the launch of the all-new Saab 9-3. GME continued to face weak market conditions, particularly in Germany, and a challenging pricing environment. "GM Europe's turnaround remains a top priority. We've made very good progress on the cost side, and now the focus is on improving revenue growth," Wagoner said. "We expect that the strong products coming from Opel/Vauxhall and Saab will lead to improved sales." GM Asia-Pacific reported a profit of $76 million in the third quarter of 2002 compared with earnings of $60 million a year ago, led by continued strong performance at Shanghai GM and GM's Australia-based Holden unit. GM Latin America/Africa/Mid-East (GMLAAM) reported a loss of $61 million in the third quarter of 2002 compared with a loss of $6 million a year ago. Results were negatively affected by unfavorable economic and market conditions in Brazil, Venezuela and Argentina. On the positive side, GM's market share in the region increased significantly to 18.2 percent in the third quarter of 2002, compared with 15.8 percent in the prior-year period. GMAC GMAC earned $476 million in the third quarter of 2002, an increase of nearly 9 percent from third-quarter earnings of $437 million a year ago. The increase was more than accounted for by improvements in mortgage operations, resulting from increased volumes and fees. "GMAC's capital position has strengthened significantly," Wagoner said. "Based on estimated asset and earnings growth next year, GMAC's leverage should remain stable without any need for incremental capital from GM." HUGHES Hughes lost $81 million in the third quarter of 2002, an improvement compared with the loss of $142 million in the prior-year quarter, primarily because of stronger performance by DIRECTV U.S. Revenue totaled $2.2 billion in the third quarter of 2002, up from $2.1 billion in the same quarter last year, led by the growing subscriber base of DIRECTV. Total DIRECTV U.S. subscriptions increased approximately 206,000 from the second quarter of 2002 to 10.9 million. Despite the unfavorable initial review by the Federal Communications Commission (FCC) GM, Hughes and EchoStar continue to work with the FCC and the U.S. Justice Department to resolve any concerns about the plan to split off Hughes and merge the company with EchoStar Communications Corp. GM believes this transaction is in the best interest of consumers, and all classes of shareholders, and will work aggressively to obtain approval. LOOKING AHEAD General Motors expects total U.S. industry vehicle sales for 2002 will be approximately 17 million units. North American production is forecast at about 1.4 million vehicles in the fourth quarter of 2002, and more than 5.6 million vehicles in calendar year 2002. For the fourth quarter of 2002, GM estimates its earnings, excluding Hughes and any special items, will be about $1.50 per share, reflecting higher volume and solid results in North America and at GMAC, partially offset by continued losses in Europe and Latin America. - 4 - GM expects 2002 earnings will be about $6.75 per share, excluding special items and Hughes. Including Hughes, but excluding special items, GM expects to earn approximately $1.40 per share in the fourth quarter of 2002 and $6.35 per share for the calendar year. For 2003, GM expects moderate economic growth and resulting U.S. industry sales in the mid-to-high-16 million-unit range. General Motors, the world's largest vehicle manufacturer, designs, builds and markets cars and trucks worldwide, and has been the global automotive sales leader since 1931. More information on GM can be found at www.gm.com. # # # In this press release and related comments by General Motors management, our use of the words "outlook," "expect," "anticipate," "estimate," "forecast," "project," "likely," "objective," "plan," "designed," "goal," "target," 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 in GM's most recent report on SEC Form 10-K (at page II-15, 16) which may be revised or supplemented in subsequent reports on SEC Forms 10-Q and 8-K. Such factors include, among others, the following: changes in economic conditions, currency exchange rates or political stability; shortages of fuel or interruptions in transportation systems, labor strikes or work stoppages; market acceptance of the corporation's new products; significant changes in the competitive environment; changes in laws, regulations and tax rates; and the ability of the corporation to achieve reductions in cost and employment levels to realize production efficiencies and implement capital expenditures at levels and times planned by management. In connection with the proposed transactions, General Motors Corporation ("GM"), HEC Holdings, Inc. ("Hughes Holdings") and EchoStar Communications Corporation ("EchoStar") have filed amended preliminary materials with the Securities and Exchange Commission ("SEC"), including a Registration Statement of Hughes Holdings on Form S-4 that contains a consent solicitation statement/information statement/prospectus. These materials are not yet final and will be further amended. Holders of GM $1-2/3 and GM Class H common stock are urged to read the definitive versions of these materials, as well as any other relevant documents filed or that will be filed with the SEC, as they become available, because these documents contain or will contain important information. The preliminary materials, the definitive versions of these materials and other relevant materials (when they become available), and any other documents filed by GM, Hughes Electronics Corporation ("Hughes"), Hughes Holdings or EchoStar with the SEC may be obtained for free at the SEC's website, www.sec.gov, and GM stockholders will receive information at an appropriate time on how to obtain transaction-related documents for free from GM. GM and its directors and executive officers, Hughes and certain of its officers, and EchoStar and certain of its executive officers may be deemed to be participants in GM's solicitation of consents from the holders of GM $1-2/3 common stock and GM Class H common stock in connection with the proposed transactions. Information regarding the participants and their interests in the solicitation was filed pursuant to Rule 425 with the SEC by EchoStar on November 1, 2001 and by each of GM and Hughes on November 16, 2001. Investors may obtain additional information regarding the interests of the participants by reading the amended preliminary consent solicitation statement/information statement/prospectus filed with the SEC and the definitive consent solicitation statement/information statement/prospectus when it becomes available. This communication shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offering of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended. - 5 - Materials included in this document contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that could cause our actual results to be materially different from historical results or from any future results expressed or implied by such forward-looking statements. The factors that could cause actual results of GM, EchoStar, Hughes, or a combined EchoStar and Hughes, to differ materially, many of which are beyond the control of EchoStar, Hughes, Hughes Holdings or GM include, but are not limited to, the following: (1) the businesses of EchoStar and Hughes may not be integrated successfully or such integration may be more difficult, time-consuming or costly than expected; (2) expected benefits and synergies from the combination may not be realized within the expected time frame or at all; (3) revenues following the transaction may be lower than expected; (4) operating costs, customer loss and business disruption including, without limitation, difficulties in maintaining relationships with employees, customers, clients or suppliers, may be greater than expected following the transaction; (5) generating the incremental growth in the subscriber base of the combined company may be more costly or difficult than expected; (6) the regulatory approvals required for the transaction may not be obtained on the terms expected or on the anticipated schedule; (7) the effects of legislative and