-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JAK1g1nfB2mhyuSGlmqA3DMiQzUtwHJCeDomtI04kV2I8+B0a9XT4+R8GZTXegxJ CtCUOxHCz6LtU3xEp6VFcw== 0000040730-95-000011.txt : 19951119 0000040730-95-000011.hdr.sgml : 19951119 ACCESSION NUMBER: 0000040730-95-000011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951114 SROS: CSE SROS: NASD SROS: NYSE SROS: PHLX SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: GENERAL MOTORS CORP CENTRAL INDEX KEY: 0000040730 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLES & PASSENGER CAR BODIES [3711] IRS NUMBER: 380572515 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-00143 FILM NUMBER: 95591212 BUSINESS ADDRESS: STREET 1: 3044 W GRAND BLVD CITY: DETROIT STATE: MI ZIP: 48202 BUSINESS PHONE: 3135565000 10-Q 1 FIRST PART OF 10-Q l:\secfiles\10-Q\1995\3rdqtr95\part-1.doc 25 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, 1995 ------------------ 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, 1995, there were outstanding 749,398,949 shares of the issuer's $1-2/3 par value common stock, 438,902,399 shares of Class E $0.10 par value common stock and 96,142,226 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 12 Part II - Other Information Item 1. Legal Proceedings 29 Item 6. Exhibits and Reports on Form 8-K 30 Signatures 30 Exhibit 11 Computation of Earnings Per Share Attributable to Common Stocks for the Quarters and Nine Months Ended September 30, 1995 and 1994 31 Exhibit 12 Computation of Ratios of Earnings to Fixed Charges for the Nine Months Ended September 30, 1995 and 1994 35 Exhibit 21 Subsidiaries of the Registrant 36 Exhibit 99(a) Electronic Data Systems Corporation and Subsidiaries Consolidated Financial Statements and Management's Discussion and Analysis 37 (b) Hughes Electronics Corporation and Subsidiaries Consolidated Financial Statements and Management's Discussion and Analysis 45 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, -------------------- -------------------- 1995 1994 1995 1994 -------------------- -------------------- (Dollars in Millions) Net Sales and Revenues Manufactured products $31,226.1 $29,420.8 $106,816.7 $97,774.2 Financial services 2,959.6 2,351.5 8,594.6 6,819.2 Computer systems services 2,107.8 1,643.3 5,953.7 4,472.1 Other income (Note 1) 1,169.4 1,094.7 3,529.1 3,332.4 -------- -------- --------- --------- Total Net Sales and Revenues 37,462.9 34,510.3 124,894.1 112,397.9 -------- -------- --------- --------- Costs and Expenses Cost of sales and other operating charges, exclusive of items listed below 28,803.1 26,954.3 93,397.7 85,176.4 Selling, general, and administrative expenses 3,189.0 2,962.4 9,572.7 8,691.8 Interest expense 1,413.8 1,377.8 4,298.8 3,930.0 Depreciation of real estate, plants, and equipment 2,163.3 1,833.2 6,323.5 5,181.1 Amortization of special tools 661.9 596.3 2,407.9 2,121.9 Amortization of intangible assets 58.9 52.1 167.1 175.4 Other deductions (Note 1) 369.5 280.6 1,226.1 1,129.4 -------- -------- --------- --------- Total Costs and Expenses 36,659.5 34,056.7 117,393.8 106,406.0 -------- -------- --------- --------- Income before Income Taxes 803.4 453.6 7,500.3 5,991.9 United States, foreign, and other income taxes (credit) 161.0 (98.4) 2,433.8 1,905.3 -------- -------- --------- -------- Income before cumulative effect of accounting change 642.4 552.0 5,066.5 4,086.6 Cumulative effect of accounting change (Note 3) - - - (758.1) -------- -------- --------- -------- Net Income 642.4 552.0 5,066.5 3,328.5 Preference shares tender offer premium (Note 9) - - 153.4 - Dividends on preference stocks 41.4 72.1 159.5 248.6 -------- -------- --------- -------- Income on Common Stocks $601.0 $479.9 $4,753.6 $3,079.9 ======== ======== ========= ======== Reference should be made to the Notes to Financial Statements. - 3 - 4 GENERAL MOTORS CORPORATION AND SUBSIDIARIES STATEMENT OF CONSOLIDATED OPERATIONS - Concluded Nine Months Ended Third Quarter September 30, --------------- ----------------- 1995 1994 1995 1994 --------------- ----------------- (Dollars in Millions Except Per Share Amounts) Earnings Attributable to Common Stocks (Note 4) $1-2/3 par value before cumulative effect of accounting change $316.7 $306.0 $4,009.0 $3,333.4 Cumulative effect of accounting change (Note 3) - - - (751.3) ----- ----- ------- ------- Net earnings attributable to $1-2/3 par value $316.7 $306.0 $4,009.0 $2,582.1 ===== ===== ======= ======= Net earnings attributable to Class E $222.9 $117.3 $551.1 $315.9 ===== ===== ======= ======= Class H before cumulative effect of accounting change $61.4 $56.6 $193.5 $188.7 Cumulative effect of accounting change (Note 3) - - - (6.8) ---- ---- ----- ----- Net earnings attributable to Class H $61.4 $56.6 $193.5 $181.9 ===== ===== ======= ======= Average number of shares of common stocks outstanding (in millions) $1-2/3 par value 748.2 752.7 749.0 737.1 Class E 438.8 261.2 393.0 259.7 Class H 95.9 92.7 95.2 91.7 Earnings Per Share Attributable to Common Stocks (Note 4) $1-2/3 par value before cumulative effect of accounting change $0.42 $0.40 $5.32 $4.46 Cumulative effect of accounting change (Note 3) - - - (1.05) ---- ---- ---- ---- Net earnings attributable to $1-2/3 par value $0.42 $0.40 $5.32 $3.41 ===== ===== ======= ======= Net earnings attributable to Class E $0.51 $0.45 $1.40 $1.22 ===== ===== ======= ======= Class H before cumulative effect of accounting change $0.64 $0.61 $2.03 $2.06 Cumulative effect of accounting change (Note 3) - - - (0.08) ---- ---- ---- ---- Net earnings attributable to Class H $0.64 $0.61 $2.03 $1.98 ===== ===== ======= ======= Cash Dividends Per Share of Common Stocks (Note 4) $1-2/3 par value $0.30 $0.20 $0.80 $0.60 Class E $0.13 $0.12 $0.39 $0.36 Class H $0.23 $0.20 $0.69 $0.60 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 1995 1994 1994 - ----------------------------------------------------------------------------- (Dollars in Millions) Cash and cash equivalents $8,998.3 $10,939.0 $9,806.1 Other marketable securities 4,891.3 5,136.6 5,036.3 --------- --------- --------- Total cash and marketable securities 13,889.6 16,075.6 14,842.4 --------- --------- --------- Finance receivables - net 54,803.3 54,077.3 51,093.5 --------- --------- --------- Accounts and notes receivable (less allowances) 11,183.7 8,977.8 8,620.7 --------- --------- --------- Inventories (less allowances) (Note 5) 11,968.5 10,127.8 10,345.4 --------- --------- --------- Contracts in process (less advances and progress payments) 2,670.5 2,265.4 2,725.2 --------- --------- --------- Net equipment on operating leases (less accumulated depreciation) 22,742.5 20,061.6 18,528.3 --------- --------- --------- Deferred income taxes 16,997.3 19,693.3 20,983.8 --------- --------- --------- Other assets (less allowances) 22,020.4 20,625.5 19,519.1 --------- --------- --------- Property Real estate, plants, and equipment-at cost 73,343.3 69,807.9 69,611.7 Less accumulated depreciation 44,662.5 42,586.4 43,039.0 --------- --------- --------- Net real estate, plants, and equipment 28,680.8 27,221.5 26,572.7 Special tools - at cost (less amortization) 7,847.4 7,559.1 7,564.2 --------- --------- --------- Total property 36,528.2 34,780.6 34,136.9 --------- --------- --------- Intangible assets - at cost (less amortization) 12,305.5 11,913.8 13,076.6 --------- --------- --------- Total Assets $205,109.5 $198,598.7 $193,871.9 ========= ========= ========= Certain September 1994 amounts were reclassified to conform with 1995 classifications. Reference should be made to the Notes to Financial Statements. - 5 - 6 GENERAL MOTORS CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET - Concluded Sept. 30, Dec. 31, Sept. 30, LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994 1994 - ----------------------------------------------------------------------------- (Dollars in Millions Except Per Share Amounts) Liabilities Accounts payable $11,408.7 $11,635.0 $9,597.7 Notes and loans payable 77,885.1 73,730.2 69,182.2 United States, foreign, and other income taxes - deferred and payable 2,569.6 2,721.0 3,329.6 Postretirement benefits other than pensions (Note 6) 41,227.7 40,018.2 39,389.0 Pensions (Note 7) 5,371.2 14,353.2 20,304.3 Other liabilities and deferred credits 43,788.8 42,867.3 41,999.2 --------- --------- --------- Total Liabilities 182,251.1 185,324.9 183,802.0 --------- --------- --------- Stocks Subject to Repurchase (Note 8) - 450.0 450.0 --------- --------- --------- Stockholders' Equity Preference stocks (Note 9) Series B 9-1/8% Depositary Shares, $0.5 and $1.1; Series C Depositary Shares, $0.3; Series D 7.92% Depositary Shares, $0.1 and $0.4; and Series G 9.12% Depositary Shares, $0.3 and $0.6 in September 1995, and in December and September 1994 1.2 2.4 2.4 Common stocks $1-2/3 par value (issued, 749,945,166, 754,345,782, and 753,639,264 shares) 1,249.9 1,257.2 1,256.1 Class E (issued, 442,811,864, 268,125,255, and 267,321,168 shares)(Notes 7 and 12) 44.3 26.8 26.7 Class H (issued, 96,308,464, 78,720,022, and 78,190,823 shares) (Note 8) 9.6 7.9 7.8 Capital surplus (principally additional paid-in capital) (Notes 7 and 8) 18,702.4 13,149.4 13,027.0 Net income retained for use in the business (Note 10) 5,726.6 1,785.8 486.5 --------- --------- --------- Subtotal 25,734.0 16,229.5 14,806.5 Minimum pension liability adjustment (3,548.4) (3,548.4) (5,311.2) Accumulated foreign currency translation adjustments 230.2 (100.4) (66.1) Net unrealized gains on investments in certain debt and equity securities (Note 3) 442.6 243.1 190.7 --------- --------- --------- Total Stockholders' Equity 22,858.4 12,823.8 9,619.9 --------- --------- --------- Total Liabilities and Stockholders' Equity $205,109.5 $198,598.7 $193,871.9 ========= ========= ========= 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, -------------------------- 1995 1994 -------------------------- (Dollars in Millions) Net Cash Provided by Operating Activities $9,144.9 $6,776.8 -------- -------- Cash Flows from Investing Activities Expenditures for real estate, plants, and equipment (4,320.4) (3,097.5) Expenditures for special tools (2,595.4) (1,564.1) Other 430.5 685.8 Change in other investing assets Investments in other marketable securities - acquisitions (13,855.6) (11,395.0) Investments in other marketable securities - liquidations 14,100.1 10,859.4 Finance receivables - acquisitions (121,008.7) (114,308.9) Finance receivables - liquidations 103,345.2 103,828.6 Proceeds from sales of finance receivables 18,660.7 13,533.3 Operating leases - net (7,213.2) (7,655.4) -------- -------- Net Cash Used in Investing Activities (12,456.8) (9,113.8) -------- -------- Cash Flows from Financing Activities Net increase (decrease) in short-term loans payable 1,138.6 (1,761.7) Increase in long-term debt 9,318.8 10,769.5 Decrease in long-term debt (6,918.0) (10,931.4) Repurchases of preference stocks (1,286.7) - Repurchases of common stocks (394.0) - Proceeds from issuing common stocks 341.3 1,113.7 Cash dividends paid to stockholders (972.3) (839.1) -------- -------- Net Cash Provided by (Used in) Financing Activities 1,227.7 (1,649.0) -------- -------- Effect of Exchange Rate Changes on Cash and Cash Equivalents 143.5 1.6 -------- -------- Net decrease in cash and cash equivalents (1,940.7) (3,984.4) Cash and cash equivalents at beginning of the period 10,939.0 13,790.5 -------- -------- Cash and cash equivalents at end of the period $8,998.3 $9,806.1 ======== ======== Certain 1994 amounts were reclassified to conform with 1995 classifications. Reference should be made to the Notes to Financial Statements. 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 accounting changes in 1994 to adopt Statement of Financial Accounting Standards (SFAS) No. 112, Employers' Accounting for Postemployment Benefits, and SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities, as described in Note 3), 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 1994 Annual Report to the SEC on Form 10-K. - 7 - 8 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS - Continued Note 1. Other income and other deductions consist of: Third Quarter Nine Months ----------------- ------------------ 1995 1994 1995 1994 ----------------- ------------------ (Dollars in Millions) Other Income Insurance premiums $217.1 $224.3 $655.7 $657.1 Nonfinancing interest 387.1 411.6 1,263.1 1,118.0 Equity in earnings of associates, net 79.6 60.5 161.4 108.7 Claims, commissions, and grants 163.9 123.4 410.5 317.7 Gain on the sale of finance receivables - 5.2 38.2 25.0 Revenue from mortgage operations 106.1 50.6 249.6 150.1 Other 215.6 219.1 750.6 955.8* ------- ------- ------- ------- Total Other Income $1,169.4 $1,094.7 $3,529.1 $3,332.4 ======= ======= ======= ======= Other Deductions Insurance losses and loss adjustment expenses $82.8 $215.4 $401.6 $556.8 Provision for(recovery of) financing losses 118.9 (8.5) 307.2 110.4 Loss on sale of NCRS net assets** - - 147.8 - Other 167.8 73.7 369.5 462.2* ------- ------- ------- ------- Total Other Deductions $369.5 $280.6 $1,226.1 $1,129.4 ======= ======= ======= ======= * 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. ** On June 9, 1995, GM completed the sale of National Car Rental System's (NCRS) net assets. The nine month results include $162.6 million net income, or $0.22 per share of GM $1-2/3 par value common stock. The net income reflects $310.4 million of tax benefits related to the restructuring for NCRS in 1992. The tax benefits were not previously recorded due to the uncertainty of ultimate realization. Note 2. Financial data of General Motors Acceptance Corporation (GMAC) and its subsidiaries were as follows: Third Quarter Nine Months ----------------- ------------------ 1995 1994 1995 1994 ----------------- ------------------ (Dollars in Millions) Net financing revenue and other $1,361.3 $1,157.3 $4,066.4 $3,470.7 Net income including the unfavorable cumulative effect of accounting change of $7.4 million in nine months 1994 $253.7 $244.6 $767.8 $678.2 Cash dividends paid to GM $225.0 $250.0 $625.0 $750.0 Note 3. 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, determined on a discounted basis, 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 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. - 8 - 9 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS - Continued 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. Unrealized gains and losses resulting from changes in fair value are included as a separate component of Stockholders' Equity. The primary effect of this Standard for the Corporation relates to debt securities held by a subsidiary of GMAC and certain equity securities. Marketable securities, other than certain securities held by GMAC and its subsidiaries, are considered available for sale. Note 4. 