-----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, KRjL8tNHAimKPuTb51GgrNEdZCpZ+x1FWCCg3EICuLJ6ipazmiOjJOe9VE/V8sG+ 8KGDTHepiZcawoeO/aXsbg== 0000040730-98-000026.txt : 19980515 0000040730-98-000026.hdr.sgml : 19980515 ACCESSION NUMBER: 0000040730-98-000026 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980514 SROS: CSE SROS: NASD SROS: NYSE SROS: PHLX SROS: PCX 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: SEC FILE NUMBER: 001-00143 FILM NUMBER: 98619075 BUSINESS ADDRESS: STREET 1: 100 RENAISSANCE CTR STREET 2: 3044 W GRAND BLVD CITY: DETROIT STATE: MI ZIP: 48243-7301 BUSINESS PHONE: 3135565000 10-Q 1 FIRST PART OF 10-Q 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 March 31, 1998 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.) 100 Renaissance Center, Detroit, Michigan 48243-7301 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 March 31, 1998, there were outstanding 668,384,434 shares of the issuer's $1-2/3 par value common stock and 104,637,585 shares of Class H $0.10 par value common stock. - 1 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES INDEX Page No. Part I - Financial Information (Unaudited) Item 1. Financial Statements Consolidated Statements of Income for the Three Months Ended March 31, 1998 and 1997 3 Consolidated Balance Sheets as of March 31, 1998, December 31, 1997 and March 31, 1997 4 Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 1998 and 1997 5 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 12 Part II - Other Information (Unaudited) Item 1. Legal Proceedings 25 Item 6. Exhibits and Reports on Form 8-K 26 Signature 26 Exhibit 99 Hughes Electronics Corporation Financial Statements and Management's Discussion and Analysis of Financial Condition and Results of Operations 27 Exhibit 27 Financial Data Schedule (for SEC information only) - 2 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES ITEM 1. FINANCIAL STATEMENTS CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Three Months Ended March 31, 1998 1997 (Dollars in Millions Except Per Share Amounts) Net sales and revenues Manufactured products $36,560 $37,440 Financial services 3,161 3,197 Other income (Note 9) 1,850 1,604 ------- ------- Total net sales and revenues 41,571 42,241 ------ ------ Costs and expenses Cost of sales and other operating charges, exclusive of items listed below 30,357 31,110 Selling, general and administrative expenses 3,742 3,591 Depreciation and amortization expenses 2,907 3,065 Interest expense 1,630 1,461 Other deductions (Note 9) 513 248 ------- ------- Total costs and expenses 39,149 39,475 ------ ------ Income before income taxes and minority interests 2,422 2,766 Income taxes 808 989 Minority interests (10) 19 ------ ------ Net income 1,604 1,796 Dividends on preference stocks 16 20 ------ ------ Earnings on common stocks $1,588 $1,776 ===== ===== Basic earnings per share attributable to common stocks (Note 8) Earnings per share attributable to $1-2/3 par value $2.31 $2.30 Earnings per share attributable to Class H (prior to its recapitalization on December 17, 1997) $- $0.59 Earnings per share attributable to Class H (subsequent to its recapitalization on December 17, 1997) $0.13 $- Diluted earnings per share attributable to common stocks (Note 8) Earnings per share attributable to $1-2/3 par value $2.27 $2.28 Earnings per share attributable to Class H (prior to its recapitalization on December 17, 1997) $- $0.59 Earnings per share attributable to Class H (subsequent to its recapitalization on December 17, 1997) $0.13 $-
Reference should be made to the notes to consolidated financial statements. - 3 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
March 31, March 31, 1998 Dec. 31, 1997 (Unaudited) 1997 (Unaudited) (Dollars in Millions) ASSETS Cash and cash equivalents $11,498 $11,262 $10,061 Other marketable securities 10,216 11,722 10,387 ------ ------ ------ Total cash and marketable securities 21,714 22,984 20,448 Finance receivables - net 63,288 58,870 62,202 Accounts and notes receivable (less allowances) 9,553 7,493 6,976 Inventories (less allowances) (Note 2) 12,923 12,102 12,851 Deferred income taxes 22,493 22,478 20,138 Equipment on operating leases (less accumulated depreciation) 33,772 33,302 30,127 Property - net (Note 3) 35,240 34,567 37,004 Intangible assets - net 11,457 11,469 12,737 Other assets - net 25,593 25,623 23,576 -------- -------- -------- Total assets $236,033 $228,888 $226,059 ======= ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities Accounts payable (principally trade) $16,426 $15,782 $14,014 Notes and loans payable 98,262 93,027 88,111 Deferred income taxes 3,131 2,923 3,686 Postretirement benefits other than pensions (Note 4) 41,532 41,168 43,607 Pensions 7,324 7,043 7,814 Accrued expenses and other liabilities 51,606 50,490 45,918 -------- -------- -------- Total liabilities 218,281 210,433 203,150 ------- ------- ------- Minority interests 740 727 104 General Motors - obligated mandatorily redeemable preferred securities of subsidiary trusts holding solely junior subordinated debentures of General Motors (Note 5) Series D 79 79 - Series G 143 143 - Stockholders' equity Preference stocks 1 1 1 Common stocks $1-2/3 par value (Note 6; issued, 669,314,625; 693,456,394; and 729,805,298 shares) 1,116 1,156 1,216 Class H (issued, 101,108,669 shares) - - 10 Class H (issued, 104,769,861, and 103,885,803 shares) 10 10 - Capital surplus (principally additional paid-in capital) 13,786 15,369 17,689 Retained earnings 6,664 5,416 7,511 ------- ------- ------- Subtotal 21,577 21,952 26,427 Minimum pension liability adjustment (4,062) (4,062) (3,490) Accumulated foreign currency translation adjustments (1,264) (888) (475) Net unrealized gains on securities 539 504 343 ----- ----- ----- Accumulated other comprehensive loss (4,787) (4,446) (3,622) Total stockholders' equity 16,790 17,506 22,805 ------ ------ ------ Total liabilities and stockholders' equity $236,033 $228,888 $226,059 ======= ======= =======
Reference should be made to the notes to consolidated financial statements. - 4 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Three Months Ended March 31, 1998 1997 (Dollars in Millions) Net cash provided by operating activities $5,973 $4,097 ----- ----- Cash flows from investing activities Expenditures for property (2,327) (1,807) Investments in other marketable securities - acquisitions (5,758) (11,603) Investments in other marketable securities - liquidations 7,300 10,107 Finance receivables - acquisitions (41,800) (37,475) Finance receivables - liquidations 32,544 26,848 Proceeds from sales of finance receivables 5,143 5,538 Operating leases - acquisitions (5,127) (5,527) Operating leases - liquidations 3,493 4,124 Other (905) 512 ------ ------ Net cash used in investing activities (7,437) (9,283) ----- ----- Cash flows from financing activities Net increase in loans payable 1,526 2,484 Increase in long-term debt 6,428 4,207 Decrease in long-term debt (4,127) (3,329) Proceeds from issuing common stocks 233 206 Repurchases of common stocks (1,911) (1,761) Cash dividends paid to stockholders (357) (422) ------ ------ Net cash provided by financing activities 1,792 1,385 ----- ----- Effect of exchange rate changes on cash and cash equivalents (92) (201) ------ ------ Net increase (decrease) in cash and cash equivalents 236 (4,002) Cash and cash equivalents at beginning of the period 11,262 14,063 ------ ------ Cash and cash equivalents at end of the period $11,498 $10,061 ====== ======