regulatory changes; (8) an inability to obtain certain retransmission consents; (9) an inability to retain necessary authorizations from the FCC; (10) an increase in competition from cable as a result of digital cable or otherwise, direct broadcast satellite, other satellite system operators, and other providers of subscription television services; (11) the introduction of new technologies and competitors into the subscription television business; (12) changes in labor, programming, equipment and capital costs; (13) future acquisitions, strategic partnership and divestitures; (14) general business and economic conditions; and (15) other risks described from time to time in periodic reports filed by EchoStar, Hughes or GM with the Securities and Exchange Commission. You are urged to consider statements that include the words "may," "will," "would," "could," "should," "believes," "estimates," "projects," "potential," "expects," "plans," "anticipates," "intends," "continues," "forecast," "designed," "goal," or the negative of those words or other comparable words to be uncertain and forward-looking. This cautionary statement applies to all forward-looking statements included in this document. - 6 - General Motors Corporation List of Special Items - After Tax (dollars in millions) Third Quarter 2002 ---------------------------------------- Other Total Diluted GMNA Hughes ACO GM EPS ----- ------ ----- ------ -------- Reported Net Income (Loss) $394 $(13) $(1,463) $(804) $(1.42) Write-down of Fiat Investment (A) - - 1,371 1,371 2.44 GMNA Production Footprint(B) 116 - - 116 0.21 Hughes Sale of Equity Interests (C) - (68) - (68) (0.03) --- --- --- --- ---- Adjusted Net Income (Loss) $510 $(81) $(92) $615 $1.20 === === === === ==== Year to Date 2002 ------------------------------------------ Other Total Diluted GMNA GME Hughes ACO GM EPS ---- --- ------ ----- ----- ------- Reported Net Income (Loss) $2,267 $(882) $(325) $(1,604) $716 $1.63 Write-down of Fiat Investment (A) - - - 1,371 1,371 2.43 GMNA Production Footprint(B) 116 - - - 116 0.20 Hughes Sale of Equity Interests (C) - - (68) - (68) (0.04) GME End of Life Vehicle Charge (D) - 55 - - 55 0.10 GME Restructuring Charge (E) - 407 - - 407 0.73 Hughes Space Shuttle Settlement (F) - - (59) - (59) (0.04) Hughes GECC Contractual Dispute (G) - - 51 - 51 0.03 Hughes Loan Guarantee Charge (H) - - 18 - 18 0.01 ----- --- --- --- ---- ---- Adjusted Net Income (Loss) $2,383 $(420) $(383) $(233) $2,607 $5.05 ===== === === === ===== ==== See Notes on next page. - 7 - General Motors Corporation List of Special Items - After Tax (A) The Write-down of the Fiat Investment relates to the completion of the previously announced impairment study of the carrying value of Fiat Auto Holdings, B.V.. This charge reduced the value of the Fiat investment from $2.4 billion to $220 million. (B) The GMNA Production Footprint charge primarily relates to costs associated with the transfer of commercial truck production from Janesville, Wis., to Flint, Michigan. (C) The Hughes Sale of Equity Interests relates primarily to the investment in the multimedia company Thomson. (D) The GME End of Life Vehicle Charge relates to the European Union's directive requiring member states to enact legislation regarding end-of-life vehicles to the responsibility of manufacturers for dismantling and recycling vehicles they have sold. This charge of $55 million relates to those member states that have passed national laws by June 30, 2002. (E) The GME Restructuring Charge relates to the initiative implemented in the first quarter of 2002 to improve the competitiveness of GM's automotive operations in Europe. (F) The Space Shuttle Settlement relates to the favorable resolution of a lawsuit that was filed against the U.S. government on March 22, 1991, based upon the National Aeronautics and Space Administration's (NASA) breach of contract to launch ten satellites on the Space Shuttle. (G) The GECC Contractual Dispute relates to an expected loss associated with a contractual dispute with General Electric Capital Corporation. (H) The Loan Guarantee Charge relates to a loan guarantee for a Hughes Network Systems' affiliate in India. - 8 - General Motors Corporation List of Special Items - After Tax (dollars in millions) Third Quarter 2001 ---------------------------------------- Other Total Diluted GMNA Hughes ACO GM EPS ----- ------ ----- ------ -------- Reported Net Income (Loss) $251 $(227) $(595) $(368) $(0.41) Ste. Therese Charge (A) 194 - - 194 0.35 Raytheon Settlement (B) - - 474 474 0.86 Gain on Sale of Thomson (C) - (67) - (67) (0.04) SkyPerfecTV! Writedown (D) - 133 - 133 0.08 Severance Charge (E) - 40 - 40 0.02 DirecTV Japan Adjustment (F) - (21) - (21) (0.01) --- --- --- --- ---- Adjusted Net Income (Loss) $445 $(142) $(121) $385 $0.85 === === === === ==== (A) The Ste. Therese Charge relates to the closing of the Ste. Therese, Quebec assembly plant. (B) The Raytheon Settlement relates to Hughes' settlement with the Raytheon Company of a purchase price adjustment related to Raytheon's 1997 merger with Hughes Defense. (C) The Gain on Sale of Thomson relates to Hughes' sale of 4.1 million shares of Thomson Multimedia common stock. (D) The SkyPerfecTV! Writedown relates to Hughes' non-cash charge from the revaluation of its investment. (E) The Severance Charge relates to Hughes' 10% company-wide workforce reduction in the U.S. (F) The DirecTV Japan Adjustment relates to a favorable adjustment to the expected costs associated with the shutdown of Hughes' DirecTV Japan business. - 9 - General Motors Corporation List of Special Items - After Tax (dollars in millions) Year to Date 2001 ---------------------------------------- Other GMNA GME GMLAAM GMAP Hughes ACO ---- --- ------ ---- ------ ----- Reported Net Income (Loss) $878 $(525) $30 $(82) $(487) $(796) Ste. Therese Charge (A) 194 - - - - - Raytheon Settlement (B) - - - - - 474 Gain on Sale of Thomson (C) - - - - (67) - SkyPerfecTV! Writedown (D) - - - - 133 - Severance Charge (E) - - - - 40 - DirecTV Japan Adjustment (F) - - - - (21) - Isuzu Restructuring (G) - - - 133 - - SFAS 133 Adjustment (H) 14 (2) 1 1 8 - ----- --- --- --- --- --- Adjusted Net Income(Loss) $1,086 $(527) $31 $52 $(394) $(322) ===== === == == === === Total Other Total Diluted ACO GMAC FIO GM EPS ----- ------ ----- ----- ------- Reported Net Income (Loss) $(982) $1,351 $(23) $346 $1.16 Ste. Therese Charge (A) 194 - - 194 0.35 Raytheon Settlement (B) 474 - - 474 0.86 Gain on Sale of Thomson (C) (67) - - (67) (0.04) SkyPerfecTV! Writedown (D) 133 - - 133 0.08 Severance Charge (E) 40 - - 40 0.02 DirecTV Japan Adjustment (F) (21) - - (21) (0.01) Isuzu Restructuring (G) 133 - - 133 0.24 SFAS 133 Adjustment (H) 22 (34) - (12) (0.03) --- ----- --- ---- ---- Adjusted Net Income (Loss) $(74) $1,317 $(23) $1,220 $2.63 == ===== == ===== ==== See page 9 for footnotes (A) - (F). G) The Isuzu Restructuring Charges include General Motors' portion of severance payments and asset impairments that were part of the second quarter restructuring of its affiliate Isuzu Motors Ltd. H) The SFAS 133 Adjustment represents the net impact during the first quarter 2001 from initially adopting SFAS No. 133, Accounting for Derivatives and Hedging Activities. - 10 - General Motors Corporation Adjusted Corporate Financial Results Third Quarter Year to Date --------------- -------------- 2002(1) 2001(1) 2002(1) 2001(1) ---- ---- ---- ---- Total net sales and revenues ($Mil's) (2) $43,603 $42,475 $138,161 $131,318 Excluding Hughes $41,400 $40,362 $131,676 $125,285 Consolidated net income ($Mil's) $615 $385 $2,607 $1,220 Excluding Hughes $696 $527 $2,990 $1,614 Net margin from consolidated net income 1.4% 0.9% 1.9% 0.9% Excluding Hughes 1.7% 1.3% 2.3% 1.3% GM $1-2/3 par value earnings per share Basic EPS $1.20 $0.86 $5.09 $2.65 Diluted EPS $1.20 $0.85 $5.05 $2.63 Diluted EPS excluding Hughes $1.24 $0.94 $5.29 $2.90 GM Class H earnings per share Basic EPS $(0.06) $(0.13) $(0.32) $(0.36) Diluted EPS $(0.06) $(0.13) $(0.32) $(0.36) Earnings attributable to GM $1-2/3 par value ($Mil's) Consolidated net income $615 $385 $2,607 $1,220 Preferred dividends - (25) (47) (76) Losses attributable to