-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, HNfpCgIT4NsIypEE5Hne12AyAly/+RE5zxfA4IOlpGIQrGD7QK7DVWWtGG5XlDsJ jyrbJrJggGUfqGlwsz3Olw== 0000040730-94-000026.txt : 19941116 0000040730-94-000026.hdr.sgml : 19941116 ACCESSION NUMBER: 0000040730-94-000026 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19940930 FILED AS OF DATE: 19941114 SROS: MSE SROS: NASD SROS: NYSE SROS: PHLX SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: GENERAL MOTORS CORP CENTRAL INDEX KEY: 0000040730 STANDARD INDUSTRIAL CLASSIFICATION: 3711 IRS NUMBER: 380572515 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-00143 FILM NUMBER: 94560040 BUSINESS ADDRESS: STREET 1: 3044 W GRAND BLVD CITY: DETROIT STATE: MI ZIP: 48202 BUSINESS PHONE: 3135565000 10-Q 1 l:\secfiles\10-Q\3rdqtr94\part-1.doc 26 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549-1004 FORM 10-Q X QUARTERLY REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE - --- ACT OF 1934 For the quarterly period ended September 30, 1994 ------------------ 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.) 767 Fifth Avenue, New York, New York 10153-0075 3044 West Grand Boulevard, Detroit, Michigan 48202-3091 - -------------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (313)-556-5000 -------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes X . No . --- --- As of September 30, 1994, there were outstanding 753,564,673 shares of the issuer's $1-2/3 par value common stock, 261,466,312 shares of Class E $0.10 par value common stock and 93,082,758 shares of Class H $0.10 par value common stock. - 1 - 2 GENERAL MOTORS CORPORATION AND SUBSIDIARIES Index Page No. -------- Part I - Financial Information Item 1. Financial Statements Statement of Consolidated Operations 3 Consolidated Balance Sheet 5 Condensed Statement of Consolidated Cash Flows 7 Notes to Financial Statements 7 Item 2. Management's Discussion and Analysis 14 Part II - Other Information Item 1. Legal Proceedings 31 Item 6. Exhibits and Reports on Form 8-K 32 Signatures 32 Exhibit 11 Computation of Earnings Per Share Attributable to Common Stocks for the Quarters and Nine Months Ended September 30, 1994 and 1993 33 Exhibit 12 Computation of Ratios of Earnings to Fixed Charges for the Nine Months Ended September 30, 1994 and 1993 37 Exhibit 99(a) Electronic Data Systems Corporation and Subsidiaries Consolidated Financial Statements and Management's Discussion and Analysis 38 (b) GM Hughes Electronics Corporation and Subsidiaries Consolidated Financial Statements and Management's Discussion and Analysis 44 Exhibit 27 Financial Data Schedule (for SEC information only) - 2 - 3 GENERAL MOTORS CORPORATION PART I AND SUBSIDIARIES ITEM 1. FINANCIAL STATEMENTS STATEMENT OF CONSOLIDATED OPERATIONS Nine Months Ended Third Quarter September 30, -------------------- -------------------- 1994 1993 1994 1993 -------------------- -------------------- (Dollars in Millions) Net Sales and Revenues Manufactured products $29,420.8 $25,442.8 $97,774.2 $87,149.4 Financial services 2,351.5 2,187.2 6,819.2 6,674.8 Computer systems services 1,643.3 1,283.0 4,472.1 3,737.5 Other income (Note 2) 1,094.7 1,224.5 3,332.4 3,390.1 -------- -------- --------- --------- Total Net Sales and Revenues 34,510.3 30,137.5 112,397.9 100,951.8 -------- -------- --------- --------- Costs and Expenses Cost of sales and other operating charges, exclusive of items listed below 26,954.3 23,516.4 85,176.4 77,956.5 Selling, general, and administrative expenses 2,962.4 2,724.5 8,691.8 8,281.1 Interest expense 1,377.8 1,365.5 3,930.0 4,345.9 Depreciation of real estate, plants, and equipment 1,833.2 1,653.0 5,181.1 4,862.2 Amortization of special tools 596.3 518.5 2,121.9 1,845.5 Amortization of intangible assets 52.1 90.6 175.4 247.1 Other deductions (Note 2) 280.6 308.7 1,129.4 990.3 Special provision for restructuring (Note 3) - 950.0 - 950.0 -------- -------- --------- -------- Total Costs and Expenses 34,056.7 31,127.2 106,406.0 99,478.6 -------- -------- --------- -------- Income (Loss) before Income Taxes 453.6 (989.7) 5,991.9 1,473.2 United States, foreign, and other income taxes (credit) (98.4) (876.8) 1,905.3 183.8 -------- -------- --------- -------- Income (Loss) before cumulative effect of accounting change 552.0 (112.9) 4,086.6 1,289.4 Cumulative effect of accounting change (Note 5) - - (758.1) - -------- -------- --------- -------- Net Income (Loss) 552.0 (112.9) 3,328.5 1,289.4 Dividends on preferred and preference stocks 72.1 86.8 248.6 270.0 -------- -------- --------- -------- Income (Loss) on Common Stocks $479.9 ($199.7) $3,079.9 $1,019.4 ======== ======== ========= ======== Certain 1993 amounts were reclassified to conform with 1994 classifications. Reference should be made to the Notes to Financial Statements. - 3 - 4 GENERAL MOTORS CORPORATION AND SUBSIDIARIES Nine Months Ended Third Quarter September 30, --------------- ----------------- 1994 1993 1994 1993 --------------- ----------------- (Dollars in Millions Except Per Share Amounts) Earnings (Loss) Attributable to Common Stocks (Note 6) $1-2/3 par value before cumulative effect of accounting change $306.0 ($347.0)$3,333.4 $615.9 Cumulative effect of accounting change (Note 5) - - (751.3) - ----- ----- ------- ----- Net earnings (loss) attributable to $1-2/3 par value $306.0 ($347.0)$2,582.1 $615.9 ----- ----- ------- ----- Net earnings attributable to Class E $117.3 $98.4 $315.9 $260.2 ----- ---- ----- ----- Class H before cumulative effect of accounting change $56.6 $48.9 $188.7 $143.3 Cumulative effect of accounting change (Note 5) - - (6.8) - ---- ---- ----- ----- Net earnings attributable to Class H $56.6 $48.9 $181.9 $143.3 ---- ---- ----- ----- Average number of shares of common stocks outstanding (in millions) $1-2/3 par value 752.7 709.6 737.1 708.3 Class E 261.2 246.6 259.7 239.4 Class H 92.7 87.4 91.7 88.5 Earnings (Loss) Per Share Attributable to Common Stocks (Note 6) $1-2/3 par value before cumulative effect of accounting change $0.40 ($0.49) $4.46 $0.85 Cumulative effect of accounting change (Note 5) - - (1.05) - ---- ---- ---- ---- Net earnings (loss) attributable to $1-2/3 par value $0.40 ($0.49) $3.41 $0.85 ---- ---- ---- ---- Net earnings attributable to Class E $0.45 $0.40 $1.22 $1.09 ---- ---- ---- ---- Class H before cumulative effect of accounting change $0.61 $0.56 $2.06 $1.61 Cumulative effect of accounting change (Note 5) - - (0.08) - ---- ---- ---- ---- Net earnings attributable to Class H $0.61 $0.56 $1.98 $1.61 ---- ---- ---- ---- Cash Dividends Per Share of Common Stocks (Note 6) $1-2/3 par value $0.20 $0.20 $0.60 $0.60 Class E $0.12 $0.10 $0.36 $0.30 Class H $0.20 $0.18 $0.60 $0.54 Reference should be made to the Notes to Financial Statements. - 4 - 5 GENERAL MOTORS CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET Sept. 30, Dec. 31, Sept. 30, ASSETS 1994 1993 1993 - ----------------------------------------------------------------------------- (Dollars in Millions) Cash and cash equivalents $9,806.1 $13,790.5 $10,452.3 Other marketable securities 4,612.6 4,172.2 4,251.6 --------- --------- --------- Total cash and marketable securities 14,418.7 17,962.7 14,703.9 --------- --------- --------- Finance receivables - net 51,093.5 53,874.7 54,083.7 --------- --------- --------- Accounts and notes receivable (less allowances) 8,620.7 6,389.2 6,835.1 --------- --------- --------- Inventories (less allowances) (Note 7) 10,345.4 8,615.1 10,068.2 --------- --------- --------- Contracts in process (less advances and progress payments) 2,725.2 2,376.8 2,233.7 --------- --------- --------- Net equipment on operating leases (less accumulated depreciation) 18,528.3 13,095.3 12,232.6 --------- --------- --------- Deferred income taxes 20,983.8 20,798.1 19,263.3 --------- --------- --------- Other assets (less allowances) 19,942.8 17,757.3 17,953.4 --------- --------- --------- Property Real estate, plants, and equipment-at cost 69,611.7 67,966.4 69,420.4 Less accumulated depreciation 43,039.0 41,725.5 42,824.4 --------- --------- --------- Net real estate, plants, and equipment 26,572.7 26,240.9 26,596.0 Special tools - at cost (less amortization) 7,564.2 7,983.9 8,001.2 --------- --------- --------- Total property 34,136.9 34,224.8 34,597.2 --------- --------- --------- Intangible assets - at cost (less amortization) 13,076.6 13,106.9 9,348.1 --------- --------- --------- Total Assets $193,871.9 $188,200.9 $181,319.2 ========= ========= ========= Certain September 1993 amounts were reclassified to conform with 1994 classifications. Reference should be made to the Notes to Financial Statements. - 5 - 6 GENERAL MOTORS CORPORATION AND SUBSIDIARIES Sept. 30, Dec. 31, Sept. 30, LIABILITIES AND STOCKHOLDERS' EQUITY 1994 1993 1993 - ----------------------------------------------------------------------------- (Dollars in Millions Except Per Share Amounts) Liabilities Accounts payable $9,597.7 $10,276.5 $9,468.9 Notes and loans payable (Note 8) 69,182.2 70,441.2 69,411.2 United States, foreign, and other income taxes - deferred and payable 3,329.6 2,409.3 2,953.4 Postretirement benefits other than pensions (Note 9) 39,389.0 37,920.0 37,258.2 Pensions (Note 10) 20,304.3 22,631.6 14,118.8 Other liabilities and deferred credits 41,999.2 38,474.8 41,072.3 --------- --------- --------- Total Liabilities 183,802.0 182,153.4 174,282.8 --------- --------- --------- Stocks Subject to Repurchase (Note 11) 450.0 450.0 450.0 --------- --------- --------- Stockholders' Equity Preference stocks (Series A Conversion, $1.8 at December 1993 and September 1993 (Note 12); Series B 9-1/8% Depositary Shares, $1.1; Series C Depositary Shares, $0.3; Series D 7.92% Depositary Shares, $0.4; and Series G 9.12% Depositary Shares, $0.6 at September 1994, December 1993, and September 1993) 2.4 4.2 4.2 Common stocks $1-2/3 par value (issued, 753,639,264, 720,105,471, and 711,979,982 shares) (Note 12) 1,256.1 1,200.2 1,186.6 Class E (issued, 267,321,168, 263,089,320, and 259,636,221 shares) 26.7 26.3 25.9 Class H (issued, 78,190,823, 75,705,433, and 73,692,010 shares) 7.8 7.6 7.4 Capital surplus (principally additional paid-in capital) 13,027.0 12,003.4 11,453.6 Net income retained for use in the business (accumulated deficit)(Note 13) 486.5 (2,002.9) (2,908.2) --------- --------- --------- Subtotal 14,806.5 11,238.8 9,769.5 Minimum pension liability adjustment (5,311.2) (5,311.2) (2,925.3) Accumulated foreign currency translation adjustments, net unrealized gains (losses) on marketable equity securities, and effect of adopting SFAS No. 115 (Notes 5 and 13) 124.6 (330.1) (257.8) --------- --------- --------- Total Stockholders' Equity 9,619.9 5,597.5 6,586.4 --------- --------- --------- Total Liabilities and Stockholders' Equity $193,871.9 $188,200.9 $181,319.2 ========= ========= ========= Certain September 1993 amounts were reclassified to conform with 1994 classifications. Reference should be made to the Notes to Financial Statements. - 6 - 7 GENERAL MOTORS CORPORATION AND SUBSIDIARIES CONDENSED STATEMENT OF CONSOLIDATED CASH FLOWS Nine Months Ended Sept. 30, -------------------------- 1994 1993 -------------------------- (Dollars in Millions) Net Cash Provided by Operating Activities $6,851.4 $9,358.7 -------- -------- Cash Flows from Investing Activities Expenditures for real estate, plants, and equipment (3,097.5) (2,523.5) Expenditures for special tools (1,564.1) (1,899.8) Other 675.3 106.9 Change in other investing assets Investments in other marketable securities - acquisitions (11,299.8) (10,521.3) Investments in other marketable securities - liquidations 10,859.4 10,282.4 Finance receivables - acquisitions (114,308.9) (75,017.4) Finance receivables - liquidations 112,614.9 76,491.4 Finance receivables - other (159.3) 837.8 Proceeds from sales of finance receivables 4,747.0 9,368.7 Operating leases - net (7,655.4) (3,114.7) -------- -------- Net Cash Provided by (Used in) Investing Activities (9,188.4) 4,010.5 -------- -------- Cash Flows from Financing Activities Net decrease in short-term loans payable (1,761.7) (7,881.8) Increase in long-term debt 11,519.8 6,471.7 Decrease in long-term debt (11,681.7) (11,531.8) Proceeds from issuing common stock 1,113.7 327.6 Cash dividends paid to stockholders (839.1) (812.8) Other - (580.5) -------- -------- Net Cash Used in Financing Activities (1,649.0) (14,007.6) -------- -------- Effect of Exchange Rate Changes on Cash and Cash Equivalents 1.6 12.1 -------- -------- Net decrease in cash and cash equivalents (3,984.4) (626.3) Cash and cash equivalents at beginning of the period 13,790.5 11,078.6 -------- -------- Cash and cash equivalents at end of the period $9,806.1 $10,452.3 ======== ======== Certain 1993 amounts were reclassified to conform with 1994 classifications. Reference should be made to the Notes to Financial Statements. Note 10 describes a non-cash transaction. NOTES TO FINANCIAL STATEMENTS In the opinion of management, the interim financial statements reflect all adjustments, consisting of only normal recurring items (with the exception of the after-tax increase to the previously announced plant closing reserve in 1993 described in Note 3 and the accounting changes in 1994 to adopt Statement of Financial Accounting Standards (SFAS) No. 112, Employers' Accounting for Postemployment Benefits, SFAS No. 114, Accounting by Creditors for Impairment of a Loan, and SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities, as described in Note 5), which are necessary for a fair presentation of the results for the interim periods presented. The results for interim periods are not necessarily indicative of results which may be expected for any other interim period or for the full year. These financial statements should be read in conjunction with the consolidated financial statements, the significant accounting policies, and the other notes to the consolidated financial statements included in the Corporation's 1993 Annual Report to the SEC on Form 10-K. Certain additional year-end 1993 disclosures have been included in this report. - 7 - 8 GENERAL MOTORS CORPORATION AND SUBSIDIARIES Note 1. Significant Accounting Policies - Financial Instruments The following should be read in conjunction with Note 1 (Significant Accounting Policies - Financial Instruments) appearing on page II-13 of GM's Annual Report on Form 10-K for the year ended December 31, 1993. Foreign exchange forward contracts and options which are entered into in connection with GM's management of its foreign currency exposures are accounted for as hedges to the extent they are designated as, and are effective as, hedges of firm foreign currency commitments. Other such foreign exchange contracts and options are marked-to-market on a current basis. The cash flows from interest rate swaps are accounted for as interest expense. Gains and losses from terminated contracts are deferred and amortized over the remaining period of the original swap. Open swap positions are reviewed regularly to ensure that they remain effective. Written options (including swaptions and interest rate caps and collars) are marked-to-market on a current basis. Note 2. Other Income and Other Deductions Other income and other deductions consist of: Third Quarter Nine Months ----------------- ------------------ 1994 1993 1994 1993 ----------------- ------------------ (Dollars in Millions) Other Income Insurance premiums $224.3 $225.0 $657.1 $617.7 Interest 411.6 437.1 1,118.0 1,282.6 Equity in earnings (losses) of associates, net 60.5 (63.5) 108.7 (213.4) Claims, commissions, and grants 123.4 178.8 317.7 303.8 Gain on the sale of finance receivables 5.2 103.2 25.0 354.0 Mortgage servicing revenue 50.6 95.6 150.1 256.8 Other 219.1 248.3 955.8* 788.6 ------- ------- ------- ------- Total Other Income $1,094.7 $1,224.5 $3,332.4 $3,390.1 ======= ======= ======= ======= Other Deductions Insurance losses and loss adjustment expenses $215.4 $177.8 $556.8 $474.4 Provision for (recovery of)financing losses (8.5) 116.7 110.4 292.6 Other 73.7 14.2 462.2* 223.3 ------- ------- ------- ------- Total Other Deductions $280.6 $308.7 $1,129.4 $990.3 ======= ======= ======= ======= * Other includes gains and losses on the sale of assets in the first quarter of 1994. The net impact of these sales of assets was not material. Note 3. Special Provision for Scheduled Plant Closings and Other Restructurings Third quarter and nine months 1993 operating results include a pre-tax increase of $950.0 million to the Corporation's previously announced plant closing reserve ($589.0 million after taxes, or $0.83 per share of $1-2/3 par value common stock). The increase in the reserve results from changes in assumptions, primarily regarding the amount and duration of job security and supplemental unemployment benefits expected to be paid to employees, given the terms of the Corporation's collective bargaining agreements negotiated in 1993. Note 4. General Motors Acceptance Corporation and Subsidiaries Financial data of General Motors Acceptance Corporation (GMAC) and its subsidiaries were as as shown on the following page: - 8 - 9 GENERAL MOTORS CORPORATION AND SUBSIDIARIES Third Quarter Nine Months ----------------- ------------------ 1994 1993 1994 1993 ----------------- ------------------ (Dollars in Millions) Net financing revenue and other $1,157.3 $1,313.3 $3,470.7 $3,959.2 Net income including the unfavorable cumulative effect of accounting change of $7.4 million in nine months 1994 $244.6 $204.8 $678.2 $774.3 Cash dividends paid to GM $250.0 $500.0 $750.0 $1,000.0 Note 5. Accounting Changes Effective January 1, 1994, the Corporation adopted SFAS No. 112, Employers' Accounting for Postemployment Benefits. The Standard requires accrual of the costs of benefits provided to former or inactive employees after employment, but before retirement. The unfavorable cumulative effect of adopting this Standard was $1,220.1 million ($758.1 million after tax), or $751.3 million ($1.05 per share) attributable to $1-2/3 par value common stock and $6.8 million ($0.08 per share) attributable to GM Class H common stock. The effect at Electronic Data Systems Corporation was not material and there was no effect on GM Class E common stock earnings. The non-cash charge is primarily related to GM's extended-disability benefit program in the U.S. which, under the new accounting Standard, will be accrued on a service-driven basis. The ongoing effect in subsequent periods is not expected to be material. The Corporation also adopted SFAS No. 114, Accounting by Creditors for Impairment of a Loan, effective January 1, 1994. SFAS No. 114 requires a creditor to evaluate the collectibility of both contractual interest and principal of all receivables when assessing the need for a loss accrual. There was no material impact on the consolidated financial position or results of operations as a result of adoption. The Corporation's loans primarily consist of large groups of smaller-balance homogeneous loans which are collectively evaluated for impairment and to which this Standard does not apply. However, certain loans of the Corporation affected by this