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 Electronic Data Systems Corporation (EDS) and Hughes Electronics Corporation (Hughes), previously known as GM Hughes Electronics Corporation. Dividends on the Class E and Class H common stocks are declared out of the Available Separate Consolidated Net Income of EDS and Hughes, respectively, since the acquisition by GM. The Available Separate Consolidated Net Income of EDS and Hughes is determined quarterly and is equal to the separate consolidated net income of EDS and Hughes, 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 (438.8 million for the third quarter of 1995) or Class H (95.9 million for the third quarter of 1995) common stock outstanding during the period and the denominator of which was 483.7 million for Class E stock and 399.9 million for Class H stock during the third quarter of 1995. Comparable denominators for the third quarter of 1994 were 481.7 million for Class E stock and 399.9 million for Class H stock. The weighted average number of shares of Class E common stock outstanding (numerator) during the third quarter of 1995 and 1995 nine months reflects the impact of the March 13, 1995 Class E common stock pension contribution which is described in Note 7. The denominators used in determining the Available Separate Consolidated Net Income of EDS and Hughes 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 Hughes. The Board's discretion to make such adjustments is limited by criteria set forth in GM's Certificate of Incorporation. In this regard, the Board has generally caused the denominators to decrease as shares are purchased by EDS or Hughes, and to increase as such shares are used, at EDS or Hughes expense, for EDS or Hughes 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 Hughes, respectively, for the prior year. - 9 - 10 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS - Continued Notwithstanding the current dividend policy, the Board of Directors declared a dividend on the Class H common stock for each of the quarters of 1994 which was based on an annual rate higher than 35% of the Available Separate Consolidated Net Income of Hughes for the preceding year. In February 1995, the Board increased the quarterly dividend from $0.20 per share to $0.23 per share (which is based on an annual rate of approximately 35% of the Available Separate Consolidated Net Income of Hughes for 1994). Note 5. Major classes of inventories are as follows: Sept. 30, Dec. 31, Sept. 30, 1995 1994 1994 ----------------------------------- (Dollars in Millions) Productive material, work in process, and supplies $6,925.0 $5,478.3 $5,836.8 Finished product, service parts, etc. 5,043.5 4,649.5 4,508.6 -------- -------- -------- Total inventories (less allowances) $11,968.5 $10,127.8 $10,345.4 ======== ======== ======== Note 6. 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 7. On March 13, 1995, GM contributed to the General Motors Hourly-Rate Employees Pension Plan (Hourly Plan) 173,163,187 shares of Class E common stock, having an aggregate fair market value of approximately $6.3 billion (determined by an independent valuation expert retained by the Trustee). The contribution was made under the terms of an agreement between GM and the Pension Benefit Guaranty Corporation (the PBGC). Subject to the terms of the agreement, GM will defer the use of the funding credits that would otherwise result from such cash and stock contributions. Consequently, GM will continue to make regular cash contributions to the Hourly Plan over the next several years. The agreement with the PBGC also provides flexibility to GM by granting a release of EDS from liability, if any, under Title IV of ERISA for GM's U.S. pension plans, in the event EDS were to leave the GM control group under certain circumstances. In addition, in connection with the contribution of the shares of Class E common stock, the U.S. Department of Labor granted an exemption with respect to, among other things, limits otherwise applicable under ERISA on the amount of Class E common stock that could legally be held by the Hourly Plan. Note 8. Stocks Subject to Repurchase at December 31, 1994 and September 30, 1994 consisted of 15 million shares of Class H common stock subject to put options issued to the Howard Hughes Medical Institute (HHMI) and exercisable at $30 per share on March 1, 1995. The Corporation held an option to call HHMI's shares until February 28, 1995 at $37.50 per share. The put and call rights expired unexercised. As a result, $1.5 million was transferred to Class H common stock and $448.5 million was transferred to capital surplus. In 1995, GM and HHMI entered into an agreement under which GM assisted the Institute in selling 15 million shares at $38.50 per share. - 10 - 11 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS - Continued Note 9. On May 23, 1995, General Motors concluded a tender offer, which began on April 25, 1995, under which it purchased for $1.3 billion of cash (i) 24.3 million depositary shares, each representing one-fourth of a share of its Series B 9-1/8% Preference Stock, at a purchase price of $27.50 per depositary share, (ii) 9.6 million depositary shares, each representing one-fourth of a share of its Series D 7.92% Preference Stock, at a purchase price of $26.375 per depositary share, and (iii) 12.9 million depositary shares, each representing one-fourth of a share of its Series G 9.12% Preference Stock, at a purchase price of $28.25 per depositary share. The repurchase had an unfavorable impact of $0.22 per share of GM $1-2/3 par value common stock. This was comprised of tender offer expenses of $13.5 million after-tax, or $0.02 per share, that were charged to income and the purchase price in excess of the carrying amount of the preference shares amounting to $153.4 million, or $0.20 per share, that was not charged to income but was charged to earnings attributable to $1-2/3 par value common stock. The number of shares remaining outstanding is 20.0 million depositary shares of Series B Preference Stock, 6.1 million depositary shares of Series D Preference Stock, and 10.1 million depositary shares of Series G Preference Stock. Note 10. At September 30, 1995, December 31, 1994, and September 30, 1994, net income retained for use in the business (accumulated deficit) attributable to the common stocks was as follows: Sept. 30, Dec. 31, Sept. 30, 1995 1994 1994 ----------------------------------- (Dollars in Millions) $1-2/3 par value $2,631.5 ($778.8) ($1,939.9) Class E 2,066.7 1,663.9 1,566.7 Class H 1,028.4 900.7 859.7 ------- ------- ------- Total $5,726.6 $1,785.8 $486.5 ======= ======= ======= The Corporation's capital surplus plus net income retained for use in the business at September 30, 1995, December 31, 1994, and September 30, 1994, as allocated pursuant to GM's Certificate of Incorporation, was as follows: Sept. 30, Dec. 31, Sept. 30, 1995 1994 1994 ----------------------------------- (Dollars in Millions) $1-2/3 par value $11,113.6 $9,013.8 $7,775.0 Class E 10,485.3 3,752.1 3,628.7 Class H 2,830.1 2,169.3 2,109.8 -------- -------- -------- Total $24,429.0 $14,935.2 $13,513.5 ======== ======== ======== Note 11. 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, 1995. 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. - 11 - 12 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS - Concluded Note 12. On August 7, 1995, the Corporation announced that it intends to pursue a split-off of its wholly owned subsidiary, EDS, to its GM Class E stockholders in a tax-free exchange of stock. To achieve a split-off, GM would exchange EDS capital stock for outstanding GM Class E common stock. GM would not recognize a gain on the transaction. At September 30, 1995, there are 438.9 million shares of GM Class E common stock outstanding, and 44.8 million shares reserved for issuance upon conversion of Series C Preference Stock. The process of establishing definitive terms for a split-off transaction which will be fair to all holders of GM common stocks will, among other things, consider differences between the values of GM Class E and EDS common stocks in order to establish any adjustment deemed appropriate by the GM Board of Directors. A split-off would be subject to the appropriate stockholder approvals, and a favorable Internal Revenue Service ruling that the transaction would be tax- free. The specific terms of a transaction, which are yet to be developed, must also be approved by the GM Board of Directors. Subject to these and other approvals and conditions, GM and EDS expect that a split-off could occur in the first half of 1996. However, it should be noted that due to the numerous uncertainties involved in these matters, there can be no assurance that any split-off of EDS will be proposed or completed. A split-off would be proposed only in a manner that would not result in the recapitalization of GM Class E common stock into GM $1-2/3 par value common stock at a 120 percent exchange ratio, as currently provided for under certain circumstances in the GM Certificate of Incorporation. In the event of a split-off, GM and EDS would enter into a long-term agreement under which EDS would provide substantially the same information technology services for GM that it does today. * * * * * 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 1994 Annual Report to the SEC on Form 10-K and Management's Discussion and Analysis relating to Electronic Data Systems Corporation (EDS) and Hughes Electronics Corporation (Hughes) included in Exhibits 99(a) and 99(b) to such Form 10-K and each Form 10-Q on file with the SEC. The competitive position and environmental matters discussions included in Part I, Item 1 of the 1994 Form 10-K are specifically incorporated by reference herein. Due to the seasonal nature of the business, third-quarter results are generally lower than other quarters during the year. General Motors Corporation's consolidated net income for the third quarter of 1995 totaled $642.4 million, or $0.42 per share of GM $1-2/3 par value common stock. That represents an improvement of $90.4 million, or 16.4%, compared with the year-ago period. Net income totaled $552.0 million, or $0.40 per share, in the comparable 1994 quarter. - 12 - 13 GENERAL MOTORS CORPORATION AND SUBSIDIARIES Sales and revenues in the third quarter of 1995 totaled $37,462.9 million - an increase of 8.6% compared with the same period last year. GM's gross- profit margin for the third quarter of 1995 (with General Motors Acceptance Corporation (GMAC) on an equity basis) was 14.1%, compared with 13.5% in 1994's third-quarter period. Selling, general, and administrative expenses (with GMAC on an equity basis) were $180.0 million higher in the 1995 third quarter, primarily due to higher administrative expenses. On a percent of sales basis, selling, general, and administrative expenses were 8.2% in both periods. Pretax income (with GMAC on an equity basis) of $312.8 million in the third quarter of 1995 is an improvement of $286.4 million over the comparable period last year, when pretax income was $26.4 million. The low third-quarter-1995 corporate-income-tax rate (with GMAC on an equity basis) of 1.2% results mainly from tax benefits at International Operations (IO). The Corporation's third-quarter-1995 net-profit margin (with GMAC on an equity basis) was 1.9%, compared with 1.8% in the prior-year period. Consolidated net income for the nine-months of 1995 was $5,066.5 million. Net income for the nine-month-1994 period was $3,328.5 million, including the $758.1 million unfavorable effect of Statement of Financial Accounting Standards (SFAS) No. 112, Employers' Accounting for Postemployment Benefits, accounting change in the first quarter. Excluding the impact of the SFAS No. 112 accounting change, income for the 1994-nine-month period was $4,086.6 million, or $4.46 per share. Sales and revenues totaled $124,894.1 million in the 1995 period, an increase of 11.1%, or $12,496.2 million, over 1994 sales and revenues of $112,397.9 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 1995 third quarter amounted to $316.7 million, or $0.42 per share, compared with third quarter 1994 income of $306.0 million, or $0.40 per share. In the nine months of 1995, income attributable to $1-2/3 par value common stock including the impact of the premium paid on the repurchase of preference stocks was $4,009.0 million, or $5.32 per $1-2/3 par value share, compared with $2,582.1 million, or $3.41 per share, in the 1994 period. Excluding the first quarter accounting change, nine-month 1994 earnings attributable to $1-2/3 par value common stock amounted to $3,333.4 million, or $4.46 per share. - 13 - 14 GENERAL MOTORS CORPORATION AND SUBSIDIARIES Following are highlights of 1995 third-quarter and nine-month financial performance by GM's major business sectors: Nine Months Ended Third Quarter September 30, ----------------- -------------------- Major Business Sector Results 1995 1994 1995 1994 - ------------------------------ ----------------- -------------------- (Dollars in Millions) NAO Income (Loss) Before Acctg.Change ($93) ($363) $1,845 $784 Cumulative Effect of Acctg.Change - - - (705) ----- ------- ------- ------- NAO Income (Loss) (93) (363) 1,845 79 ----- ------- ------- ------- IO Income 111 232 1,146 1,121 ----- ------- ------- ------- GMAC Income Before Accounting Change 254 245 768 685 Cumulative Effect of Acctg. Change - - - (7) ----- ------- ------- ------- GMAC Income 254 245 768 678 ----- ------- ------- ------- EDS Earnings 246 216 670 585 ----- ------- ------- ------- Hughes Earnings Before Acctg. Change 256 244 813 824 Cumulative Effect of Acctg. Change - - - (30) ----- ------- ------- ------- Hughes Earnings 256 244 813 794 ----- ------- ------- ------- Other * Income (Loss) Before Accounting Change (132) (22) (176) 88 Cumulative Effect of Acctg. Change - - - (16) ----- ------- ------- ------- Other Income (Loss) (132) (22) (176) 72 ----- ------- ------- ------- Consolidated Net Income $642 $552 $5,066 $3,329 ===== ======= ======= ======= Income Before Cumulative Effect of Accounting Change $642 $552 $5,066 $4,087 ===== ======= ======= ======= Certain amounts for 1994 were reclassified to conform with 1995 classifications. * Includes NCRS (through the date of sale - June 9, 1995), Allison Transmission Division, GM Locomotive Group, and purchase accounting adjustments. Worldwide Wholesale Sales - ------------------------- Third quarter 1995 worldwide wholesale vehicle sales totaled 1,848,000 units, 3.2% more than the 1994 third quarter level of 1,790,000 units, reflecting higher sales in the United States, partially offset by a decline in Other North America, as shown in the table on the next page. Worldwide wholesale vehicle sales of 6,430,000 units during the nine months of 1995 were up 286,000 units, or 4.7%, over the year ago period, reflecting an increase in the United States and Overseas, partially offset by a decline in Other North America. - 14 - 15 GENERAL MOTORS CORPORATION AND SUBSIDIARIES Third Quarter Nine Months -------------- -------------- 1995 1994 1995 1994 -------------- -------------- Worldwide Wholesale Sales (Units in Thousands) United States Cars 649 577 2,349 2,243 Trucks 446 436 1,515 1,444 ----- ----- ----- ----- Total United States 1,095 1,013 3,864 3,687 Other North America 73 96 334 396 ----- ----- ----- ----- Total North America 1,168 1,109 4,198 4,083 Overseas 680 681 2,232 2,061 ----- ----- ----- ----- Total All Sources 1,848 1,790 6,430 6,144 ===== ===== ===== ===== Dealer Vehicle Unit Deliveries of Cars and Trucks Worldwide - ----------------------------------------------------------- During the 1995 third quarter, GM dealer vehicle deliveries of cars and trucks worldwide were up 3.5% to 2,059,000 units, resulting in a 17.4% worldwide market share, compared with 1,990,000 units in the same period last year. Worldwide GM dealer vehicle deliveries of cars and trucks during the nine months of 1995 were 6,290,000 units, 0.8% below the 6,338,000 units delivered in the comparable 1994 period. Employment and Payrolls - ----------------------- As detailed in the table below, third quarter 1995 worldwide employment averaged 700,000 men and women, a 1.6% increase from the 689,000 in the third quarter of 1994. Worldwide payrolls were $8,177.3 million for the third quarter of 1995, compared with $7,675.2 million in the comparable 1994 period. Nine month average worldwide employment increased by 15,000 men and women from the 1994 nine-month period, while 1995 worldwide payrolls totaled $25,119.9 million, a 6.9% increase over 1994 payrolls of $23,506.6 million. Third