GM Class H 57 113 293 314 --- --- ----- ----- Total earnings attributable to GM $1-2/3 par value $672 $473 $2,853 $1,458 === === ===== ===== GM $1-2/3 par value average shares outstanding (Mil's) Basic shares 560 551 560 549 Diluted shares 561 558 565 556 Cash dividends per share of common stocks GM $1-2/3 par value $0.50 $0.50 $1.50 $1.50 GM Class H - - - - Book value per share of common stocks at Sept. 30 GM $1-2/3 par value $25.41 $37.44 GM Class H $5.08 $7.49 Total cash at Sept. 30 Excluding Hughes($Bil's) (3) $18.2 $11.0 Automotive, Communications Services, and Other Operations ($Mil's) Depreciation $1,108 $1,071 $3,293 $3,239 Amortization of special tools 645 609 1,859 1,747 Amortization of intangible assets 10 80 22 238 ----- ----- ----- ----- Total $1,763 $1,760 $5,174 $5,224 ===== ===== ===== ===== See footnotes on page 15. - 11 - General Motors Corporation Adjusted Segment Financial Results Third Quarter Year to Date -------------- -------------- 2002(1) 2001(1) 2002(1) 2001(1) ---- ---- ---- ---- (dollars in millions) Total net sales and revenues GMNA $26,355 $26,269 $85,580 $79,492 GME 5,564 5,117 17,149 17,616 GMLAAM 1,161 1,312 3,768 4,446 GMAP 1,158 1,000 3,344 3,138 ------ ------ ------- ------- Total GMA 34,238 33,698 109,841 104,692 Hughes 2,203 2,113 6,485 6,033 Other 241 486 1,876 1,467 ------ ------ ------- ------- Total ACO 36,682 36,297 118,202 112,192 GMAC 6,799 6,116 19,727 18,915 Other Financing 122 62 232 211 ------ ------ ------- ------- Total FIO 6,921 6,178 19,959 19,126 ------ ------ ------- ------- Consolidated net sales and revenues $43,603 $42,475 $138,161 $131,318 ====== ====== ======= ======= Pre-tax income (loss) GMNA $734 $641 $3,360 $1,523 GME (248) (400) (564) (747) GMLAAM (96) (11) (234) 71 GMAP 9 9 (35) 44 --- --- ----- ----- Total GMA 399 239 2,527 891 Hughes (4) (104) (173) (548) (573) Other (177) (143) (407) (402) --- --- ----- ----- Total ACO 118 (77) 1,572 (84) GMAC 789 710 2,223 2,142 Other Financing (24) (11) (34) (34) --- --- ----- ----- Total FIO 765 699 2,189 2,108 --- --- ----- ----- Consolidated pre-tax income $883 $622 $3,761 $2,024 === === ===== ===== Net income (loss) GMNA $510 $445 $2,383 $1,086 GME (180) (287) (420) (527) GMLAAM (61) (6) (174) 31 GMAP 76 60 122 52 --- --- ----- ----- Total GMA 345 212 1,911 642 Hughes (4)(5) (81) (142) (383) (394) Other (92) (121) (233) (322) --- --- ----- ----- Total ACO 172 (51) 1,295 (74) GMAC 476 437 1,346 1,317 Other Financing (33) (1) (34) (23) --- --- ----- ----- Total FIO 443 436 1,312 1,294 --- --- ----- ----- Consolidated net income $615 $385 $2,607 $1,220 === === ===== ===== See footnotes on page 15. - 12 - General Motors Corporation Supplementary Adjusted Segment Financial Results Third Quarter Year to Date --------------- -------------- 2002(1) 2001(1) 2002(1) 2001(1) ---- ---- ---- ---- (dollars in millions) Income tax expense (benefit) GMNA $232 $179 $987 $387 GME (63) (112) (110) (212) GMLAAM (47) (8) (79) 21 GMAP 21 (12) 12 7 -- -- --- --- Total GMA $143 $47 $810 $203 === == === === Equity income (loss) and minority interests GMNA $8 $(17) $10 $(50) GME 5 1 34 8 GMLAAM (12) (3) (19) (19) GMAP 88 39 169 15 -- -- -- -- Total GMA $89 $20 $194 $(46) == == === == Effective income tax rate GMNA 31.6% 27.9% 29.4% 25.4% GME 25.4% 28.0% 19.5% 28.4% GMLAAM 49.0% 72.7% 33.8% 29.6% GMAP 233.3% (133.3%) (34.3%) 15.9% Total ACO 29.0% 33.8% 29.0% 31.0% Net margins GMNA 1.9% 1.7% 2.8% 1.4% GME (3.2%) (5.6%) (2.4%) (3.0%) GMLAAM (5.3%) (0.5%) (4.6%) 0.7% GMAP 6.6% 6.0% 3.6% 1.7% Total GMA 1.0% 0.6% 1.7% 0.6% Hughes (4)(5) (3.7%) (6.7%) (5.9%) (6.5%) Total ACO 0.5% (0.1%) 1.1% (0.1%) GMAC 7.0% 7.1% 6.8% 7.0% Consolidated net income 1.4% 0.9% 1.9% 0.9% See footnotes on page 15. - 13 - General Motors Corporation Operating Statistics Third Quarter Year to Date -------------- -------------- 2002 2001 2002 2001 ---- ---- ---- ---- (units in thousands) Worldwide Wholesale Sales United States - Cars 482 513 1,555 1,572 United States - Trucks 639 597 2,056 1,815 ----- ----- ----- ----- Total United States 1,121 1,110 3,611 3,387 Canada, Mexico, and Other 152 146 581 483 ----- ----- ----- ----- Total GMNA 1,273 1,256 4,192 3,870 GME 364 396 1,225 1,359 GMLAAM 162 154 476 500 GMAP 119 121 313 360 ----- ----- ----- ----- Total Worldwide 1,918 1,927 6,206 6,089 ===== ===== ===== ===== Vehicle Unit Deliveries Chevrolet - Cars 187 179 585 637 Chevrolet - Trucks 485 432 1,431 1,321 Pontiac 132 138 401 419 GMC 151 123 415 392 Buick 135 119 324 301 Oldsmobile 38 53 123 189 Saturn 66 49 212 200 Cadillac 56 46 145 125 Other 21 14 48 40 ----- ----- ----- ----- Total United States 1,271 1,153 3,684 3,624 Canada, Mexico, and Other 183 166 572 514 ----- ----- ----- ----- Total GMNA 1,454 1,319 4,256 4,138 GME 387 418 1,267 1,421 GMLAAM 169 159 483 498 GMAP 171 137 449 387 ----- ----- ----- ----- Total Worldwide 2,181 2,033 6,455 6,444 ===== ===== ===== ===== Market Share United States - Cars 25.1% 26.6% 25.4% 27.2% United States - Trucks 30.6% 28.6% 30.6% 28.4% Total United States 28.0% 27.7% 28.1% 27.8% Total North America 27.6% 27.2% 27.8% 27.4% Total Europe 8.6% 9.0% 8.7% 9.3% Latin America (6) 24.5% 22.3% 23.7% 22.1% Asia and Pacific 4.7% 4.2% 4.2% 3.9% Total Worldwide 15.2% 14.8% 14.8% 14.9% U.S. Retail/Fleet Mix % Fleet Sales - Cars 31.0% 29.3% 28.6% 28.9% % Fleet Sales - Trucks 10.9% 12.1% 11.6% 14.0% Total Vehicles 19.6% 20.2% 19.0% 21.3% Retail Lease as % of Retail Sales Total Smartlease and Smartbuy 8.6% 12.5% Days Supply of Inventory at Sept. 30 United States - Cars 75 63 United States - Trucks 96 95 Capacity Utilization U.S. and Canada (2 shift rated) 86.8% 84.5% 85.6% 78.4% GMNA Net Price (2.2)% (2.1)% See footnotes on page 15. - 14 - General Motors Corporation Operating Statistics Third Quarter Year to Date -------------- -------------- 2002 2001 2002 2001 ---- ---- ---- ---- GMAC's U.S. Cost of Borrowing 4.31% 5.04% Current Debt Spreads Over U.S. Treasuries 2 Year 340 bp 205 bp 5 Year 360 bp 230 bp 10 Year 380 bp 245 bp Worldwide Employment at Sept. 30 (in 000's) United States Hourly 120 126 United States Salary 40 42 --- --- Total United States 160 168 Canada, Mexico, and Other 33 33 --- --- GMNA 193 201 GME 68 74 GMLAAM 23 24 GMAP 11 11 Hughes 12 11 GMAC 31 29 Other 12 13 --- --- Total 350 363 === === Worldwide Payrolls ($Bil's) $5.1 $4.9 $15.5 $15.0 Footnotes: --------- (1) Adjusted amounts for all periods represent the reported amounts excluding the effects of special items as detailed on pages 7 and 8. (2) The reported total net sales and revenues totaled ($Mil's): Q3 2002 - $43,578, Year-to-Date 2002 - $138,107, Q3 2001 - $42,475, and Year-to-Date 2001 $131,310. (3) Represents total cash for Automotive, Communications Services, and Other Operations, excluding Hughes, which includes cash and marketable securities, as well as $3.0 billion invested in short-term fixed income securities of the Corporation's Voluntary Employees' Beneficiary Association Trust. (4) The Q3 2001 and Year-to-Date 2001 amounts exclude the effects of purchase accounting adjustments related to General Motors' acquisition of Hughes in 1985. This purchase accounting adjustment is not recorded in 2002 because the related goodwill is no longer being amortized effective January 1, 2002 in accordance with SFAS No. 142, Goodwill and Other Intangible Assets. (5) Excludes Hughes Series A Preferred Stock dividends paid to General Motors. (6) Latin America excludes the Middle East and Africa. - 15 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, ------------- ------------- 2002 2001 2002 2001 ---- ---- ---- ---- (dollars in millions except per share amounts) GENERAL MOTORS CORPORATION AND SUBSIDIARIES Total net sales and revenues $43,578 $42,475 $138,107 $131,310 ------ ------ ------- ------- Cost of sales and other expenses 36,774 34,946 113,517 106,757 Selling, general, and administrative expenses 6,173 5,926 17,944 17,171 Interest expense 2,036 1,888 5,916 6,238 ------ ------ ------- ------- Total costs and expenses 44,983 42,760 137,377 130,166 ------ ------ ------- ------- Income (loss) before income taxes and minority interests (1,405) (285) 730 1,144 Income tax expense (551) 76 137 588 Equity income/(loss) and