Standard are currently carried at the lower of book value or the fair value of the collateral. The net book value of such loans at September 30, 1994 was $186.0 million, net of a $174.9 million valuation reserve. Also effective January 1, 1994, the Corporation adopted SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities, which resulted in a $241.0 million after-tax increase in Stockholders' Equity. This Standard requires the recording at fair value of debt securities which are not expected to be held to maturity and equity securities which have a readily determinable fair value. The primary effect of this Standard for the Corporation relates to debt securities held by Motors Insurance Corporation and certain equity securities. The ongoing effect on the third quarter and nine months ended September 30, 1994 resulted in a $29.9 million and a $183.6 million, respectively, after-tax decrease in Stockholders' Equity. The total effect of SFAS No. 115 at September 30, 1994 was a net increase of $57.4 million in Stockholders' Equity. Note 6. Earnings Per Share Attributable to and Dividends on Common Stocks Earnings per share attributable to common stocks have been determined based on the relative amounts available for the payment of dividends to holders of $1-2/3 par value, Class E, and Class H common stocks. The allocation of earnings attributable to such common stocks and the calculation of the related amounts per share are computed by considering the weighted average number of common shares outstanding and common stock equivalents, to the extent the effect of such equivalents is not antidilutive. Operations of the incentive plans and the assumed exercise of stock options do not have a material dilutive effect on earnings per share at this time. Dividends on the $1-2/3 par value common stock are declared out of the earnings of GM and its subsidiaries, excluding the Available Separate Consolidated Net Income of EDS and GMHE. Dividends on the Class E and Class H common stocks are declared out of the Available Separate Consolidated Net Income of EDS and GMHE, respectively, since the acquisition by GM. - 9 - 10 GENERAL MOTORS CORPORATION AND SUBSIDIARIES The Available Separate Consolidated Net Income of EDS and GMHE is determined quarterly and is equal to the separate consolidated net income of EDS and GMHE, respectively, excluding the effects of purchase accounting adjustments arising at the time of acquisition, multiplied by a fraction, the numerator of which is a number equal to the weighted average number of shares of Class E or Class H common stock outstanding during the period and the denominator of which was 481.7 million for Class E stock and 399.9 million for Class H stock during the third quarter of 1994. Comparable denominators for the third quarter of 1993 were 480.5 million for Class E stock and 399.9 million for Class H stock. The denominators used in determining the Available Separate Consolidated Net Income of EDS and GMHE are adjusted as deemed appropriate by the Board of Directors to reflect subdivisions or combinations of the Class E and Class H common stocks and to reflect certain transfers of capital to or from EDS and GMHE. In this regard, the Board has generally caused the denominators to decrease as shares are purchased by EDS or GMHE, and to increase as such shares are used, at EDS or GMHE expense, for EDS or GMHE employee benefit plans or acquisitions. Dividends may be paid on common stocks only when, as, and if declared by the Board of Directors in its sole discretion. The Board's policy with respect to $1-2/3 par value common stock is to distribute dividends based on the outlook and the indicated capital needs of the business. The current policy of the Board with respect to the Class E and Class H common stocks is to pay cash dividends approximately equal to 30% and 35% of the Available Separate Consolidated Net Income of EDS and GMHE, respectively, for the prior year. Notwithstanding the current dividend policy, the dividends paid and to be paid on the Class H Common Stock during 1994 and 1993 exceeds 35% of the Available Separate Consolidated Net Income (Loss) of GMHE for the preceding year (excluding the effect of the $749.4 million after-tax special restructuring charge at Hughes in 1992). Note 7. Major Classes of Inventories Major classes of inventories are as follows: Sept. 30, Dec. 31, Sept. 30, 1994 1993 1993 ----------------------------------- (Dollars in Millions) Productive material, work in process, and supplies $5,836.8 $4,671.9 $5,618.9 Finished product, service parts, etc. 4,508.6 3,943.2 4,449.3 -------- ------- -------- Total inventories (less allowances) $10,345.4 $8,615.1 $10,068.2 ======== ======= ======== Note 8. Notes and Loans Payable The following should be read in conjunction with Note 14 (Notes and Loans Payable) appearing on page II-30 of GM's Annual Report on Form 10-K for the year ended December 31, 1993. The notes and loans payable at December 31, 1993 include $5.9 billion in currencies other than the U.S. Dollar, primarily the Canadian Dollar ($1.7 billion) and German Mark ($1.7 billion). At December 31, 1993 and 1992, notes and loans payable include $62.8 billion and $74.2 billion of obligations with fixed rates, and $7.6 billion and $8.4 billion of obligations with variable interest rates (predominantly based on LIBOR), after considering the impact of interest rate swap agreements. To achieve its desired balance between fixed and variable rate debt, the Corporation has entered into interest rate swap, interest rate cap, interest rate collar, and swaption agreements. The notional amounts of such agreements as of December 31, 1993 were approximately $4,709 million ($3,471 million pay variable and $1,238 million pay fixed), $5,239 million, zero, and $1,191 million, respectively. The notional amounts of such agreements as of December 31, 1992 were approximately $4,242 million ($3,247 million pay variable and $995 million pay fixed), $929 million, $3 million, and $1,446 million, respectively. - 10 - 11 GENERAL MOTORS CORPORATION AND SUBSIDIARIES Swaps accounted for on a settlement basis relate to specific long-term corporate debt obligations outstanding over the same (or longer) periods as the designated swaps. The balance of the net unamortized gains at December 31, 1993 and 1992 resulting from terminated swaps amounted to $7.9 million and zero, respectively. Note 9. Postretirement Benefits Other Than Pensions The Corporation has disclosed in the financial statements certain amounts associated with estimated future postretirement benefits other than pensions and characterized such amounts as "accumulated postretirement benefit obligations", "liabilities", or "obligations". Notwithstanding the recording of such amounts and the use of these terms, the Corporation does not admit or otherwise acknowledge that such amounts or existing postretirement benefit plans of the Corporation (other than pensions) represent legally enforceable liabilities of the Corporation. Note 10. Pensions In September 1993, 18.8 million shares of $1-2/3 par value common stock were contributed at a value of $838.1 million to the General Motors Pension Plan for Salaried Employees. These shares had been sold to the Corporation from individual employee accounts in various stock savings plans of the Corporation. Note 11. Stocks Subject to Repurchase Stocks Subject to Repurchase at September 30, 1994 consist of 15 million shares of Class H common stock subject to put options issued to the Howard Hughes Medical Institute and exercisable under most circumstances at $30 per share on March 1, 1995. The Corporation holds an option to call the Institute's shares until February 28, 1995 at $37.50 per share. Note 12. Preference Stock General Motors converted all 17,825,000 outstanding shares of its Series A Conversion Preference Stock (Preference Equity Redemption Cumulative Stock or PERCS) into shares of GM $1-2/3 par value common stock on June 18, 1994. GM originally issued this stock in June 1991 at a price of $41.375 per share. Holders of the Preference Stock received 0.992435 shares of GM $1-2/3 par value common stock for each share of Preference Stock called for conversion, plus $0.1655 in cash in payment of the accrued and unpaid dividend (covering the June 1 to June 18 period). Fractional shares of GM $1-2/3 par value common stock were paid in cash. When all preference stock has been converted, a total of 17.7 million shares of GM $1-2/3 par value common stock will have been issued in this conversion. The exchange of 0.992435 share of GM $1-2/3 par value common stock for each PERCS was equivalent to the call price of $53.79 per share divided by $54.20, which was the average daily closing price on the New York Stock Exchange of the GM $1-2/3 par value common stock for the five consecutive trading days ending on the "determination date" of June 1, 1994. The determination date was the second trading day immediately preceding the "notice of conversion" date of June 3, 1994. Note 13. Stockholders' Equity At September 30, 1994, December 31, 1993, and September 30, 1993, consolidated net income retained for use in the business (accumulated deficit) attributable to the common stocks was as follows: Sept. 30, Dec. 31, Sept. 30, 1994 1993 1993 ----------------------------------- (Dollars in Millions) $1-2/3 par value ($1,939.9) ($4,080.1) ($4,858.3) Class E 1,566.7 1,344.3 1,262.6 Class H 859.7 732.9 687.5 ------- ------- ------- Total $486.5 ($2,002.9) ($2,908.2) ======= ======= ======= - 11 - 12 GENERAL MOTORS CORPORATION AND SUBSIDIARIES The Corporation's capital surplus plus net income retained for use in the business (less accumulated deficit) at September 30, 1994, December 31, 1993, and September 30, 1993, as allocated pursuant to GM's Certificate of Incorporation, was as follows: Sept. 30, Dec. 31, Sept. 30, 1994 1993 1993 ----------------------------------- (Dollars in Millions) $1-2/3 par value $7,775.0 $4,870.0 $3,727.3 Class E 3,628.7 3,243.8 3,057.7 Class H 2,109.8 1,886.7 1,760.4 -------- -------- ------- Total $13,513.5 $10,000.5 $8,545.4 ======== ======== ======= However, consistent with Delaware law, which governs the amount legally available for the payment of dividends on the Corporation's common stock, the Board of Directors has determined that such amount is materially higher than the Corporation's capital surplus plus net income retained for use in the business (less accumulated deficit). At September 30, 1994, December 31, 1993, and September 30, 1993, accumulated foreign currency translation adjustments, net unrealized gains on marketable equity securities, and the effect of adopting SFAS No. 115 were as shown below: Sept. 30, Dec. 31, Sept. 30, 1994 1993 1993 ----------------------------------- (Dollars in Millions) Accumulated foreign currency translation adjustments ($66.1) ($494.4) ($429.2) ------ ------ ------ Net unrealized gains on marketable equity securities 133.3 164.3 171.4 ------ ------ ------ Effect of adopting SFAS No. 115: Favorable cumulative effect at January 1, 1994 241.0 - - Ongoing unfavorable effect for the 1994 nine months (183.6) - - ------ ------ ------ Total SFAS No. 115 effect 57.4 - - ------ ------ ------- Total $124.6 ($330.1) ($257.8) ====== ====== ====== Note 14. Financial Instruments with Off-Balance-Sheet Risk The following should be read in conjunction with Note 18 (Financial Instruments with Off-Balance-Sheet Risk) appearing on page II-42 of GM's Annual Report on Form 10-K for the year ended December 31, 1993. The Corporation's financing and cash management activities subject it to market rate risk from exposure to changes in interest rates. To manage these exposures, the Corporation has entered into various financial instrument transactions. The Corporation's objective of entering into these transactions is to minimize interest expense while maintaining the desired level of exposure to the risk of interest rate fluctuations. To achieve this objective, the Corporation will at times use written options. GM is an international corporation with operations in over 50 countries. GM 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 major North American countries (Canada and Mexico), Western European countries (primarily Germany, United Kingdom, Spain, Belgium, and France), Japan, and Brazil. The magnitude of these exposures significantly varies over time depending upon the strength of local automotive markets and sourcing decisions. - 12 - 13 GENERAL MOTORS CORPORATION AND SUBSIDIARIES GM and its subsidiaries enter into agreements to manage certain foreign exchange exposures in accordance with established policy guidelines. These agreements primarily hedge debt, firm and anticipated commitments involving vehicles, components, and fixed assets, and subsidiary dividends. As a general practice, GM has not hedged the foreign exchange exposure related either to the translation of overseas earnings into U.S. dollars or the translation of overseas equity positions back to U.S. dollars. GM uses foreign exchange forward contacts, it purchases foreign exchange options, and may from time to time write offsetting options at exercise prices which limit the effect of forward contracts and purchased options. The fair value of foreign exchange forward contracts is estimated by obtaining quotes for future contracts with similar terms, adjusted where necessary for maturity differences. The fair value of such contracts were a receivable of approximately $54 million and a payable of approximately $52 million at December 31, 1993, and a receivable of approximately $95 million and a payable of approximately $155 million at December 31, 1992. The fair value of foreign exchange options is estimated using active exchange quotations for most options, and pricing models for illiquid options. Fair value amounts were a receivable of approximately $12 million and a payable of approximately $11 million at December 31, 1993, and a receivable of approximately $19 million and a payable of approximately $8 million at December 31, 1992. At December 31, 1993 and 1992, the notional amount of interest rate and mortgage contracts with off-balance-sheet risk was approximately $11,139 million and $6,620 million, respectively. The fair value of such agreements at December 31, 1993 were a receivable of approximately $179 million and a payable of approximately $210 million, and at December 31, 1992 a receivable of approximately $95 million and a payable of approximately $142 million. Note 15. Contingent Liabilities The Corporation and its subsidiaries are subject to potential liability under government regulations and various claims and legal actions which are pending or may be asserted against them. Some of the pending actions purport to be class actions. The aggregate ultimate liability of the Corporation and its subsidiaries under these government regulations, and under these claims and actions, was not determinable at September 30, 1994. In the opinion of management, such liability is not expected to have a material adverse effect on the Corporation's consolidated operations or financial position. * * * * * - 13 - 14 GENERAL MOTORS CORPORATION AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS Results of Operations The following management's discussion and analysis should be read in conjunction with the management's discussion and analysis included in the Corporation's 1993 Annual Report to the SEC on Form 10-K and its Quarterly Reports on Form 10-Q for the first and second quarters of 1994. The competitive position and environmental matters discussions included in Part I, Item 1 of the 1993 Form 10-K are specifically incorporated by reference herein. Reference should also be made to information disclosed in GM's Current Reports on Form 8-K. General Motors Corporation reported improved earnings in the third quarter of 1994, compared with the same period last year, as overall business conditions remained strong. GM's consolidated net income totaled $552.0 million, or $0.40 per share of GM $1-2/3 par value common stock, in the third quarter of 1994. That compares with a reported net loss of $112.9 million, or a loss of $0.49 per share, in the same period last year, which included special items amounting to an unfavorable $288.5 million, or a loss of $0.39 per share. These items included an increase of $589.0 million, or an unfavorable $0.83 per share of $1-2/3 par value common stock, to the Corporation's plant-closing reserve; and labor-contract-related costs of $143.8 million, or $0.20 per share; partially offset by the $444.3 million, or $0.64 per share, favorable impact of an increase in the U.S. corporate income tax rate. GM's sales and revenues totaled a record $34,510.3 million in the third quarter of 1994, an increase of 14.5% compared with the $30,137.5 million in the third quarter of 1993. Gross-profit margin -- with General Motors Acceptance Corporation (GMAC) on an equity basis -- was 13.5%, compared with 12.3% in the comparable period last year. The net-profit margin was 1.8% in the third quarter of 1994, compared with a net-loss margin of 0.4% in the third quarter last year. While sales were strong, results were adversely impacted by new-model start-ups, capacity constraints, the lost production resulting from strikes at two North American facilities, and higher selling, general, and administrative expenses. The income tax credit in the third quarter of 1994 is primarily a function of the low level of pre-tax income, a low effective tax rate for foreign operations, and a favorable adjustment related to book tax accruals which had been established in prior years. GM's International Operations (IO) continued to be profitable in the third quarter, but results were somewhat below last year's unusually high third-quarter earnings level. Consolidated net income for the nine-month-1994 period was $3,328.5 million, or $3.41 per share of GM $1-2/3 par value common stock, including the $758.1 million unfavorable effect of Statement of Financial Accounting Standards (SFAS) No. 112, Employers' Accounting for Postemployment Benefits, accounting charge in the first quarter. That compares with reported net income of $1,289.4 million, or $0.85 per share, for the prior-year nine-month period. Excluding the impact of the SFAS No. 112 accounting charge, income for the 1994-nine-month period was $4,086.6 million, or $4.46 per share, compared with $1,577.9 million, or $1.24 per share, in the first nine months of 1993, excluding the special items enumerated above. Sales and revenues totaled $112,397.9 million in the 1994 period, an increase of 11.3%, or $11,446.1 million, over 1993 sales and revenues of $100,951.8 million. After preference stock dividend payments and the apportionment of earnings attributable to GM Class E and Class H common stock, the income attributable to $1-2/3 par value common stock in the 1994 third quarter amounted to $306.0 million, or $0.40 per share, compared with a third quarter 1993 loss of $347.0 million, or $0.49 per share. In the nine months of 1994, income attributable