Quarter Nine Months ------------- ------------- 1995 1994 1995 1994 ------------- ------------- (in thousands) Average Worldwide Employment GM (excluding units listed below) 513 510 520 518 GMAC 17 18 17 18 EDS 89 78 87 74 Hughes 81 77 80 77 NCRS - 6 4 6 --- --- --- --- Average Number of Employees 700 689 708 693 === === === === Certain amounts for 1994 were reclassified to conform with 1995 classifications. North American Automotive Operations GM NAO, including GM's Delphi Automotive Systems, reported a net loss of $92.8 million in the third quarter of 1995, an improvement of $270.4 million, compared with a net loss in the third quarter of 1994 totaling $363.2 million. NAO results reflect strong market performance and continued cost reductions. While NAO incurred a seasonal loss in the quarter, NAO vehicle unit deliveries of cars and trucks increased 26,000 units compared to the 1994 third quarter deliveries. NAO's gross margin improved from 8.2% in the 1994 third quarter to 10.6% in the 1995 period reflecting cost-cutting measures and NAO's strategies for improving the vehicle development process. The 1995 third quarter's effective income tax rate dropped from the 1994 period, which included a $200 million tax benefit. - 15 - 16 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NAO's pretax loss of $184.5 million in the third quarter of 1995 is an improvement of $798.0 million over the comparable period last year, when the pretax loss was $982.5 million. The third quarter of 1994 included a nonrecurring tax benefit of more than $200 million that impacted NAO's results. NAO's net-profit margin was a negative 0.4% in the third quarter of 1995, compared with a negative 1.8% in the prior-year period. Delphi Automotive Systems continues to show profitable performance as a strategic business sector as it globalizes its operations and grows its business outside GM's North American Operations. Delphi's sales outside the NAO vehicle groups accounted for 31.5% of its sales in the third quarter of 1995. Delphi is growing its business, not only through existing operations but through acquisitions and joint ventures around the world. During the third quarter of 1995, Delphi announced six new business ventures in areas such as China, Malaysia, South Africa and Germany, bringing the total number of announced new ventures to 14 for the year. Successful establishment of these new operations will help position Delphi to meet its goal of 50 percent sales outside the NAO vehicle groups by 2002 as it strengthens its customer base worldwide. GM dealer vehicle deliveries in the United States in the third quarter of 1995 totaled 1,235,000 units, resulting in a 32.2% share of the U.S. vehicle market, up from the 31.5% market share in the third quarter of 1994. GM passenger car deliveries totaled 775,000 units and truck deliveries totaled 460,000 units, up 3.6% and 2.0%, respectively, from the 1994 third quarter. Passenger car market share increased from 33.4% in the 1994 third quarter to 34.6% in the 1995 quarter, while the truck share stayed even at 28.8%. Nine-month 1995 NAO earnings were $1,845.4 million, an improvement of $1,765.9 million over the 1994 nine-month income of $79.5 million, including the unfavorable effect of the $704.6 million accounting change in the 1994 first quarter, partially offset by the $200 million nonrecurring tax benefit in 1994. Excluding the accounting change in 1994, NAO earnings improved $1,061.3 million period to period. NAO's net profit margin improved from 0.1% (1.1% excluding the accounting change) in the 1994 nine-month period to 2.4% in the 1995 nine months. GM dealer U.S. vehicle deliveries in the 1995 period were 3.5% below comparable 1994 deliveries, including a 5.6% car decline and a 0.3% decrease in truck deliveries. Nine-month market share dropped from 32.7% in 1994 to 32.0% in 1995, with cars down 0.6 percentage points and trucks down 0.5 percentage points. International Automotive Operations GM International Operation's net income for the third quarter of 1995 totaled $111.0 million, compared with $231.8 million in the same period of 1994. GM's automotive operations in Europe reported a net loss of $98 million in the third quarter of 1995, compared with a net loss of $14 million in the same period of 1994. For the remainder of GM's International Operations, including Latin American Operations and Asia-Pacific Operations, net income totaled $209 million in the third quarter of 1995, compared with $246 million in the prior-year period. International GM vehicle deliveries in the third quarter of 1995 were 717,000 units, up 6.4% from the 674,000 units delivered in the 1994 quarter, reflecting improved deliveries in Latin America and in the Asia/Pacific region. IO's pretax loss of $117.1 million in the third quarter of 1995 represents a decline of $360.4 million compared with the same period last year, when pretax income was $243.3 million. The lower pretax earnings were largely due to results of the European automotive operations, which were affected by the start-up costs for the new Vectra. Exchange-rate movements and a weaker sales mix were also factors in Europe and the remainder of GM's International Operations. In addition, increased labor- and material- cost pressures had an adverse impact in Latin America. Tax benefits at IO - 16 - 17 GENERAL MOTORS CORPORATION AND SUBSIDIARIES came from the mix of foreign earnings. Losses were incurred in Europe where generally high effective tax rates were in effect, while income was earned at other international operations, which had generally lower effective tax rates. These items equate to approximately $110 million of benefit above a normalized U.S. rate of 37 percent. The results for the quarter include short-term unfavorable items and are not representative of IO's future earnings. The net- profit margin for International Operations was 1.6% in the third quarter of 1995, compared with 3.4% in the prior-year period Nine month 1995 IO income was $1,146.4 million compared to $1,120.9 million in the nine months of 1994. GM's European automotive operations reported nine- month 1995 net income of $548 million compared to $515 million in the 1994 period. For the remainder of GM's IO, including Latin American Operations and Asia-Pacific Operations, net income totaled $598 million, compared to $606 million in the 1994 nine months. Net-profit margins decreased from 5.5% in the 1994 period to 4.8% in the 1995 nine-month period. General Motors Acceptance Corporation GMAC serves the financing and insurance needs of GM customers. The Corporation hereby encourages reference to the GMAC Third Quarter 1995 Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission. GMAC reported third-quarter-1995 net income of $253.7 million, compared with $244.6 million in the third quarter of 1994. The third-quarter-1995 increase primarily resulted from a 5% increase in net income from financing operations which resulted from more favorable funding margins and increased average earning asset levels, principally wholesale receivables and operating leases. For the nine months of 1995, GMAC's consolidated net income totaled $767.8 million, compared to nine-month 1994 net income of $678.2 million, including the $7.4 million unfavorable effect of the first quarter 1994 SFAS No. 112 accounting change. The 15% increase in the nine month net income from financing operations resulted from more favorable funding margins and increased average earning asset levels, principally wholesale receivables and operating leases. GMAC financed 26% of new General Motors vehicles delivered in the U.S. during the third quarter of 1995, a three percentage point increase compared to the second quarter of 1995 and the third quarter of 1994. Penetration for the nine months of 1995 decreased to 24% of new GM deliveries, one percentage point lower than the comparable 1994 period. The recent increase in penetration of retail delivery financing is primarily related to improved competitive conditions for GMAC. GMAC also provides wholesale financing for GM and other dealers' new and used vehicle inventories. In the United States, inventory financing was provided for 770,000 and 2,752,000 new GM vehicles in the third quarter and nine months of 1995, compared with 782,000 and 2,747,000 new GM vehicles during the same periods in 1994. GMAC's U.S. wholesale financing represented 71.6% of all GM sales to dealers during the nine months of 1995, a decrease from 74.8% for the comparable period a year ago. Consolidated net pre-tax margin after interest and discount and depreciation expense for the third quarter and nine months of 1995 increased by $152.6 million and $293.2 million over the comparable 1994 periods. The period-to- period improvements primarily reflect increased revenue from higher earning asset levels and more favorable funding margins. Interest and discount expense increased $181.3 million and $621.1 million for the third quarter and nine months of 1995 over the comparable periods in 1994 due to increased funding levels and higher interest rates. The Company's worldwide cost of funds for the third quarter of 1995 averaged 6.99%, an increase of 36 basis points from a year ago. The worldwide cost of funds averaged 7.13% for the nine months of 1995, an increase of 57 basis - 17 - 18 GENERAL MOTORS CORPORATION AND SUBSIDIARIES points from the comparable 1994 period. The higher funding costs are primarily attributable to a significant increase in the general level of short- term interest rates in the United States where the bank prime lending rate climbed from an average 7.50% in the third quarter of 1994 to an average 8.77% in the third quarter of 1995. Total borrowing costs for United States operations averaged 6.90% for the third quarter and 6.98% for the nine months of 1995, compared with 6.41% and 6.32%, respectively, for the same 1994 periods. Expenses increased $159.9 million and $370.7 million for the third quarter and nine month periods ended September 30, 1995, respectively, due principally to an increase in the provision for financing losses. Earning assets were $87.5 billion at September 30, 1995 compared to $82.1 billion and $77.4 billion at December 31, 1994 and September 30, 1994, respectively. The higher asset levels are primarily attributable to increased operating lease assets and retail finance receivables. During the third quarter of 1995, GMAC completed its second sale of wholesale receivables in the amount of $1.9 billion. Outstanding amounts related to these receivable sales comprise GMAC's wholesale finance servicing portfolio which totaled $4.3 billion at September 30, 1995 compared to $2.6 billion at December 31, 1994 and $1.9 billion at September 30, 1994. As of September 30, 1995, GMAC's total borrowings were $69.4 billion compared with $66.7 billion at December 31, 1994 and $61.6 billion at September 30, 1994. The Company's ratio of borrowings to equity capital was 8.4:1 at September 30, 1995, as compared to 8.4:1 at December 31, 1994 and 7.8:1 at September 30, 1994. Summary Financial Data - GMAC Nine Months Ended Condensed GMAC Consolidated Third Quarter September 30, ---------------- ----------------- Statement of Income 1995 1994 1995 1994 ---------------- ----------------- (Dollars in Millions) Financing Revenue Retail and lease financing $857.6 $660.7 $2,380.3 $2,167.2 Leasing 1,618.9 1,300.4 4,591.2 3,486.0 Wholesale and term loans 483.1 390.4 1,623.1 1,166.0 ------- ------- ------- ------- Total financing revenue 2,959.6 2,351.5 8,594.6 6,819.2 Interest and discount 1,222.9 1,041.6 3,718.0 3,096.9 Depreciation on operating leases 1,135.6 861.4 3,176.6 2,315.5 ------- ------- ------- ------- Net financing revenue 601.1 448.5 1,700.0 1,406.8 Insurance premiums earned 269.9 282.6 814.7 848.2 Other income 490.3 426.2 1,551.7 1,215.7 ------- ------- ------- ------- Net Financing Revenue and Other 1,361.3 1,157.3 4,066.4 3,470.7 Expenses 950.4 790.5 2,770.1 2,399.4 ------- ------- ------- ------- Income before income taxes 410.9 366.8 1,296.3 1,071.3 Income taxes 157.2 122.2 528.5 385.7 ------- ------- ------- ------- Income before cumulative effect of accounting change 253.7 244.6 767.8 685.6 Cumulative effect of accounting change - - - (7.4)* ------- ------- ------- ------- Net Income $253.7 $244.6 $767.8 $678.2 ======= ======= ======= ======= *Effective January 1, 1994, GMAC adopted SFAS No. 112. Financing Operations $222.2 $211.6 $666.8 $582.2 Insurance Operations 31.5 33.0 101.0 96.0 ------- ------- ------- ------- Consolidated Net Income $253.7 $244.6 $767.8 $678.2 ======= ======= ======= ======= Consolidated Return on Average Equity 12.2% 12.3% 12.5% 11.4% ======= ======= ======= ======= - 18 - 19 GENERAL MOTORS CORPORATION AND SUBSIDIARIES Condensed GMAC Consolidated Sept. 30, Dec. 31, Sept. 30, Balance Sheet 1995 1994 1994 ------------------------------------- (Dollars in Millions) Cash and cash equivalents $758.7 $1,339.5 $1,774.4 Investments in securities 4,282.2 3,891.7 3,937.1 Finance receivables - net 55,324.3 54,625.1 51,567.5 Net investment in operating leases 21,502.7 17,809.2 16,481.8 Notes receivable from General Motors Corporation 1,600.0 1,080.5 1,296.4 Other assets 6,891.2 6,791.4 6,151.5 -------- -------- -------- Total Assets $90,359.1 $85,537.4 $81,208.7 ======== ======== ======== Short-term debt $37,563.3 $35,114.8 $30,451.5 Accounts payable and other liabilities (including GM and affiliates - $2,787.3, $1,867.3 and $2,712.9) 12,636.2 10,989.3 11,739.5 Long-term debt 31,856.0 31,539.6 31,173.4 Stockholder's equity 8,303.6 7,893.7 7,844.3 -------- -------- -------- Total Liabilities and Stockholder's Equity $90,359.1 $85,537.4 $81,208.7 ======== ======== ======== Certain amounts for September 1994 have been reclassified to conform with 1995 classifications. Nine Months Ended Condensed GMAC Consolidated September 30, -------------------- Statement of Cash Flows 1995 1994 -------------------- (Dollars in Millions) Net Cash Provided by Operating Activities $4,902.2 $4,389.4 -------- -------- Cash Flows from Investing Activities Finance receivables-acquisitions (121,008.7) (114,308.9) -liquidations 101,821.6 103,828.6 Notes receivable from General Motors Corporation (519.5) 59.1 Operating leases-acquisitions (10,535.5) (9,742.2) -liquidations 3,943.9 2,544.4 Investments in securities-acquisitions (9,828.6) (9,802.4) -liquidations 9,529.3 9,563.6 Net increase in short-term investments - 6.2 Proceeds from sales of receivables - wholesale 13,396.4 8,786.3 - retail 5,264.3 4,747.0 Due and deferred from receivable sales 60.2 282.7 Other 818.9 (112.9) -------- -------- Net Cash Used in Investing Activities (7,057.7) (4,148.5) -------- -------- Cash Flows from Financing Activities Debt with original maturities 90 days and over -proceeds 35,755.2 37,041.4 -liquidations (36,366.6) (37,053.0) Debt with original maturities less than 90 days -net change 2,808.4 (1,764.5) Cash dividends paid to GM (625.0) (750.0) Proceeds from issuance of stock - 35.0 -------- -------- Net Cash Provided by (Used in) Financing Activities 1,572.0 (2,491.1) -------- -------- Effect of exchange rate changes on cash and cash equivalents 2.7 (3.5) -------- -------- Net decrease in cash and cash equivalents (580.8) (2,253.7) Cash and cash equivalents at beginning of the period 1,339.5 4,028.1 -------- -------- Cash and cash equivalents at end of the period $758.7 $1,774.4 ======== ======== Certain amounts for 1994 have been reclassified to conform with 1995 classifications. - 19 - 20 GENERAL MOTORS CORPORATION AND SUBSIDIARIES Electronic Data Systems Corporation Electronic Data Systems Corporation (EDS) reported earnings totaling $245.7 million for the 1995-third-quarter