Reference should be made to the notes to consolidated financial statements. - 5 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 1. Financial Statement Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. The consolidated financial statements include the accounts of General Motors Corporation (hereinafter referred to as the "Corporation") and domestic and foreign subsidiaries that are more than 50% owned, principally General Motors Acceptance Corporation and Subsidiaries (GMAC) and Hughes Electronics Corporation, prior to the December 17, 1997 restructuring of the company (hereinafter referred to as "former Hughes") and subsequent to the December 17, 1997 restructuring of the company (hereinafter referred to as "Hughes") (collectively referred to as "General Motors" or "GM"). In the opinion of management, all adjustments (consisting of only normal recurring items), which are necessary for a fair presentation have been included. The results for interim periods are not necessarily indicative of results which may be expected for any other interim period or for the full year. For further information, refer to the consolidated financial statements and notes thereto included in the GM 1997 Annual Report on Form 10-K, as amended, filed with the Securities and Exchange Commission. Certain amounts for 1997 were reclassified to conform with the 1998 classifications. Note 2. Inventories Inventories included the following (in millions): March 31, Dec. 31, March 31, 1998 1997 1997 Productive material, work in process, and supplies $7,637 $7,023 $7,896 Finished product, service parts, etc. 7,554 7,347 7,294 ------- ------- ------- Total inventories at FIFO 15,191 14,370 15,190 Less LIFO allowance 2,268 2,268 2,339 ------- ------- ------- Total inventories (less allowances) $12,923 $12,102 $12,851 ====== ====== ====== Note 3. Property - Net Property - net included the following (in millions): March 31, Dec. 31, March 31, 1998 1997 1997 Real estate, plants, and equipment $70,216 $69,680 $69,191 Less accumulated depreciation (42,166) (41,915) (41,037) ------- ------ ------ Real estate, plants, and equipment - net 28,050 27,765 28,154 Special tools - net 7,190 6,802 8,850 ------- ------- ------- Total property - net $35,240 $34,567 $37,004 ====== ====== ====== Note 4. Postretirement Benefits Other Than Pensions GM has disclosed in the consolidated 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, GM does not admit or otherwise acknowledge that such amounts or existing postretirement benefit plans of GM (other than pensions) represent legally enforceable liabilities of GM. - 6 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued (Unaudited) Note 5. Preferred Securities of Subsidiary Trusts General Motors - Obligated Mandatorily Redeemable Preferred Securities of Subsidiary Trusts In July 1997, the General Motors Capital Trust D (Series D Trust) issued approximately $79 million of its 8.67% Trust Originated Preferred Securitiessm (TOPrSsm) Series D, (Series D Preferred Securities), in a one-for-one exchange for 3,055,255 of the outstanding GM Series D 7.92% Depositary Shares, each representing one-fourth of a share of GM Series D Preference Stock, $0.10 par value per share. In addition, the General Motors Capital Trust G (Series G Trust) issued approximately $143 million of its 9.87% TOPrS, Series G (Series G Preferred Securities), in a one-for-one exchange for 5,064,489 of the outstanding GM Series G 9.12% Depositary Shares, each representing one-fourth of a share of GM Series G Preference Stock, $0.10 par value per share. Concurrently with the exchanges and the related purchases by GM from the Series D and Series G Trusts (Trusts) of the common securities of such Trusts, which represent approximately 3 percent of the total assets of such Trusts, GM issued to the wholly-owned Trusts, as the Series D Trust's sole assets its 8.67% Junior Subordinated Deferrable Interest Debentures, Series D, due July 1, 2012 and as the Series G Trust's sole assets, its 9.87% Junior Subordinated Deferrable Interest Debentures, Series G, due July 1, 2012 (the "Series D Debentures" and "Series G Debentures" or collectively the "Debentures"), having aggregate principal amounts equal to the aggregate stated liquidation amounts of the Series D and Series G Preferred Securities and the related common securities, respectively ($79 million with respect to the Series D Debentures and $131 million with respect to the Series G Debentures). The Series D Debentures are redeemable, in whole or in part, at GM's option on or after August 1, 1999, at a redemption price equal to 100% of the outstanding principal amount of the Series D Debentures plus accrued and unpaid interest, or, under certain circumstances, prior to August 1, 1999, at a redemption price equal to 105% of the outstanding principal of the Series D Debentures from the Series D expiration date through July 31, 1998, declining ratably on each August 1 thereafter to 100% on August 1, 1999, plus accrued and unpaid interest. The Series D Preferred Securities will be redeemed upon the maturity or earlier redemption of the Series D Debentures. The Series G Debentures are redeemable, in whole or in part, at GM's option on or after January 1, 2001, at a redemption price equal to 100% of the outstanding principal amount of the Series G Debentures plus accrued and unpaid interest, or, under certain circumstances, prior to January 1, 2001, at a redemption price equal to 114% of the outstanding principal of the Series G Debentures from the Series G expiration date through December 31, 1997, declining ratably on each January 1 thereafter to 100% on January 1, 2001, plus accrued and unpaid interest. The Series G Preferred Securities will be redeemed upon the maturity or earlier redemption of the Series G Debentures. GM has guaranteed the payment in full to the holders of the Series D and Series G Preferred Securities (collectively the "Preferred Securities") of all distributions and other payments on the Preferred Securities to the extent not paid by the Trusts only if and to the extent that the Trusts have assets therefore, GM has made payments of interest or principal on the related Debentures. These guarantees, when taken together with GM's obligations under the Preferred Securities Guarantees, the Debentures, and the Indentures relating thereto and the obligations under the Declaration of Trust of the Trusts, including the obligations to pay certain costs and expenses of the Trusts, constitute full