minority interests 50 (7) 123 (210) --- --- --- --- Net income (loss) (804) (368) 716 346 Dividends on preference stocks - (25) (47) (76) --- --- --- --- Earnings attributable to common stocks $(804) $(393) $669 $270 === === === === Basic earnings (losses) per share attributable to common stocks Earnings per share attributable to $1-2/3 par value $(1.42) $(0.41) $1.65 $1.18 ==== ==== ==== ==== Earnings per share attributable to Class H $(0.01) $(0.19) $(0.28) $(0.43) ==== ==== ==== ==== Earnings (losses) per share attributable to common stocks assuming dilution Earnings per share attributable to $1-2/3 par value $(1.42) $(0.41) $1.63 $1.16 ==== ==== ==== ==== Earnings per share attributable to Class H $(0.01) $(0.19) $(0.28) $(0.43) ==== ==== ==== ==== - 16 - CONSOLIDATED STATEMENTS OF INCOME - concluded (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, ------------- ------------- 2002 2001 2002 2001 ---- ---- ---- ---- (dollars in millions) AUTOMOTIVE, COMMUNICATIONS SERVICES, AND OTHER OPERATIONS Total net sales and revenues $36,657 $36,297 $118,148 $112,192 ------ ------ ------- ------- Cost of sales and other expenses 34,868 32,861 107,540 100,537 Selling, general, and administrative expenses 3,645 4,107 11,153 11,837 Total costs and expenses 38,513 36,968 118,693 112,374 ------ ------ ------- ------- Interest expense 242 216 706 529 Net expense from transactions with Financing and Insurance Operations 72 97 208 315 ----- ---- ----- ------ Income (loss) before income taxes and minority interests (2,170) (984) (1,459) (1,026) Income tax expense (benefit) (835) (181) (684) (194) Equity income/(loss) and minority interests 88 (1) 179 (150) ----- --- --- ---- Net (loss) - Automotive, Communications Services, and Other Operations $(1,247) $(804) $(596) $(982) ===== === === === FINANCING AND INSURANCE OPERATIONS Total revenues $6,921 $6,178 $19,959 $19,118 ----- ----- ------ ------ Interest expense 1,794 1,672 5,210 5,709 Depreciation and amortization expense 1,395 1,477 4,109 4,429 Operating and other expenses 2,267 1,854 6,231 5,420 Provision for financing and insurance losses 772 573 2,428 1,705 ----- ----- ------ ------ Total costs and expenses 6,228 5,576 17,978 17,263 ----- ----- ------ ------ Net income from transactions with Automotive, Communications Services, and Other Operations (72) (97) (208) (315) --- --- --- ---- Income before income taxes and minority interests 765 699 2,189 2,170 Income tax expense 284 257 821 782 Equity income/(loss) and minority interests (38) (6) (56) (60) --- --- ----- ---- Net income - Financing and Insurance Operations $443 $436 $1,312 $1,328 === === ===== ===== - 17 - CONSOLIDATED BALANCE SHEETS Sept. 30, Sept. 30, 2002 Dec. 31, 2001 GENERAL MOTORS CORPORATION AND SUBSIDIARIES (Unaudited) 2001 (Unaudited) --------- ---- --------- (dollars in millions) ASSETS Automotive, Communications Services, and Other Operations Cash and cash equivalents $14,670 $8,432 $7,899 Marketable securities 1,360 790 829 ------- ------ -------- Total cash and marketable securities 16,030 9,222 8,728 Accounts and notes receivable (less allowances) 5,649 5,406 6,200 Inventories (less allowances) 10,673 10,034 10,508 Equipment on operating leases (less accumulated depreciation) 4,524 4,524 4,974 Deferred income taxes and other current assets 9,061 7,877 8,751 ------- ------- ------- Total current assets 45,937 37,063 39,161 Equity in net assets of nonconsolidated associates 5,045 4,950 4,913 Property - net 35,071 34,908 34,555 Intangible assets - net 13,796 13,721 7,675 Deferred income taxes 22,884 22,294 15,930 Other assets 14,610 17,274 30,984 ------- ------- -------- Total Automotive, Communications Services, and Other Operations assets 137,343 130,210 133,218 Financing and Insurance Operations Cash and cash equivalents 7,338 10,123 10,530 Investments in securities 12,828 10,669 9,598 Finance receivables - net 107,808 99,813 90,190 Investment in leases and other receivables 35,964 34,618 36,441 Other assets 46,395 36,979 33,624 Net receivable from Automotive, Communications Services, and Other Operations 529 1,557 1,243 ------- ------- ------- Total Financing and Insurance Operations assets 210,862 193,759 181,626 ------- ------- ------- Total assets $348,205 $323,969 $314,844 ======= ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Automotive, Communications Services, and Other Operations Accounts payable (principally trade) $19,851 $18,297 $19,335 Loans payable 1,472 2,402 1,744 Accrued expenses 36,817 34,090 35,417 Net payable to Financing and Insurance Operations 529 1,557 1,243 ------ ------ ------- Total current liabilities 58,669 56,346 57,739 Long-term debt 16,794 10,726 9,320 Postretirement benefits other than pensions 34,138 34,515 34,276 Pensions 9,742 10,790 3,443 Other liabilities and deferred income taxes 15,764 13,794 14,183 ------- ------- ------- Total Automotive, Communications Services, and Other Operations liabilities 135,107 126,171 118,961 Financing and Insurance Operations Accounts payable 8,558 7,900 6,936 Debt 168,265 153,186 144,846 Other liabilities and deferred income taxes 16,326 16,259 14,577 ------- ------- ------- Total Financing and Insurance Operations liabilities 193,149 177,345 166,359 ------- ------- ------- Total liabilities 328,256 303,516 285,320 Minority interests 817 746 700 Stockholders' equity $1-2/3 par value common stock (issued, 561,337,257; 559,044,427; and 554,439,259 shares) 936 932 924 Class H common stock (issued, 958,110,735; 877,505,382; and 877,032,955 shares) 96 88 88 Capital surplus (principally additional paid-in capital) 21,561 21,519 21,330 Retained earnings 9,291 9,463 9,565 ------ ------ ------ Subtotal 31,884 32,002 31,907 Accumulated foreign currency translation adjustments (3,009) (2,919) (2,825) Net unrealized loss on derivatives (286) (307) (392) Net unrealized gains on securities 141 512 179 Minimum pension liability adjustment (9,598) (9,581) (45) ------ ------ ------ Accumulated other comprehensive loss (12,752) (12,295) (3,083) ------ ------ ------ Total stockholders' equity 19,132 19,707 28,824 ------- ------- ------- Total liabilities and stockholders' equity $348,205 $323,969 $314,844 ======= ======= ======= - 18 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended September 30, ------------------------------- 2002 2001 ------------------------- ------------------------- Automotive, Financing Automotive, Financing Comm.Serv. and Comm.Serv. and and Other Insurance and Other Insurance --------- --------- --------- --------- (dollars in millions) Net cash provided by (used in) operating activities $7,931 $7,706 $5,509 $902 Cash flows from investing activities Expenditures for property (4,920) (70) (6,287) (53) Investments in marketable securities - acquisitions (1,391) (34,002) (840) (25,071) Investments in marketable securities - liquidations 821 31,889 1,172 25,205 Mortgage loans held for investment - net - (8,812) - 501 Mortgage servicing rights - acquisitions - 206 - (884) Mortgage servicing rights - liquidations - 1 - 17 Finance receivables - acquisitions - (181,246) - (166,597) Finance receivables - liquidations - 87,051 - 103,919 Proceeds from sales of finance receivables - 85,684 - 63,798 Operating leases - acquisitions (4,215) (13,200) (4,480) (10,586) Operating leases - liquidations 4,017 11,105 4,783 9,239 Investments in companies, net of cash acquired (156) (150) (679) (446) Other 672 (169) (146) (391) ----- ------ ----- ----- Net cash used in investing activities (5,172) (21,713) (6,477) (1,349) ----- ------ ----- ----- Cash flows from financing activities Net (decrease) increase in loans payable (930) 8,437 (464) (19,885) Long-term debt - borrowings 9,697 19,582 4,533 42,791 Long-term debt - repayments (3,731) (17,826) (2,673) (13,817) Repurchases of common and preference stocks (97) - (264) - Proceeds from issuing common stocks 64 - 91 - Proceeds from sales of treasury stocks 19 - 222 - Cash dividends paid to stockholders (887) - (900) - ----- ------ --- ----- Net cash provided by financing activities 4,135 10,193 545 9,089 ----- ------ --- ----- Effect of exchange rate changes on cash and cash equivalents 372 1 (69) (5) Net transactions with Automotive/ Financing Operations (1,028) 1,028 (728) 728 ----- ----- ----- --- Net (decrease) increase in cash and cash equivalents 6,238 (2,785) (1,220) 9,365 Cash and cash equivalents at beginning of the period 8,432 10,123 9,119 1,165 ------ ------ ----- ------- Cash and cash equivalents at end of the period $14,670 $7,338 $7,899 $10,530 ====== ===== ===== ======