period, or $0.51 per share of GM Class E common stock. That compares with $216.4 million earned in the third quarter of 1994, or $0.45 per share. EDS results in the third quarter of 1995 reflect increased business activity in virtually every part of the world, which increased its total revenues 21 percent year-over-year. Business from sources outside of GM increased 27 percent in the third quarter of 1995. Non-GM business accounted for 69 percent of EDS' total revenues during the period. Nine month EDS earnings of $669.4 million resulted in earnings per Class E share of $1.40, compared with $585.4 million, or $1.22 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 4 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 and amounted to $38.8 million and $14.4 million, respectively, in the 1995 and 1994 nine-month periods. Condensed EDS Consolidated Statement Nine Months Ended of Income and Available Separate Third Quarter September 30, ---------------- ----------------- Consolidated Net Income 1995 1994 1995 1994 ---------------- ----------------- (Dollars in Millions Except Per Share Amounts) Revenues Systems and other contracts GM and affiliates $965.9 $879.5 $2,846.4 $2,577.4 Outside customers 2,107.8 1,643.3 5,953.7 4,472.1 Interest and other income 35.4 42.1 56.1 88.7 ------- ------- ------- ------- Total Revenues 3,109.1 2,564.9 8,856.2 7,138.2 Costs and Expenses 2,725.1 2,226.8 7,810.2 6,223.6 Income Taxes 138.3 121.7 376.6 329.2 ------- ------- ------- ------- Separate Consolidated Net Income $245.7 $216.4 $669.4 $585.4 ======= ======= ======= ======= Available Separate Consolidated Net Income* Average number of shares of Class E common stock outstanding (in millions) (Numerator) 438.8 261.2 393.0 259.7 Class E dividend base (in millions) (Denominator) 483.7 481.7 483.3 481.6 Available Separate Consolidated Net Income $222.9 $117.3 $551.1 $315.9 ===== ===== ===== ===== Earnings Attributable to Class E Common Stock on a Per Share Basis $0.51 $0.45 $1.40 $1.22 ==== ==== ==== ==== Cash dividends per share of Class E common stock $0.13 $0.12 $0.39 $0.36 ==== ==== ==== ==== * Available Separate Consolidated Net Income is determined quarterly. - 20 - 21 GENERAL MOTORS CORPORATION AND SUBSIDIARIES Hughes Electronics Corporation Hughes Electronics Corporation (Hughes) reported record third-quarter earnings of $256.1 million during the third quarter of 1995, or $0.64 per share of GM Class H common stock. That compares with 1994-third-quarter earnings of $244.2 million, or $0.61 per share. The earnings improvement at Hughes is primarily attributed to increased revenues in each of the Hughes business segments, ongoing cost-reduction efforts, and a decrease in the effective tax rate, partially offset by a decrease in other income. Revenues for the 1995 period were $3,441.3 million, a 2.6% increase from the $3,354.5 million reported in the third quarter of 1994. For the nine months of 1995, Hughes earnings were $813.4 million, or $2.03 per share of GM Class H common stock, on revenues of $10,743.7 million. In the nine months of 1994, 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. Earnings per share attributable to GM Class H common stock are based on the Available Separate Consolidated Net Income of Hughes as described in Note 4 to the Financial Statements. Reference should be made to Hughes' Management's Discussion and Analysis in Exhibit 99(b) which is incorporated herein by reference. Condensed Hughes Statement of Consolidated Operations and Nine Months Ended Available Separate Consolidated Third Quarter September 30, ------------------ ------------------ Net Income 1995 1994 1995 1994 ------------------ ------------------ (Dollars in Millions Except Per Share Amounts) Revenues Net sales Outside customers $2,341.6 $2,264.1 $6,850.3 $6,760.5 GM and affiliates 1,126.7 1,056.7 3,893.3 3,638.9 Other income(loss)-net (27.0) 33.7 0.1 78.3 ------- ------- ------- ------- Total Revenues 3,441.3 3,354.5 10,743.7 10,477.7 Costs and Expenses 3,130.7 2,993.1 9,593.5 9,238.4 Income Taxes 121.6 148.2 465.8 508.2 ------- ------- ------- ------- Income before cumulative effect of accounting change 189.0 213.2 684.4 731.1 Cumulative effect of accounting change - - - (30.4)(1) ------- ------- ------- ------- Net Income 189.0 213.2 684.4 700.7 Adjustments to exclude the effect of GM purchase accounting adjustments related to Hughes Aircraft Company (2) 67.1 31.0 129.0 92.9 ------- ------- ------- ------- Earnings Used for Computation of Available Separate Consolidated Net Income $256.1 $244.2 $813.4 $793.6 ======= ======= ======= ======= Available Separate Consolidated Net Income (3) Average number of shares of Class H common stock outstanding (in millions) (Numerator) 95.9 92.7 95.2 91.7 Class H dividend base (in millions) (Denominator) 399.9 399.9 399.9 399.9 Available Separate Consolidated Net Income $61.4 $56.6 $193.5 $181.9 ==== ==== ===== ===== See notes on next page. - 21 - 22 GENERAL MOTORS CORPORATION AND SUBSIDIARIES Condensed Hughes Statement of Consolidated Operations and Nine Months Ended Available Separate Consolidated Third Quarter September 30, ------------------ ------------------ Net Income - Concluded 1995 1994 1995 1994 ------------------ ------------------ (Dollars in Millions Except Per Share Amounts) Earnings Attributable to Class H Common Stock on a Per Share Basis Before cumulative effect of accounting change $0.64 $0.61 $2.03 $2.06 Cumulative effect of acctg. change - - - (0.08)(1) ---- ---- ---- ---- Net earnings attributable to Class H common stock on a per share basis $0.64 $0.61 $2.03 $1.98 ==== ==== ==== ==== Cash dividends per share of Class H common stock $0.23 $0.20 $0.69 $0.60 ==== ==== ==== ==== (1) Effective January 1, 1994, Hughes adopted SFAS No. 112 ($30.4 million or $0.08 per share). (2) Amortization and write-off of intangible assets arising from GM's acquisition of Hughes Aircraft Company. (3) Available Separate Consolidated Net Income is determined quarterly. Liquidity and Capital Resources With GMAC on an equity basis, cash and marketable securities totaled $8,848.7 million at the end of the 1995 third quarter, compared with $9,345.2 million at June 30, 1995, $10,976.4 million at December 31, 1994 and $9,321.9 million at September 30, 1994. The decline in liquidity at the end of the third quarter of 1995, compared with the end of June this year, is more than accounted for by the $800 million cash contribution to the U.S. pension plans during the third quarter, and cash expenditures at EDS, including its acquisition of A.T. Kearney. Cash and cash equivalents, including GMAC, at September 30, 1995 amounted to $8,998.3 million, compared with $10,939.0 million at December 31, 1994 and $9,806.1 million at September 30, 1994. The decrease in 1995 was due to an excess of net cash used in investing activities over the net cash provided by operating and financing activities. 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 $9,144.9 million in the nine months of 1995, compared to $6,776.8 million in the 1994 period, reflecting the net effects of higher net income, an increase in depreciation of equipment on operating leases, increases in other investments, miscellaneous assets, and deferred credits, decreases in deferred income taxes and income taxes payable, and a decrease in proceeds on sale of mortgage loans. Net cash used in investing activities in the 1995 nine-month period amounted to $12,456.8 million, consisting primarily of capital expenditures and the increase in equipment on operating leases. Net cash used in investing activities in the 1994 period amounted to $9,113.8 million, consisting primarily of capital expenditures and the net increase in equipment on operating leases. Total capital expenditures were $6,915.8 million in the nine months of 1995 compared with $4,661.6 million in the 1994 period. Net cash provided by financing activities in the 1995 period of $1,227.7 million - 22 - 23 GENERAL MOTORS CORPORATION AND SUBSIDIARIES primarily reflected a net increase in short-term loans payable of $1,138.6 million and the net increase in long-term debt of $2,400.8 million, offset in part by the $1,286.7 million repurchases of preference stock and $972.3 million in cash dividends paid to stockholders. 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. During the first nine months of 1995, notes and loans payable increased $4,154.9 million to $77,885.1 million at September 30, 1995 from a balance of $73,730.2 million at December 31, 1994 reflecting primarily a net increase in long-term debt. GM's fully consolidated ratio of debt to stockholders' equity (excluding stocks subject to repurchase) was 3.41 to 1 at September 30, 1995 compared to 5.75 to 1 at December 31, 1994 and 7.19 to 1 at September 30, 1994, reflecting higher stockholders' equity due to the Class E common stock contribution to the U.S. hourly pension plan and improved profitability. On May 30, 1995, Moody's Investors Service (Moody's) raised the long-term credit ratings of General Motors Corporation, GMAC, Hughes and certain related affiliates. In this action, the credit rating of GMAC's commercial paper was also raised. The ratings for commercial paper and term debt of EDS and the rating for the commercial paper of Hughes were not affected by the action announced by Moody's. The rating of senior debt issued by GM, GMAC and certain of their affiliates was raised to A3 from Baa1. Moody's defines A3 bonds as having "upper-medium grade" quality, whereas the Baa1 rating signifies "medium grade" quality. The rating for GM preference stock was upgraded two levels, to baa1 from baa3 (baa3 is the lowest investment grade category). The rating of commercial paper issued by GMAC was raised to P-1 from P-2. Moody's employs its P-1 rating to indicate that an issuer's ability to repay is superior relative to other issuers, while the P-2 rating indicates that the issuer has a strong ability for repayment relative to other issuers. On April 4, 1995, Standard & Poor's Corporation (S&P) affirmed its positive outlook and its rating of General Motors Corporation and related entities. It raised its commercial paper rating of EDS to A-1 from A-2, second highest within the four investment grade ratings available from S&P for commercial paper, indicating a strong degree of safety regarding timely payments, and removed the rating from CreditWatch, where it was placed on February 6, 1995. On October 26, 1995, S&P raised the long-term debt ratings of GM, GMAC, and Hughes from BBB+ to A-, seventh highest within the 10 investment grade ratings available from S&P for long-term debt, based on a strong capability to pay interest and repay principal, although somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher rated categories. Additionally, S&P raised its rating on GM's preference stock from BBB to BBB+, eighth highest within the 10 S&P investment grade ratings. S&P affirmed its A-2 rating on GMAC's and Hughes' commercial paper. The senior debt (A) and commercial paper (A-1) rating on EDS remain on CreditWatch with positive implications for a possible upgrade. 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. A third quarter cash dividend on $1-2/3 par value common stock of $0.30 per share was paid on September 9, 1995. On November 6, 1995, the Board of Directors declared a cash dividend of $0.30 per share on $1-2/3 par value common stock for the fourth quarter of 1995 payable December 9, 1995. This dividend declaration continues the level established in the second quarter of 1995, and raises 1995 cash dividends to $1.10 per share, compared with $0.80 per share in 1994. - 23 - 24 GENERAL MOTORS CORPORATION AND SUBSIDIARIES A third quarter cash dividend on Class E common stock of $0.13 per share was paid on September 9, 1995. On November 6, 1995, the Board of Directors also declared a cash dividend of $0.13 per share on Class E common stock payable December 9, 1995. This continues the level established in the first quarter of 1995 and raises 1995 cash dividends to $0.52 per share compared with $0.48 per share in 1994. A third quarter cash dividend on Class H common stock of $0.23 per share was paid on September 9, 1995. On November 6, 1995, the Board of Directors also declared a cash dividend of $0.23 per share on Class H common stock payable December 9, 1995. This continues the level in effect since the first quarter of 1995 and raises 1995 cash dividends to $0.92 per share, compared with $0.80 per share in 1994. Book value per share of $1-2/3 par value common stock increased to $23.90 at the end of the 1995 third quarter from $11.18 at the end of 1994. Book value per share of Class E common stock increased to $3.05 from $1.43 at the end of 1994 and book value per share of Class H common stock increased to $11.97 from $5.59 at the end of 1994. At year-end 1994, GM's total unfunded pension position decreased to $12.6 billion ($9.4 billion U.S. and $3.2 billion non-U.S.) from $22.3 billion at December 31, 1993. GM contributed $800 million and $3.3 billion to its U.S. pension plans during the third quarter of 1995 and 1994, respectively, for a total of $10.4 billion (cash and stock) and $5.2 billion in pension contributions during the nine months of 1995 and 1994, respectively. In the nine months of 1995, the Corporation contributed approximately 173 million shares of Class E common stock, valued at $6.3 billion, to its U.S. hourly pension plan (see Note 7 to the Financial Statements). The March 13, 1995 Class E common stock contribution to the U.S. hourly pension plan increases the weighted average number of Class E shares outstanding which increases the allocation of EDS earnings to Class E common stock and decreases the allocation of EDS earnings to $1-2/3 par value common stock. The reduction in EDS earnings allocated to $1-2/3 par value common stock was more than offset by reduced pension expense as a result of the stock contribution. The relationship between the reduction in EDS earnings allocated to $1-2/3 par value common stock and reduced pension expense will vary from period to period. The stock contribution has no impact on Class E earnings per share since the increased allocation of EDS earnings to Class E common stock is offset by the higher weighted average number of Class E shares outstanding. 