to $1-2/3 par value common stock was $2,582.1 million, or $3.41 per $1-2/3 par value share, compared with $615.9 million, or $0.85 per share, in the 1993 period. Excluding the first quarter accounting charge, nine-month 1994 earnings amounted to $3,333.4 million, an improvement of $2,717.5 million ($3.61 per $1-2/3 par value share) over the 1993 nine months, excluding the special items. - 14 - 15 GENERAL MOTORS CORPORATION AND SUBSIDIARIES Third quarter 1994 worldwide wholesale vehicle sales totaled 1,790,000 units, 8.1% more than the 1993 third quarter level of 1,656,000 units, reflecting higher sales in all regions, as shown in the table below. Worldwide wholesale vehicle sales of 6,144,000 units during the nine months of 1994 were up 411,000 units, or 7.2%, over the year ago period. Third Quarter Nine Months -------------- -------------- 1994 1993 1994 1993 -------------- -------------- Worldwide Wholesale Sales (Units in Thousands) United States Cars 577 558 2,243 2,135 Trucks 436 362 1,444 1,297 ----- ----- ----- ----- Total United States 1,013 920 3,687 3,432 Other North America 96 91 396 361 ----- ----- ----- ----- Total North America 1,109 1,011 4,083 3,793 Overseas 681 645 2,061 1,940 ----- ----- ----- ----- Total All Sources 1,790 1,656 6,144 5,733 ===== ===== ===== ===== During the 1994 third quarter, GM vehicle deliveries of cars and trucks worldwide were 1,997,000 units, compared with 1,903,000 units in the same period last year, an increase of 4.9%. Worldwide GM vehicle deliveries of cars and trucks during the nine months of 1994 were 6,341,000 units, 6.9% above the 5,931,000 units delivered in the comparable 1993 period. As shown in the following table, GMAC financed or leased worldwide 444,000 new passenger cars and trucks, a decrease of 8% from the comparable 1993 period. Nine Months Ended Units Financed or Leased Third Quarter September 30, -------------- ----------------- by GMAC Worldwide 1994 1993 1994 1993 -------------- ----------------- (Units in Thousands) United States 293 350 1,026 1,025 Outside the U.S. 151 133 471 401 ---- --- ----- ----- Total GMAC 444 483 1,497 1,426 ==== === ===== ===== During the third quarter of 1994, GMAC financed 23% of new General Motors products delivered in the U.S., a 6 percentage point decrease from the same period last year, while penetration for the first nine months of 1994 decreased to 25% of new GM deliveries, two percentage points lower than the comparable 1993 period. As detailed in the table below, third quarter 1994 worldwide employment averaged 672,000 men and women, a 1.5% decrease from the 682,000 in the third quarter of 1993, adjusted to include NCRS. Worldwide payrolls were $7,675.2 million, compared with $7,208.9 million in the comparable 1993 period, due to increased overtime and increased wages from the 1993 contract. Nine month average worldwide employment decreased by 26,000 men and women from the 1993 nine-month period, while 1994 worldwide payrolls totaled $23,506.6 million, a 5.2% increase over 1993 payrolls of $22,337.8 million. Third Quarter Nine Months ------------- ------------- 1994 1993 1994 1993 ------------- ------------- (in thousands) Average Worldwide Employment GM (excluding units listed below) 493 505 512 532 GMAC 18 18 18 18 Electronic Data Systems Corporation (EDS) 78 71 74 72 GM Hughes Electronics Corporation (GMHE) 77 82 77 85 National Car Rental System Inc. (NCRS) 6 6 6 6 --- --- --- --- Average Number of Employees 672 682 687 713 === === === === - 15 - 16 GENERAL MOTORS CORPORATION AND SUBSIDIARIES Selling, general, and administrative expenses, with GMAC on an equity basis, in the third quarter and nine months of 1994 were $289.6 million and $508.6 million, respectively, above the third quarter and nine-month 1993 amounts, primarily due to higher advertising expense and higher administrative expenses, reflecting business growth at EDS. On a percent of sales basis, selling, general, and administrative expenses were 8.2% in the third quarter and 7.3% in the nine months of 1994, down from the 8.4% in the third quarter and 7.6% in the nine-month period of 1993. Following are highlights of 1994 third-quarter and nine-month financial performance by GM's major business sectors: Nine Months Ended Third Quarter September 30, ----------------- -------------------- Major Business Sector Results 1994 1993(1) 1994 1993(1) - ------------------------------ ----------------- -------------------- (Dollars in Millions) NAO Income (Loss) Before Special Items and Accounting Change ($328.4) ($824.7) $905.2 ($1,027.8) Reserve Increase - (589.0) - (589.0) Contract Related - (143.8) - (143.8) Incremental Tax Change - 457.1 - 457.1 ----- ------- ------- ------- Income(Loss) Before Acctg.Change (328.4)(1,100.4) 905.2 (1,303.5) Cumulative Effect of Acctg.Change - - (707.7) - ----- ------- ------- ------- NAO Income (Loss) (328.4)(1,100.4) 197.5 (1,303.5) ----- ------- ------- ------- I.O. Income 239.5 403.2 1,208.1 849.5 ----- ------- ------- ------- GMAC Income Before Special Item and Accounting Change 244.6 221.2 685.6 790.7 Incremental Tax Change - (16.4) - (16.4) ----- ------- ------- ------- Income Before Accounting Change 244.6 204.8 685.6 774.3 Cumulative Effect of Acctg.Change - - (7.4) - ----- ------- ------- ------- GMAC Income 244.6 204.8 678.2 774.3 ----- ------- ------- ------- EDS Earnings Before Special Item 216.4 198.0 585.4 527.5 Incremental Tax Change - (6.4) - (6.4) ----- ------- ------- ------- EDS Earnings 216.4 191.6 585.4 521.1 ----- ------- ------- ------- GMHE Earnings Before Special Item and Accounting Change 244.2 214.0 824.0 635.3 Incremental Tax Change - 10.0 - 10.0 ----- ------- ------- ------- Earnings Before Acctg. Change 244.2 224.0 824.0 645.3 Cumulative Effect of Acctg. Change - - (30.4) - ----- ------- ------- ------- GMHE Earnings 244.2 224.0 793.6 645.3 ----- ------- ------- ------- Other (2) Loss Before Accounting Change (64.3) (36.1) (121.7) (197.3) Cumulative Effect of Acctg. Change - - (12.6) - ----- ------- ------- ------- Other Loss (64.3) (36.1) (134.3) (197.3) ----- ------- ------- ------- Consolidated Net Income (Loss) $552.0 ($112.9) $3,328.5 $1,289.4 ===== ======= ======= ======= CNI Before Special Items and Accounting Change $552.0 $175.6 $4,086.6 $1,577.9 ===== ======= ======= ======= CNI Before Accounting Change $552.0 ($112.9) $4,086.6 $1,289.4 ===== ======= ======= ======= (1) Certain amounts for 1993 were reclassified to conform with 1994 sector structure. (2) Includes Power Products and Defense and purchase accounting adjustments. North American Automotive Operations (NAO) In the third quarter of 1994, NAO reported a loss of $328.4 million. This compares with a loss of $1,100.4 million in the third quarter of 1993. Excluding special items, NAO's net loss amounted to $824.7 million in the - 16 - 17 GENERAL MOTORS CORPORATION AND SUBSIDIARIES third quarter of 1993. NAO's net-loss margin was 1.6% in the third quarter of 1994, compared with a reported 6.3% net-loss margin in the prior-year period. Compared with the third quarter of 1993, NAO's results were favorably impacted by wholesale vehicle sales that were 98,000 units higher, by continuing progress in certain cost areas, and an adjustment related to book tax accruals established in prior years. Partially offsetting these favorable factors were higher engineering costs associated with GM's aggressive product programs, increased overtime and premium-transportation costs, some strike-related losses, and higher selling, general, and administrative expenses. GM's share of the total U.S. vehicle market in the third quarter of 1994 was 31.5%, compared with 31.2% in the third quarter of 1993. Total U.S. retail deliveries in the third quarter of 1994 were up 6.1% compared with the same period last year, as NAO focused on the more-profitable retail vehicle sales. GM's share of total U.S. car deliveries was 33.4% in the third quarter, compared with 31.8% in the previous year's third quarter. The Corporation's share of total U.S. truck deliveries was 28.8%, compared with 30.3% in the same period last year, primarily due to continued capacity constraints. September of 1994 marked the conclusion of GM's best U.S. model-year performance since 1989, with all-time record deliveries of 1.9 million trucks and more than 3 million passenger cars. 1994-model year deliveries increased 9.3% compared with the 1993 model year. The market remains strong in North America, and GM's market share increased in both the third quarter of 1994 and the 1994-model year compared with the previous year, despite intense competition and capacity constraints that limited production of some key models. Nine-month 1994 NAO earnings were $197.5 million, an improvement of $1,501.0 million over the 1993 nine-month loss, despite the unfavorable effect of the $707.7 million accounting charge in the 1994 first quarter. Excluding the accounting change in 1994 and special items in 1993, NAO earnings improved $1,933.0 million period to period. GM is pleased with the market response to its products in North America and in particular the strong consumer reaction to the significant number of new vehicles introduced this year. Equally important, GM's internal measurements show that the 1995-model start-up was the best ever from a product-quality perspective. The focus on quality is evident as recent customer surveys give GM all-time-high ratings in sales satisfaction, and GM is among the best in service, and overall customer satisfaction. GM is encouraged about the outlook for future sales as GM brings up to full production new models that are more competitive and more profitable. International Automotive Operations (IO) IO posted net income of $239.5 million in the third quarter of 1994, compared with 1993's third-quarter earnings of $403.2 million. International Operations remains a strong contributor to the Corporation, and sales in Europe and Latin America continue to improve. International Automotive Operation's net-profit margin was 3.5% in the 1994-third-quarter period, a deterioration of 3.3 percentage points from the 6.8% net-profit margin in the year-ago period. These results were affected by an unfavorable sales mix, costs associated with further employment-separation programs in Europe to reduce the number of workers, which are part of the continued implementation of lean-manufacturing strategies, product- and powertrain-development programs in Europe, and less-favorable tax positions in Europe and Latin America. GM's Opel/Vauxhall passenger-car market share in Western Europe was 12.1% in the third quarter of 1994, compared with 13.0% in the third quarter last year. The overall car market in Western Europe is recovering from last year's sharp decline, and GM expects a continued increase in new car sales for the balance of the year. Worldwide retail sales of the Saab lineup increased 20.6% in the third quarter of 1994, compared with the year earlier period. - 17 - 18 GENERAL MOTORS CORPORATION AND SUBSIDIARIES Nine month 1994 IO income was $1,208.1 million compared to $849.5 million in the nine months of 1993, with net-profit margins increasing from 4.5% in the 1993 period to 6.0% in the 1994 nine-month period. During the first nine months of 1994, Opel/Vauxhall models remained number one in the Western Europe passenger car market, while GM sales in Latin America remained strong despite continued capacity constraints, with vehicle sales reaching an all-time record in Brazil. General Motors Acceptance Corporation GMAC serves the financing and insurance needs of GM customers. The Corporation hereby encourages reference to the GMAC Third Quarter 1994 Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission. GMAC reported third-quarter 1994 earnings of $244.6 million, compared with $204.8 million in the prior-year period, including an unfavorable adjustment of $16.4 million for the incremental tax rate change in 1993. GMAC's results in the third quarter of 1994, when compared with the same period a year ago, reflect higher earnings in U.S. auto-financing operations and continued favorable loan-loss experience. For the nine months of 1994, GMAC's consolidated net income totaled $678.2 million, including the $7.4 million unfavorable effect of the first quarter SFAS No. 112 accounting change, $96.1 million below the same period last year, which included the $16.4 million special item. Net income from financing operations, including GMAC Mortgage Corporation (GMACM) results, totaled $211.6 million for the 1994 third quarter. The $45.4 million increase from the same period last year reflects higher earnings in U.S. auto financing operations largely due to a more favorable funding mix, resulting from greater investor confidence in GM and GMAC, and continued favorable loan-loss experience. In addition, the third quarter of 1993 was unfavorably affected by a cumulative adjustment for the statutory increase in the U.S. Federal income tax rate effective for the 1993 tax year. For the first nine months of 1994, net financing income (excluding the cumulative impact of SFAS No. 112) totaled $589.0 million in comparison to $630.1 million during the same period in 1993. During the third quarter of 1994, GMAC financed or leased worldwide 444,000 new passenger cars and trucks, a decrease of 8% from the comparable 1993 period, as shown in the table on page 15. The decrease in retail and lease unit financing and penetration reflects continued intense competitive pressures within a robust sales environment. Net income from insurance operations was $33.0 million for the third quarter of 1994, a $5.6 million decrease as compared to the third quarter of 1993, with the year-to-year change primarily reflective of lower underwriting results due to accelerated amortization of credit insurance policy acquisition costs. For the first nine months of 1994, net income from insurance operations (excluding the cumulative impact of SFAS No. 112) was $96.6 million, compared with $144.2 million for the same period in 1993. The decline in net income reflects non-recurring capital gains recognized in the first nine months of 1993, only partially offset by lower insurance loss experience in the 1994 period. Financing revenue totaled $2,351.5 million and $6,819.2 million for the third quarter and first nine months of 1994, respectively, $164.3 million greater than the amount reported for the comparable 1993 quarter and $144.4 million greater than the amount recorded for the 1993 nine month period. The year-to-year increase is primarily attributable to increases in leasing revenues, resulting from continued growth in operating lease activity and greater wholesale revenue due to GMAC's resumption of dealer wholesale inventory formerly financed by GM. This increase was partially offset by reduced lease financing revenues due to General Motors' reduction in fleet sales to daily rental companies. Interest and discount expense amounted to $1,041.6 million for the third quarter of 1994, compared with $1,114.1 million for the same period in 1993. Interest and discount expense totaled $3,096.9 million for the first nine - 18 - 19 GENERAL MOTORS CORPORATION AND SUBSIDIARIES months of 1994, a decrease of 14.8% from the comparable period in 1993. The average cost of funds worldwide for the third quarter of 1994 declined to 6.63%, a decrease of 32 basis points from a year earlier. The worldwide cost of funds averaged 6.56% for the first nine months of 1994, down 37 basis points from a year ago. Total borrowing costs for United States operations averaged 6.41% for the third quarter and 6.32% for the first nine months of 1994, compared with 6.56% and 6.53%, respectively, for the same 1993 periods. The decline in borrowing costs reflects a more favorable short-term funding mix resulting from an increasingly positive perception of GMAC's financial position by the capital markets. Depreciation expense on operating leases, primarily GMAC's SmartLease program, amounted to $861.4 million for the third quarter of 1994, compared with $692.4 million for the same period in 1993. For the first nine months of 1994, depreciation expense on operating leases totaled $2,315.5 million compared to $1,980.3 million for the first nine months of 1993, with the increase attributable to continued successful marketing of the SmartLease program in the United States and Canada. Other income, including gains on receivable sales, as well as servicing fees and other income related to sold finance receivables, amounted to $426.2 million and $1,215.7 million for the third quarter and first nine months of 1994, compared with $631.7 million and $2,042.7 million, respectively, for the same periods of 1993. The decreases are primarily attributable to a quarter- to-quarter decrease of $143.8 million and a nine months decrease of $458.1 million due to lower interest and service fees from General Motors as a result of the termination of the financing agreement whereby GM had previously assumed some dealer wholesale inventory financing. This reduction is offset by increased financing revenues on wholesale receivables. Capital gains at MIC for the nine month period ended September 30, 1994 decreased $129.2 million from the comparable prior year period, primarily reflecting non- recurring capital gains recognized during the first nine months of 1993. Other operating expenses, including salaries and benefits and insurance losses and loss adjustment expenses, totaled $792.2 million for the third quarter and $2,249.4 million for the first nine months of 1994, $8.9 million and $47.1 million lower than the respective comparable 1993 periods. The decrease is primarily attributable to lower losses incurred on commercial lines and lower commission expenses for originated mortgages, as well as reduced amortization of purchased mortgage servicing rights. GMAC has continued to have significantly improved charge-off and recovery experience. Based on these continued improvements, the Company adjusted its reserves accordingly which resulted in a provision for losses on finance receivables of ($8.5) million for the third quarter of 1994, compared to a provision of $116.7 million in the same period of 1993. For the first nine months of 1994, the provision for losses on finance receivables totaled $110.4 million as compared to $292.6 million for the first nine months of 1993. Total net chargeoffs for the third quarter and first nine months of 1994 were $44.8 million and $149.5 million, respectively, as compared to $93.4 million and $271.5 million in the third quarter and first nine months of 1993. Consolidated earning assets totaled $77,390.7 million at September 30, 1994, up $3,029.2 million from $74,361.5 million at September 30, 1993 and up $2,606.9 million from the December 31, 1993 level of $74,783.8 million. The year-to-year increase can be largely attributed to an increase in operating lease assets due to the continued acceptance and popularity of the SmartLease program, offset by lower finance receivables. Operating lease assets, net of depreciation, offered principally under the GMAC