and unconditional guarantees by GM of each Trust's obligations under its Preferred Securities. sm "Trust Originated Preferred Securities" and "TOPrS" are service trademarks of Merrill Lynch & Co. Note 6. Common Stock Repurchases During the three months ended March 31, 1998, GM used $1.6 billion to acquire approximately 24 million shares of $1-2/3 par value common stock, which completed the second $2.5 billion stock repurchase program announced in August 1997 and represented approximately 8 percent of the $4 billion stock repurchase program announced in February 1998. GM also used approximately $346 million to repurchase shares of $1-2/3 par value common stock for certain employee benefit plans during the three months ended March 31, 1998. Note 7. Comprehensive Income GM adopted Statement of Financial Accounting Standards (SFAS) No. 130, Reporting Comprehensive Income, which established standards for reporting and displaying comprehensive income and its components in an annual financial statement that is displayed with the same prominence as other financial statements. This statement also requires that an entity report a total for comprehensive income in condensed financial statements of interim periods. - 7 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued (Unaudited) Note 7. Comprehensive Income (concluded) GM's total comprehensive income was as follows (in millions): Three Months Ended March 31, 1998 1997 Net income $1,604 $1,796 Other comprehensive (loss) income: Foreign currency translation adjustments (376) (362) Unrealized gains (losses) on securities 35 (80) ---- ---- Other comprehensive loss (341) (442) ----- ----- Total comprehensive income $1,263 $1,354 ===== ===== Note 8. Earnings Per Share Attributable to Common Stocks Earnings per share attributable to each class of GM common stock was determined based on the attribution of earnings to each such class of common stock for the period divided by the weighted-average number of common shares for each such class outstanding during the period. Diluted earnings per share attributable to each class of GM common stock considers the impact of potential common shares, unless the inclusion of the potential common shares would have an antidilutive effect. The assumed exercise of stock options has no effect on Class H common stock earnings per share, because to the extent that shares of 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 (ASCNI). The attribution of earnings to each class of common stock was as follows (in millions): Three Months Ended March 31, 1998 1997 Earnings attributable to common stocks Earnings attributable to $1-2/3 par value $1,574 $1,717 ----- ----- Earnings attributable to Class H (prior to its recapitalization on December 17, 1997) $ - $59 -- -- Earnings attributable to Class H (subsequent to its recapitalization on December 17, 1997) $14 $ - -- -- Earnings attributable to $1-2/3 par value common stock for the period represent the earnings attributable to all GM common stocks for the period, reduced by the ASCNI of former Hughes and Hughes for the respective period. Earnings attributable to Class H common stock for the three months ended March 31, 1998 represent the ASCNI of Hughes, excluding the effects of purchase accounting adjustments arising at the time of the Corporation's acquisition of HAC which remains after the spin-off of Hughes Defense, calculated for such period and multiplied by a fraction, the numerator of which was a number equal to the weighted-average number of shares of Class H common stock outstanding during the quarter (104 million) and the denominator of which was 400 million. Earnings attributable to Class H common stock for the three months ended March 31, 1997 represent the ASCNI of former Hughes. The ASCNI of former Hughes was determined quarterly in amounts equal to the separate consolidated net income of former Hughes for the respective quarter, excluding the effects of purchase accounting adjustments arising at the time of the Corporation's acquisition of HAC, calculated for such period and multiplied by a fraction, the numerator of which was a number equal to the weighted-average number of shares of Class H common stock outstanding during the quarter (100 million) and the denominator of which was 400 million. The denominator used in determining the ASCNI of former Hughes was adjusted from time-to-time as deemed appropriate by GM's Board of Directors (GM Board) to reflect subdivisions or combinations of the Class H common stock and to reflect certain transfers of capital to or from former Hughes. The denominator used in determining the ASCNI of Hughes may be adjusted from time-to-time as deemed appropriate by the GM Board to reflect subdivisions or combinations of the Class H common stock and to reflect certain transfers of capital to or from Hughes. The GM Board's discretion to make such adjustments is limited by criteria set forth in the Corporation's Restated Certificate of Incorporation. - 8 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
Note 8. Earnings Per Share Attributable to Common Stocks (concluded) The reconciliation of the amounts used in the basic and diluted earnings per share computations for net income was as follows (in millions except per share amounts): Class H Common Stock - Class H Common Stock - Prior to its recapitalization Subsequent to its recapitalization $1-2/3 Par Value Common Stock on December 17,1997 On December 17, 1997 ----------------------------- ----------------------------- --------------------------------- Per Share Per Share Per Share Income Shares Amount Income Shares Amount Income Shares Amount Three Months Ended March 31, 1998 Net income $1,590 $14 Less:Dividends on preference stocks 16 - ----- ---- Basic EPS Net income available to common stockholders 1,574 682 $2.31 14 104 $0.13 ---- ---- Effect of Dilutive Securities Assumed exercise of dilutive stock options - 11 - 5 ------ ----- --- ---- Diluted EPS Adjusted net income available to common stockholders $1,574 693 $2.27 $14 109 $0.13 ===== === ==== == === ==== Three Months Ended March 31, 1997 Net income $1,737 $59 Less:Dividends on preference stocks 20 - ----- ---- Basic EPS Net income available to common stockholders 1,717 747 $2.30 59 100 $0.59 ---- ---- Effect of Dilutive Securities Assumed exercise of dilutive stock options (2) 5 2 3 ----- ---- ----- ---- Diluted EPS Adjusted net income available to common stockholders $1,715 752 $2.28 $61 103 $0.59 ===== === ==== == === ====