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 present value of the plans' obligations. The decrease in long-term interest rates which has occurred in the U.S. between December 31, 1994 (the latest measurement date of GM's pension plans) and September 30, 1995 would, if there were no further changes in long-term interest rates during 1995, require the Corporation to calculate its December 31, 1995 pension obligation using a discount rate approximately 100 basis points below that used at the last measurement date. GM's reported unfunded pension position would be adversely affected by such a change in interest rates. The unfunded pension position would also be affected by contributions during the year, the actual return on pension investments and various other factors. A change in the unfunded pension position will also affect the minimum pension liability adjustment to stockholders' equity. The change 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. There has been a 125 basis point decrease in long-term interest rates between October 1, 1994 (the most recent valuation date) and September 30, 1995. However, a change to the accumulated postretirement benefit obligation would have no impact on GM's stockholders' equity in 1995 and no cash impact. - 24 - 25 GENERAL MOTORS CORPORATION AND SUBSIDIARIES Neither changes in the Corporation's unfunded pension obligations under SFAS No. 87 nor changes in the Corporation's postretirement obligations under SFAS No. 106 would have an impact on the earnings to be reported by the Corporation for 1995. However, in accordance with applicable accounting standards, any change in these obligations would impact the Corporation's 1996 and subsequent years' earnings as non-cash increases/decreases in pension and other postretirement benefit expense. In March 1995, the Financial Accounting Standards Board (FASB) issued SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, effective January 1, 1996. The Statement establishes accounting standards for the impairment of long-lived assets, certain identifiable intangibles, and goodwill related to those assets to be held and used and for long-lived assets and certain identifiable intangibles to be disposed of. The Corporation has not yet determined the effect of this Standard. On August 7, 1995, the Corporation announced that it intends to pursue a split-off of its wholly owned subsidiary, EDS, to its GM Class E stockholders in a tax-free exchange of stock. To achieve a split-off, GM would exchange EDS capital stock for outstanding GM Class E common stock. GM would not recognize a gain on the transaction. There are currently 438.9 million shares of GM Class E common stock outstanding, and 44.8 million shares currently reserved for issuance upon conversion of Series C Preference Stock. The process of establishing definitive terms for a split-off transaction which will be fair to all holders of GM common stocks will, among other things, consider differences between the values of GM Class E and EDS common stocks in order to establish any adjustment deemed appropriate by the GM Board of Directors. A split-off would be subject to the appropriate stockholder approvals, and a favorable Internal Revenue Service ruling that the transaction would be tax- free. The specific terms of a transaction, which are yet to be developed, must also be approved by the GM Board of Directors. Subject to these and other approvals and conditions, GM and EDS expect that a split-off could occur in the first half of 1996. However, it should be noted that due to the numerous uncertainties involved in these matters, there can be no assurance that any split-off of EDS will be proposed or completed. A split-off would be proposed only in a manner that would not result in the recapitalization of GM Class E common stock into GM $1-2/3 par value common stock at a 120 percent exchange ratio, as currently provided for under certain circumstances in the GM Certificate of Incorporation. In the event of a split-off, GM and EDS would enter into a long-term agreement under which EDS would provide substantially the same information technology services for GM that it does today. The FASB's Emerging Issues Task Force (EITF) is considering an issue (Issue No. 95-1) that may require the Corporation to delay the timing of when it records revenues and profits on a significant portion of the vehicles sold to daily rental car companies. The effect of such a delay would not be material in 1995 if adopted on a prospective basis. If adopted on a one-time cumulative effect basis in the first quarter of 1995, the effect would be material in the period of adoption. In either case, there would be no effect on the Corporation's cash flows. The Financial Accounting Standards Board issued SFAS No. 123, Accounting for Stock-Based Compensation, in October 1995 that encourages companies to record expense for stock options and other stock-based employee compensation plans based on their fair value at date of grant. As allowed by the Standard, the Corporation plans to continue to apply its current accounting policy under APB Opinion No. 25 in 1995 and future years. In the 1996 annual financial - 25 - 26 GENERAL MOTORS CORPORATION AND SUBSIDIARIES statements, the Corporation will increase its note disclosure to include the pro-forma impact on net income and earnings per share of the application of the fair value based method of accounting encouraged by the Standard. 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 1995 1994 1995 1994 -------------------- -------------------- (Dollars in Millions) Net Sales and Revenues (1) Manufactured products $28,881.3 $27,148.2 $99,953.6 $91,022.3 Hughes manufactured products 2,360.5 2,282.6 6,909.3 6,833.3 Computer systems services 2,187.9 1,710.9 6,187.2 4,675.0 -------- -------- --------- --------- Total Net Sales and Revenues 33,429.7 31,141.7 113,050.1 102,530.6 -------- -------- --------- --------- Costs and Expenses Cost of sales and other operating charges, exclusive of items listed below 28,728.1 26,931.8 93,315.6 85,213.7 Selling, general, and administrative expenses 2,729.7 2,549.7 8,148.0 7,453.1 Depreciation of real estate, plants, and equipment 1,018.8 965.7 3,120.9 2,849.7 Amortization of special tools 661.9 596.3 2,407.9 2,121.9 Amortization of intangible assets 37.9 45.2 113.2 135.7 -------- -------- --------- -------- Total Costs and Expenses 33,176.4 31,088.7 107,105.6 97,774.1 -------- -------- --------- -------- Operating Income 253.3 53.0 5,944.5 4,756.5 Other income less income deductions - net 270.0 338.4 762.4 965.6 Interest expense (210.5) (365.0) (664.4) (910.1) -------- -------- -------- -------- Income before Income Taxes 312.8 26.4 6,042.5 4,812.0 Income taxes (credit) 3.7 (220.5) 1,905.2 1,519.7 -------- -------- -------- -------- Income after Income Taxes 309.1 246.9 4,137.3 3,292.3 Earnings of nonconsolidated affiliates 333.3 305.1 929.2 786.9 -------- -------- -------- -------- Income before cumulative effect of accounting change 642.4 552.0 5,066.5 4,079.2 Cumulative effect of accounting change (2) - - - (750.7) -------- -------- -------- -------- Net Income $642.4 $552.0 $5,066.5 $3,328.5 ======== ======== ======== ======== Certain amounts for 1994 were reclassified to conform with 1995 classifications. (1) Includes sales to nonconsolidated affiliates of $277.6 million and $231.1 million in the third quarter and $834.1 million and $810.5 million in the nine months of 1995 and 1994, respectively, including $80.1 million and $67.6 million in computer systems services revenues for the third quarter and $233.5 million and $202.9 million for the nine months. (2) 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. - 26 - 27 GENERAL MOTORS CORPORATION AND SUBSIDIARIES Consolidated Balance Sheet With GMAC on an Equity Basis Sept. 30, Dec. 31, Sept. 30, ASSETS 1995 1994 1994 ----------------------------------- (Dollars in Millions) Current Assets Cash and cash equivalents $8,239.6 $9,731.4 $8,222.8 Other marketable securities 609.1 1,245.0 1,099.1 --------- --------- --------- Total cash and marketable securities 8,848.7 10,976.4 9,321.9 Accounts and notes receivable Trade 9,887.8 7,873.1 7,584.8 Nonconsolidated affiliates 1,794.5 2,080.4 2,902.5 Inventories 11,968.5 10,127.8 10,345.4 Contracts in process 2,670.5 2,265.4 2,725.2 Prepaid expenses and deferred income taxes 6,667.0 6,455.6 8,613.2 --------- --------- --------- Total Current Assets 41,837.0 39,778.7 41,493.0 Equity in Net Assets of Nonconsolidated Affiliates 9,874.2 9,204.3 8,859.2 Deferred Income Taxes 14,117.1 16,318.6 15,283.6 Other Investments and Miscellaneous Assets 14,619.4 14,835.5 14,276.5 Property - Net 36,428.2 34,661.4 34,036.7 Intangible Assets 11,756.6 11,536.4 12,713.9 --------- --------- --------- Total Assets $128,632.5 $126,334.9 $126,662.9 ========= ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable $10,413.2 $10,905.0 $8,775.4 Loans payable 1,705.3 993.7 992.0 Income taxes payable - 144.7 996.9 Accrued liabilities and deferred income taxes (including current portion of postretirement benefits other than pensions) 25,857.9 26,584.4 28,277.1 Stocks subject to repurchase - 450.0 450.0 --------- --------- --------- Total Current Liabilities 37,976.4 39,077.8 39,491.4 Long-Term Debt 6,760.3 6,082.3 6,565.4 Payable to GMAC - 1,212.5 1,487.6 Capitalized Leases 137.1 136.4 154.2 Postretirement Benefits Other Than Pensions 38,660.5 37,348.0 36,863.4 Pensions 3,748.6 11,223.1 15,055.8 Other Liabilities and Deferred Income Taxes 16,991.8 16,752.2 16,178.7 Deferred Credits 1,499.4 1,678.8 1,246.5 Stockholders' Equity 22,858.4 12,823.8 9,619.9 --------- --------- --------- Total Liabilities and Stockholders' Equity $128,632.5 $126,334.9 $126,662.9 ========= ========= ========= - 27 - 28 GENERAL MOTORS CORPORATION AND SUBSIDIARIES Condensed Statement of Consolidated Cash Flows Nine Months Ended With GMAC on an Equity Basis September 30, ------------------- 1995 1994 ------------------- (Dollars in Millions) Net Cash Provided by Operating Activities $6,258.5 $2,990.5 -------- ------- Cash Flows from Investing Activities Expenditures for real estate, plants, and equipment (4,255.1) (3,015.0) Expenditures for special tools (2,595.4) (1,564.1) Change in other investing assets Investments in other marketable securities - acquisitions (4,021.9) (1,585.0) Investments in other marketable securities - liquidations 4,657.8 1,208.4 Other (1,045.9) 130.1 -------- ------- Net Cash Used in Investing Activities (7,260.5) (4,825.6) -------- ------- Cash Flows from Financing Activities Increase in long-term debt 1,708.1 791.7 Decrease in long-term debt (1,029.9) (444.7) Net increase in payable to GMAC 311.5 132.1 Repurchases of preference stocks (1,286.7) - Repurchases of common stocks (394.0) - Proceeds from issuing common stocks 341.3 1,113.7 Cash dividends paid to stockholders (972.3) (839.1) Other 691.4 (463.4) -------- ------- Net Cash Provided by (Used in) Financing Activities (630.6) 290.3 -------- ------- Effect of Exchange Rate Changes on Cash and Cash Equivalents 140.8 5.1 -------- ------- Net decrease in cash and cash equivalents (1,491.8) (1,539.7) Cash and cash equivalents at beginning of the period 9,731.4 9,762.5 -------- ------- Cash and cash equivalents at end of the period $8,239.6 $8,222.8 ======== ======= * * * * * * * * - 28 - 29 GENERAL MOTORS CORPORATION PART II AND SUBSIDIARIES ITEM 1. LEGAL PROCEEDINGS 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, 1995 are summarized below. It was previously reported that GM had filed a petition for writ of certiorari seeking review by the U.S. Supreme Court of the U.S. Court of Appeals for the Third Circuit decision which had reversed approval by the Pennsylvania Federal Court of a nationwide C/K pickup truck class action settlement. On October 2, 1995, the U.S. Supreme Court denied certiorari. As a result, the action has been returned to the Federal District Court in Pennsylvania for further proceedings. * * * Other Pending Legal Proceedings Reported in Previous 1995 Current Report and Quarterly Reports Reference is made to the Registrant's Current Report dated March 24, 1995 (Item 5(a)) and Quarterly Reports on Form 10-Q for the quarters ended March 31 and June 30, 1995. * * * (b) Previously reported legal proceedings which have been terminated, either during the quarter ended September 30, 1995, or subsequent thereto, but before the filing of this report are summarized below. With respect to the previously reported matter in which the Region II office of the U.S. Environmental Protection Agency (EPA) had issued a Civil Administrative Complaint alleging that a plant operated by the GM Powertrain Division in Massena, New York had improperly disposed of polychlorinated biphenyl contaminated sludge, the EPA, on November 3, 1995, dismissed the complaint with prejudice. * * * - 29 - 30 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, 1995 and 1994. 31 12 Computation of Ratios of Earnings to Fixed Charges for the Nine Months Ended September 30, 1995 and 1994. 35 21 Subsidiaries of the Registrant 36 99(a) Electronic Data Systems Corporation and Subsidiaries Consolidated Financial Statements and Management's Discussion and Analysis. 37 (b) Hughes Electronics Corporation and Subsidiaries Consolidated Financial Statements and Management's Discussion and Analysis. 45 27 Financial Data Schedule (for SEC information only) (b) REPORTS ON FORM 8-K. No report on Form 8-K was filed during the quarter ended September 30, 1995. * * * * * * 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 13, 1995 (Leon J. Krain, Vice President - ---------------------- and Group Executive) By s/Wallace W. Creek ------------------------------- Date November 13, 1995 (Wallace W. Creek, Comptroller) - ---------------------- - 30 - EX-11 2 EXHIBIT 11 l:\secfiles\10-Q\1995\3rdqtr95\exhib11.doc 1 1 GENERAL MOTORS CORPORATION EXHIBIT 11 AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE ATTRIBUTABLE TO COMMON STOCKS Quarter Ended September 30, 1995 ----------------------------- $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 $358.1 $222.9 $61.4 Dividends on preference stocks 41.4 - - ----- ----- ---- Earnings attributable to common stocks 316.7 222.9 61.4 Dividends on common stocks 224.3 57.0 22.1 ----- ----- ---- Undistributed earnings 92.4 165.9 39.3 Adjustments Change in earnings attributable to each class of common stock related to the assumed exercise of stock options * (1.4) - 1.3 Dividends on assumed common stock transactions (1.2) - (0.5) ----- ----- ---- Adjusted earnings attributable to common stocks $89.8 $165.9 $40.1 ===== ===== ==== Weighted average shares outstanding (in millions) 748.2 438.8 95.9 Adjustment Assumed exercise of dilutive stock options * 4.2 - 2.1 ----- ----- ---- Adjusted weighted average shares outstanding 752.4 438.8 98.0 ===== ===== ==== Per Share Data Earnings per share attributable to undistributed earnings on common stocks $0.12 $0.38 $0.41 Dividends 0.30 0.13 0.23 ---- ---- ---- Earnings per share attributable to common stocks $0.42 $0.51 $0.64 ==== ==== ==== 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. - 31 - 2 GENERAL MOTORS CORPORATION AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE ATTRIBUTABLE TO COMMON STOCKS - Continued 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. - 32 - 3 GENERAL MOTORS CORPORATION AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE ATTRIBUTABLE TO COMMON STOCKS - Continued Nine Months Ended September 30, 1995 ----------------------------- $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 $4,321.9 $551.1 $193.5 Premium on repurchases of preference stocks 153.4 - - Dividends on preference stocks 159.5 - - ------- ----- ----- Earnings attributable to common stocks 4,009.0 551.1 193.5 Dividends on common stocks 598.8 148.3 65.7 ------- ----- ----- Undistributed earnings 3,410.2 402.8 127.8 Adjustment Change in earnings attributable to each class of common stock related to the assumed exercise of stock options * (4.7) - 4.7 Dividends on assumed common stock transactions (2.9) - (1.6) ------- ----- ----- Adjusted earnings attributable to common stocks $3,402.6 $402.8 $130.9 ======= ===== ===== Weighted average shares outstanding (in millions) 749.0 393.0 95.2 Adjustment Assumed exercise of dilutive stock options * 3.8 - 2.2 ----- ----- ---- Adjusted weighted average shares outstanding 752.8 393.0 97.4 ===== ===== ==== Per Share Data Earnings per share attributable to undistributed earnings on common stocks $4.52 $1.02 $1.34 Adjustment - (0.01)** - Dividends 0.80 0.39 0.69 ---- ---- ---- Earnings per share attributable to common stocks $5.32 $1.40 $2.03 ==== ==== ==== 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. ** The per-share reported earnings attributable to Class E common stock of $1.40 equals the sum of the separate computations of each of the first three quarters, consistent with the requirements for calculating earnings per share based on EDS earnings and the Class E denominator. The nine month calculation shown above (based on 1995 weighted average outstanding Class E shares for the