- 19 - HUGHES THIRD QUARTER 2002 RESULTS DRIVEN BY CONTINUED STRONG DIRECTV U.S. FINANCIAL PERFORMANCE DIRECTV U.S. Revenues Increase 19% to 1,616 Million; EBITDA Increases Nearly Ten Fold to $196 Million El Segundo, Calif., October 14, 2002 - Hughes Electronics Corporation, a world-leading provider of digital television entertainment, broadband services, satellite-based private business networks, and global video and data broadcasting, today reported third quarter 2002 revenues increased 5.3% to $2,214.2 million, compared with $2,103.3 million in the third quarter of 2001. EBITDA1 for the quarter increased to $243.5 million compared with $76.5 million in the third quarter of last year. EBITDA margin1 was 11.0% in the quarter compared with an EBITDA margin of 3.6% last year. Included in the 2001 third quarter results were one time charges primarily related to severance of $65.3 million. Excluding these charges, EBITDA was $141.8 million and EBITDA margin was 6.7%. The operating loss for the third quarter of 2002 was $23.0 million compared with an operating loss (excluding the severance charges) of $138.4 million in the third quarter of 2001. "The increases in HUGHES' third quarter revenues and EBITDA were driven mainly by superior operating performance at DIRECTV U.S.," said Jack A. Shaw, HUGHES' president and chief executive officer. "Over the past few quarters, we have implemented several changes at the DIRECTV U.S. business that were specifically designed to maximize subscriber returns and cash flow. For example, we have reduced our distribution costs while improving subscriber activation rates, changed the pricing on our programming packages to create better value for customers and improve our margins, and we continue to vigorously attack the pirates who are illegally receiving our service. As a result of these changes, we believe that we are attaining higher quality customers and achieving a better return on our subscriber investment-albeit sometimes at the expense of faster subscriber growth. Considering the 19% increase in DIRECTV U.S. quarterly revenues and a nearly ten-fold increase in EBITDA compared with last year, it is clear that these changes are generating the desired results." Shaw continued, "In the third quarter, DIRECTV U.S added 206,000 net subscribers compared with our original estimate for the quarter of 250,000 - 300,000 subscribers. This shortfall was due to increased churn resulting from our decision to aggressively fight signal piracy by replacing customers' older generation conditional access cards as well as slightly lower than expected sales through our national distribution network. At the same time, consistent with our goal to maximize profitability, third quarter DIRECTV U.S. EBITDA of $196 million was 31% higher than our original guidance." Regarding the pending merger with EchoStar Communications, Shaw added, "We are disappointed that the Federal Communications Commission has designated the matter for administrative hearing. We will continue to work aggressively within the context of the FCC and Department of Justice processes to achieve approval of the merger." - 20 - For the full year, HUGHES is reducing its consolidated revenue forecast to a range of $8.9 billion to $9.0 billion from a prior range of $9.0 billion to $9.2 billion and is updating its EBITDA guidance to approximately $750 million from a range of $750 million to $850 million. The benefits from the increase in DIRECTV U.S.' full year revenue and EBITDA guidance due to its continued strong performance is more than offset by the negative effects from the devaluation impact on DIRECTV Latin America and the slumping telecommunications market on HNS. HUGHES is also improving its guidance for cash requirements to approximately $700 million from a prior range of $1.2 billion to $1.4 billion. The improvement is mostly due to the cash provided from the sale of equity investments as well as ongoing efforts to conserve cash. Please see the table at the end of this press release for a complete listing of HUGHES' current guidance. The improvements in DIRECTV U.S. revenues and EBITDA in the third quarter were partially offset by the further devaluation of several foreign currencies which has negatively impacted the DIRECTV business in Latin America, the absence of sales-type lease contracts at PanAmSat and lower sales in the Carrier businesses of Hughes Network Systems (HNS). In the third quarter of 2002, HUGHES reported an operating loss of $23.0 million compared with an operating loss of $203.7 million in 2001. This lower operating loss was due to the higher EBITDA and the elimination of approximately $70 million of amortization expense for goodwill and intangible assets in 2002 in accordance with Statement of Financial Accounting Standards Number 142 "Goodwill and Other Intangible Assets" (SFAS 142). These changes were partially offset by higher depreciation expense, mostly at DIRECTV U.S. due to the launch of two new satellites and additional infrastructure expenditures made during the last year. HUGHES had a third quarter 2002 net loss of $13.6 million compared to a net loss of $227.2 million in the same period of 2001. In addition to the lower operating loss, also impacting the results in the third quarter of 2002 was a pre-tax gain of $158 million resulting from the sale of 8.8 million shares of Thomson Multimedia common stock, a $32 million write-down of two equity investments, a pre-tax loss of $25 million related to the sale of SkyPerfecTV! common stock and increased net interest expense. The third quarter 2001 net loss included a pre-tax charge of $212 million from the write-down of HUGHES' SkyPerfecTV! investment, a pre-tax gain of $108 million that resulted from the sale of 4.1 million shares of Thomson Multimedia common stock, and a favorable adjustment to the expected costs associated with the shutdown of the DIRECTV Japan business. - 21 - NINE-MONTH FINANCIAL REVIEW For the first nine months of 2002, revenues increased 8.0% to $6,462.1 million compared to $5,981.4 million in the first nine months of 2001. This increase was primarily due to continued subscriber growth at DIRECTV in the United States partially offset by lower sales in the Carrier businesses of HNS and the absence of sales-type lease contracts at PanAmSat. EBITDA through September of 2002 was $500.8 million and EBITDA margin was 7.7%, compared to EBITDA of $271.7 million and EBITDA margin of 4.5% in the first nine months of 2001. The 84.3% increase in EBITDA and the increase in EBITDA margin were primarily attributable to additional gross profit gained from the DIRECTV U.S. revenue growth and lower subscriber acquisition costs, a $95 million one-time gain based on the favorable resolution of litigation related to the National Aeronautics and Space Administration's (NASA) breach of contract to launch ten HUGHES' satellites, and the $65 million charge primarily related to severance recorded in 2001. These improvements were partially offset by the devaluation of several foreign currencies and the costs associated with the 2002 World Cup in the DIRECTV Latin America business, and a one-time EBITDA charge of $48 million related to losses associated with the final settlement of a contractual dispute with General Electric Capital Corporation (GECC). HUGHES' operating loss for the first nine months of 2002 was $289.3 million compared with an operating loss of $579.2 million in the same period of 2001. The lower loss was due to the higher EBITDA and the elimination of approximately $204 million of amortization expense for goodwill and intangible assets in 2002 in accordance with SFAS 142. These changes were partially offset by higher depreciation expense, particularly at DIRECTV U.S. due to the recent launch of two new satellites and additional infrastructure expenditures