SmartLease program, increased to $16,481.8 million at September 30, 1994 from $11,363.5 million and $10,755.1 million at December 31, 1993 and September 30, 1993, respectively. The increase primarily reflects growth in the U.S. and Canadian markets, driven by continued consumer acceptance of leasing and enhanced manufacturer's subvented programs. Wholesale receivables financed by GMAC, primarily dealer vehicle inventories, were $17,003.0 million at September 30, 1994, compared to $20,673.6 million at December 31, 1993 and $10,272.2 million at September 30, - 19 - 20 GENERAL MOTORS CORPORATION AND SUBSIDIARIES 1993. The level of wholesale receivables at the end of the third quarter of 1994, as compared to the asset levels at September 30, 1993, reflects the resumption by GMAC of dealer wholesale inventory financing previously financed by General Motors, offset by lower levels of dealer inventory and sales of wholesale finance receivables. The Company sold wholesale receivables, which it also continues to service, totaling $2.2 billion during 1994. Cash and cash equivalents, which primarily include short term borrowed funds in excess of requirements invested in short-term marketable securities, totaled $1,774.4 million at September 30, 1994. This compared to $4,028.1 million at December 31, 1993 and $3,068.7 million at September 30, 1993. The decrease is due to a strategy that seeks to reduce the liquidity portfolio and has been undertaken as a direct result of the Company's improved access to the capital markets. At September 30, 1994, consolidated worldwide retail finance receivables, net of unearned income, totaled $28.0 billion, unchanged from September 30, 1993 but up $2.0 billion from year-end 1993. The Company continues to utilize an asset securitization program as an alternative funding source and as a result sold retail receivables with principal in the United States aggregating $2.7 billion and $9.8 billion, respectively, during the nine month periods ended September 30, 1994 and September 30, 1993. Consolidated worldwide capital leasing and lease financing receivables, net of unearned income, at September 30, 1994 were $3,256.8 million, down $522.1 million and $971.7 million from December 31, 1993 and September 30, 1993, respectively. These reductions are primarily reflective of General Motors' reduction in fleet sales to daily rental companies and the resultant GMAC fleet financing reduction. GMAC's total borrowings were $61,624.9 million at September 30, 1994, compared with $61,207.2 million at September 30, 1993 and $62,773.2 million at December 31, 1993. Approximately 79.1% represented funding for operations in the United States, with the remaining 20.9% of borrowings being allocated among Canada (6.7%), Germany (6.5%), and other countries (7.7%). Total short- term debt worldwide at September 30, 1994 amounted to $17,606.9 million, down from $17,733.8 million at December 31, 1993 and up from $14,882.5 million at September 30, 1993. Summary Financial Data - GMAC Condensed GMAC Consolidated Nine Months Ended Statement of Income Third Quarter September 30, ---------------- ----------------- 1994 1993 1994 1993 ---------------- ----------------- (Dollars in Millions) Financing Revenue Retail and lease financing $660.7 $959.2 $2,167.2 $2,910.6 Leasing 1,300.4 980.8 3,486.0 2,869.6 Wholesale and term loans 390.4 247.2 1,166.0 894.6 ------- ------- ------- ------- Total financing revenue 2,351.5 2,187.2 6,819.2 6,674.8 Interest and discount 1,041.6 1,114.1 3,096.9 3,635.6 Depreciation on operating leases 861.4 692.4 2,315.5 1,980.3 ------- ------- ------- ------- Net financing revenue 448.5 380.7 1,406.8 1,058.9 Insurance premiums earned 282.6 300.9 848.2 857.6 Other income 426.2 631.7 1,215.7 2,042.7 ------- ------- ------- ------- Net Financing Revenue and Other 1,157.3 1,313.3 3,470.7 3,959.2 Expenses 790.5 960.4 2,399.4 2,693.2 ------- ------- ------- ------- Income before income taxes 366.8 352.9 1,071.3 1,266.0 Income taxes 122.2 148.1 385.7 491.7 ------- ------- ------- ------- Income before cumulative effect of accounting change 244.6 204.8 685.6 774.3 Cumulative effect of accounting change - - (7.4)* - ------- ------- ------- ------- Net Income $244.6 $204.8 $678.2 $774.3 ======= ======= ======= ======= *Effective January 1, 1994, GMAC adopted SFAS No. 112. Certain amounts for 1993 have been reclassified to conform with 1994 classifications. - 20 - 21 GENERAL MOTORS CORPORATION AND SUBSIDIARIES Condensed GMAC Consolidated Balance Sheet Sept. 30, Dec. 31, Sept. 30, 1994 1993 1993 ------------------------------------- (Dollars in Millions) Cash and cash equivalents $1,774.4 $4,028.1 $3,068.7 Investments in securities 3,513.4 3,449.7 3,477.2 Finance receivables - net 51,567.5 54,134.8 46,036.3 Receivables - General Motors Corporation1,296.4 1,355.5 10,043.2 Other assets 23,057.0 17,782.7 16,901.5 -------- -------- -------- Total Assets $81,208.7 $80,750.8 $79,526.9 ======== ======== ======== Short-term debt $30,451.5 $35,084.4 $32,997.4 Accounts payable and other liabilities (including GM and affiliates - $2,712.9, $2,487.5 and $2,113.2) 11,739.5 10,125.3 10,412.6 Long-term debt 31,173.4 27,688.8 28,209.8 Stockholder's equity 7,844.3 7,852.3 7,907.1 -------- -------- -------- Total Liabilities and Stockholder's Equity $81,208.7 $80,750.8 $79,526.9 ======== ======== ======== Certain amounts for September 1993 have been reclassified to conform with 1994 classifications. Condensed GMAC Consolidated Nine Months Ended Statement of Cash Flows September 30, -------------------- 1994 1993 -------------------- (Dollars in Millions) Net Cash Provided by Operating Activities $3,979.9 $3,738.4 -------- -------- Cash Flows from Investing Activities Finance receivables-acquisitions (114,308.9) (75,017.4) -liquidations 112,614.9 76,491.4 Notes receivable from General Motors Corporation 59.1 1,520.0 Operating leases-acquisitions (9,742.2) (4,882.1) -liquidations 2,544.4 1,953.3 Investments in securities-acquisitions (9,707.2) (9,021.9) -liquidations 9,563.6 8,706.7 Net increase in short-term investments 6.2 - Proceeds from sales of receivables 4,747.0 9,368.7 Due and deferred from receivable sales 257.7 (195.1) Other 226.4 677.1 -------- -------- Net Cash Provided by (Used in) Investing Activities (3,739.0) 9,600.7 -------- -------- Cash Flows from Financing Activities Debt with original maturities 90 days and over -proceeds 37,791.7 26,666.6 -liquidations (37,803.3) (33,934.8) Debt with original maturities less than 90 days -net change (1,764.5) (5,865.3) Cash dividends paid to GM (750.0) (1,000.0) Proceeds from issuance of stock 35.0 - -------- -------- Net Cash Used in Financing Activities (2,491.1) (14,133.5) -------- -------- Effect of exchange rate changes on cash and cash equivalents (3.5) (8.0) -------- -------- Net decrease in cash and cash equivalents (2,253.7) (802.4) Cash and cash equivalents at beginning of the period 4,028.1 3,871.1 -------- -------- Cash and cash equivalents at end of the period $1,774.4 $3,068.7 ======== ======== Certain amounts for 1993 have been reclassified to conform with 1994 classifications. - 21 - 22 GENERAL MOTORS CORPORATION AND SUBSIDIARIES Electronic Data Systems Corporation EDS reported record earnings for the third quarter of 1994, with net income totaling $216.4 million, or $0.45 per share of GM Class E common stock. That compares with earnings of $191.6 million, or $0.40 per share, in the third quarter of 1993, which included an unfavorable $6.4 million for the incremental tax rate change. The results reflect continued strong business growth, particularly in Europe and the Asia/Pacific region. Revenues from EDS' non-GM business were up 30% over 1993 third-quarter levels. New contract signings reached $1.38 billion in the third quarter of 1994. Record nine month EDS earnings of $585.4 million resulted in record earnings per Class E share of $1.22, compared with $521.1 million, including the unfavorable $6.4 million tax item, or $1.09 per share a year earlier. Earnings per share attributable to GM Class E common stock are based on the Available Separate Consolidated Net Income of EDS as described in Note 6 to the Financial Statements. Reference should be made to EDS' Management's Discussion and Analysis in Exhibit 99(a) which is incorporated herein by reference. EDS financial statements do not include the amortization of the $2,179.5 million initial cost to GM of EDS customer contracts, computer software programs, and other intangible assets, including goodwill, arising from the acquisition of EDS by GM in 1984. This cost, plus the $343.2 million cost of contingent notes purchased in 1986, less certain income tax benefits, was assigned principally to intangible assets, including goodwill, and is being amortized by GM over the estimated useful lives of the assets acquired. The costs assigned to customer contracts and computer software programs were fully amortized prior to 1992. Such amortization is charged against Other Sector Income. Summary Financial Data - EDS Nine Months Ended Third Quarter September 30, ---------------- ----------------- 1994 1993 1994 1993 ---------------- ----------------- (Dollars in Millions Except Per Share Amounts) Revenues Systems and other contracts GM and affiliates $879.5 $787.1 $2,577.4 $2,467.8 Outside customers 1,643.3 1,283.0 4,472.1 3,737.5 Interest and other income 42.1 14.2 88.7 42.7 ------- ------- ------- ------- Total Revenues 2,564.9 2,084.3 7,138.2 6,248.0 Costs and Expenses 2,226.8 1,784.9 6,223.6 5,433.8 Income Taxes 121.7 107.8 329.2 293.1 ------- ------- ------- ------- Separate Consolidated Net Income $216.4 $191.6 $585.4 $521.1 ======= ======= ======= ======= Available Separate Consolidated Net Income* Average number of shares of Class E common stock outstanding (in millions) (Numerator) 261.2 246.6 259.7 239.4 Class E dividend base (in millions) (Denominator) 481.7 480.5 481.6 480.2 Available Separate Consolidated Net Income $117.3 $98.4 $315.9 $260.2 ===== ==== ===== ===== Earnings Attributable to Class E Common Stock on a Per Share Basis $0.45 $0.40 $1.22 $1.09 ==== ==== ==== ==== Cash dividends per share of Class E common stock $0.12 $0.10 $0.36 $0.30 ==== ==== ==== ==== * Available Separate Consolidated Net Income is determined quarterly. - 22 - 23 GENERAL MOTORS CORPORATION AND SUBSIDIARIES GM Hughes Electronics Corporation GMHE earned $244.2 million in the third quarter of 1994, or $0.61 per share of GM Class H common stock. That compares with earnings of $224.0 million, including a favorable $10.0 million for the incremental tax rate change, in the third quarter of 1993, or $0.56 per share. The third-quarter-1994 financial results reflect improving operating performance as earnings increased despite nearly flat revenues during the period. Continued strength in the domestic automotive market was offset primarily by the declining defense market. For the nine months of 1994, GMHE earnings were $793.6 million, including the $30.4 million unfavorable effect of SFAS No. 112, or $1.98 per share of GM Class H common stock, on revenues of $10,477.7 million. In the nine months of 1993, earnings were $645.3 million, including the favorable $10.0 million tax item, or $1.61 per share of GM Class H common stock, on revenues of $9,816.5 million. Earnings per share attributable to GM Class H common stock are based on the Available Separate Consolidated Net Income of GMHE as described in Note 6 to the Financial Statements. Reference should be made to GMHE's Management's Discussion and Analysis in Exhibit 99(b) which is incorporated herein by reference. Summary Financial Data - GMHE Nine Months Ended Third Quarter September 30, ------------------ ------------------ 1994 1993 1994 1993 ------------------ ------------------ (Dollars in Millions Except Per Share Amounts) Revenues/Net sales Outside customers $2,264.1 $2,293.9 $6,760.5 $6,591.9 GM and affiliates 1,056.7 925.8 3,638.9 3,106.8 Other income-net 33.7 100.2 78.3 117.8 ------- ------- ------- ------- Total Revenues 3,354.5 3,319.9 10,477.7 9,816.5 Costs and Expenses 2,993.1 2,985.2 9,238.4 8,854.0 Income Taxes 148.2 141.6 508.2 410.0 ------- ------- ------- ------- Income before cumulative effect of accounting change 213.2 193.1 731.1 552.5 Cumulative effect of acctg. change - - (30.4)(1) - ------- ------- ------- ------- Net Income 213.2 193.1 700.7 552.5 Adjustments to exclude the effect of GM purchase accounting adjustments related to Hughes(2) 31.0 30.9 92.9 92.8 ------- ------- ------- ------- Earnings Used for Computation of Available Separate Consolidated Net Income $244.2 $224.0 $793.6 $645.3 ======= ======= ======= ======= Available Separate Consolidated Net Income (3) Average number of shares of Class H common stock outstanding (in millions) (Numerator) 92.7 87.4 91.7 88.5 Class H dividend base (in millions) (Denominator) 399.9 399.9 399.9 399.9 Available Separate Consolidated Net Income $56.6 $48.9 $181.9 $143.3 ==== ==== ===== ===== Earnings Attributable to Class H Common Stock on a Per Share Basis Before cumulative effect of accounting change $0.61 $0.56 $2.06 $1.61 Cumulative effect of acctg. change - - (0.08)(1) - ---- ---- ---- ---- Net earnings attributable to Class H common stock $0.61 $0.56 $1.98 $1.61 ==== ==== ==== ==== Cash dividends per share of Class H common stock $0.20 $0.18 $0.60 $0.54 ==== ==== ==== ==== Reference should be made to the notes on the next page. - 23 - 24 GENERAL MOTORS CORPORATION AND SUBSIDIARIES (1) Effective January 1, 1994, GMHE adopted SFAS No. 112 ($30.4 million or $0.08 per share). (2) Amortization of intangible assets arising from GM's acquisition of Hughes. (3) Available Separate Consolidated Net Income is determined quarterly. Liquidity and Capital Resources Cash and cash equivalents, including GMAC, at September 30, 1994 amounted to $9,806.1 million, compared with $13,790.5 million at December 31, 1993 and $10,452.3 million at September 30, 1993. The decrease in 1994 was due to an excess of net cash used in investing and financing activities over the net cash provided by operating activities. Net cash provided by operating activities was $6,851.4 million in the nine months of 1994, compared to $9,358.7 million in the 1993 period, reflecting pension contributions in excess of pension expense, increases in accounts receivable, inventories, contracts in process, and other investments and miscellaneous assets, partially offset by higher net income before the accounting change and higher income taxes payable. Net cash used in investing activities in the 1994 period amounted to $9,188.4 million, consisting primarily of capital expenditures and the net increase in equipment on operating leases, reflecting the continued acceptance and popularity of the GMAC SmartLease program. Net cash provided by investing activities amounted to $4,010.5 million in 1993 primarily due to the net reduction in finance receivables (resulting from sales of finance receivables) exceeding capital expenditures and the net increase in equipment on operating leases. Total capital expenditures were $4,661.6 million in the nine months of 1994 compared with $4,423.3 million in the 1993 period. Net cash used in financing activities of $1,649.0 million in the 1994 nine-month period primarily reflected the net decrease in short-term loans payable of $1,761.7 million and cash dividends paid to stockholders of $839.1 million, offset in part by $1,113.7 million in proceeds from issuing common stocks, primarily for employee benefit plans. Net cash used in financing activities of $14,007.6 million in the 1993 period primarily reflected the net decrease in short-term loans payable of $7,881.8 million and a net decrease in long-term debt of $5,060.1 million. During the first nine months of 1994, notes and loans payable decreased $1,259.0 million to $69,182.2 million at September 30, 1994 from a balance of $70,441.2 million at December 31, 1993 reflecting primarily a net decrease in short-term loans payable. GM's fully consolidated ratio of debt to stockholders' equity (excluding stocks subject to repurchase) was 7.19 to 1 at September 30, 1994 compared to 12.58 to 1 at December 31, 1993. Refer to Note 1 to the Consolidated Financial Statements for a description of the Corporation's accounting policies for related financial instruments. Note 8 to the Consolidated Financial Statements contains additional information regarding GM's notes and loans payable at year end, including the impact of such financial instruments. On April 19, 1994, Standard & Poor's Corporation (S&P) revised its ratings outlook from negative to positive and reaffirmed its ratings of General Motors Corporation and related entities. S&P currently rates the senior debt of GM, GMAC, and GMHE as BBB+ within the ten investment grade ratings available for long-term debt. The commercial paper of GMAC, GMHE, and EDS is currently rated A-2 within the four investment grade ratings for commercial paper. GM's preference stock is rated BBB. 