period) requires an adjustment of ($0.01) due to the significant differences in the weighted average number of shares outstanding in each quarter resulting from the Class E stock contribution to the U.S. hourly pension plan. - 33 - 4 GENERAL MOTORS CORPORATION AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE ATTRIBUTABLE TO COMMON STOCKS - Concluded 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 conversion of preference stock 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 - EX-12 3 EXHIBIT 12 l:\secfiles\10-Q\1995\3rdqtr95\exhib12.doc 1 1 GENERAL MOTORS CORPORATION EXHIBIT 12 AND SUBSIDIARIES COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES Nine Months Ended September 30, --------------------- 1995 1994 --------------------- (Dollars in Millions) Income before cumulative effect of accounting change $5,066.5 $4,086.6 United States, foreign, and other income taxes 2,433.8 1,905.3 Equity in income of associates (91.2) (9.2) Cash dividends received from associates 13.7 8.6 Amortization of capitalized interest 38.3 37.7 -------- ------- Income before income taxes, undistributed (income) losses of associates, and amortization of capitalized interest 7,461.1 6,029.0 -------- ------- Fixed charges included in net income Interest and related charges on debt 4,262.5 3,651.0 Portion of rentals deemed to be interest 424.2 334.5 -------- ------- Total fixed charges included in net income 4,686.7 3,985.5 -------- ------- Earnings available for fixed charges $12,147.8 $10,014.5 ======== ======= Fixed charges Fixed charges included in net income $4,686.7 $3,985.5 Interest capitalized in the period 37.5 21.1 -------- ------- Total fixed charges $4,724.2 $4,006.6 ======== ======= Ratios of earnings to fixed charges 2.57 2.50 ==== ==== - 35 - EX-99 4 EXHIBIT 99A l:\secfiles\10-Q\1995\3rdqtr954\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 (in millions except per share amounts) Nine Months Ended Third Quarter September 30, ----------------- ------------------ 1995 1994 1995 1994 ----------------- ------------------ Revenues Systems and other contracts GM and affiliates $965.9 $879.5 $2,846.4 $2,577.4 Outside customers 2,107.8 1,643.3 5,953.7 4,472.1 Interest and other income 35.4 42.1 56.1 88.7 ------- ------- ------- ------- Total revenues 3,109.1 2,564.9 8,856.2 7,138.2 ------- ------- ------- ------- Costs and expenses Cost of revenues 2,386.1 1,920.7 6,857.4 5,356.7 Selling, general, and administrative 307.0 288.8 872.4 829.1 Interest 32.0 17.3 80.4 37.8 ------- ------- ------- ------- Total costs and expenses 2,725.1 2,226.8 7,810.2 6,223.6 ------- ------- ------- ------- Income before income taxes 384.0 338.1 1,046.0 914.6 Provision for income taxes 138.3 121.7 376.6 329.2 ------- ------- ------- ------- Separate Consolidated Net Income $245.7 $216.4 $669.4 $585.4 ======= ======= ======= ======= Available Separate Consolidated Net Income (Note 1) Average number of shares of GM Class E common stock outstanding (Numerator) 438.8 261.2 393.0 259.7 Class E dividend base (Denominator) 483.7 481.7 483.3 481.6 Available Separate Consolidated Net Income $222.9 $117.3 $551.1 $315.9 ===== ===== ===== ===== Earnings Attributable to GM Class E Common Stock on a Per Share Basis (Note 1) $0.51 $0.45 $1.40 $1.22 ==== ==== ==== ==== See accompanying note to consolidated financial statements. - 37 - 2 ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets (in millions) September 30, December 31, 1995 1994 --------------------------- ASSETS Current assets Cash and cash equivalents $580.8 $608.2 Marketable securities 95.8 149.6 Accounts receivable 2,571.0 2,082.1 Accounts receivable from GM and affiliates 231.4 65.4 Inventories 213.6 137.8 Prepaids and other 390.5 311.0 -------- ------- Total current assets 4,083.1 3,354.1 -------- ------- Property and equipment, at cost less accumulated depreciation of $3,097.7 at September 30, 1995 and $2,680.9 at December 31, 1994 Land 128.0 125.3 Buildings and facilities 537.0 559.2 Computer equipment 2,154.2 1,871.0 Other equipment and furniture 258.8 201.1 -------- ------- Total property and equipment, net 3,078.0 2,756.6 -------- ------- Operating and other assets Land held for development, at cost 98.4 97.4 Investment in leases and other 1,488.4 1,308.8 Software, goodwill, and other intangibles, net 1,518.0 1,269.6 -------- ------- Total operating and other assets 3,104.8 2,675.8 -------- ------- Total Assets $10,265.9 $8,786.5 ======== ======= LIABILITIES AND STOCKHOLDER'S EQUITY Current liabilities Accounts payable $498.7 $571.1 Accrued liabilities 1,471.0 1,451.0 Deferred revenue 583.1 536.7 Income taxes 168.9 111.0 Notes payable 258.3 203.4 -------- ------- Total current liabilities 2,980.0 2,873.2 -------- ------- Deferred income taxes 637.5 659.8 -------- ------- Notes payable 1,877.4 1,021.0 -------- ------- Stockholder's equity Common stock, without par value; authorized 1,000.0 shares. Issued and outstanding 483.7 shares at September 30, 1995 and 481.7 shares at December 31, 1994 516.9 455.1 Retained earnings 4,254.1 3,777.4 ------- ------- Total stockholder's equity 4,771.0 4,232.5 ------- ------- Total Liabilities and Stockholder's Equity $10,265.9 $8,786.5 ======== ======= See accompanying note to consolidated financial statements. - 38 - 3 ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows (in millions) Nine Months Ended Third Quarter September 30, --------------- ----------------- 1995 1994 1995 1994 --------------- ----------------- Cash Flows from Operating Activities Net income $245.7 $216.4 $669.4 $585.4 ----- ----- ------ ----- Adjustments to reconcile net income to net cash provided by operating activities (net of effects of acquired companies) Depreciation and amortization 269.1 152.2 797.3 485.4 Accretion of discount related to commercial paper 12.1 9.9 42.7 19.8 Increase in accounts receivable (184.9) (269.5) (349.6) (332.5) Increase in accounts receivable from GM and affiliates (33.4) (124.1) (164.6) (33.4) Increase in inventories (47.1) (14.2) (75.8) (54.5) (Increase) decrease in prepaids and other (14.1) 3.0 (55.3) (55.7) Increase (decrease) in accounts payable and accrued liabilities (4.3) 123.2 (280.2) 140.2 Increase (decrease) in deferred revenue (29.5) 23.9 35.7 26.3 Increase (decrease) in income taxes 49.6 112.6 58.2 (2.6) Increase (decrease) in deferred income taxes 5.0 (64.3) (21.4) 15.3 ----- ----- ------- ----- Total adjustments 22.5 (47.3) (13.0) 208.3 ----- ----- ------- ----- Net cash provided by operating activities268.2 169.1 656.4 793.7 ----- ----- ------- ----- Cash Flows from Investing Activities Payments for purchase of available-for-sale securities (25.8) (98.7) (73.6) (220.7) Proceeds from sale of available-for-sale securities 38.6 84.8 149.8 199.2 Payments related to land held for development (0.1) (1.6) (1.0) (3.0) Payments for investment in leases and certain other assets (94.6) (94.4) (355.7) (404.5) Proceeds from investment in leases and certain other assets 80.8 155.5 231.8 301.8 Payments for purchase of software and certain other intangibles (24.3) 16.4 (98.5) (23.5) Payments for purchase of property and equipment (254.1) (358.1) (869.2) (785.4) Payments related to acquisitions, net of cash acquired (261.7) (21.9) (388.8) (70.5) ----- ----- ------- ------- Net cash used in investing activities ($541.2)($318.0)($1,405.2) ($1,006.6) ------ ------ -------- -------- Certain 1994 amounts were reclassified to conform with 1995 classifications. See accompanying note to consolidated financial statements. - 39 - 4 ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows - Concluded (in millions) Nine Months Ended Third Quarter September 30, --------------- ----------------- 1995 1994 1995 1994 --------------- ----------------- Cash Flows from Financing Activities Net increase (decrease) in current notes payable with maturities less than 90 days ($41.5) $10.1 $- ($90.9) Payments on notes payable (287.3) (84.7) (718.7) (138.8) Proceeds from notes payable 645.2 47.0 1,569.0 527.2 Proceeds from issuance of common stock 5.7 0.6 61.8 33.6 Cash dividends paid to GM (62.8) (57.8) (188.3) (173.3) ----- ----- ----- ----- Net cash provided by (used in) financing activities 259.3 (84.8) 723.8 157.8 ----- ----- ----- ----- Effect of Exchange Rate Changes on Cash and Cash Equivalents (5.7) 14.1 (2.4) 26.5 ----- ----- ----- ----- Net Decrease in Cash and Cash Equivalents (19.4) (219.6) (27.4) (28.6) Cash and Cash Equivalents at Beginning of Period 600.2 574.4 608.2 383.4 ----- ----- ----- ----- Cash and Cash Equivalents at End of Period $580.8 $354.8 $580.8 $354.8 ===== ===== ===== ===== See accompanying note to consolidated financial statements. Note 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), 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' 1994 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 - 40 - 5 ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES Note to Consolidated Financial Statements - Concluded determined quarterly and is equal to the separate consolidated net 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 483.7 million during the third quarter of 1995. The comparable denominator for the third quarter of 1994 was 481.7 million. On March 13, 1995, GM contributed 173,163,187 shares of GM Class E common stock to its hourly pension plan. This contribution increased the weighted average shares outstanding during the third quarter and nine months ended September 30, 1995. 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. The Board's discretion to make such adjustments is limited by criteria set forth in GM's Certificate of Incorporation. In 1994 and 1988, EDS initiated programs to repurchase 9.5 million and 11.0 million shares, respectively of GM Class E common stock in order to meet certain future requirements of EDS' 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. * * * * * Management's Discussion and Analysis Result of Operations - --------------------- During the third quarter, EDS achieved continued double-digit earnings and revenue growth, marking the 18th consecutive quarter of double-digit earnings growth and the 32nd quarter in a row in which EDS' revenues have increased over the corresponding quarter of the year before. REVENUES. Total revenues (including interest and other income) for the quarter ended September 30, 1995 rose $544.2 million, or 21.2%, over the corresponding quarter in 1994 to $3,109.1 million. Total revenues for the nine months ended September 30, 1995 increased $1,718.0 million, or 24.1%, to $8,856.2 million compared with $7,138.2 million for the corresponding period in 1994. Base revenues (revenues not attributable to General Motors and its affiliates) for the quarter ended September 30, 1995 rose 27.2% to $2,143.2 million compared to $1,685.4 million for the same period in 1994. Base revenues for the nine months ended September 30, 1995 increased 31.8% to $6,009.8 million compared with $4,560.8 million for the same period in 1994. Base revenues comprised 69% and 68% of total revenues for the three and nine month periods ended September 30, 1995, respectively. For the three and nine month periods ended September 30, 1994, base revenues were 66% and 64% of total revenues, respectively. While it is anticipated that General Motors will continue to contribute a significant portion of total systems and other contracts revenues, EDS expects the percentage of revenues from GM and its affiliates to continue to decline as base revenues continue to increase. COSTS AND EXPENSES. Cost of revenues as a percentage of systems and other contracts revenues increased slightly to 78% for both the three and nine months ended September 30, 1995, compared with 76% for both the three and nine - 41 - 6 ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES months ended September 30, 1994. However, selling, general, and administrative expenses as a percentage of systems and other contracts revenues decreased slightly from 11% and 12% in the three and nine months ended September 30, 1994, respectively, to 10% for both of the corresponding periods in 1995 NET INCOME. For the three and nine month periods ended September 30, 1995, EDS' separate consolidated net income increased 13.5% to $245.7 million and 14.3% to $669.4 million, respectively, when compared to net income of $216.4 million and $585.4 million for the respective periods of last year. Earnings per share of GM Class E common stock rose from $0.45 to $0.51, or 13.3% for the third quarter of 1995 compared to the third quarter of 1994. Year-to-date earnings per share increased from $1.22 to $1.40, or 14.8% over 1994. Return on assets decreased to 9.9% for the twelve-month period ending September 30, 1995, compared with 10.6% for the corresponding period in 1994. Return on stockholder's equity remained relatively constant at 21% for the twelve-month periods ended September 30, 1995 and 1994. EDS' effective tax rate also remained constant at 36% for the nine months ended September 30, 1995 and 1994. Liquidity and Capital Resources - ------------------------------- EDS' liquidity and capital structure changed during 1995 to reflect the steady growth in significant customer relationships established in recent years. As a result, working capital increased from $480.9 million at December 31, 1994, to $1,103.1 million at September 30, 1995. The 1995 increase was primarily in the areas of accounts receivable, inventories, and prepaids and other, as well as decreases in accounts payable. EDS' current ratio increased to 1.4-to-1 at September 30, 1995, up from 1.2- to-1 at December 31, 1994. The ratio of noncurrent debt-to-capital was 28% at September 30, 1995, compared with 19% at December 31, 1994. EDS' capital at September 30, 1995 consisted of $1,877.4 million in noncurrent notes payable and $4,771.0 million in stockholder's equity (GM's equity in its indirectly wholly owned subsidiary, EDS). Total debt was $2,135.7 million at September 30, 1995, which consisted of long and short-term notes payable. This compared with total debt of $1,224.4 million at December 31, 1994. At September 30, 1995, EDS had unused uncommitted short-term lines of credit totaling $623.0 million and unused committed lines of credit of $1,815.5 million. On October 5, 1995, EDS increased its unused committed lines of credit to $2,500.0 million. The total debt-to-capital ratio (which includes current debt as a component of capital) was 30.9% at September 30, 1995 and 22.4% at December 31, 1994. On August 31, 1995, EDS acquired A.T. Kearney, a Chicago-based international management consulting firm. At the acquisition date, EDS paid approximately $113 million in cash and $162 million in short and long-term notes to A.T. Kearney in connection with this acquisition. Additionally, the terms include a stock incentive provision of approximately 6.6 million shares of GM Class E common stock, which will vest over a long-term period for certain A.T. Kearney people joining the new entity. Prior to September 30, 1995, EDS retired $80.9 million of short-term notes related to the acquisition. The acquisition combined EDS' Management Consulting Services unit with A.T. Kearney to create a new EDS-owned subsidiary operating under the A.T. Kearney name. In May 1995, EDS issued $350 million of its 6.85% five-year notes and $300 million of its 7.125% ten-year notes in a private placement to investment banks for resale only to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the Securities Act). The proceeds of such offering are being used for general corporate purposes, including repayment of outstanding commercial paper borrowings and funding of acquisitions. Such notes were not and will not be registered under the Securities Act or any other applicable securities laws and may not be offered, - 42 - 7 ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES sold or otherwise transferred unless registered pursuant to, or exempt from registration under, the Securities Act and other applicable securities laws. Additionally, during the third quarter of 1995, EDS increased its borrowings of commercial paper by $301.1 million. On April 4, 1995, Standard & Poor's Corporation ("S&P") raised its commercial paper rating of EDS to A-1 from A-2, second highest within the four investment grade ratings available from S&P for commercial paper, indicating a strong degree of safety regarding timely payments. Additionally, on August 7, 1995, S&P placed the EDS rating on CreditWatch with positive implications following General Motors' announcement that it intends to split-off EDS. 