- 9 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued (Unaudited) Note 9. Other Income and Other Deductions Other income and other deductions consisted of the following (in millions): Three Months Ended March 31, 1998 1997 Other income Nonfinancing interest $572 $466 Insurance premiums 369 255 Claims and commissions 134 121 Income from sales of receivables programs 107 128 Mortgage servicing and processing fees 182 171 Insurance capital and investment gains 148 137 Mortgage investment and other income 236 130 VW Settlement (1) - 88 Equity in net (losses) earnings of associates (5) 23 Other 107 85 ----- ------ Total other income $1,850 $1,604 ===== ===== Other deductions Provision for financing losses $101 $130 Insurance losses and loss adjustment expenses 257 139 Other 155 (21) --- ---- Total other deductions $513 $248 === === (1) During 1997, an agreement with Volkswagen A.G. (VW) that settled a civil lawsuit GM brought against VW resulted in a pre-tax gain of $88 million, after deducting certain legal expenses ($55 million after-tax or $0.07 per share of $1-2/3 par value common stock). Note 10. Segment Reporting GM adopted SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, which establishes standards for reporting information about operating segments in annual financial statements and requires selected information about operating segments in interim financial statements. Operating Segments(a):
GM-NAO Delphi(b)GMIO GMAC Hughes(c) Other Total For the Three Months Ended: (in millions) March 31, 1998 Net sales and revenues from external customers $25,085 $1,518 $7,935 $ - $1,285 $604 $36,427 Intersegment net sales and revenues 804 6,105 215 - 6 (7,130) - ------ ----- ------ --- -------- ----- ------- Total net sales and revenues $25,889 $7,623 $8,150 $ - $1,291 $(6,526) $36,427 ====== ===== ===== === ===== ===== ====== Net income (loss) (d) $826 $263 $160 $349 $54 $(48) $1,604 Segment assets (e) $67,946 $22,924 $24,537 $ - $12,461 $6,182 $134,050 March 31, 1997 Net sales and revenues from external customers $24,659 $1,205 $8,199 $ - $2,766 $628 $37,457 Intersegment net sales and revenues 200 5,459 84 - 1,362 (7,105) - ------ ----- ----- --- ----- ----- ------ Total net sales and revenues $24,859 6,664 $8,283 $ - $4,128 $(6,477) $37,457 ====== ===== ===== === ===== ===== ====== Net income (loss) (d) $764 $180 $317 $372 $235 $(72) $1,796 Segment assets (e) $65,862 $21,508 $24,624 $ - $14,049 $9,969 $136,012 See notes on next page.
- 10 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued Note 10: Segment Reporting (concluded) (a)Calculated with financing and insurance operations on an equity basis, which is the basis upon which such operations are evaluated. (b)Includes Delco Electronics Corporation's assets as of March 31, 1998 and operating results for the period ended March 31, 1998. (c)Represents Hughes and former Hughes for the period ended March 31, 1998 and 1997, respectively. (d)The amount reported for Hughes excludes amortization of GM purchase accounting adjustments of approximately $5 million and $31 million, for 1998 and 1997, respectively, related to GM's acquisition of Hughes Aircraft Company. Such amortization was allocated to GM's Other segment which is consistent with the basis upon which the segments are evaluated. (e)The amount reported for Hughes excludes the unamortized GM purchase accounting adjustments of approximately $442 million and $2,693 million, for 1998 and 1997, respectively, related to GM's acquisition of Hughes Aircraft Company. These adjustments were allocated to GM's Other segment which is consistent with the basis upon which the segments are evaluated. Note 11. Contingent Matters Hughes has maintained a suit against the U.S. Government since September 1973 regarding the Government's infringement and use of a Hughes patent (the "Williams Patent") covering "Velocity Control and Orientation of a Spin Stabilized Body," principally satellites. On April 7, 1998, the Court of Appeals for the Federal Circuit (CAFC) affirmed its previous decision in the Williams case and its award of $114 million in damages. The CAFC ruled that the conclusions reached in the Williams case were consistent with the U.S. Supreme Court's findings in the Warner-Jenkinson case. On or before May 24, 1998 the U.S. Government may petition the CAFC for a rehearing. Hughes is unable to estimate the duration of any appeal effort on behalf of the U.S. Government. While no amount has been recorded in the financial statements of Hughes to reflect the $114 million award or the interest accumulating thereon, a resolution of this issue could result in a gain that would be material to the earnings of GM attributable to Class H common stock. GM is subject to potential liability under government-regulations and various claims and legal actions which are pending or may be asserted against them. Some of the pending actions purport to be class actions. The aggregate ultimate liability of GM under these government regulations, and under these claims and actions, was not determinable at March 31,1998. After discussion with counsel, it is the opinion of management that such liability is not expected to have a material adverse effect on the Corporation's consolidated financial statements. * * * * * * - 11 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following management's discussion and analysis of financial condition and results of operations (MD&A) should be read in conjunction with the MD&A included in the General Motors (GM) 1997 Annual Report on Form 10-K, as amended, (the "1997 Form 10-K"), the Hughes Electronics Corporation (Hughes) consolidated financial statements and MD&A for the period ended December 31, 1997, included as Exhibit 99 to the 1997 Form 10-K, the GMAC Annual Report on Form 10-K for the period ended December 31, 1997, the Hughes consolidated financial statements and MD&A for the period ended March 31, 1998, included as Exhibit 99 to this GM Quarterly Report on Form 10-Q for the period ended March 31, 1998, and the GMAC Quarterly Report on Form 10-Q for the period ended March 31, 1998, filed with the Securities and Exchange Commission. All earnings per share amounts included in the MD&A are reported as basic. The disaggregated financial results for GM's automotive sectors (GM's North American Operations (GM-NAO), Delphi Automotive Systems (Delphi) and GM's International Operations (GMIO)) have been prepared using a management approach, which is consistent with the basis and manner in which GM management internally disaggregates financial information for the purposes of assisting in making internal operating decisions. In this regard, certain common expenses were allocated among sectors less precisely than would be required for standalone financial information prepared in accordance with generally accepted accounting principles (GAAP) and certain expenses (primarily certain U.S. taxes related to non-U.S. operations) were included in GM's "Other" sector. The financial results represent the historical information used by management for internal decision making purposes; therefore, other data prepared to represent the way in which the business will operate in the future, or data prepared on a GAAP basis, may be materially different. Net profit margins presented in the MD&A represent net income as a percentage of net sales and revenues. - 12 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES GM-NAO Financial Highlights Three Months Ended March 31, 1998 1997 (Dollars in Millions) Net sales and