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. GM contributed $3.3 billion to its U.S. pension plans during the third quarter of 1994 for a total of $5.2 billion in pension contributions during the first nine months of 1994. Even with the pension contributions, the Corporation's net liquidity remained strong in the third quarter of 1994. With GMAC on an equity basis, cash and marketable securities totaled $9,321.9 million at the end of the third quarter, compared with $8,158.0 million at - 24 - 25 GENERAL MOTORS CORPORATION AND SUBSIDIARIES September 30, 1993, and $12,643.4 million at June 30, 1994. GM's cash position continues to strengthen and GM plans to maintain all-important future product programs utilizing improved capital-spending efficiencies, while at the same time improving the balance sheet. GM and certain of its subsidiaries and affiliates maintain various syndicated bank credit facilities which in aggregate provide $26.8 billion of committed credit availability. Of this amount, $3.0 billion is directly available to the Corporation and the remainder is available to GMAC and its subsidiaries and affiliates and other GM subsidiaries and affiliates worldwide. The Corporation'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. With respect to Class E and Class H common stocks, the Corporation's current policy is to pay aggregate annual cash dividends approximately equal to 30% and 35% of the Available Separate Consolidated Net Income of EDS and GMHE, respectively, for the prior year. In February 1994, the Board of Directors increased the quarterly dividends on Class E common stock from $0.10 per share to $0.12 per share and on Class H common stock from $0.18 per share to $0.20 per share. Notwithstanding the current dividend policy, the dividends paid and to be paid on the Class H common stock during 1994 and 1993 exceeds 35% of the Available Separate Consolidated Net Income (Loss) of GMHE for the preceding year (excluding the effect of the $749.4 million after-tax special restructuring charge at Hughes in 1992). A third quarter cash dividend on $1-2/3 par value common stock of $0.20 per share was paid on September 10, 1994. On November 7, 1994, the Board of Directors declared a cash dividend of $0.20 per share on $1-2/3 par value common stock for the fourth quarter of 1994 payable December 10, 1994. The dividend continues the level established in the fourth quarter of 1992, and brings 1994 cash dividends to $0.80 per share, the same as in 1993. A third quarter cash dividend on Class E common stock of $0.12 per share was paid on September 10, 1994. On November 7, 1994, the Board of Directors also declared a cash dividend of $0.12 per share on Class E common stock payable December 10, 1994. This continues the level established in the first quarter of 1994 and brings 1994 cash dividends to $0.48 per share compared with $0.40 per share in 1993. A third quarter cash dividend on Class H common stock of $0.20 per share was paid on September 10, 1994. On November 7, 1994, the Board of Directors also declared a cash dividend of $0.20 per share on Class H common stock payable December 10, 1994. This continues the level in effect since the first quarter of 1994 and brings 1994 cash dividends to $0.80 per share, compared with $0.72 per share in 1993. General Motors converted all 17,825,000 outstanding shares of its Series A Conversion Preference Stock (Preference Equity Redemption Cumulative Stock or PERCS) into shares of GM $1-2/3 par value common stock on June 18, 1994. GM originally issued this stock in June 1991 at a price of $41.375 per share. Holders of the Preference Stock received 0.992435 shares of GM $1-2/3 par value common stock for each share of Preference Stock called for conversion, plus $0.1655 in cash in payment of the accrued and unpaid dividend (covering the June 1 to June 18 period). Fractional shares of GM $1-2/3 par value common stock were paid in cash. When all preference stock has been converted, a total of 17.7 million shares of GM $1-2/3 par value common stock will have been issued in this conversion. Book value per share of $1-2/3 par value common stock increased to $7.32 at the end of the 1994 third quarter from $1.65 at the end of 1993. Book value per share of Class E common stock increased to $0.93 from $0.21 at the end of 1993 and book value per share of Class H common stock increased to $3.66 from $0.83 at the end of 1993. Under SFAS No. 87, Employers' Accounting for Pensions, any year-to-year movement in the rate of interest on long-term, high-quality corporate bonds necessitates a change in the discount rate used to calculate the actuarial - 25 - 26 GENERAL MOTORS CORPORATION AND SUBSIDIARIES present value of the plans' obligations. This annual requirement to reset the discount rate in line with movements in market interest rates can result in considerable volatility of the discount rate used in this calculation and consequently in the amount of the plans' obligations under SFAS No. 87. The Corporation's worldwide unfunded pension liability at December 31, 1993, as calculated under SFAS No. 87, increased by a net of $8.3 billion from $14.0 billion at December 31, 1992 to $22.3 billion. The single largest cause of this increase in GM's unfunded liability was the general decline in long-term interest rates which, at October 1, 1993, in the U.S. were at their lowest level in approximately 20 years. The approximate 190 basis point increase in long-term interest rates in the U.S. which has occurred since the last measurement date of GM's pension plans through November 11, 1994, if maintained, would decrease GM's reported unfunded pension liabilities at year- end 1994 by $9.5 billion. Other factors that influence the unfunded pension liability include the actual pension plan contributions and return on pension investments during the year, the expected normal growth in the pension liability, and employee turnover, retirement, and mortality experience. Additionally, the measurement date on which the Corporation's year-end funded status is based has been changed from October 1 to December 31 for its principal U.S. plans. The purpose of this change is to align the SFAS No. 87 measurement date with calendar year financial statement reporting. The impact of this change on the Corporation's 1994 net income is expected to be immaterial. Assuming the foregoing estimated decrease in the unfunded liability occurs, the Corporation estimates that its minimum pension liability adjustment to stockholders' equity would decrease by about $2.2 billion at December 31, 1994, from the $5.3 billion adjustment reported at year-end 1993 to approximately $3.1 billion. On May 11, 1994, the Corporation reached an agreement with the Pension Benefit Guaranty Corporation (PBGC) which could lead to incremental cash and stock contributions of approximately $10 billion to its U.S. hourly pension plan in the near term. The funding proposal includes $4 billion in cash plus a contribution of approximately 177 million shares of Class E common stock. At the November 11 NYSE closing price of $35-1/8, 177 million shares of Class E common stock would have a value of $6.2 billion. GM has already satisfied its 1994 Employee Retirement Income Security Act (ERISA) minimum funding obligation with a cash contribution of $1.9 billion to its U.S. hourly pension plan in the first quarter of 1994. The funding proposal would be in addition to this ERISA minimum contribution. In the third quarter, GM contributed $3.3 billion in cash to its U.S. pension plans bringing total cash contributions for the year to $5.2 billion. Subject to certain approvals, GM may designate the additional $3.3 billion cash contribution as part of the $4 billion cash funding required under the PBGC agreement. GM's ability to make the contribution as planned is contingent upon receiving approval from the U.S. Department of Labor (DOL), and other conditions. GM has filed its application with the DOL. The proposed prohibited transaction exemption has been made available to the public on November 10, 1994. Under the terms of the agreement with the PBGC, GM will defer the use of funding credits that would result from the incremental cash and stock contributions. Consequently, GM will continue to make regular cash contributions to its pension plans over the next several years. The PBGC agreement also provides flexibility to GM by granting a release of EDS from liability, if any, to the PBGC under GM's U.S. pension plans in the event EDS were to leave the GM corporate group under certain circumstances. In addition, GM will seek relief from the excise tax that can apply when large contributions are made to pension plans. The PBGC reform bill (HR3396) currently pending before Congress proposes this relief. If GM obtains the necessary government approval, the stock contribution would require approval by the GM Board of Directors. No assurances can be given at this time that the approvals will be obtained. - 26 - 27 GENERAL MOTORS CORPORATION AND SUBSIDIARIES The increase in long-term interest rates described above similarly impacts the calculation of the Corporation's postretirement health care obligations under SFAS No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions. The 165 basis point increase in long-term corporate bond rates that had occurred for the twelve months ending October 1, 1994 would decrease GM's accumulated postretirement benefit obligation, which was $45.6 billion at December 31, 1993, by approximately $8 billion. Further, any change in the accumulated postretirement benefit obligation would have no impact on GM's stockholders' equity in 1994 and no cash impact. Although the same interest rate factors affect the accounting liabilities for pensions and other postretirement benefits, the estimated decrease related to SFAS No. 106 could also be affected by future national health care reform initiatives. Neither the estimated decrease in the Corporation's unfunded pension obligations under SFAS No. 87 nor the estimated decrease in the Corporation's postretirement obligations under SFAS No. 106 would have an impact on the earnings to be reported by the Corporation for 1994. However, in accordance with applicable accounting standards, any change in these obligations would impact the Corporation's earnings in 1995 and subsequent years as a result of their impact on the non-cash expense portions of pension and other postretirement benefits. Refer to Note 1 to the Consolidated Financial Statements for a description of the Corporation's accounting policies regarding foreign exchange financial instruments. Note 14 to the Consolidated Financial Statements includes additional information regarding the Corporation's management of foreign exchange exposures and year-end fair value amounts of such financial instruments. - 27 - 28 GENERAL MOTORS CORPORATION AND SUBSIDIARIES GENERAL MOTORS OPERATIONS WITH GMAC ON AN EQUITY BASIS In order to facilitate analysis, the following financial statements present financial data for the Corporation's manufacturing, wholesale marketing, defense, electronics, and computer service operations with the financing and insurance operations reflected on an equity basis. This is the same basis and format used in years prior to GM's adoption of SFAS No. 94, Consolidation of All Majority-owned Subsidiaries. Statement of Nine Months Ended Consolidated Operations Third Quarter September 30, -------------------- -------------------- With GMAC on an Equity Basis 1994 1993 1994 1993 -------------------- -------------------- (Dollars in Millions) Net Sales and Revenues (1) Manufactured products $29,430.8 $25,451.4 $97,855.6 $87,214.7 Computer systems services 1,710.9 1,350.7 4,675.0 3,935.2 -------- -------- --------- -------- Total Net Sales and Revenues 31,141.7 26,802.1 102,530.6 91,149.9 -------- -------- --------- -------- Costs and Expenses Cost of sales and other operating charges, exclusive of items listed below 26,931.8 23,518.3 85,213.7 78,003.6 Selling, general, and administrative expenses 2,549.7 2,260.1 7,453.1 6,944.5 Depreciation of real estate, plants, and equipment 965.7 951.7 2,849.7 2,852.2 Amortization of special tools 596.3 518.5 2,121.9 1,845.5 Amortization of intangible assets 45.2 48.0 135.7 143.0 Special provision for restructuring(2) - 950.0 - 950.0 -------- -------- -------- -------- Total Costs and Expenses 31,088.7 28,246.6 97,774.1 90,738.8 -------- -------- -------- -------- Operating Income (Loss) 53.0 (1,444.5) 4,756.5 411.1 Other income less income deductions - net 338.4 571.4 965.6 1,184.2 Interest expense (365.0) (405.8) (910.1) (1,174.6) -------- -------- -------- -------- Income (Loss) before Income Taxes 26.4 (1,278.9) 4,812.0 420.7 Income taxes (credit) (220.5) (1,024.7) 1,519.7 (307.8) -------- -------- -------- -------- Income (Loss) after Income Taxes 246.9 (254.2) 3,292.3 728.5 Earnings of nonconsolidated affiliates 305.1 141.3 786.9 560.9 -------- -------- -------- -------- Income (Loss) before cumulative effect of accounting change 552.0 (112.9) 4,079.2 1,289.4 Cumulative effect of accounting change (3) - - (750.7) - -------- -------- -------- -------- Net Income (Loss) $552.0 ($112.9) $3,328.5 $1,289.4 ======== ======== ======== ======== (1) Includes sales to nonconsolidated affiliates of $231.1 million and $245.4 million in the third quarter and $810.5 million and $758.2 million in the nine months of 1994 and 1993, respectively, including $67.6 million and $67.7 million in computer systems services revenues for the third quarter and $202.9 million and $197.7 million for the nine months. (2) Plant closing reserve increase as discussed previously. (3) Effective January 1, 1994, the Corporation adopted SFAS No. 112, Employers' Accounting for Postemployment Benefits. Not included is the unfavorable cumulative effect on GMAC earnings of $7.4 million of adopting SFAS No. 112 because the cumulative effect is included in earnings of nonconsolidated affiliates. - 28 - 29 GENERAL MOTORS CORPORATION AND SUBSIDIARIES Consolidated Balance Sheet With GMAC on an Equity Basis Sept. 30, Dec. 31, Sept. 30, ASSETS 1994 1993 1993 ----------------------------------- (Dollars in Millions) Current Assets Cash and cash equivalents $8,222.8 $9,762.5 $7,383.6 Other marketable securities 1,099.1 722.5 774.4 --------- --------- --------- Total cash and marketable securities 9,321.9 10,485.0 8,158.0 Accounts and notes receivable Trade 7,584.8 5,563.1 13,559.5 Nonconsolidated affiliates 2,902.5 2,955.2 2,723.0 Inventories 10,345.4 8,615.1 10,068.2 Contracts in process 2,725.2 2,376.8 2,233.7 Prepaid expenses and deferred income taxes 8,613.2 8,036.3 7,104.8 --------- --------- --------- Total Current Assets 41,493.0 38,031.5 43,847.2 Equity in Net Assets of Nonconsolidated Affiliates 8,859.2 8,638.5 8,671.8 Deferred Income Taxes 15,283.6 14,874.1 14,097.1 Other Investments and Miscellaneous Assets 14,276.5 12,586.4 12,866.8 Property - Net 34,036.7 34,103.9 34,508.0 Intangible Assets 12,713.9 12,746.1 8,955.3 --------- --------- --------- Total Assets $126,662.9 $120,980.5 $122,946.2 ========= ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable $8,775.4 $9,546.5 $8,673.6 Loans payable 992.0 1,449.6 1,820.6 Income taxes payable 996.9 389.9 799.3 Accrued liabilities and deferred income taxes (including current portion of postretirement benefits other than pensions) 28,277.1 23,823.3 24,155.2 Stocks subject to repurchase 450.0 - - --------- --------- --------- Total Current Liabilities 39,491.4 35,209.3 35,448.7 Long-Term Debt 6,565.4 6,218.4 6,383.4 Payable to GMAC* 1,487.6 1,355.5 10,043.2 Capitalized Leases 154.2 165.2 171.5 Postretirement Benefits Other Than Pensions 36,863.4 35,423.6 34,823.7 Pensions 15,055.8 20,583.3 12,417.2 Other Liabilities and Deferred Income Taxes 16,178.7 14,739.7 15,330.0 Deferred Credits 1,246.5 1,238.0 1,292.1 Stocks Subject to Repurchase - 450.0 450.0 Stockholders' Equity 9,619.9 5,597.5 6,586.4 --------- --------- --------- Total Liabilities and Stockholders' Equity $126,662.9 $120,980.5 $122,946.2 ========= ========= ========= Certain September 1993 amounts were reclassified to conform with 1994 classifications. * Reference should be made to the note on the next page. - 29 - 30 GENERAL MOTORS CORPORATION AND SUBSIDIARIES * During 1986 through 1993, for marketing and financial reasons, GM assumed part of the dealer inventory financing previously provided by GMAC. Primarily to support these receivables, GM entered into a financing agreement with GMAC which provided that GMAC would extend loans to GM up to a maximum of $17 billion which would bear interest at floating market rates. GMAC serviced these receivables for GM for a fee. This financing agreement ensured that GMAC's ongoing funding activities would continue, and returned to GMAC the approximate amount of interest and fees it would have earned had it retained the dealer inventory financing business. As of December 1, 1993, GMAC resumed the financing of wholesale receivables and the amounts previously borrowed under this agreement with GMAC were repaid. This financing agreement has been terminated. Condensed Statement of Consolidated Cash Flows Nine Months Ended With GMAC on an Equity Basis September 30, ------------------- 1994 1993 ------------------- (Dollars in Millions) Net Cash Provided by Operating Activities $2,990.5 $5,953.6 -------- ------- Cash Flows from Investing Activities Expenditures for real estate, plants, and equipment (3,015.0) (2,457.8) Expenditures for special tools (1,564.1) (1,899.8) Change in other investing assets Investments in other marketable securities - acquisitions (1,585.0) (1,493.4) Investments in other marketable securities - liquidations 1,208.4 1,472.2 Finance receivables - 1,164.4 Other 130.1 (148.0) -------- ------- Net Cash Used in Investing Activities (4,825.6) (3,362.4) -------- ------- Cash Flows from Financing Activities Increase in long-term debt 791.7 898.4 Decrease in long-term debt (444.7) (1,371.5) Net increase (decrease) in payable to GMAC 132.1 (1,520.0) Proceeds from issuing common stocks 1,113.7 327.6 Cash dividends paid to stockholders (839.1) (812.8) Other (463.4) 43.0 -------- ------- Net Cash Provided by (Used in) Financing Activities 290.3 (2,435.3) -------- ------- Effect of Exchange Rate Changes on Cash and Cash Equivalents 5.1 20.1 -------- ------- Net increase (decrease) in cash and cash equivalents (1,539.7) 176.0 Cash and cash equivalents at beginning of the period 9,762.5 7,207.6 -------- ------- Cash and cash equivalents at end of the period $8,222.8 $7,383.6 ======== ======= Certain 1993 amounts were reclassified to conform with 1994 classifications. * * * * * * * * - 30 - 31 GENERAL MOTORS CORPORATION PART II AND SUBSIDIARIES ITEM 1. 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 quarter ended September 30, 1994 are summarized below. Other Matters With respect to the previously reported Government investigation, individual product liability claims and lawsuits and class actions relating to alleged safety defects in 1970-1991 Chevrolet and GMC full-size pickup trucks (the "C/K pickup trucks"), the following developments are reported: On October 17, 1994, the Secretary of Transportation, Federico Pena, announced his initial decision that a safety-related defect exists in 1971-91 GM C/K pickup trucks having side-mounted fuel tanks. In his announcement, it was indicated that his final decision as to whether a safety-related defect exists or to close the investigation, will be made after a public meeting scheduled for December 6, 1994. In an October 31, 1994 letter to the Department, GM offered to treat the Secretary's October 17 decision as his final decision and order for the purposes of allowing the Department to proceed directly and promptly to Federal court, in order that the matter may be resolved in a judicial forum. GM has consistently maintained that there is no basis for a finding that the trucks' side-mounted fuel tanks are in violation of Federal safety standards, or that a safety-related defect exists. Accordingly, GM has urged that the investigation be closed. The Department of Transportation has not disputed GM's contention that the trucks comply with the directly relevant Federal motor vehicle safety standard applicable to fuel system integrity in side impacts. Indeed, Secretary Pena's statement acknowledges that fact. GM also believes that Secretary Pena's assertion that the trucks present an unreasonable risk is contrary to the safety record of the trucks in more than 20 years of service. GM firmly believes that the government's investigative record does not support the initial decision announced by Secretary Pena. GM announced on October 17 that it is prepared to go to court to defend the safety of these trucks. * * * On October 24, 1994, a jury sitting in two cases consolidated for trial in the California Superior Court for the County of Los Angeles, both of which cases had been brought by individual plaintiffs, JEFFREY LANE V. HUGHES AIRCRAFT COMPANY and DAVID VILLALPANDO V. HUGHES AIRCRAFT COMPANY, rendered verdicts resulting in an aggregate award against Hughes in the amount of $89.5 million. $80 million of the award was for punitive damages and the remainder was for emotional distress and lost wages and benefits. One plaintiff alleged racial discrimination by Hughes with respect to pay and promotion, and both plantiffs alleged retaliation by Hughes. Hughes vigorously denies plaintiffs' allegations and has characterized the awards as irrational, irresponsible and outrageous. Hughes intends to seek a new trial or other post judgment relief from the trial court and, if necessary, will appeal. * * * Other Pending Legal Proceedings Reported in Previous 1994 Quarterly and Current Reports Reference is made to the Registrant's Quarterly Reports on Form 10-Q for the quarters ended March 31 and June 30, 1994 and the Current Report on Form 8-K dated May 13, 1994 and filed on August 30, 1994. * * * - 31 - 32 GENERAL MOTORS CORPORATION AND SUBSIDIARIES ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS. Exhibit Number Exhibit Name Page No. - -------------- ------------------------------------------------ -------- 11 Computation of Earnings Per Share Attributable to Common Stocks for the Quarters and Nine Months Ended September 30, 1994 and 1993. 