made during the last year. For the first nine months of 2002, net losses totaled $325.1 million compared to net losses of $489.0 million in the same period of 2001. The lower net loss was principally due to the lower operating loss, the write-down of HUGHES' SkyPerfecTV! investment in 2001, the larger pre-tax gain on the sale of HUGHES' Thomson Multimedia common stock in 2002 compared to 2001, and an improved effective tax rate due to the favorable resolution of certain tax contingencies. These improvements were partially offset by an increase in net interest expense including a charge of $74 million related to the GECC settlement in 2002 and the discontinuation of the minority interest adjustment related to DIRECTV Latin America. SEGMENT FINANCIAL REVIEW: THIRD QUARTER 2002 Direct-To-Home Broadcast Third quarter 2002 revenues for the segment increased 13.3% to $1,781.0 million from $1,572.6 million in the third quarter of 2001. The segment had EBITDA of $139.4 million compared with negative EBITDA of $74.2 million in the third quarter of 2001. Operating loss was $29.6 million in the third quarter of 2002 compared with an operating loss of $245.4 million in the same period last year. United States: Excluding subscribers in the National Rural Telecommunications Cooperative (NRTC) territories, DIRECTV's owned and operated gross subscriber additions in the quarter were 682,000 and after accounting for churn, DIRECTV added 206,000 net subscribers. DIRECTV owned and operated subscribers totaled 9.20 million as of September 30, 2002, 14% more than the 8.05 million cumulative subscribers attained as of September 30, 2001. For the third quarter of 2002, the total number of subscribers in NRTC territories fell by 31,000, reducing the total number of NRTC subscribers as of September 30, 2002, to 1.72 million. As a result, the DIRECTV platform ended the quarter with 10.92 million total subscribers. DIRECTV reported quarterly revenues of $1,616 million, an increase of 19% from last year's third quarter revenues of $1,363 million. The increase was due to continued subscriber growth and higher monthly revenue per subscriber. - 22 - EBITDA for the third quarter of 2002 was $196 million. Excluding a $48 million one-time charge primarily related to severance, EBITDA in the same period of 2001 was $20 million. The increased EBITDA was primarily due to the additional gross profit gained from DIRECTV's increased revenue, lower general and administrative expenses and lower subscriber acquisition costs. Operating profit in the current quarter increased to $94 million compared with an operating loss, excluding the severance charge, of $93 million in 2001 principally due to the improved EBITDA and reduced amortization expense in accordance with SFAS 142. These increases were partially offset by higher depreciation expense, mostly related to the launch of the DIRECTV 4S satellite in December 2001 and DIRECTV 5 in May 2002, as well as additional infrastructure expenditures made during the last year. Please refer to the "Selected DIRECTV U.S. Financial Highlights" attachment for additional information on DIRECTV's subscribers and other important financial metrics. DIRECTV DSL: In the third quarter of 2002, the DIRECTV DSL service added approximately 18,000 net customers. As of September 30, 2002, DIRECTV DSL had about 151,000 residential broadband customers in the United States compared with about 73,000 customers as of September 30, 2001, representing an increase of approximately 107%. The DIRECTV DSL service had third quarter 2002 revenues of $20 million compared with $9 million reported in the third quarter of 2001. The increase was driven by the larger subscriber base and an increase in monthly revenue per subscriber. DIRECTV DSL had negative EBITDA of $27 million in the quarter compared with negative EBITDA of $33 million in the same period last year. This improvement was driven by the additional gross profit gained from the revenue growth as well as improved operational efficiencies. DIRECTV DSL's operating loss in the third quarter of 2002 decreased to $40 million compared with an operating loss of $44 million in 2001 primarily due to the improved EBITDA. Latin America: Due to extremely difficult economic conditions in several countries throughout the region, the DIRECTV service in Latin America lost 65,000 net subscribers in the third quarter of 2002. As a result, the total number of subscribers in Latin America as of the end of the quarter was approximately 1,604,000 compared with about 1,497,000 as of September 30, 2001. Revenues for DIRECTV Latin America were $146 million for the quarter compared with $201 million in the third quarter of 2001. This decrease was due to the devaluation of several foreign currencies, the most significant of which was in Argentina. DIRECTV Latin America had negative EBITDA of $29 million in the quarter. Excluding a $10 million one-time charge primarily related to severance, EBITDA in the same period of 2001 was negative $7 million. The decrease in EBITDA was primarily due to the devaluation of several foreign currencies in the region. DIRECTV Latin America's operating loss increased to $84 million in the quarter from an operating loss, excluding the severance charge, of $53 million in the same period of 2001. The increased loss was due to the increased negative EBITDA and higher depreciation expense associated with additional infrastructure expenditures partially offset by reduced amortization expense in accordance with SFAS 142. - 23 - Satellite Services PanAmSat, which is 81%-owned by HUGHES, generated third quarter 2002 revenues of $199.1 million compared with $252.9 million in the same period of the prior year. EBITDA for the quarter was $145.4 million and EBITDA margin was 73.0%. Excluding an approximately $7 million one-time charge primarily related to severance, EBITDA in the third quarter of 2001 was $173.1 million and EBITDA margin was 68.5%. The decrease in revenues and EBITDA was primarily due to a $46 million sales-type lease recorded in the third quarter of 2001. The increase in EBITDA margin was primarily due to the company's continued focus on reducing its operating costs. Operating profit for the quarter was $66.4 million compared with operating profit, excluding the severance charge, of $69.0 million in the third quarter of 2001. The decline was primarily due to the reduced EBITDA mostly offset by lower amortization expense in accordance with SFAS 142 and lower depreciation expense. As of September 30, 2002, PanAmSat had contracts for satellite services representing future payments (backlog) of over $5.50 billion compared to approximately $5.55 billion at the end of the second quarter of 2002. Network Systems Hughes Network Systems (HNS) generated third quarter 2002 revenues of $300.2 million compared with $339.7 million in the third quarter of 2001. The decline was due to lower sales in the Carrier businesses primarily related to the substantial completion of the XM Satellite Radio and Thuraya Satellite Telecommunications Company contracts partially offset by higher DIRECTV receiver shipments. HNS shipped 737,000 DIRECTV receiver systems in the third quarter of 2002 compared to 500,000 units in the same period last year. Additionally, HNS added approximately 15,000 net DIRECWAY residential and small office/home office (SOHO) broadband customers in the quarter. As of September 30, 2002, DIRECWAY had approximately 138,000 residential and SOHO subscribers in North America compared to 87,000 one year ago, a 59% increase. Excluding one-time adjustments of $9 million for severance costs and an inventory provision, HNS reported negative EBITDA of $16.5 million in the quarter compared to negative EBITDA of $22.6 million in the third quarter of 2001. Improved margins in the Satellite Broadband and Set-Top Box businesses were partially offset by the lower EBITDA associated with the decline in sales in the Carrier businesses. HNS' operating loss of $36.5 million, before the one-time adjustments, was slightly higher than the prior year's loss of $35.1 million. The change in operating loss was attributable to the increased depreciation and amortization