revenues $25,889 $24,859 ------ ------ Pre-tax income 1,202 1,127 Income tax expense 379 378 Earnings of nonconsolidated affiliates 3 15 ----- ---- Net income $826 $764 === === Net profit margin 3.2% 3.1% Vehicle Unit Deliveries of Cars and Trucks - GM-NAO Three Months Ended March 31, 1998 1997 GM as GM as a % of a % of Industry GM Industry Industry GM Industry (Units in Thousands) United States Cars 1,873 571 30.5% 2,026 639 31.5% Trucks 1,748 523 29.9% 1,693 484 28.6% ----- ------ ----- ----- Total United States 3,621 1,094 30.2% 3,719 1,123 30.2% Canada and Mexico 450 129 28.7% 383 121 31.6% ----- ------ ------ ------ Total North America 4,071 1,223 30.0% 4,102 1,244 30.3% ===== ===== ===== ===== Wholesale Sales - GM-NAO Cars 662 786 Trucks 675 616 ------ ------ Total 1,337 1,402 ===== ===== GM-NAO Financial Review GM-NAO reported net income of $826 million for the 1998 first quarter compared with $764 million in the prior year quarter. The improvement in 1998 first quarter net income was primarily due to a favorable product mix, continued improvements in the cost and profitability of new vehicles, and material cost reductions, partially offset by higher retail incentives. Net sales and revenues for the 1998 first quarter were $25.9 billion, which represented an increase of approximately $1 billion or 4.1% compared with the prior year quarter. The increase in net sales and revenues primarily resulted from a favorable mix related to new vehicles and higher truck production (increase of 57,000 trucks over first quarter 1997). Pre-tax income in the first quarter of 1998 increased by $75 million compared with the prior year quarter primarily due to a favorable product mix from higher truck production, lower manufacturing costs, and material cost reductions. Partially offsetting the increase in pre-tax income was a combination of lower total vehicle production volume and higher retail incentives in an increasingly competitive market. GM vehicle unit deliveries in North America were 1,223,000 units, which represented a market share of 30.0% in the 1998 first quarter compared with 30.3% in the prior year quarter. - 13 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES Delphi Financial Highlights Three Months Ended March 31, Adjusted Reported 1998(1) 1997(1) 1997 (Dollars in Millions) Net sales and revenues $7,623 $7,995 $6,664 ----- ----- ----- Pre-tax income 376 371 237 Income tax expense 120 123 72 Minority interests - 1 1 Earnings of nonconsolidated affiliates 7 15 14 ----- ---- ---- Net income $263 $264 $180 === === === Net profit margin 3.5% 3.3% 2.7% - ----------------------- (1) Amounts have been adjusted to reflect the changes to GM's organizational structure resulting from the Hughes Transactions which occured in December 1997. The 1998 and adjusted 1997 amounts include the results of Delco Electronics (Delco). Delphi Financial Review Delphi reported net income of $263 million for the 1998 first quarter compared with $264 million of income in the adjusted prior year quarter. First quarter 1997 included a plant closing charge of $50 million after-tax related to the announcement that Delphi Interior and Lighting Systems would cease production at its Trenton, NJ plant. Net sales and revenues for the 1998 first quarter were $7.6 billion, which represented a decrease of $372 million or 4.7% compared with the adjusted prior year quarter. The decrease was primarily due to significant pricing concessions to original equipment manufacturers (OEM's) and volume reductions at GM-NAO, along with the negative impact of foreign currency exchange, primarily related to the Latin American and Asia-Pacific economic downturn. Including total sales from nonconsolidated joint ventures and adjusting for the addition of Delco, Delphi's 1998 first quarter sales to customers outside the GM-NAO vehicle groups increased approximately 2 percentage points compared to the 1997 first quarter and represented approximately 34% of total sales. Pre-tax income in the first quarter of 1998 increased by $5 million compared with the adjusted prior year quarter of $371 million. 1997 earnings included an $80 million pre-tax charge for the closing of the Trenton, NJ plant. Excluding the impact of the plant closing charge, Delphi's adjusted pretax income decreased by $75 million primarily due to lower production volumes at GM-NAO during the first quarter of 1998 and the impact of the economic downturn in Asia and Latin America, partially offset by decreased manufacturing and material costs. Delphi is the principal supplier of automotive components and systems to GM-NAO. Delphi's sales of automotive components and systems today is highly dependent on GM's production of vehicles in North America, the level of Delphi-supplied content per GM-NAO vehicle, the price of such automotive components and systems, and the competitiveness of Delphi's product offerings. Delphi's strategy is to minimize its dependence on GM-NAO sales by growing its automotive components and systems sales globally and by expanding its non-GM-NAO sales base in North America. In addition, the global automotive components and systems market is highly competitive which has led Delphi to refine its strategy to focus on profitable growth, as well as increased market share through technology leadership, quality, cost control and responsiveness. Additionally, as the integration of Delco and Delphi proceeds and Delphi establishes the competitiveness of its combined operations, GM will be evaluating the relevant business considerations and interests of GM stockholders relating to these operations including consideration of a possible future public offering of some portion of the business operations formed by the combination of Delphi and Delco. There can be no assurances as to how long the evaluations may take, what recommendations, if any, management may make to GM's Board of Directors, or whether or when any such offering may occur. In response to the increasingly competitive automotive components and systems market, Delphi continuously reviews competitiveness of its operations, growth opportunities, and its strategy of increasing market share through technology leadership, quality, cost, and responsiveness. Consistent with this practice, during the third quarter of 1997, Delphi initiated steps to effect the sale of its lighting, coil springs, and seating businesses. These businesses, with combined revenues of approximately $2 billion and global employment of over 11,000 are not core to Delphi's strategic growth objectives. Delphi continues to negotiate with prospective buyers for these businesses, and expects that the sale of one or all of these businesses could be concluded during the second or third quarter of 1998. In connection with the possible consummation of such transactions, management would expect to record an aggregate charge against earnings, the amount of which is currently not estimable. - 14 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES GMIO Financial Highlights