33 12 Computation of Ratios of Earnings to Fixed Charges for the Nine Months Ended September 30, 1994 and 1993. 37 99(a) Electronic Data Systems Corporation and Subsidiaries Consolidated Financial Statements and Management's Discussion and Analysis. 38 (b) GM Hughes Electronics Corporation and Subsidiaries Consolidated Financial Statements and Management's Discussion and Analysis. 44 27 Financial Data Schedule (for SEC information only) (b) REPORTS ON FORM 8-K. One report on Form 8-K dated May 13, 1994, was filed during the quarter ended September 30, 1994 reporting matters under Item 5, Other Events. * * * * * * SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. GENERAL MOTORS CORPORATION ------------------------------- (Registrant) By s/Leon J. Krain ------------------------------- Date November 14, 1994 (Leon J. Krain, Vice President - ---------------------- and Group Executive) By s/Wallace W. Creek ------------------------------- Date November 14, 1994 (Wallace W. Creek, Comptroller) - ---------------------- - 32 - EX-11 2 l:\secfiles\10-Q\3rdqtr94\exhib11.doc 4 1 GENERAL MOTORS CORPORATION EXHIBIT 11 AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE ATTRIBUTABLE TO COMMON STOCKS Quarter Ended September 30, 1994 ----------------------------- $1-2/3 Par Value Class E Class H Common Common Common Stock Stock Stock ----------------------------- (Dollars in Millions Except Per Share Amounts) Net income attributable to stocks $378.1 $117.3 $56.6 Dividends on preference stocks 72.1 - - ----- ----- ---- Earnings attributable to common stocks 306.0 117.3 56.6 Dividends on common stocks 150.6 31.4 18.5 ----- ----- ---- Undistributed earnings 155.4 85.9 38.1 Adjustments Change in earnings attributable to each class of common stock related to the assumed exercise of stock options * (1.3) - 1.3 Dividends on assumed common stock transactions (0.9) - (0.4) ----- ----- ---- Adjusted earnings attributable to common stocks $153.2 $85.9 $39.0 ===== ===== ==== Weighted average shares outstanding (in millions) 752.7 261.2 92.7 Adjustment Assumed exercise of dilutive stock options * 4.5 - 2.1 ----- ----- ---- Adjusted weighted average shares outstanding 757.2 261.2 94.8 ===== ===== ==== Per Share Data Earnings per share attributable to undistributed earnings on common stocks $0.20 $0.33 $0.41 Dividends 0.20 0.12 0.20 ---- ---- ---- Earnings per share attributable to common stocks $0.40 $0.45 $0.61 ==== ==== ==== Note: The difference between fully diluted and primary earnings per share is immaterial. * The assumed exercise of stock options reflected by these adjustments has no effect on Class E or Class H common stock earnings per share, because to the extent that shares of Class E or Class H common stock deemed to be outstanding would increase, such increased shares would also increase the numerator of the fraction used to determine Available Separate Consolidated Net Income. - 33 - 2 GENERAL MOTORS CORPORATION AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE ATTRIBUTABLE TO COMMON STOCKS Quarter Ended September 30, 1993 ----------------------------- $1-2/3 Par Value Class E Class H Common Common Common Stock Stock Stock ----------------------------- (Dollars in Millions Except Per Share Amounts) Net income (loss) attributable to stocks ($260.2) $98.4 $48.9 Dividends on preference stocks 86.8 - - ----- ---- ---- Earnings (Loss) attributable to common stocks (347.0) 98.4 48.9 Dividends on common stocks 141.9 25.0 15.7 ----- ---- ---- Undistributed earnings (loss) (488.9) 73.4 33.2 Adjustments Change in earnings attributable to each class of common stock related to the assumed share transactions * (2.5) 1.0 1.5 Dividends on assumed common stock transactions (0.9) (0.2) (0.5) ----- ---- ---- Adjusted earnings (loss) attributable to common stocks ($492.3) $74.2 $34.2 ===== ==== ==== Weighted average shares outstanding (in millions) 709.6 246.6 87.4 Adjustments Shares issued on assumed conversion of preference stocks * - 2.4 - Assumed exercise of dilutive stock options * 4.3 0.1 2.7 ----- ----- ---- Adjusted weighted average shares outstanding 713.9 249.1 90.1 ===== ===== ==== Per Share Data Earnings (Loss) per share attributable to undistributed earnings (loss) on common stocks ($0.69) $0.30 $0.38 Dividends 0.20 0.10 0.18 ---- ---- ---- Earnings (Loss) per share attributable to common stocks ($0.49) $0.40 $0.56 ==== ==== ==== Note: The difference between fully diluted and primary earnings per share is immaterial. * The assumed conversion of preference stocks and exercise of stock options reflected by these adjustments has no effect on Class E or Class H common stock earnings per share, because to the extent that shares of Class E or Class H common stock deemed to be outstanding would increase, such increased shares would also increase the numerator of the fraction used to determine Available Separate Consolidated Net Income. - 34 - 3 GENERAL MOTORS CORPORATION AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE ATTRIBUTABLE TO COMMON STOCKS Nine Months Ended September 30, 1994 ---------------------------- $1-2/3 Par Value Class E Class H Common Common Common Stock Stock Stock ---------------------------- (Dollars in Millions Except Per Share Amounts) Net income attributable to stocks (before cumulative effect of accounting change) $3,582.0 $315.9 $188.7 Dividends on preference stocks 248.6 - - ------- ----- ----- Earnings attributable to common stocks 3,333.4 315.9 188.7 Dividends on common stocks 442.0 93.5 55.0 ------- ----- ----- Undistributed earnings 2,891.4 222.4 133.7 Adjustments Add-back dividends on assumed conversion of preference stock 32.4 - - Change in earnings attributable to each class of common stock related to the assumed exercise of stock options * (4.3) - 4.3 Dividends on assumed common stock transactions (10.0) - (1.2) ------- ----- ----- Adjusted earnings attributable to common stocks $2,909.5 $222.4 $136.8 ======= ===== ===== Weighted average shares outstanding (in millions) 737.1 259.7 91.7 Adjustments Shares issued on assumed conversion of preference stock 11.0 - - Assumed exercise of dilutive stock options * 5.7 - 2.1 ----- ----- ---- Adjusted weighted average shares outstanding 753.8 259.7 93.8 ===== ===== ==== Per Share Data Earnings per share attributable to undistributed earnings on common stocks (before cumulative effect of accounting change) $3.86 $0.86 $1.46 Cumulative effect of accounting change at January 1, 1994 (1.05) - (0.08) Dividends 0.60 0.36 0.60 ---- ---- ---- Earnings per share attributable to common stocks $3.41 $1.22 $1.98 ==== ==== ==== Note: The difference between fully diluted and primary earnings per share is immaterial. * The assumed exercise of stock options reflected by these adjustments has no effect on Class E or Class H common stock earnings per share, because to the extent that shares of Class E or Class H common stock deemed to be outstanding would increase, such increased shares would also increase the numerator of the fraction used to determine Available Separate Consolidated Net Income. - 35 - 4 GENERAL MOTORS CORPORATION AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE ATTRIBUTABLE TO COMMON STOCKS Nine Months Ended September 30, 1993 ----------------------------- $1-2/3 Par Value Class E Class H Common Common Common Stock Stock Stock ----------------------------- (Dollars in Millions Except Per Share Amounts) Net income attributable to stocks $885.9 $260.2 $143.3 Dividends on preferred and preference stocks 270.0 - - ----- ----- ----- Earnings attributable to common stocks 615.9 260.2 143.3 Dividends on common stocks 425.0 72.1 48.5 ----- ----- ----- Undistributed earnings 190.9 188.1 94.8 Adjustments Add-back dividends on assumed conversion of preference stocks 4.6 - - Change in earnings attributable to each class of common stock related to the assumed share transactions * (13.6) 10.2 3.4 Dividends on assumed common stock transactions (1.3) (2.8) (1.2) ----- ----- ----- Adjusted earnings attributable to common stocks $180.6 $195.5 $97.0 ===== ===== ===== Weighted average shares outstanding (in millions) 708.3 239.4 88.5 Adjustments Shares issued on assumed conversion of preference stocks * - 9.3 - Assumed repurchase of common stock subject to put options - - 0.3 Assumed exercise of dilutive stock options * 2.2 0.1 1.8 ----- ----- ---- Adjusted weighted average shares outstanding 710.5 248.8 90.6 ===== ===== ==== Per Share Data Earnings per share attributable to undistributed earnings on common stocks $0.25 $0.79 $1.07 Dividends 0.60 0.30 0.54 ---- ---- ---- Earnings per share attributable to common stocks $0.85 $1.09 $1.61 ==== ==== ==== Note: The difference between fully diluted and primary earnings per share is immaterial. * The assumed conversion of preference stocks and exercise of stock options reflected by these adjustments has no effect on Class E or Class H common stock earnings per share, because to the extent that shares of Class E or Class H common stock deemed to be outstanding would increase, such increased shares would also increase the numerator of the fraction used to determine Available Separate Consolidated Net Income. - 36 - EX-12 3 l:\secfiles\10-Q\3rdqtr94\exhib12.doc 1 1 GENERAL MOTORS CORPORATION EXHIBIT 12 AND SUBSIDIARIES COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES Nine Months Ended September 30, --------------------- 1994 1993 --------------------- (Dollars in Millions) Income before cumulative effect of accounting change $4,086.6 $1,289.4 United States, foreign, and other income taxes 1,905.3 183.8 Equity in (income) losses of associates (9.2) 66.5 Cash dividends received from associates 8.6 4.8 Amortization of capitalized interest 37.7 42.1 -------- ------- Income before income taxes, undistributed (income) losses of associates, and amortization of capitalized interest 6,029.0 1,586.6 -------- ------- Fixed charges included in net income Interest and related charges on debt 3,651.0 4,266.9 Portion of rentals deemed to be interest 334.5 337.1 -------- ------- Total fixed charges included in net income 3,985.5 4,604.0 -------- ------- Earnings available for fixed charges $10,014.5 $6,190.6 ======== ======= Fixed charges Fixed charges included in net income $3,985.5 $4,604.0 Interest capitalized in the period 21.1 30.3 -------- ------- Total fixed charges $4,006.6 $4,634.3 ======== ======= Ratios of earnings to fixed charges 2.50 1.34 ==== ==== Certain amounts for 1993 have been reclassified to conform with 1994 classifications. - 37 - EX-99 4 l:\secfiles\10-Q\3rdqtr94\exhib99a.doc 6 1 EXHIBIT 99(a) ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS AND MANAGEMENT'S DISCUSSION AND ANALYSIS - ---------------------------------------------------------------------------- Consolidated Statements of Income Nine Months Ended Third Quarter September 30, ----------------- ------------------ 1994 1993 1994 1993 ----------------- ------------------ (in millions except per share amounts) Revenues Systems and other contracts GM and affiliates $879.5 $787.1 $2,577.4 $2,467.8 Outside customers 1,643.3 1,283.0 4,472.1 3,737.5 Interest and other income 42.1 14.2 88.7 42.7 ------- ------- ------- ------- Total revenues 2,564.9 2,084.3 7,138.2 6,248.0 ------- ------- ------- ------- Costs and expenses Cost of revenues 1,920.7 1,545.1 5,356.7 4,688.9 Selling, general, and administrative 288.8 231.7 829.1 719.4 Interest 17.3 8.1 37.8 25.5 ------- ------- ------- ------- Total costs and expenses 2,226.8 1,784.9 6,223.6 5,433.8 ------- ------- ------- ------- Income before income taxes 338.1 299.4 914.6 814.2 Provision for income taxes 121.7 107.8 329.2 293.1 ------- ------- ------- ------- Separate Consolidated Net Income $216.4 $191.6 $585.4 $521.1 ======= ======= ======= ======= Available Separate Consolidated Net Income (Note 1) Average number of shares of GM Class E common stock outstanding (in millions) (Numerator) 261.2 246.6 259.7 239.4 Class E dividend base (in millions) (Denominator) 481.7 480.5 481.6 480.2 Available Separate Consolidated Net Income $117.3 $98.4 $315.9 $260.2 ===== ===== ===== ===== Earnings Attributable to GM Class E Common Stock on a Per Share Basis (Note 1) $0.45 $0.40 $1.22 $1.09 ==== ==== ==== ==== See accompanying notes to consolidated financial statements. - 38 - 2 ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets September 30, December 31, 1994 1993 --------------------------- (in millions) Assets Current assets Cash and cash equivalents $354.8 $383.4 Marketable securities 241.3 224.1 Accounts receivable 1,785.6 1,412.5 Accounts receivable from GM and affiliates 150.4 112.6 Inventories 188.1 130.7 Prepaids and other 309.8 243.5 ------- ------- Total current assets 3,030.0 2,506.8 ------- ------- Property and equipment, at cost less accumulated depreciation of $2,693.8 at September 30, 1994 and $2,405.7 at December 31, 1993 Land 124.8 121.6 Buildings and facilities 549.3 532.0 Computer equipment 1,674.6 1,275.5 Other equipment and furniture 187.9 185.6 ------- ------- Total property and equipment, net 2,536.6 2,114.7 ------- ------- Operating and other assets Land held for development, at cost 97.4 94.4 Investment in leases and other 1,266.3 1,159.9 Software, goodwill, and other intangibles, net 1,116.2 1,066.3 ------- ------- Total operating and other assets 2,479.9 2,320.6 ------- ------- Total Assets $8,046.5 $6,942.1 ======= ======= Liabilities and Stockholder's Equity Current liabilities Accounts payable $450.5 $359.8 Accrued liabilities 1,156.2 996.0 Deferred revenue 471.8 429.7 Income taxes 204.9 202.2 Notes payable 163.6 172.7 ------- ------- Total current liabilities 2,447.0 2,160.4 ------- ------- Deferred income taxes 652.8 641.5 ------- ------- Notes payable 869.5 522.8 ------- ------- Stockholder's equity Common stock, without par value; authorized 1,000.0 shares. Issued and outstanding 481.7 shares at September 30, 1994 and 480.9 shares at December 31, 1993 454.8 421.2 Retained earnings 3,622.4 3,196.2 ------- ------- Total stockholder's equity 4,077.2 3,617.4 ------- ------- Total Liabilities and Stockholder's Equity $8,046.5 $6,942.1 ======= ======= See accompanying notes to consolidated financial statements. - 39 - 3 ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows Nine Months Ended Third Quarter September 30, --------------- ----------------- 1994 1993 1994 1993 --------------- ----------------- (in millions) Cash Flows from Operating Activities Net income $216.4 $191.6 $585.4 $521.1 ----- ----- ------- ----- Adjustments to reconcile net income to net cash provided by operating activities (net of effects of acquired companies) Depreciation and amortization 162.1 153.7 505.2 456.3 Increase in accounts receivable (269.5) (74.8) (332.5) (96.6) Increase in accounts receivable from GM and affiliates (124.1) (50.5) (33.4) (22.7) Increase in inventories (14.2) (12.0) (54.5) (38.8) (Increase) decrease in prepaids and other 3.0 (22.1) (55.7) (36.6) Increase (decrease) in accounts payable and accrued liabilities 123.2 103.6 140.2 (11.4) Increase in deferred revenue 23.9 46.3 26.3 26.9 Increase (decrease) in income taxes 112.6 32.4 (2.6) (0.4) Increase (decrease) in deferred income taxes (64.3) 43.6 15.3 119.3 ----- ----- ------- ----- Total adjustments (47.3) 220.2 208.3 396.0 ----- ----- ------- ----- Net cash provided by operating activities 169.1 411.8 793.7 917.1 ----- ----- ------- ----- Cash Flows from Investing Activities Payments for purchase of marketable securities (98.7) (137.6) (220.7) (242.3) Proceeds from sale of marketable securities 84.8 110.5 199.2 193.2 Payments related to land held for development (1.6) (2.0) (3.0) (6.8) Payments for investment in leases and other (94.4) (112.1) (404.5) (257.6) Proceeds from investment in leases and other 155.5 139.5 301.8 296.1 Payments for purchase of software, goodwill, and other intangibles 16.4 (31.3) (23.5) (57.5) Payments for purchase of property and equipment (358.1) (300.1) (785.4) (652.4) Payments related to acquisition of outside companies, net of cash acquired (21.9) 53.2 (70.5) (49.7) ----- ----- ------- ----- Net cash used in investing activities ($318.0)($279.9)($1,006.6) ($777.0) ----- ----- ------- ----- See accompanying notes to consolidated financial statements. - 40 - 4 ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES Nine Months Ended Third Quarter September 30, --------------- ----------------- 1994 1993 1994 1993 --------------- ----------------- (in millions) Cash Flows from Financing Activities Net increase (decrease) in current notes payable with maturities less than 90 days $10.1 $47.5 ($90.9) $138.3 Payments on notes payable (84.7) (13.2) (138.8) (177.9) Proceeds from notes payable 47.0 2.2 527.2 53.7 Proceeds from issuance of common stock 0.6 4.2 33.6 46.2 Cash dividends paid to GM (57.8) (48.0) (173.3) (144.0) ----- ----- ----- ----- Net cash provided by (used in) financing activities (84.8) (7.3) 157.8 (83.7) ----- ----- ----- ----- Effect of Exchange Rate Changes on Cash and Cash Equivalents 14.1 (2.9) 26.5 (6.2) ----- ----- ----- ----- Net Increase (Decrease) in Cash and Cash Equivalents (219.6) 121.7 (28.6) 50.2 Cash and Cash Equivalents at Beginning of Period 574.4 350.4 383.4 421.9 ----- ----- ----- ----- Cash and Cash Equivalents at End of Period $354.8 $472.1 $354.8 $472.1 ===== ===== ===== ===== See accompanying notes to consolidated financial statements. Notes to Consolidated Financial Statements In the opinion of management, the interim consolidated financial statements reflect all adjustments, consisting of only normal recurring items (with the exception of the accounting change in 1994 to adopt Statement of Financial Accounting Standards (SFAS) No. 115, Accounting for Certain Investments in Debt and Equity Securities, as described in Note 2), which are necessary for a fair presentation of the results for the interim periods presented. The results for interim periods are not necessarily indicative of results which may be expected for any other interim