expense associated with additional infrastructure expenditures, partially offset by the improved EBITDA. BALANCE SHEET From December 31, 2001 to September 30, 2002, the company's consolidated cash balance increased $163.1 million to $863.2 million and total debt increased $728.7 million to $3,376.0 million. The major uses of cash were $1,030.7 million for satellite and capital expenditures, the payment of $180 million to GECC and the final purchase price adjustment payment of $134 million to the Raytheon Company. Additionally, in the first nine months of 2002 were receipts of $215 million from an insurance claim on the PAS-7 satellite, $211 million for the sale of Thomson Multimedia common stock and $95 million from the resolution of the breach of contract lawsuit with NASA. Hughes Electronics Corporation is a unit of General Motors Corporation. The earnings of Hughes Electronics are used to calculate the earnings attributable to the General Motors Class H common stock (NYSE:GMH). A live webcast of HUGHES' third quarter 2002 earnings call will be available on the company's website at www.hughes.com. The call will begin at 2:00 p.m. ET, today. The dial in number for the call is (913) 981-5572. The webcast will be archived on the Investor Relations portion of the HUGHES website and a replay will be available (dial in number: 719-457-0820, code: 278463) beginning at 2:00 p.m. ET on Wednesday, October 16. - 24 - Hughes Financial Guidance - -------------------------------------------------------------------------------- Fourth Quarter Prior Full Year Revised Full 2002 2002 Year 2002 - -------------------------------------------------------------------------------- HUGHES - -------------------------------------------------------------------------------- Revenues $2.4 - $2.5B $9.0 - 9.2B $8.9 - 9.0B - -------------------------------------------------------------------------------- EBITDA $225 - $275M $750 - 850M ~$750M - -------------------------------------------------------------------------------- Cash Requirements ~$300M $1.2 - 1.4B ~$700M - -------------------------------------------------------------------------------- DIRECTV U.S. - -------------------------------------------------------------------------------- Revenues ~$1.75B ~$6.3B ~$6.38B - -------------------------------------------------------------------------------- EBITDA ~$150M $525 - 545M# ~$580M# - -------------------------------------------------------------------------------- Net Subscriber Adds 250 - 300K## ~1.2M## 1.0 - 1.05M## - -------------------------------------------------------------------------------- DIRECTV DSL - -------------------------------------------------------------------------------- Revenues $20 -25M ~$75M No Change - -------------------------------------------------------------------------------- EBITDA ~$(30)M $(110) - (120)M No Change - -------------------------------------------------------------------------------- Net Subscriber Adds 10 - 25K 70 - 85K No Change - -------------------------------------------------------------------------------- DIRECTV Latin America - -------------------------------------------------------------------------------- Revenues $130 - 160M $745-765M $670 - 700M - -------------------------------------------------------------------------------- EBITDA $(10) - 10M $(135) - (155)M $(180) - (200)M - -------------------------------------------------------------------------------- Net Subscriber Adds ~0 120 - 140K ~0 - -------------------------------------------------------------------------------- Hughes Network Systems - -------------------------------------------------------------------------------- Revenues ~$400M ~$1.3B ~$1.2B - -------------------------------------------------------------------------------- EBITDA $(5) - 5M $(50) - (75)M $(85) - (95)M - -------------------------------------------------------------------------------- DIRECWAY Net Sub Adds ~35K ~100K ~75K - -------------------------------------------------------------------------------- PanAmSat - -------------------------------------------------------------------------------- Revenues $190 - 200M $790 - 825M $805 - 815M - -------------------------------------------------------------------------------- New Outright Sales None No Change and Sales- None Type Leases - -------------------------------------------------------------------------------- EBITDA Margin ~72% 70% or higher 72% or higher - -------------------------------------------------------------------------------- EBITDA $135 - 150M $570 - 590M $580 - 595M - -------------------------------------------------------------------------------- # Excludes $56 million EBITDA charge for loss related to GECC lawsuit ## Excludes subscribers in NRTC territories (1) EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) is the sum of operating profit (loss) and depreciation and amortization. EBITDA margin is calculated by dividing EBITDA by total revenues. EBITDA is not presented as an alternative measure of operating results or cash flow from operations, as determined in accordance with accounting principles generally accepted in the United States of America. EBITDA does not reflect the funds available for investment in the business of HUGHES, dividends or other discretionary uses. EBITDA as presented herein may not be comparable to similarly titled measures reported by other companies. ### - 25 - Selected DIRECTV U.S. Financial Highlights
------------------------------------------------------------------------------------------ Quarters Ended --------------------------------------------------- 9/30/01 12/31/01 3/31/02 6/30/02 9/30/02 DIRECTV U.S. Key Performance Metrics ------------------------------------------------------------------------------------------ Average Revenue per User (ARPU),$(1) $57.30 $61.35 $56.70 $58.10 $59.20 ------------------------------------------------------------------------------------------ Subscriber Acquisition Cost (SAC)$(2) $560 $565 $525 $530 $535 ------------------------------------------------------------------------------------------ Churn, % (3) 1.9% 1.7% 1.6% 1.7% 1.7% ------------------------------------------------------------------------------------------ Pre-Marketing Cash Flow (PMCF), % 40% 38% 39% 40% 41% ------------------------------------------------------------------------------------------ Subscriber Detail (in millions) ---------------------------------- DIRECTV - Owned & Operated ----------------------------------------------=------------------------------------------- Residential 7.55 7.88 8.27 8.46 8.68 ------------------------------------------------------------------------------------------ Commercial 0.31 0.33 0.34 0.37 0.38 ------------------------------------------------------------------------------------------ Suspended 0.19 0.23 0.18 0.16 0.14 ------------------------------------------------------------------------------------------ Total DIRECTV - Owned & Operated (4) 8.05 8.44 8.79 8.99 9.20 ------------------------------------------------------------------------------------------ NRTC, Total (5) 1.87 1.89 1.75 1.75 1.72 ------------------------------------------------------------------------------------------ Grand Total 9.92 10.33 10.54 10.74 10.92 ------------------------------------------================================================
(1) Total revenue divided by average period-end total DIRECTV Owned & Operated customers (2) Sales and marketing acquisition costs divided by DIRECTV Owned & Operated customer gross adds in the period; includes advanced and leased set-top boxes (3) Net customer disconnects divided by average period-end DIRECTV Owned and Operated customers (4) Excludes pending customers to reflect policy change effective 1/1/02 (5) Reflects DIRECTV billing system data except Q1 and Q2 2002 which also reflect Pegasus Communicatons Corp. policy change and adjustments reported in Pegasus' Form 10Q filings ----------------------------------------------------------------------------- - 26 - CONSOLIDATED STATEMENTS OF OPERATIONS AND AVAILABLE SEPARATE CONSOLIDATED NET INCOME (LOSS) (Dollars in Millions) (Unaudited)