Three Months Ended March 31, 1998 1997 (Dollars in Millions) Net sales and revenues $8,150 $8,283 ----- ----- Pre-tax income 213 473 Income tax expense 72 164 Minority interests (1) 3 Earnings of nonconsolidated affiliates 20 5 -- ----- Net income GM Europe (GME) 99 149 Other International 61 168 -- --- Total net income $160 $317 === === Net profit margin 2.0% 3.8% Vehicle Unit Deliveries of Cars and Trucks - GMIO Three Months Ended March 31, 1998 1997 GM as GM as a % of a % of Industry GM Industry Industry GM Industry (Units in Thousands) International Europe 4,974 492 9.9% 4,473 465 10.4% Latin America, Africa, and the Middle East 1,033 186 18.0% 1,024 169 16.5% Asia and Pacific 2,969 119 4.0% 3,811 181 4.7% ----- --- ----- --- Total International 8,976 797 8.9% 9,308 815 8.8% ===== === ===== === Wholesale Sales - GMIO Cars 541 554 Trucks 181 229 --- --- Total 722 783 === === GMIO Financial Review GMIO's 1998 first quarter net income was $160 million or 2% of net sales and revenues, compared with $317 million or 3.8% in the prior year quarter. The decrease in 1998 first quarter net income was partially due to the economic downturn in Asia and Latin America. Also, the 1997 first quarter results included a $55 million after-tax ($88 million pre-tax) gain related to a settlement agreement with Volkswagen A.G. Net sales and revenues for the 1998 first quarter decreased by 1.6% to approximately $8.2 billion compared with $8.3 billion in the prior year quarter, while pre-tax income decreased by $260 million. The decreases in net sales and revenues and pre-tax income were primarily due to lower wholesale sales volumes in the intensely competitive Asia and Pacific markets. Net income for GME totaled $99 million in the 1998 first quarter compared with net income of $149 million in the prior year quarter. Excluding the $55 million after-tax gain in 1997 previously discussed, GME's net income for the first quarter of 1998 was relatively consistent with the 1997 amount despite an increase in start-up, design and launch costs in 1998 for the new Astra in Europe. Net income from the remainder of GMIO's operations, which include the Latin America and Asia and Pacific Operations, totaled $61 million in the first quarter of 1998 compared with $168 million in the prior year quarter. The decrease in first quarter net income primarily resulted from pricing and competitive pressures in Brazil resulting from the economic reforms put in place following the Asian currency crisis, and expenses related to expansion programs. These programs included the start-up of a new plant in Rosario, Argentina, which began production of the Corsa in the fourth quarter of 1997. - 15 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES General Motors Acceptance Corporation (GMAC) Financial Highlights Three Months Ended March 31, 1998 1997 (Dollars in Millions) Financing revenue Retail and lease financing $902 $940 Operating leases 1,785 1,801 Wholesale and term loans 420 434 ------ ------ Total automotive financing revenue 3,107 3,175 Interest and discount 1,385 1,266 Depreciation on operating leases 1,178 1,158 ----- ----- Net automotive financing revenue 544 751 Insurance premiums earned 471 305 Mortgage revenue 417 301 Other income 331 326 ------ ------ Net financing revenue and other 1,763 1,683 Expenses 1,248 1,052 ----- ----- Pre-tax income 515 631 Income tax expense 166 259 --- --- Net income $349 $372 === === Net income from automotive financing operations $246 $257 Net income from insurance operations 80 78 Net income from mortgage operations 23 37 ---- ---- Net income $349 $372 === === Return on average equity (1) 15.7% 17.8% (1) Return on average equity represents net income as a percentage of average stockholder's equity outstanding for each month in the period. - 16 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES GMAC Financial Review GMAC's consolidated first quarter net income for 1998 totaled $349 million, a 6.2% decrease from the first quarter of 1997. The 4.3% decline in net income from automotive financing operations was attributed to reduced net financing margins partially offset by a lower effective income tax rate and a decrease in provisions for credit losses. Earnings from insurance operations for the first quarter 1998 increased 2.6% over the first quarter of 1997. Improved underwriting results was the primary contributor to the increase, partially offset by lower capital gains. Net income from mortgage operations for the first quarter of 1998 was 37.8% lower than in 1997 primarily due to the effects of accelerated prepayment experience on first and second mortgages, resulting from lower interest rates. During the first quarter of 1998, GMAC financed 43.4% of new GM vehicle retail deliveries in the U.S., up from 32.1% during the same period last year. Increased retail and lease incentive programs sponsored by GM were the primary factors contributing to the higher financing penetration levels. In the United States, wholesale inventory financing was provided for 725,000 and 841,000 new GM vehicles, representing 62.8% and 67.9% of all GM sales to dealers during the first quarter of 1998 and 1997, respectively. The decline in U.S. wholesale financing market share reflects the continued competitive pressures in this market segment. Automotive financing revenue for the first quarter of 1998 totaled $3.1 billion, a decline of $68 million compared with the first quarter of 1997. Reduced average outstanding automotive receivable balances resulting from increased sales of receivables activity during 1997 was the leading factor in the decline in total finance revenue. Insurance premiums earned, mortgage revenue, and other income totaled $1.2 billion and $932 million during the quarters ended March 31, 1998 and 1997, respectively. The $287 million improvement was predominantly attributable to increased insurance premiums and investment income resulting from the acquisition of Integon by GMAC Insurance Holdings, Inc. (GMACI) in October 1997, as well as higher mortgage investment income due to continued growth at GMAC Mortgage Group, Inc. (GMACMG), partially offset by lower capital gains at GMACI. GMAC's worldwide cost of borrowing for the first quarter of 1998 averaged 6.09%, a decrease of 18 basis points from the first quarter of 1997. Total borrowing costs for U.S. operations averaged 6.08% for the first quarter of 1998 compared with 6.31% for the same period in 1997. The decreases in U.S. and worldwide borrowing costs were attributable to lower long-term interest rates and a greater proportion of floating rate debt compared to fixed rate debt. Consolidated salaries and other operating expenses totaled $788 million and $694 million for the respective quarters ended March 31, 1998 and 1997. The increase was mainly attributable to the inclusion of Integon by GMACI, and continued growth at GMACMG. Annualized net retail losses were 1.03% of total average serviced automotive receivables during the first quarter of 