period or for the full year. These consolidated financial statements should be read in conjunction with the consolidated financial statements, the summary of significant accounting policies, and the other notes to the consolidated financial statements included in General Motors' 1993 Annual Report to the SEC on Form 10-K. Note 1. The consolidated financial statements of EDS do not reflect the purchase accounting adjustments arising as a result of the acquisition of EDS by GM. Earnings Attributable to GM Class E Common Stock on a Per Share Basis have been determined based on the relative amounts available for the payment of dividends to holders of GM Class E common stock. Holders of GM Class E common stock have no direct rights in the equity or assets of EDS, but rather have rights in the equity and assets of GM (which includes 100% of the stock of EDS). Dividends on the GM Class E common stock are declared out of the Available Separate Consolidated Net Income of EDS earned since the acquisition of EDS by GM. The Available Separate Consolidated Net Income of EDS is determined quarterly and is equal to the separate consolidated net - 41 - 5 ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES income of EDS, excluding the effects of purchase accounting adjustments arising from the acquisition of EDS, multiplied by a fraction, the numerator of which is a number equal to the weighted average number of shares of GM Class E common stock outstanding during the period and the denominator of which was 481.7 million during the third quarter of 1994. The comparable denominator for the third quarter of 1993 was 480.5 million. The denominator used in determining the Available Separate Consolidated Net Income of EDS is adjusted as deemed appropriate by the GM Board of Directors to reflect subdivisions or combinations of the GM Class E common stock and to reflect certain transfers of capital to or from EDS. In 1988, EDS initiated a program to repurchase 11.0 million shares of GM Class E common stock in order to meet certain future requirements of the Company's employee benefit plans. The GM Board has generally caused the denominator used in calculating the Available Separate Consolidated Net Income of EDS to decrease as shares are purchased and to increase as shares are used for the employee benefit plans. The current GM Board policy is that the cash dividends on the GM Class E common stock, when, as, and if declared by the GM Board in its sole discretion, will equal approximately 30% of the Available Separate Consolidated Net Income of EDS for the prior year. Consistent with Delaware law, which governs the amount legally available for the payment of dividends on GM's common stock, the GM Board of Directors has determined that such amount is materially higher than GM's capital surplus plus net income retained for use in the business (less accumulated deficit). Note 2. EDS adopted SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities, on January 1, 1994. This statement requires that certain investments in debt and equity securities be classified into one of three categories: held-to-maturity, available-for-sale, or trading. The implementation of this Standard had an immaterial effect on the consolidated financial statements. * * * * * Management's Discussion and Analysis Result of Operations - --------------------- EDS signed $1.4 billion in new business during the quarter ended September 30, 1994, bringing the total of new business signed for the year to $7.4 billion. This compares to $4.3 billion signed during the first nine months of 1993. Total revenue for the quarter ended and nine months ended September 30, 1994 rose $480.6 million and $890.2 million, respectively, over the comparable quarter and nine-month period in the prior year to $2,564.9 million and $7,138.2 million, respectively. Revenues related to GM and affiliates amounted to $879.5 million and $787.1 million for the third quarter ended September 30, 1994 and 1993, respectively, and $2,577.4 million and $2,467.8 million for the nine months ended September 30, 1994 and 1993, respectively. The growth of non-GM revenue during the third quarter and nine-month period ending September 30, 1994, when compared to the corresponding periods in 1993, was 30% and 21%, respectively. This growth results from several new contracts and improved performance of existing contracts. GM revenue increased 11.7% and 4.4% during the third quarter and nine-month period ending September 30, 1994, respectively, when compared with the same period in 1993. While it is anticipated that GM will continue to contribute a significant portion of systems revenue, the percentage of revenue from GM and subsidiaries will continue to decline as non-GM revenues continue to increase. - 42 - 6 ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES Total costs and expenses as a percentage of systems and other contracts revenue remained relatively flat at 88.3% for both the quarter and nine months ended September 30, 1994, when compared to the corresponding periods in 1993. For the quarter and nine-month periods ended September 30, 1994, EDS' separate consolidated net income increased 12.9% to $216.4 million and 12.3% to $585.4 million, respectively, when compared to net income of $191.6 million and $521.1 million for the respective periods of last year. Earnings per share of GM Class E common stock rose from $0.40 to $0.45, or 12.5%, for the third quarter of 1994 when compared to the third quarter of 1993. Year-to- date earnings per share increased from $1.09 to $1.22, or 11.9% over 1993. EDS' effective tax rate remained at 36% for the quarter. Liquidity and Capital Resources - ------------------------------- EDS maintained a strong liquidity and capital structure during the third quarter. The current ratio improved to 1.24-to-1 at September 30, 1994 from 1.16-to-1 at December 31, 1993. Return on assets was 10.6% for the first nine months of 1994 compared to 10.9% for the same period of 1993. Return on equity was 20.9% for the first nine months of 1994 compared to 21.7% for the same period of 1993. The noncurrent debt-to-capital ratio was 18% at September 30, 1994 and 13% at December 31, 1993. At September 30, 1994, EDS' capital consisted of $869.5 million in noncurrent notes payable and $4,077.2 million in stockholder's equity. Total debt was $1,033.1 million at September 30, 1994 and represented a 49% increase from total debt of $695.5 million at December 31, 1993. Debt, which consists largely of commercial paper, increased primarily to support specific working capital needs related to new business during 1994. The total debt-to- capital ratio (includes current debt as a component of capital) was 20.2% at September 30, 1994 and 16.1% at December 31, 1993. EDS continued to maintain a strong cash position. Overall cash and cash equivalents decreased $28.6 million from the end of 1993 to $354.8 million at the end of the third quarter. Cash flows from operations decreased from $917.1 million during the first nine months of 1993 to $793.7 million during the same period of 1994. Cash flows from operations decreased $242.7 million during the third quarter of 1994 when compared to the third quarter of 1993. The changes in cash flows from operations principally reflect the timing of receipts and disbursements. Cash used in investing activities was $318.0 million and $1,006.6 million for the quarter and first nine months of 1994, respectively, compared with $279.9 million and $777.0 million, respectively, for the corresponding periods in 1993. The increased use of cash during the first nine months of 1994 is due to expenditures supporting the growth of business. Net cash provided by (used in) financing activities was ($84.8) million and $157.8 million for the quarter and first nine months of 1994, respectively, compared to ($7.3) million and ($83.7) million, respectively, for the same periods last year. The changes in cash flows from financing activities is principally due to the issuance of long-term debt. During the quarter, EDS made net additions to property and equipment of $360.3 million and net additions to software, goodwill, and other intangibles of $6.5 million. EDS paid cash dividends to GM totaling $57.8 million in the third quarter and has consistently paid cash dividends since 1974. * * * * * - 43 - EX-99 5 l:\secfiles\10-Q\3rdqtr94\exhib99b.doc 4 1 EXHIBIT 99(b) GM HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS AND MANAGEMENT'S DISCUSSION AND ANALYSIS - ------------------------------------------------------------------------------ Statement of Consolidated Operations and Available Separate Consolidated Net Income Nine Months Ended Third Quarter September 30, ------------------ ------------------ 1994 1993 1994 1993 ------------------ ------------------ (Dollars in Millions Except per Share Amounts) Revenues Net sales Outside customers $2,264.1 $2,293.9 $6,760.5 $6,591.9 General Motors and affiliates 1,056.7 925.8 3,638.9 3,106.8 Other income - net (Note 1) 33.7 100.2 78.3 117.8 ------- ------- ------- ------- Total Revenues 3,354.5 3,319.9 10,477.7 9,816.5 ------- ------- ------- ------- Costs and Expenses Cost of sales and other operating charges, exclusive of items listed below 2,599.4 2,585.9 8,103.9 7,698.2 Selling, general, and administrative expenses 237.6 227.0 678.1 671.3 Depreciation and amortization 119.2 125.1 348.1 356.4 Amortization of GM purchase accounting adjustments related to Hughes 31.0 30.9 92.9 92.8 Interest expense - net 5.9 16.3 15.4 35.3 ------- ------- ------- ------- Total Costs and Expenses 2,993.1 2,985.2 9,238.4 8,854.0 ------- ------- ------- ------- Income before Income Taxes 361.4 334.7 1,239.3 962.5 United States, foreign, and other income taxes 148.2 141.6 508.2 410.0 ------- ------- ------- ------- Income before cumulative effect of accounting change 213.2 193.1 731.1 552.5 Cumulative effect of accounting change (Note 2) - - (30.4) - ------- ------- ------- ------- Net Income 213.2 193.1 700.7 552.5 Adjustments to exclude the effect of GM purchase accounting adjustments related to Hughes (Note 3) 31.0 30.9 92.9 92.8 ------- ------- ------- ------- Earnings Used for Computation of Available Separate Consolidated Net Income $244.2 $224.0 $793.6 $645.3 ======= ======= ======= ======== Available Separate Consolidated Net Income (Note 3) Average number of shares of GM Class H Common Stock outstanding (in millions) (Numerator) 92.7 87.4 91.7 88.5 Class H dividend base (in millions) (Denominator) 399.9 399.9 399.9 399.9 Available Separate Consolidated Net Income $56.6 $48.9 $181.9 $143.3 ======= ======= ======= ======= Earnings Attributable to GM Class H Common Stock on a Per Share Basis (Note 3) Before cumulative effect of accounting change $0.61 $0.56 $2.06 $1.61 Cumulative effect of accounting change (Note 2) - - (0.08) - ---- ---- ---- ---- Net earnings attributable to GM Class H Common Stock $0.61 $0.56 $1.98 $1.61 ==== ==== ==== ==== Reference should be made to the Notes to Consolidated Financial Statements. - 44 - 2 GM HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES Consolidated Balance Sheet September 30, December 31, ASSETS 1994 1993 --------------------------- (Dollars in Millions Except Per Share Amount) Current Assets Cash and cash equivalents $1,047.1 $1,008.7 Accounts and notes receivable Trade receivables (less allowances) 750.4 736.7 General Motors and affiliates 132.6 404.1 Contracts in process, less advances and progress payments 2,725.2 2,376.8 Inventories (less allowances) Productive material, work in process, and supplies 1,200.4 957.1 Finished product 115.7 103.3 Prepaid expenses, including deferred income taxes 183.2 127.6 -------- -------- Total Current Assets 6,154.6 5,714.3 Property-Net 2,591.7 2,634.4 Telecommunications and Other Equipment - Net 963.7 767.6 Intangible Assets, net of amortization 3,283.7 3,374.4 Investments and Other Assets, including deferred income taxes - principally at cost (less allowances) 1,578.6 1,626.4 -------- -------- Total Assets $14,572.3 $14,117.1 ======== ======== LIABILITIES AND STOCKHOLDER'S EQUITY Current Liabilities Accounts payable Outside $665.5 $717.1 General Motors and affiliates 70.6 117.5 Advances on contracts 590.6 660.6 Notes and loans payable 125.4 77.8 United States, foreign, and other income taxes payable 74.7 102.1 Accrued liabilities 1,779.4 1,874.0 -------- -------- Total Current Liabilities 3,306.2 3,549.1 -------- -------- Long-Term Debt and Capitalized Leases 356.8 416.8 -------- -------- Postretirement Benefits Other Than Pensions (Note 4) 1,534.5 1,446.3 -------- -------- Other Liabilities, Deferred Income Taxes, and Deferred Credits 1,589.9 1,376.8 -------- -------- Stockholder's Equity Capital stock (outstanding, 1,000 shares, $0.10 par value) and additional paid-in capital 6,326.2 6,323.1 Net income retained for use in the business 1,598.9 1,138.2 -------- -------- Subtotal 7,925.1 7,461.3 Minimum pension liability adjustment (120.4) (120.4) Accumulated foreign currency translation adjustments (19.8) (12.8) -------- -------- Total Stockholder's Equity 7,784.9 7,328.1 -------- -------- Total Liabilities and Stockholder's Equity $14,572.3 $14,117.1 ======== ======== Reference should be made to the Notes to Consolidated Financial Statements. - 45 - 3 GM HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES Condensed Statement of Consolidated Cash Flows Nine Months Ended September 30, ------------------ 1994 1993 ------------------ (Dollars in Millions) Net Cash Provided by Operating Activities $565.2 $1,192.7 ------- ------- Cash Flows from Investing Activities Investment in companies, net of cash acquired - (47.2) Expenditures for property and special tools (292.6) (243.0) Expenditures for telecommunications and other equipment (205.3) (76.1) Proceeds from disposals of property 22.6 47.4 Net collections on notes receivable 200.9 1.2 Other - 1.4 ------- ------- Net Cash Used in Investing Activities (274.4) (316.3) ------- ------- Cash Flows from Financing Activities Net increase (decrease) in notes and loans payable 47.6 (52.5) Increase in long-term debt 7.5 73.7 Decrease in long-term debt (67.5) (275.9) Cash dividends paid to General Motors (240.0) (216.0) ------- ------- Net Cash Used in Financing Activities (252.4) (470.7) ------- ------- Net increase in cash and cash equivalents 38.4 405.7 Cash and cash equivalents at beginning of the period 1,008.7 702.7 ------- ------- Cash and cash equivalents at end of the period $1,047.1 $1,108.4 ======= ======= Certain amounts for 1993 have been reclassified to conform with 1994 classifications. Reference should be made to the Notes to Consolidated Financial Statements. Notes To Consolidated Financial Statements In the opinion of management, the interim consolidated financial statements reflect all adjustments, consisting of only normal recurring items (with the exception of the accounting change in 1994 to adopt Statement of Financial Accounting Standards (SFAS) No. 112, Employers' Accounting for Postemployment Benefits, as described in Note 2), which are necessary for a fair presentation of the results for the interim periods presented. The results for interim periods are not necessarily indicative of results which may be expected for any other interim period or for the full year. These consolidated financial statements should be read in conjunction with the consolidated financial statements, the summary of significant accounting policies, and the other notes to the consolidated financial statements included in General Motors' 1993 Annual Report to the SEC on Form 10-K. Note 1. Other income-net for the third quarter of 1993 and nine months ended September 30, 1993 includes an $89.7 million pre-tax gain on the sale of GMHE's interest in Japan Communications Satellite Company, Inc. (JCSAT). Note 2. Effective January 1, 1994, GMHE adopted SFAS No. 112. The Standard requires accrual of the costs of benefits provided to former or inactive employees after employment, but before retirement. The unfavorable cumulative effect of adopting this Standard was $30.4 million, net of income taxes of $19.2 million, or $0.08 per share of GM Class H common stock. The noncash charge is primarily related to Delco Electronics Corporation's extended-disability benefit program in the U.S. which, under the new accounting Standard, will be accrued on a service-driven basis. The ongoing effect was not material. - 46 - 4 GM HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES Note 3. Earnings attributable to General Motors Class H common stock on a per share basis have been determined based on the relative amounts available for the payment of dividends to holders of the GM Class H common stock. Holders of GM Class H common stock have no direct rights in the equity or assets of GMHE, but rather have rights in the equity and assets of GM (which includes 100% of the stock of GMHE). Dividends on the GM Class H common stock are declared by GM's Board of Directors out of the Available Separate Consolidated Net Income of GMHE since the acquisition of Hughes Aircraft Company (Hughes) by GM. The Available Separate Consolidated Net Income of GMHE is determined quarterly and is equal to the separate consolidated net income of GMHE, excluding the effects of GM purchase accounting adjustments arising from the acquisition of Hughes (Earnings Used for Computation of Available Separate Consolidated Net Income), multiplied by a fraction, the numerator of which is a number equal to the weighted average number of shares of GM Class H common stock outstanding during the period and the denominator of which was 399.9 million during the third quarters of 1994 and 1993. The denominator used in determining the Available Separate Consolidated Net Income of GMHE is adjusted as deemed appropriate by the GM Board of Directors to reflect subdivisions or combinations of the GM Class H common stock and to reflect certain transfers of capital to or from GMHE. In this regard, the GM Board has generally caused the denominator to decrease as shares are purchased by GMHE and to increase as such shares are used, at GMHE expense, for GMHE employee benefit plans or acquisitions. Dividends may be paid on GM Class H common stock only when, as, and if declared by the GM Board of Directors in its sole discretion. The current policy of the GM Board with respect to GM Class H common stock is to pay cash dividends approximately equal to 35% of the Available Separate Consolidated Net Income of GMHE for the prior year. In February 1994, the GM Board increased the quarterly dividends on Class H common stock from $0.18 per share to $0.20 per share. Notwithstanding the current dividend policy, the dividends paid and to be paid on the GM Class H Common Stock during 1994 and 1993 exceeds 35% of the Available Separate Consolidated Net Income (Loss) of GMHE for the preceding year. The GM Board determined that 1992 Available Separate Consolidated Net Income of GMHE used as a basis for 1993 dividends was calculated without giving effect to the $749.4 million after-tax special restructuring charge at