Nine Months Third Quarter Ended September 30, ------------------ ------------------ 2002 2001 2002 2001 - ---------------------------------------------------------------------- ------------------ Revenues Direct broadcast, leasing and other services $1,972.3 $1,830.9 $5,834.3 $5,267.7 Product sales 241.9 272.4 627.8 713.7 - ----------------------------------------------------------------------------------------- Total Revenues 2,214.2 2,103.3 6,462.1 5,981.4 - ----------------------------------------------------------------------------------------- Operating Costs and Expenses, Exclusive of Depreciation and Amortization Expense Shown Below Broadcast programming and other costs 957.2 830.1 2,939.3 2,355.4 Cost of products sold 209.5 246.7 567.2 590.4 Selling, general and administrative expenses 804.0 950.0 2,454.8 2,763.9 Depreciation and amortization 266.5 280.2 790.1 850.9 - ----------------------------------------------------------------------------------------- Total Operating Costs and Expenses 2,237.2 2,307.0 6,751.4 6,560.6 - ----------------------------------------------------------------------------------------- Operating Loss (23.0) (203.7) (289.3) (579.2) Interest income 5.4 9.4 17.1 52.2 Interest expense (76.4) (40.6) (275.1) (134.0) Other, net 78.7 (86.3) 46.0 (90.0) - ----------------------------------------------------------------------------------------- Loss Before Income Taxes, Minority Interests and Cumulative Effect of Accounting Change (15.3) (321.2) (501.3) (751.0) Income tax benefit 5.8 93.1 190.5 217.8 Minority interests in net (earnings) losses of subsidiar (4.1) 0.9 (14.3) 51.6 - ----------------------------------------------------------------------------------------- Loss before cumulative effect of accounting change (13.6) (227.2) (325.1) (481.6) Cumulative effect of accounting change, net of taxes - - - (7.4) - ----------------------------------------------------------------------------------------- Net Loss (13.6) (227.2) (325.1) (489.0) Adjustment to exclude the effect of GM purchase accounting - 0.9 - 2.5 - ----------------------------------------------------------------------------------------- Loss excluding the effect of GM purchase accounting (13.6) (226.3) (325.1) (486.5) Preferred stock dividends - (24.1) (46.9) (72.3) - ----------------------------------------------------------------------------------------- Loss Used for Computation of Available Separate Consolidated Net Income (Loss) $(13.6) $(250.4) $(372.0) $(558.8) ========================================================================================= Available Separate Consolidated Net Income (Loss) Average number of shares of General Motors Class H Common Stock outstanding (in millions) (Numerator) 958.1 876.8 906.6 876.0 Average Class H dividend base (in millions) (Denominator) 1,381.7 1,300.5 1,330.2 1,299.7 Available Separate Consolidated Net Income (Loss) $(9.4) $(168.8) $(253.5) $(376.6) =========================================================================================
- 27 - CONSOLIDATED BALANCE SHEETS (Dollars in Millions) September 30, 2002 December 31, ASSETS (Unaudited) 2001 ------------------------------------------------------------------------------ Current Assets Cash and cash equivalents $863.2 $700.1 Accounts and notes receivable 1,068.8 1,090.5 Contracts in process 142.8 153.1 Inventories 272.6 360.1 Deferred income taxes 143.6 118.9 Prepaid expenses and other 955.7 918.4 ------------------------------------------------------------------------------ Total Current Assets 3,446.7 3,341.1 Satellites, net 4,940.2 4,806.6 Property, net 2,138.6 2,197.8 Goodwill, net 6,715.3 6,496.6 Intangible Assets, net 445.9 660.2 Net Investment in Sales-type Leases 167.8 227.0 Investments and Other Assets 910.2 1,480.8 ------------------------------------------------------------------------------ Total Assets $18,764.7 $19,210.1 ============================================================================== LIABILITIES AND STOCKHOLDER'S EQUITY ------------------------------------------------------------------------------ Current Liabilities Accounts payable $1,143.9 $1,227.5 Deferred revenues 190.4 178.5 Short-term borrowings and current portion of 985.4 1,658.5 long-term debt Accrued liabilities and other 1,230.9 1,342.0 ------------------------------------------------------------------------------ Total Current Liabilities 3,550.6 4,406.5 Long-Term Debt 2,390.6 988.8 Other Liabilities and Deferred Credits 1,250.2 1,465.1 Deferred Income Taxes 560.5 746.5 Commitments and Contingencies Minority Interests 547.6 531.3 Stockholder's Equity 10,465.2 11,071.9 ------------------------------------------------------------------------------ Total Liabilities and Stockholder's Equity $18,764.7 $19,210.1 ============================================================================== Holders of GM Class H common stock have no direct rights in the equity or assets of Hughes, but rather have rights in the equity and assets of General Motors (which includes 100% of the stock of Hughes). - 28 - SELECTED SEGMENT DATA (Dollars in Millions) (Unaudited)
Nine Months Third Quarter Ended September 30, -------------------- --------------------- 2002 2001 2002 2001 ------------------------------------------------------------------------------------- DIRECT-TO-HOME BROADCAST Total Revenues $1,781.0 $ 1,572.6 $ 5,218.5 $ 4,590.2 EBITDA (1) $ 139.4 $ (74.2) $ 97.4 $ (69.5) EBITDA Margin (1) 7.8% N/A 1.9% N/A Operating Loss $ (29.6) $ (245.4) $ (381.5) $ (573.8) Depreciation and Amortization $ 169.0 $ 171.2 $ 478.9 $ 504.3 Capital Expenditures $ 103.9 $ 168.6 $ 400.6 $ 522.5 ------------------------------------------------------------------------------------- SATELLITE SERVICES Total Revenues $ 199.1 $ 252.9 $ 615.5 $ 666.4 EBITDA (1) $ 145.4 $ 166.2 $ 447.2 $ 440.7 EBITDA Margin (1) 73.0% 65.7% 72.7% 66.1% Operating Profit $ 66.4 $ 62.1 $ 184.5 $ 136.0 Operating Profit Margin 33.4% 24.6% 30.0% 20.4% Depreciation and Amortization $ 79.0 $ 104.1 $ 262.7 $ 304.7 Capital Expenditures $ 76.5 $ 80.3 $ 260.0 $ 241.7 ------------------------------------------------------------------------------------- NETWORK SYSTEMS Total Revenues $ 300.2 $ 339.7 $ 797.4 $ 890.1 EBITDA (1) $ (25.5) $ (22.6) $ (88.1) $ (97.7) Operating Loss $ (45.5) $ (35.1) $ (142.7) $ (144.2) Depreciation and Amortization $ 20.0 $ 12.5 $ 54.6 $ 46.5 Capital Expenditures $ 99.3 $ 121.9 $ 315.4 $ 467.2 ------------------------------------------------------------------------------------- ELIMINATIONS and OTHER Total Revenues $ (66.1) $ (61.9) $ (169.3) $ (165.3) EBITDA (1) $ (15.8) $ 7.1 $ 44.3 $ (1.8) Operating Profit (Loss) $ (14.3) $ 14.7 $ 50.4 $ 2.8 Depreciation and Amortization $ (1.5) $ (7.6) $ (6.1) $ (4.6) Capital Expenditures $ 22.6 $ (4.8) $ 54.7 $ (4.0) ------------------------------------------------------------------------------------- TOTAL Total Revenues $2,214.2 $ 2,103.3 $ 6,462.1 $ 5,981.4 EBITDA (1) $ 243.5 $ 76.5 $ 500.8 $ 271.7 EBITDA Margin (1) 11.0% 3.6% 7.7% 4.5% Operating Loss $ (23.0) $ (203.7) $ (289.3) $ (579.2) Depreciation and Amortization $ 266.5 $ 280.2 $ 790.1 $ 850.9 Capital Expenditures $ 302.3 $ 366.0 $ 1,030.7 $ 1,227.4 =====================================================================================
- --------------------- 1 EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) is the sum of operating profit (loss) and depreciation and amortization. EBITDA margin is calculated by dividing EBITDA by total revenues. EBITDA is not presented as an alternative measure of operating results or cash flow from operations, as determined in accordance with accounting principles generally accepted in the United States of America. EBITDA does not reflect the funds available for investment in the business of HUGHES, dividends or other discretionary uses. EBITDA as presented herein may not be comparable to similarly titled measures reported by other companies. ### - 29 - SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. GENERAL MOTORS CORPORATION -------------------------- (Registrant) Date October 15, 2002 ---------------- By /s/Peter R. Bible ------------------------------- (Peter R. Bible, Chief Accounting Officer) - 30- -----END PRIVACY-ENHANCED MESSAGE-----