1998, compared to 1.41% for the same period last year. The provision for credit losses totaled $107 million and $130 million for the three month periods ended March 31, 1998 and 1997, respectively. The decline in the provision is primarily due to lower credit losses resulting from tightened credit standards. The effective income tax rate for the first quarter of 1998 was 32.1%, compared to 41.0% for the same period last year. The decrease in the effective tax rate was attributable to lower U.S. and foreign taxes assessed on foreign source income and a favorable change resulting from periodic assessments of state and local income tax accruals. - 17 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES Hughes Financial Highlights Three Months Ended March 31, 1998 1997(1) (Dollars in Millions Except Per Share Amounts) Revenues Product sales $692 $683 Direct broadcast, leasing and other services 599 341 ------ ------ Total revenues 1,291 1,024 Income from continuing operations before income taxes and minority interests 79 6 Income taxes 31 2 Minority interests 1 14 Income from discontinued operations, net of taxes - 1 ---- --- Net income $49 $19 == == Earnings used for computation of Available Separate Consolidated Net Income (2) $54 $24 == == Earnings per share attributable to Class H common stock (3) $0.13 $0.06 (1)The 1997 amounts presented relate only to the results of the telecommunications and space businesses of former Hughes. See Hughes Financial Review for further discussion. (2)Excludes amortization of GM purchase accounting adjustments of $5 million in both periods related to GM's acquisition of Hughes Aircraft Company in 1985. (3)The 1997 amount is presented on a pro forma basis to reflect the changes to GM's organizational structure resulting from the Hughes Transactions which occurred in December 1997. See Hughes Financial Review for further discussion. - 18 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES Hughes Financial Review On December 17, 1997, GM and former Hughes completed a series of related transactions (Hughes Transactions) that were designed to address strategic challenges facing the three principal businesses of former Hughes (consisting of the defense electronics, automotive electronics and telecommunications and space businesses). The Hughes Transactions included the tax-free spin-off of the defense electronics business of former Hughes (Hughes Defense) to holders of $1-2/3 par value and Class H common stocks, followed immediately by the merger of Hughes Defense with Raytheon Company. Concurrently, Delco was transferred from former Hughes to Delphi. Finally, Class H common stock was recapitalized into a GM tracking stock, Class H common stock, that is linked to the telecommunications and space businesses of Hughes. The 1997 amounts presented relate only to the telecommunications and space businesses of former Hughes. Hughes Electronics reported net income of $49 million for the first quarter of 1998 compared with $19 million for the first quarter of 1997. Excluding amortization of purchase accounting adjustments related to GM's acquisition of Hughes Aircraft Company, Hughes' earnings used for computation of available separate consolidated net income was $54 million for the first quarter of 1998 compared with $24 million for the same period in 1997. Earnings per share on the same basis for the first quarter of 1998 were $0.13 per share versus pro forma earnings per share of $0.06 in 1997. The increase was principally due to decreased losses in the Direct-To-Home Broadcast segment and an increase in operating profit in the Satellite Services segment primarily due to the May 1997 PanAmSat merger. First quarter 1998 revenues increased 26.1% to $1.3 billion compared with $1.0 billion in the first quarter of 1997. The increase in revenues resulted from a 64.6% increase in revenues in the Direct-To-Home Broadcast segment resulting from continued record subscriber growth, strong average monthly revenue per subscriber and low subscriber churn rates; a 51.3% increase in revenues for the Satellite Services segment primarily due to the May 1997 PanAmSat merger and increased operating lease revenues for both video distribution and business communication services; and an 11.6% increase in revenues for the Satellite Manufacturing segment from higher commercial satellite sales. Operating profit, excluding amortization of purchase accounting adjustments related to GM's acquisition of Hughes Aircraft Company, also rose sharply in the first quarter of 1998 to $84 million compared with $33 million in the first quarter of 1997. First quarter operating profit margin on the same basis increased to 6.5% in 1998 from 3.2% in 1997. The increases were primarily due to continued increases in subscribers in the Direct-To-Home Broadcast segment and the May 1997 PanAmSat merger and increased operating lease revenues in the Satellite Services segment. For 1997, earnings per share attributable to Class H common stock is presented on a pro forma basis. Prior to the Hughes Transactions, such amounts were calculated based on the financial performance of former Hughes. Since the financial statements for the three months ended March 31, 1997 relate only to the telecommunications and space businesses of former Hughes, they do not reflect the earnings attributable to the Class H common stock on a historical basis. The pro forma presentation is used, therefore, to present the financial results which would have been achieved for 1997 relative to the Class H common stock had the results been calculated based on the performance of the telecommunications and space businesses of former Hughes. Previously reported first quarter 1997 amounts of former Hughes for net income, earnings used for computation of available separate consolidated net income, and earnings per share attributable to Class H common stock were $205 million, $235 million (excluding amortization of GM purchase accounting adjustments of approximately $31 million related to GM's acquisition of Hughes Aircraft Company),and $0.59, respectively. In May 1998, Hughes purchased an additional 9.5% interest in PanAmSat for $851 million in cash, increasing Hughes ownership interest in PanAmSat to 81.0%. - 19 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES To facilitate analysis, the following sections present GM's financial statements with its financing and insurance operations (primarily GMAC) reflected on an equity basis. Consolidated Statements of Income With Financing and Insurance Operations on an Equity Basis (Unaudited) Three Months Ended March 31, 1998 1997 (Dollars in Millions) Net sales and revenues $36,427 $37,457 ------ ------ Costs and expenses Cost of sales and other operating charges, exclusive of items listed below 30,323 31,104 Selling, general, and administrative expen 2,860 2,884 Depreciation and amortization expenses 1,683 1,879 ----- ------ Total costs and expenses 34,866 35,867 ------ ------ Operating income 1,561 1,590 Other income less