Hughes. Consistent with Delaware law, which governs the amount legally available for the payment of dividends on GM's common stock, the GM Board of Directors has determined that such amount is materially higher than GM's capital surplus plus net income retained for use in the business (less accumulated deficit). Note 4. GMHE has disclosed in the financial statements certain amounts associated with estimated future postretirement benefits other than pensions and characterized such amounts as "accumulated postretirement benefit obligations", "liabilities", or "obligations". Notwithstanding the recording of such amounts and the use of these terms, GMHE does not admit or otherwise acknowledge that such amounts or existing postretirement benefit plans of GMHE (other than pensions) represent legally enforceable liabilities of GMHE. Management's Discussion and Analysis* Results of Operations - --------------------- GMHE reported third quarter earnings, before the effect of purchase accounting adjustments related to General Motors' acquisition of Hughes, of $244.2 million, a 9.0% increase from the $224.0 million reported in the third quarter of 1993. Earnings per share of GM Class H common stock, on the same basis, increased 8.9% to $0.61 per share from $0.56 per share in the comparable period of 1993. * The following discussion excludes the purchase accounting adjustments related to GM's acquisition of Hughes (see Supplemental Data beginning on page 50). - 47 - 5 GM HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES For the first nine months of 1994, excluding the unfavorable effect of an accounting change related to postemployment benefits recorded in the first quarter ($30.4 million after tax, or $0.08 per GM Class H share), earnings increased 27.7% to $824.0 million, from $645.3 million recorded in the first nine months of 1993. Earnings per share on the same basis increased 28.0% to $2.06 from $1.61 per share in the first nine months of 1993. Revenues for the quarter were $3,354.5 million, a 1.0% increase over the $3,319.9 million recorded in 1993's third quarter. Revenues for the first nine months of 1994 increased to $10,477.7 million, a 6.7% increase from the $9,816.5 million in 1993's first nine months. Costs and expenses as a percentage of revenues decreased to 88.3% in the quarter from 89.0% in the third quarter of 1993. For the nine months ended September 30, 1994, costs and expenses as a percentage of revenues decreased to 87.3% from 89.2% in the comparable 1993 period. Income taxes were $148.2 million, or 37.8% of income before income taxes, for the quarter compared with $141.6 million, or 38.7% of income before income taxes, in the comparable quarter of 1993. For the first nine months, income taxes, excluding the cumulative effect of the accounting change, were $508.2 million, or 38.1% of income before taxes, compared with $410.0 million, or 38.9% of income before taxes, in the comparable 1993 period. Operating profit was $364.6 million for the third quarter, a 29.4% increase from the operating profit of $281.7 million posted for the comparable period of 1993. The operating profit margin improved to 11.0% for the quarter, compared with 8.7% in the same quarter of 1993. Operating profit for the first nine months of 1994 was $1,269.3 million, representing an increase of 30.5% over the $972.8 million recorded in the same period of 1993. As a result, the operating profit margin for the first nine months of 1994 increased to 12.2%, from 10.0% for the first nine months of 1993. Effective with the first quarter of 1994, calculation of the operating profit margin is based on net sales rather than revenues. Third quarter and nine month 1993 amounts have been restated on this basis. Results for the third quarter and nine months ended September 30, 1994 reflected continued success at improving operating performance in three of the four GMHE business segments. Continued strength in the domestic automotive market and demand for telecommunications products and services provided by GMHE offset primarily by the declining defense market resulted in modest revenue increases. Continuing efforts to improve competitiveness in our defense and automotive businesses, as well as earnings recognized in the third quarter of 1994 with respect to a DIRECTV contract with the National Rural Telecommunications Cooperative (NRTC), increased operating profit margins. The Automotive Electronics segment reported revenues for the quarter of $1,141.9 million, an increase of 22.7% from revenues of $931.0 million for the same period of 1993. The increase reflects a 12.7% increase in GM vehicles produced in North America, a 7.3% increase in GMHE-supplied electronic content in these vehicles, from $844 to $906 per vehicle, and a 24.4% increase in international and non-GM sales, from $131 million to $163 million. Operating profit increased 36.6% for the quarter to $117.3 million from $85.9 million for the comparable period last year, reflecting increased production volumes and continued cost reductions. As a result, the operating profit margin improved to 10.4% from 9.2% in the third quarter of 1993. The Telecommunications and Space segment reported revenues for the quarter of $677.2 million, a decrease of 4.3% from revenues of $707.9 million reported in the third quarter of 1993. The decline was due primarily to a pre-tax gain on the sale of GMHE's 30% interest in Japan Communications Satellite Company of $89.7 million in the third quarter of 1993 with no similar transaction in 1994. The decrease was partially offset by additional sales at Hughes Network Systems, Inc. (HNS) relating to the BellSouth cellular equipment and services contract and by DIRECTV revenues relating to the NRTC contract. Operating profit more than doubled to $135.2 million for the third quarter of 1994 from $64.5 million for the 1993 third quarter and the operating profit margin increased to 20.1% from 10.4% in the third quarter of 1993. The increase was - 48 - 6 GM HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES due to earnings recognized by DIRECTV as a result of the NRTC contract, cost reduction efforts in the satellite manufacturing business and increased earnings at HNS related to additional sales volume, which were partially offset by operating losses at DIRECTV related to the start of direct-to-home broadcast television services. The Defense Electronics segment reported third quarter revenues of $1,356.2 million, a decrease of 8.1% from revenues of $1,475.6 million for the same period of 1993. The decline was due to reduced production rates on a variety of programs including ground radar, shipboard displays, Trident missile components and low frequency acoustics, plus terminations of the Advanced Cruise Missile program at the end of 1993 and the Follow-On Early Warning System earlier this year. Operating profit increased 31.2% to $168.2 million in the third quarter of 1994, from $128.2 million in the comparable quarter of 1993 and the operating profit margin improved to 12.4% from 8.8%. The increase was a result of ongoing efforts to reduce costs across GMHE's defense businesses and continuing benefits from the consolidation of the missile business. Commercial Technologies segment revenues were $179.2 million, a decline of 12.8% from the $205.4 million in revenues in the third quarter of 1993. The decline was due primarily to the sale of Hughes Rediffusion Simulation Limited and related entities in December 1993 offset by increases in sales from air traffic control programs. Operating profit decreased from $7.2 million in the third quarter of 1993 to a loss of $52.0 million in the third quarter of 1994. The operating loss reflects additional costs related to technical problems with the Hughes-Avicom International, Inc. in-flight entertainment system and associated loss of revenues due to delays in aircraft installation. Liquidity and Capital Resources - ------------------------------- Cash and cash equivalents at September 30, 1994 amounted to $1,047.1 million, an increase of $38.4 million over December 31, 1993. Net cash provided by operating activities was $565.2 million for the 1994 nine months, a decrease of $627.5 million compared to the same period in 1993. The decrease was due primarily to an increase in working capital associated with the acquired missile business, the BellSouth digital cellular contract and the Peace Shield program. Net cash used in investing activities improved $41.9 million to $274.4 million from $316.3 million for the comparable 1993 period primarily reflecting collection of a $200 million receivable from GM in the first quarter of 1994 offset by an increase during the nine month period in capital expenditures of $178.8 million. Net cash used in financing activities improved $218.3 million to $252.4 million for the 1994 nine months from $470.7 for the comparable 1993 period due primarily to the pre-payment of debt in the third and fourth quarters of 1993. As a measure of liquidity, GMHE's current ratio (ratio of current assets to current liabilities) increased to 1.86 at September 30, 1994 from 1.61 at December 31, 1993. Capital expenditures, including expenditures for telecommunications and other equipment, for the nine months ended September 30, 1994 increased to $497.9 million from $319.1 million in the comparable period in 1993 primarily due to expenditures related to satellite and ground equipment for DIRECTV and continuing efforts to consolidate the missile business in Tuscon. Long-term debt and capitalized leases decreased $60.0 million from $416.8 million at December 31, 1993 to $356.8 million at September 30, 1994 primarily reflecting the reclassification of debt from long-term to current during the third quarter of 1994. The ratio of long-term debt to the total of such debt and proforma stockholder's equity improved to 7.0% at September 30, 1994 from 9.0% at December 31, 1993. - 49 - 7 GM HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES Supplemental Data The Consolidated Financial Statements reflect the application of purchase accounting adjustments as described in Note 3 to the Consolidated Financial Statements. However, as provided in GM's Certificate of Incorporation, the earnings attributable to GM Class H common stock for purposes of determining the amount available for the payment of dividends on GM Class H common stock specifically excludes such adjustments. More specifically, amortization of purchase accounting adjustments associated with GM's purchase of Hughes was $31.0 million and $30.9 million for the third quarters of 1994 and 1993, respectively. Such amounts were excluded from the earnings available for the payment of dividends on GM Class H common stock and were charged against the earnings available for the payment of dividends on GM's $1-2/3 par value stock. Unamortized purchase accounting adjustments associated with GM's purchase of Hughes were $3,036.2 million at September 30, 1994 and $3,129.1 million at December 31, 1993. In order to provide additional analytical data to the users of GMHE's financial information, supplemental data in the form of unaudited summary pro forma financial data are provided. Consistent with the basis on which earnings of GMHE available for the payment of dividends on GM Class H common stock is determined, the pro forma data exclude the General Motors' purchase accounting adjustments related to the acquisition of Hughes. Included in the supplemental data are certain financial ratios which provide measures of financial returns excluding the impact of purchase accounting adjustments. The pro forma data are not presented as a measure of GM's total return on its investment in GMHE. - 50 - 8 GM HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES Summary Pro Forma Financial Data* Pro Forma Condensed Statement of Consolidated Operations Nine Months Ended Third Quarter September 30, ------------------ ------------------ 1994 1993 1994 1993 ------------------ ------------------ (Dollars in Millions Except per Share Amounts) Total Revenues $3,354.5 $3,319.9 $10,477.7 $9,816.5 Total Costs and Expenses 2,962.1 2,954.3 9,145.5 8,761.2 ------- ------- ------- ------- Income before Income Taxes 392.4 365.6 1,332.2 1,055.3 United States, foreign, and other income taxes 148.2 141.6 508.2 410.0 ------- ------- ------- ------- Income before cumulative effect of accounting change 244.2 224.0 824.0 645.3 Cumulative effect of accounting change - - (30.4) - ------- ------- ------- ------- Earnings Used for Computation of Available Separate Consolidated Net Income $244.2 $224.0 $793.6 $645.3 ======= ======= ======= ======= Earnings Attributable to General Motors Class H Common Stock on a Per Share Basis Before cumulative effect of accounting change $0.61 $0.56 $2.06 $1.61 Cumulative effect of accounting change - - (0.08) - ---- ---- ---- ---- Net earnings attributable to General Motors Class H Common Stock $0.61 $0.56 $1.98 $1.61 ==== ==== ==== ==== Pro Forma Condensed Consolidated Balance Sheet September 30, December 31, ASSETS 1994 1993 --------------------------- (Dollars in Millions) Total Current Assets $6,154.6 $5,714.3 Property - Net 2,591.7 2,634.4 Telecommunication and Other Equipment - Net 963.7 767.6 Intangible Assets, Investments, and Other Assets 1,826.1 1,871.7 -------- -------- Total Assets $11,536.1 $10,988.0 ======== ======== LIABILITIES AND STOCKHOLDER'S EQUITY Total Current Liabilities $3,306.2 $3,549.1 Long-Term Debt and Capitalized Leases 356.8 416.8 Postretirement Benefits Other Than Pensions, Other Liabilities, Deferred Income Taxes, and Deferred Credits 3,124.4 2,823.1 Total Stockholder's Equity** 4,748.7 4,199.0 -------- -------- Total Liabilities and Stockholder's Equity** $11,536.1 $10,988.0 ======== ======== * The summary is unaudited and excludes GM purchase accounting adjustments related to the acquisition of Hughes. ** General Motors' equity in its wholly-owned subsidiary, GMHE. Holders of GM Class H common stock have no direct rights in the equity or assets of GMHE, but rather have rights in the equity and assets of General Motors (which includes 100% of the stock of GMHE). - 51 - 9 GM HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES Summary Pro Forma Financial Data* Pro Forma Selected Segment Data Nine Months Ended Third Quarter September 30, ------------------ ------------------- 1994 1993 1994 1993 ------------------ ------------------- (Dollars in Millions) AUTOMOTIVE ELECTRONICS Revenues Amount $1,141.9 $931.0 $3,865.1 $3,209.9 As a percentage of GMHE Revenues 34.0% 28.0% 36.9% 32.7% Net Sales $1,124.2 $936.1 $3,826.3 $3,203.0 Operating Profit (1) $117.3 $85.9 $561.6 $404.7 Operating Profit Margin(2) 10.4% 9.2% 14.7% 12.6% Depreciation and Amortization $41.0 $41.7 $119.8 $107.1 Capital Expenditures $36.9 $56.6 $89.0 $93.0 TELECOMMUNICATIONS AND SPACE Revenues Amount $677.2 $707.9(3)$1,825.6 $1,610.4(3) As a percentage of GMHE Revenues 20.2% 21.3% 17.4% 16.4% Net Sales $673.3 $620.4 $1,823.9 $1,519.8 Operating Profit (1) $135.2 $64.5 $271.7 $149.8 Operating Profit Margin(2) 20.1% 10.4% 14.9% 9.9% Depreciation and Amortization(4) $36.6 $22.9 $91.2 $75.6 Capital Expenditures(5) $111.3 $62.3 $291.9 $157.6 DEFENSE ELECTRONICS Revenues Amount $1,356.2 $1,475.6 $4,303.1 $4,454.6 As a percentage of GMHE Revenues 40.4% 44.5% 41.1% 45.4% Net Sales $1,354.7 $1,460.3 $4,273.2 $4,434.3 Operating Profit (1) $168.2 $128.2 $500.8 $418.0 Operating Profit Margin(2) 12.4% 8.8% 11.7% 9.4% Depreciation and Amortization(4) $34.0 $49.3 $114.4 $141.2 Capital Expenditures $30.9 $14.0 $97.1 $58.1 COMMERCIAL TECHNOLOGIES Revenues Amount $179.2 $205.4 $483.9 $541.6 As a percentage of GMHE Revenues 5.4% 6.2% 4.6% 5.5% Net Sales $168.6 $202.9 $476.0 $541.6 Operating Profit (Loss)(1) ($52.0) $7.2 ($56.1) $13.6 Operating Profit (Loss) Margin (2) (30.8%) 3.5% (11.8%) 2.5% Depreciation and Amortization(4) $7.6 $11.2 $22.7 $32.5 Capital Expenditures $8.3 $3.9 $19.9 $10.4 CORPORATE Operating Loss (1) ($4.1) ($4.1) ($8.7) ($13.3) Certain amounts for 1993 have been reclassified to conform with 1994 classifications. * The summary is unaudited and excludes GM purchase accounting adjustments related to the acquisition of Hughes. (1) Net Sales less Total Costs and Expenses other than Interest Expense. (2) Operating Profit (Loss) as a percentage of Net Sales. (3) Includes $89.7 million pre-tax gain on sale of interest in JCSAT. (4) Excludes amortization arising from purchase accounting adjustments related to GM's acquisition of Hughes amounting to $2.7 million, $2.7 million, $8.1 million, and $8.1 million, respectively, for the Telecommunications and Space segment; $25.7 million, $25.6 million, $77.1 million, and $77.0 million, respectively, for the Defense Electronics segment; and $2.6 million, $2.6 million, $7.7 million, and $7.7 million, respectively, for the Commercial Technologies segment. (5) Includes expenditures related to telecommunications and other equipment amounting to $70.6 million, $24.6 million, $205.3 million, and $76.1 million, respectively. - 52 - 10 GM HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES Summary Pro Forma Financial Data* Pro Forma Selected Financial Data Nine Months Ended Third Quarter September 30, ------------------ ------------------ 1994 1993 1994 1993 ------------------ ------------------ (Dollars in Millions Except per Share Amounts) Operating profit $364.6 $281.7 $1,269.3 $972.8 Income before income taxes and cumulative effect of accounting change $392.4 $365.6 $1,332.2 $1,055.3 Earnings used for computation of available separate consolidated net income $244.2 $224.0 $793.6(1) $645.3 Average number of GM Class H dividend base shares (2) 399.9 399.9 399.9 399.9 Stockholder's Equity $4,748.7 $3,995.8 $4,748.7 $3,995.8 Dividends per share of GM Class H common stock $0.20 $0.18 $0.60 $0.54 Working capital $2,848.4 $1,995.0 $2,848.4 $1,995.0 Operating profit as a percent of net sales 11.0% 8.7% 12.2% 10.0% Pre-tax income as a percent of revenues 11.7% 11.0% 12.7% 10.8% Net income as a percent of revenues 7.3% 6.7% 7.6% 6.6% * The summary is unaudited and excludes GM purchase accounting adjustments related to the acquisition of Hughes. (1) Includes unfavorable cumulative effect of accounting change of $30.4 million. (2) Class H dividend base shares is used in calculating earnings attributable to GM Class H common stock on a per share basis. This is not the same as the average number of GM Class H shares outstanding, which was 92.7 million for the third quarter of 1994 and 87.4 million for the third quarter of 1993. * * * * * * * - 53 - EX-27 6
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM GENERAL MOTORS CORPORATION SEPTEMBER 30, 1994 CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THIRD QUARTER 1994 FORM 10-Q. 0000040730 GENERAL MOTORS CORPORATION 1,000,000 U.S.DOLLAR 9-MOS DEC-31-1994 JAN-01-1994 SEP-30-1994 1.0 9,806 4,613 59,714 0 10,345 0 77,176 43,039 193,872 0 69,182 1,291 0 2 8,327 193,872 97,774 112,398 85,176 92,479 175 110 3,930 5,992 1,905 4,087 0 0 (758) 3,329 3.41 0
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