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. Cash flows from operations increased $99.1 million during the third quarter of 1995 when compared to the third quarter of 1994. Cash used in investing activities during the third quarter of 1995 was $541.2 million compared with $318.0 million in the corresponding period of last year due to increased participation in business combinations, including the acquisition of A.T. Kearney. Net cash provided by financing activities was $259.3 million in the third quarter of 1995. During the same period in 1994, EDS used cash in financing activities of $84.8 million primarily for payments on notes payable and dividends. EDS continues to maintain a strong cash position, holding cash and cash equivalents of $580.8 million at September 30, 1995. For the nine months ended September 30, 1995, cash flows from operations were $656.4 million, down $137.3 million from the corresponding period in 1994 due primarily to changes in working capital items. Net cash used in investing activities increased $398.6 million, to $1,405.2 million during the nine months of 1995 from $1,006.6 million in the same period for 1994. This was primarily due to purchases of property and equipment, as well as increased participation in business combinations and other investments to support business growth. Net cash provided by financing activities increased $566.0 million to $723.8 million for the nine months of 1995 due to the issuance of long-term debt and notes payable. EDS paid cash dividends to GM totaling $188.3 million for the nine months of 1995, and $173.3 million for the same period in 1994. EDS expects that it will continue to use funds in the foreseeable future for capital expenditures, note repayments and working capital. Capital expenditures may consist of purchases of computer and telecommunications equipment, buildings and facilities, land, and software, as well as acquisitions. EDS' projected capital expenditures for 1995 will be approximately $1,200 to $1,500 million. However, actual capital expenditures are somewhat dependent on acquisition and joint venture alliances, as well as capital requirements for new business. The competitive environment and changing market forces are increasing the capital intensity of EDS' business. Increasing amounts of capital will be required by EDS in order to make investments in acquisitions, joint ventures and strategic alliances in other parts of the information industry and in new product development. In addition, information technology customer contracts frequently now require front-end investments in computers and telecommunications equipment, software, and other property, plant and equipment. For these reasons, EDS' ability to continue to access the capital markets on an efficient basis will become increasingly important to EDS' ability to compete effectively. - 43 - 8 ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES On August 7, 1995, the Corporation announced that it intends to pursue a split-off of its wholly owned subsidiary, EDS, to its GM Class E stockholders in a tax-free exchange of stock. To achieve a split-off, GM would exchange EDS capital stock for outstanding GM Class E common stock. GM would not recognize a gain on the transaction. As of September 30, 1995, there were 438.9 million shares of GM Class E common stock outstanding, and 44.8 million shares currently reserved for issuance upon conversion of Series C Preference Stock. The process of establishing definitive terms for a split-off transaction which will be fair to all holders of GM common stocks will, among other things, consider differences between the values of GM Class E and EDS common stocks in order to establish any adjustment deemed appropriate by the GM Board of Directors. A split-off would be subject to the appropriate stockholder approvals, and a favorable Internal Revenue Service ruling that the transaction would be tax- free. The specific terms of a transaction, which are yet to be developed, must also be approved by the GM Board of Directors. Subject to these and other approvals and conditions, GM and EDS expect that a split-off could occur in the first half of 1996. However, it should be noted that due to the numerous uncertainties involved in these matters, there can be no assurance that any split-off of EDS will be proposed or completed. A split-off would be proposed only in a manner that would not result in the recapitalization of GM Class E common stock into GM $1-2/3 par value common stock at a 120% exchange ratio, as currently provided for under certain circumstances in the GM Certificate of Incorporation. In the event of a split-off, GM and EDS would enter into a long-term agreement under which EDS would provide substantially the same information technology services for GM that it does today. * * * * * - 44 - EX-99 5 EXHIBIT 99B l:\secfiles\10-Q\1995\3rdqtr95\exhib99b.doc 6 1 EXHIBIT 99(b) 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, ------------------ ------------------ 1995 1994 1995 1994 ------------------ ------------------ (Dollars in Millions Except per Share Amounts) Revenues Net sales Outside customers $2,341.6 $2,264.1 $6,850.3 $6,760.5 General Motors and affiliates 1,126.7 1,056.7 3,893.3 3,638.9 Other income (loss) - net (Note 1) (27.0) 33.7 0.1 78.3 ------- ------- -------- ------- Total Revenues 3,441.3 3,354.5 10,743.7 10,477.7 ------- ------- -------- ------- Costs and Expenses Cost of sales and other operating charges, exclusive of items listed below 2,694.5 2,599.4 8,301.3 8,103.9 Selling, general, and administrative expenses 289.2 237.6 837.9 678.1 Depreciation and amortization 114.6 119.2 355.6 348.1 Amortization of GM purchase accounting adjustments related to Hughes Aircraft Company 31.0 31.0 92.9 92.9 Interest expense - net 1.4 5.9 5.8 15.4 ------- ------- ------- ------- Total Costs and Expenses 3,130.7 2,993.1 9,593.5 9,238.4 ------- ------- ------- ------- Income before Income Taxes 310.6 361.4 1,150.2 1,239.3 Income taxes 121.6 148.2 465.8 508.2 ------- ------- ------- ------- Income before cumulative effect of accounting change 189.0 213.2 684.4 731.1 Cumulative effect of accounting change (Note 2) - - - (30.4) ------- ------- ------- ------- Net Income 189.0 213.2 684.4 700.7 Adjustments to exclude the effect of GM purchase accounting adjustments related to Hughes Aircraft Company (Notes 1 and 3) 67.1 31.0 129.0 92.9 ------- ------- ------- ------- Earnings Used for Computation of Available Separate Consolidated Net Income $256.1 $244.2 $813.4 $793.6 ======= ======= ======= ======== Available Separate Consolidated Net Income (Note 3) Average number of shares of GM Class H Common Stock outstanding (in millions) (Numerator) 95.9 92.7 95.2 91.7 Class H dividend base (in millions) (Denominator) 399.9 399.9 399.9 399.9 Available Separate Consolidated Net Income $61.4 $56.6 $193.5 $181.9 ======= ======= ======= ======= Earnings Attributable to GM Class H Common Stock on a Per Share Basis (Note 3) Before cumulative effect of accounting change $0.64 $0.61 $2.03 $2.06 Cumulative effect of accounting change (Note 2) - - - (0.08) ---- ---- ---- ---- Net earnings attributable to GM Class H Common Stock on a per share basis $0.64 $0.61 $2.03 $1.98 ==== ==== ==== ==== Reference should be made to the Notes to Consolidated Financial Statements. - 45 - 2 HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES Consolidated Balance Sheet September 30, December 31, ASSETS 1995 1994 --------------------------- (Dollars in Millions Except Per Share Amount) Current Assets Cash and cash equivalents $1,333.7 $1,501.8 Accounts and notes receivable Trade receivables (less allowances) 1,101.7 1,039.5 General Motors and affiliates 151.8 153.9 Contracts in process, less advances and progress payments 2,670.5 2,265.4 Inventories (less allowances) Productive material, work in process, and supplies 1,162.4 968.0 Finished product 139.7 119.9 Prepaid expenses, including deferred income taxes 287.1 195.1 -------- -------- Total Current Assets 6,846.9 6,243.6 Property-Net 2,644.8 2,611.8 Telecommunications and Other Equipment - Net 1,101.1 1,071.7 Intangible Assets, net of amortization 3,188.4 3,271.3 Investments and Other Assets, including deferred income taxes - principally at cost (less allowances) 1,763.6 1,652.1 -------- -------- Total Assets $15,544.8 $14,850.5 ======== ======== LIABILITIES AND STOCKHOLDER'S EQUITY Current Liabilities Accounts payable Outside $864.8 $779.9 General Motors and affiliates 62.2 80.5 Advances on contracts 781.7 645.1 Notes and loans payable 144.9 125.7 Income taxes payable 205.3 31.4 Accrued liabilities 1,925.5 1,885.5 -------- -------- Total Current Liabilities 3,984.4 3,548.1 -------- -------- Long-Term Debt and Capitalized Leases 280.7 353.5 -------- -------- Postretirement Benefits Other Than Pensions (Note 4) 1,607.9 1,541.4 -------- -------- Other Liabilities, Deferred Income Taxes, and Deferred Credits 1,280.5 1,431.7 -------- -------- Stockholder's Equity Capital stock (outstanding, 1,000 shares, $0.10 par value) and additional paid-in capital 6,335.0 6,326.5 Net income retained for use in the business 2,152.0 1,743.6 -------- -------- Subtotal 8,487.0 8,070.1 Minimum pension liability adjustment (76.1) (76.1) Accumulated foreign currency translation adjustments (19.6) (18.2) -------- -------- Total Stockholder's Equity 8,391.3 7,975.8 -------- -------- Total Liabilities and Stockholder's Equity $15,544.8 $14,850.5 ======== ======== Reference should be made to the Notes to Consolidated Financial Statements. - 46 - 3 HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES Condensed Statement of Consolidated Cash Flows Nine Months Ended September 30, ------------------ 1995 1994 ------------------ (Dollars in Millions) Net Cash Provided by Operating Activities $739.5 $561.6 ------- ------- Cash Flows from Investing Activities Investment in companies, net of cash acquired (168.2) - Expenditures for property and special tools (361.3) (292.6) Increase in telecommunications and other equipment (96.2) (205.3) Proceeds from disposal of property 56.3 22.6 Proceeds from sale of investments and businesses 23.7 3.6 (Increase) Decrease in notes receivable (32.3) 200.9 ------- ------- Net Cash Used in Investing Activities (578.0) (270.8) ------- ------- Cash Flows from Financing Activities Net increase (decrease) in notes and loans payable (65.8) 47.6 Increase in long-term debt and capitalized leases 28.0 7.5 Decrease in long-term debt and capitalized leases (15.8) (67.5) Cash dividends paid to General Motors (276.0) (240.0) ------- ------- Net Cash Used in Financing Activities (329.6) (252.4) ------- ------- Net increase (decrease) in cash and cash equivalents (168.1) 38.4 Cash and cash equivalents at beginning of the period 1,501.8 1,008.7 ------- ------- Cash and cash equivalents at end of the period $1,333.7 $1,047.1 ======= ======= Certain amounts for 1994 have been reclassified to conform with 1995 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' 1994 Annual Report to the SEC on Form 10-K. Note 1. Other income (loss) - net for the third quarter and nine months of 1995 includes a $76.1 million charge for estimated losses on disposition of certain non-strategic business units including $36.1 million from the write-off of purchase accounting adjustments related to GM's acquisition of Hughes Aircraft Company and $35.9 million of revenue earned for providing services to GM. Note 2. Effective January 1, 1994, Hughes Electronics Corporation (Hughes), formerly GM Hughes Electronics Corporation, 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 charge is primarily related to extended-disability benefits which, under the accounting Standard, are accrued on a service-driven basis. - 47 - 4 HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES Notes To Consolidated Financial Statements - Concluded 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 Hughes, but rather have rights in the equity and assets of GM (which includes 100% of the stock of Hughes). 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 Hughes earned since the acquisition of Hughes Aircraft Company by GM. The Available Separate Consolidated Net Income of Hughes is determined quarterly and is equal to the separate consolidated net income of Hughes, excluding the effects of GM purchase accounting adjustments arising from the acquisition of Hughes Aircraft Company (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 1995 and 1994. The denominator used in determining the Available Separate Consolidated Net Income of Hughes 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 Hughes. The Board's discretion to make such adjustments is limited by criteria set forth in GM's Certificate of Incorporation. In this regard, the GM Board has generally caused the denominator to decrease as shares are purchased by Hughes and to increase as such shares are used for Hughes' employee benefit plans or acquisitions. Note 4. Hughes 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, Hughes does not admit or otherwise acknowledge that such amounts or existing postretirement benefit plans of Hughes (other than pensions) represent legally enforceable liabilities of Hughes. * * * * * Management's Discussion and Analysis The following discussion excludes the purchase accounting adjustments related to GM's acquisition of Hughes Aircraft Company (see Supplemental Data beginning on page 50). Results of Operations - --------------------- Hughes reported third quarter earnings, before the effects of purchase accounting adjustments related to General Motors' acquisition of Hughes Aircraft Company, of $256.1 million, a 4.9% increase from the $244.2 million reported in the third quarter of 1994. Earnings per share of GM Class H common stock increased 4.9% to $0.64 per share from $0.61 per share in the third quarter of 1994. For the first nine months of 1995, earnings increased 2.5% to $813.4 million compared with $793.6 million reported in the same period in 1994. Earnings per share increased 2.5% to $2.03 from $1.98 per share in the first nine months of 1994. The 1994 earnings included the unfavorable effect of an accounting change related to postemployment benefits of $30.4 million after tax, or $0.08 per share. - 48 - 5 HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES Revenues for the period (excluding the write-off of purchase accounting adjustments related to GM's acquisition of Hughes Aircraft Company) were $3,477.4 million, a 3.7% increase from the $3,354.5 million reported in the third quarter of 1994. Revenues for the first nine months of 1995 (excluding the aforementioned purchase accounting adjustments) increased to $10,779.8 million, a 2.9% increase from the $10,477.7 million reported in the first nine months of 1994. Costs and expenses as a percentage of revenues increased to 89.1% from 88.3% in the third quarter of 1994. For the nine months ended September 30, 1995, costs and expenses as a percentage of revenues increased to 88.1% from 87.3% in the comparable 1994 period. Income taxes were $121.6 million, or 32.2% of income before income taxes, for the quarter compared with $148.2 million, or 37.8% of income before income taxes, in the comparable quarter of 1994. For the first nine months, income taxes were $465.8 million, or 36.4% of income before income taxes, compared with $508.2 million, or 38.1% of income before income taxes, in the comparable 1994 period. Operating profit was $370.0 million for the third quarter, a 1.5% increase from the operating profit of $364.6 million reported during the comparable period in 1994. The operating profit margin on the same basis was 10.7% for the quarter compared with 11.0% in the third quarter of 1994. Operating profit for the first nine months of 1995 was $1,248.8 million, a 1.6% decrease from the $1,269.3 million in the same period last year. The operating profit margin on the same basis for the first nine months of 1995 was 11.6% compared with 12.2% in the prior year's period. Third quarter revenue growth was the result of strong performance in each of Hughes' three business segments. Increased revenues were principally due to DIRECTV(R) subscriber growth and higher Galaxy satellite transponder sales, the acquisition of CAE-Link Corporation in February 1995 by Hughes Aircraft Company and international and domestic sales growth at Delco Electronics. The improvement in operating profit was attributed to the increased segment revenues and ongoing cost reduction efforts at Delco Electronics. The decline in operating profit margin was primarily due to the 1994 recognition of earnings related to a DIRECTV contract with the National Rural Telecommunications Cooperative (NRTC), as well as planned increased 1995 operating expenses associated with the continued expansion of DIRECTV. The increase in revenue for the nine months ended September 30, 1995, when compared with the comparable period for 1994, reflects strong performance in the Automotive Electronics and Telecommunications and Space segments, partially offset by decreased revenues in the Aerospace and Defense Systems segment. The decrease in operating profit for the nine months ended September 30, 1995 was primarily the result of increased operating expenses associated with the continued expansion of DIRECTV, 1994 recognition of earnings related to a DIRECTV contract with the NRTC and lower production rates in the Aerospace and Defense Systems segment, partially offset by the results of aggressive cost reduction efforts in the Automotive Electronics segment. Hughes historically reported its operations in four business segments: Automotive Electronics, Defense Electronics, Telecommunications and Space, and Commercial Technologies. In connection with organizational changes, effective January 1, 1995, Hughes reports its operations in three segments: Automotive Electronics, Aerospace and Defense Systems, and Telecommunications and Space. This new segment presentation better reflects Hughes' strategic direction and the manner in which its businesses are now managed. All 1994 financial data have been restated to reflect the new segment reporting format. The Automotive Electronics segment reported revenues for the quarter of $1,173.3 million, an increase of 3.7% from revenues of $1,131.4 million for the same period in 1994. The improvement reflects a 3.1% increase in GM vehicles produced in North America, an increase in Hughes-supplied electronic content in GM vehicles produced in North America (from $906 per vehicle to $910 per vehicle) and a 12.3% increase in international and non-GM sales (from $162 million to $182 million). Operating profit increased 27.8% in the third - 49 - 6 HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES quarter to $150.9 million from $118.1 million for the same period in 1994. The improvement is attributable to continued strong cost reduction efforts and increased electronic content. As a result, the operating profit margin improved to 13.1% from 10.6% The Aerospace and Defense Systems segment reported third quarter 1995 revenues of $1,517.0 million, a 4.0% increase over revenues of $1,458.7 million reported in the same period in 1994. The growth is principally due to the additional revenues resulting from the acquisition of the CAE-Link training and simulation business and increased effort on the Tomahawk missile program. Primarily due to these revenue increases, operating profit for the period increased 1.9% to $178.7 million compared with $175.3 million for the third quarter of 1994. Operating profit margin in the period was 11.9% compared with 12.0% in 1994. The Telecommunications and Space segment reported revenues for the quarter of $762.6 million, an increase of 10.3% over revenues of $691.2 million reported in the prior year's third quarter. The increase was largely due to higher Galaxy satellite transponder sales at Hughes Communications, Inc. and DIRECTV subscriber growth, partially offset by DIRECTV revenues recognized in 1994 with respect to a contract with the NRTC. Operating profit of $65.7 million for the third quarter compares with $136.3 million reported in the same period in 1994. The reduction was principally due to the 1994 earnings recognized by DIRECTV as a result of the NRTC contract and higher 1995 operating expenses associated with the continued expansion of DIRECTV, which were partly offset by profits from Galaxy transponder sales. As a result, third quarter operating profit margin decreased to 8.9% in 1995 from 19.8% in 1994. Liquidity and Capital Resources - ------------------------------- Cash and cash equivalents at September 30, 1995 were $1,333.7 million, a decrease of $168.1 million from the $1,501.8 million reported at December 31, 1994. The decrease is primarily the result of cash used for the acquisition of CAE-Link Corporation of $168.2 million, cash dividends paid to General Motors of $276.0 million, and capital expenditures of $508.9 million, partially offset by net cash provided by operating activities of $739.5 million and the proceeds from disposal of property of $56.3 million. As a measure of liquidity, Hughes' current ratio (ratio of current assets to current liabilities) decreased to 1.72 at September 30, 1995 from 1.76 at December 31, 1994. Capital expenditures, including expenditures for telecommunications and other equipment, were $508.9 million through September 30, 1995, compared with $497.9 million for the comparable period in 1994. Long-term debt and capitalized leases decreased $72.8 million to $280.7 million at September 30, 1995 from $353.5 million at December 31, 1994 primarily reflecting the reclassification of debt from long-term to current during the third quarter of 1995. The ratio of long-term debt to the total of such debt and proforma stockholder's equity improved to 4.8% at September 30, 1995 from 6.6% at December 31, 1994. 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 Aircraft Company was $31.0 million for the third quarters of 1995 and 1994. - 50 - 7 HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES In addition, the third quarter of 1995 includes the write-off of an additional $36.1 million of purchase accounting adjustments associated with the disposition of several nonstrategic business units. 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 Aircraft Company were $2,876.3 million at September 30, 1995 and $3,005.3 million at December 31, 1994. In order to provide additional analytical data to the users of Hughes' financial information, supplemental data in the form of unaudited summary pro forma financial data are provided. Consistent with the basis on which earnings of Hughes 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 Aircraft Company. 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 Hughes. - 51 - 8 HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES Summary Pro Forma Financial Data* Pro Forma Condensed Statement of Consolidated Operations Nine Months Ended Third Quarter September 30, ------------------ ------------------ 1995 1994 1995 1994 ------------------ ------------------ (Dollars in Millions Except per Share Amounts) Total Revenues $3,477.4 $3,354.5 $10,779.8 $10,477.7 Total Costs and Expenses 3,099.7 2,962.1 9,500.6 9,145.5 ------- ------- -------- ------- Income before Income Taxes 377.7 392.4 1,279.2 1,332.2 Income taxes 121.6 148.2 465.8 508.2 ------- ------- ------- ------- Income before cumulative effect of accounting change 256.1 244.2 813.4 824.0 Cumulative effect of accounting change - - - (30.4) ------- ------- ------- ------- Earnings Used for Computation of Available Separate Consolidated Net Income $256.1 $244.2 $813.4 $793.6 ======= ======= ======= ======= Earnings Attributable to GM Class H Common Stock on a Per Share Basis Before cumulative effect of accounting change $0.64 $0.61 $2.03 $2.06 Cumulative effect of accounting change - - - (0.08) ---- ---- ---- ---- Net earnings attributable to GM Class H Common Stock on a per share basis $0.64 $0.61 $2.03 $1.98 ==== ==== ==== ==== Pro Forma Condensed Consolidated Balance Sheet September 30, December 31, ASSETS 1995 1994 --------------------------- (Dollars in Millions) Total Current Assets $6,846.9 $6,243.6 Property - Net 2,644.8 2,611.8 Telecommunication and Other Equipment - Net 1,101.1 1,071.7 Intangible Assets, Investments, and Other Assets 2,075.7 1,918.1 -------- -------- Total Assets $12,668.5 $11,845.2 ======== ======== LIABILITIES AND STOCKHOLDER'S EQUITY Total Current Liabilities $3,984.4 $3,548.1 Long-Term Debt and Capitalized Leases 280.7 353.5 Postretirement Benefits Other Than Pensions, Other Liabilities, Deferred Income Taxes, and Deferred Credits 2,888.4 2,973.1 Total Stockholder's Equity** 5,515.0 4,970.5 -------- -------- Total Liabilities and Stockholder's Equity** $12,668.5 $11,845.2 ======== ======== * The summary is unaudited and excludes GM purchase accounting adjustments related to the acquisition of Hughes Aircraft Company. ** General Motors' equity in its wholly-owned subsidiary, Hughes. Holders of GM Class H common stock have no direct rights in the equity or assets of Hughes, but rather have rights in the equity and assets of General Motors (which includes 100% of the stock of Hughes). - 52 - 9 HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES Summary Pro Forma Financial Data* - Continued Pro Forma Selected Segment Data Nine Months Ended Third Quarter September 30, ------------------ ------------------- 1995 1994 1995 1994 ------------------ ------------------- (Dollars in Millions) AUTOMOTIVE ELECTRONICS Revenues Amount $1,173.3 $1,131.4 $4,154.3 $3,839.3 As a percentage of Hughes Revenues 34.1% 33.7% 38.7% 36.6% Net Sales $1,155.2 $1,113.6 $4,090.6 $3,799.8 Operating Profit (1) $150.9 $118.1 $655.1 $562.7 Operating Profit Margin(2) 13.1% 10.6% 16.0% 14.8% Depreciation and Amortization $29.4 $40.7 $115.7 $118.7 Capital Expenditures $71.6 $37.1 $182.4 $82.7 AEROSPACE AND DEFENSE SYSTEMS Revenues Amount $1,517.0 $1,458.7 $4,334.5 $4,588.9 As a percentage of Hughes Revenues 44.1% 43.5% 40.3% 43.8% Net Sales $1,503.5 $1,458.9 $4,313.5 $4,565.1 Operating Profit (1) $178.7 $175.3 $495.8 $515.9 Operating Profit Margin(2) 11.9% 12.0% 11.5% 11.3% Depreciation and Amortization(3) $31.3 $29.2 $95.8 $107.4 Capital Expenditures $22.9 $33.1 $73.7 $99.9 TELECOMMUNICATIONS AND SPACE Revenues Amount $762.6 $691.2 $2,156.7 $1,870.7 As a percentage of Hughes Revenues 22.2% 20.6% 20.1% 17.9% Net Sales $737.6 $688.4 $2,145.6 $1,868.9 Operating Profit (1) $65.7 $136.3 $143.1 $271.0 Operating Profit Margin(2) 8.9% 19.8% 6.7% 14.5% Depreciation and Amortization(3) $47.7 $38.9 $125.8 $96.8 Capital Expenditures(4) $102.8 $111.6 $246.2 $294.0 CORPORATE AND OTHER Operating Loss (1) ($25.3) ($65.1) ($45.2) ($80.3) Certain amounts for 1994, previously reported in four business segments, have been reclassified to conform with 1995 classifications based on three business segments. * The summary is unaudited and excludes GM purchase accounting adjustments related to the acquisition of Hughes Aircraft Company. (1) Net Sales less Total Costs and Expenses other than Interest Expense. (2) Operating Profit as a percentage of Net Sales. (3) Excludes amortization arising from purchase accounting adjustments related to GM's acquisition of Hughes Aircraft Company amounting to $25.2 million in each of the third quarters and $75.6 million in each of the nine month periods for the Aerospace and Defense Systems segment; and $5.3 million in each of the third quarters and $15.9 million in each of the nine month periods for the Telecommunications and Space segment. (4) Includes expenditures related to telecommunications and other equipment amounting to $64.8 million, $70.6 million, $147.6 million, and $205.3 million, respectively. - 53 - 10 HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES Summary Pro Forma Financial Data* - Concluded Pro Forma Selected Financial Data Nine Months Ended Third Quarter September 30, ------------------ ------------------ 1995 1994 1995 1994 ------------------ ------------------ (Dollars in Millions Except per Share Amounts) Operating profit $370.0 $364.6 $1,248.8 $1,269.3 Income before income taxes and cumulative effect of accounting change $377.7 $392.4 $1,279.2 $1,332.2 Earnings used for computation of available separate consolidated net income $256.1 $244.2 $813.4 $793.6(1) Average number of GM Class H dividend base shares (2) 399.9 399.9 399.9 399.9 Stockholder's Equity $5,515.0 $4,748.7 $5,515.0 $4,748.7 Dividends per share of GM Class H common stock $0.23 $0.20 $0.69 $0.60 Working capital $2,862.5 $2,848.4 $2,862.5 $2,848.4 Operating profit as a percent of net sales 10.7% 11.0% 11.6% 12.2% Pre-tax income as a percent of net sales 10.9% 11.8% 11.9% 12.8% Net income as a percent of net sales 7.4% 7.4% 7.6% 7.6% * The summary is unaudited and excludes GM purchase accounting adjustments related to the acquisition of Hughes Aircraft Company. (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 95.9 million for the third quarter of 1995 and 92.7 million for the third quarter of 1994. * * * * * * * - 54 - EX-27 6 FDS
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM GENERAL MOTORS CORPORATION SEPTEMBER 30, 1995 CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THIRD QUARTER 1995 FORM 10-Q. 0000040730 GENERAL MOTORS CORPORATION 1,000,000 U.S. DOLLAR 9-MOS DEC-31-1995 JAN-01-1995 SEP-30-1995 1.0 8,998 4,891 65,987 0 11,969 0 81,191 44,663 205,110 0 77,885 1,304 0 1 21,553 205,110 106,817 124,894 93,398 102,129 167 307 4,299 7,500 2,434 5,067 0 0 0 5,067 5.32 0
EX-21 7 L:\secfiles\10-Q\3rdqtr\exhib21.doc1 1 EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT As of December 31, 1994 In order to clarify the ownership of certain previously reported subsidiary companies of the Registrant listed below, all voting securities are owned directly or indirectly by the Registrant, except where otherwise indicated in brackets. State or Sovereign Power Name of Subsidiary of Incorporation - ------------------ ---------------- Controladora General Motors, S.A. de C.V. Mexico Alambrados y Circuitos Electricos, S.A. de C.V. (49% owned by subsidiary) Mexico DR DE CHIHUAHUA, S.A. de C.V. (49% owned by subsidiary) Mexico Ensamble de Cubiertas Automotrices, S.A. de C.V. (49% owned by subsidiary) Mexico Rio Bravo Electricos, S.A. de C.V. (49% owned by subsidiary) Mexico Vestiduras Fronterizas, S.A. de C.V. (49% owned by subsidiary) Mexico Empresas Ca-Le de Tlaxcala, S.A. de C.V. (43% owned by subsidiary and 6% owned by General Motors Corporation) Mexico - 36 - -----END PRIVACY-ENHANCED MESSAGE-----