income deductions 582 739 Interest expense 255 219 ---- ----- Income before income taxes, minority interests, and earnings of nonconsolidated affiliates 1,888 2,110 Income taxes 641 730 --- ------ Income before minority interests and earnings of nonconsolidated affiliates 1,247 1,380 Minority interests (4) 19 Earnings of nonconsolidated affiliates 361 397 ------ ------ Net income $1,604 $1,796 ===== ===== Net profit margin 4.4% 4.8% Results of Operations With Financing and Insurance Operations on an Equity Basis In the first quarter of 1998, GM's net income totaled $1.6 billion or $2.31 per share of $1-2/3 par value common stock, which represented a decrease of $192 million compared with approximately $1.8 billion or $2.30 per share of $1-2/3 par value common stock in the first quarter of 1997. The decrease in net income was primarily due to the spin-off of Hughes Defense and the negative impact of the economic downturn in Asia and Latin America. Highlights of first quarter financial performance by GM's major business sectors were as follows (in millions): Three Months Ended March 31, 1998 1997 GM-NAO $826 $764 Delphi 263 180 GMIO 160 317 GMAC 349 372 Hughes 54 235 Other (48) (72) ------ ----- Net income $1,604 $1,796 ===== ===== Reference should be made to the GM sectors' financial reviews that are presented on pages 13 through 19 and incorporated by reference to supplement the information presented herein. First quarter 1998 net sales and revenues were $36.4 billion, which represented a decrease of $1 billion compared with the prior year quarter. The decrease in net sales and revenues was primarily due to the spin-off of Hughes Defense. - 20 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES Results of Operations With Financing and Insurance Operations on an Equity Basis (concluded) The gross margin percentage for the 1998 first quarter was 16.8% compared with 17.0% in the prior year quarter. The year-over-year change in the gross margin resulted from higher sales incentives in North America; higher interest rates in Latin America; lower volumes in the intensely competitive Asia and Pacific markets; and the start-up, design and launch costs of the new Astra in Europe. Cost of sales and other operating charges decreased to $30.3 billion in the first quarter of 1998 compared with $31.1 billion in the prior year quarter. The decrease in cost of sales was primarily due to the spin-off of Hughes Defense. Depreciation and amortization expense decreased by $196 million in the first quarter of 1998 compared with prior year quarter primarily due to a reduction in tool amortization at GM-NAO as a result of the previously reported competitiveness studies at GM. Other income less income deductions amounted to $582 million for the 1998 first quarter compared with $739 million in the prior year quarter. The decrease of $157 million was primarily due to lower interest income in the 1998 first quarter and favorable settlements of legal claims during the 1997 first quarter, which included an $88 million pre-tax gain that resulted from an agreement with VW settling a civil lawsuit which GM brought against VW. Consolidated Balance Sheets With Financing and Insurance Operations on an Equity Basis (Unaudited) March 31, Dec. 31, March 31, 1998 1997 1997 ---- ---- ---- (Dollars in Millions) ASSETS Cash and cash equivalents $11,015 $10,685 $9,395 Other marketable securities 2,557 3,826 5,233 ----- ------- ------- Total cash and marketable securities 13,572 14,511 14,628 Accounts and notes receivable (less allowances) Trade 5,047 5,164 5,507 Nonconsolidated affiliates 2,096 836 1,844 Inventories (less allowances) 11,895 12,102 12,851 Equipment on operating leases (less accumulated depreciation) 4,554 4,677 4,187 Deferred income taxes and other 6,362 6,278 5,771 ------- ------- ------- Total current assets 43,526 43,568 44,788 Equity in net assets of nonconsolidated affiliates 10,665 10,164 9,696 Deferred income taxes 20,678 20,721 20,354 Other investments and miscellaneous assets 13,843 13,564 11,967 Property - net 34,598 33,914 36,634 Intangible assets - net 10,740 10,752 12,573 -------- -------- -------- Total assets $134,050 $132,683 $136,012 ======= ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable $12,499 $12,474 $11,379 Loans payable 1,219 656 1,306 Accrued expenses and customer deposits 32,591 33,459 30,168 ------ ------ ------ Total current liabilities 46,309 46,589 42,853 Long-term debt 5,788 5,491 5,316 Capitalized leases 183 185 191 Postretirement benefits other than pensions 38,724 38,388 40,988 Pensions 5,165 4,271 6,183 Other liabilities and deferred income taxes 20,171 19,336 17,572 ------- ------- ------- Total liabilities 116,340 114,260 113,103 ------- ------- ------- Minority interests 698 695 104 General Motors - obligated mandatorily redeemable preferred securities of subsidiary trusts holding solely junior subordinated debentures of General Motors Series D 79 79 - Series G 143 143 - Stockholders' equity 16,790 17,506 22,805 -------- -------- -------- Total liabilities and stockholders' equity $134,050 $132,683 $136,012 ======= ======= ======= - 21 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES Liquidity and Capital Resources With Financing and Insurance Operations on an Equity Basis GM's cash and marketable securities totaled $13.6 billion at March 31, 1998, compared with $14.5 billion at December 31, 1997 and $14.6 billion at March 31, 1997. The decrease in cash and marketable securities from December 31, 1997 was primarily due to $1.6 billion of cash used to acquire approximately 24 million shares of $1-2/3 par value common stock under stock repurchase programs announced in August 1997 and February 1998. The increase in accounts and notes receivable from nonconsolidated affiliates since December 31, 1997 was primarily due to increased financing volume between GMAC and GM as a result of incentives. During the first quarter of 1998, loans payable and long-term debt were $7.0 billion at March 31, 1998, compared with $6.1 billion at December 31, 1997 and $6.6 billion at March 31, 1997. The increase during the first quarter of 1998 was primarily due to issuances of commercial paper. Net liquidity, calculated as cash and marketable securities less the total of loans payable, long-term debt and capitalized leases was $6.4 billion at March 31, 1998, compared with $8.2 billion at December 31, 1997 and $7.8 billion at March 31, 1997. Book value per share of $1-2/3 par value common stock was $22.00 at March 31, 1998, compared with $22.26 at December 31, 1997 and $28.10 at March 31, 1997. Book value per share of Class H common stock was $13.20 at March 31, 1998, compared with $13.36 at December 31, 1997 and $14.05 at March 31, 1997. Liquidity and Capital Resources for GMAC At March 31, 1998, GMAC owned assets and serviced automotive receivables totaling $125.6 billion, which was $4.4 billion and $16.2 billion higher than December 31 and March 31, 1997, respectively. Comparing the first quarter of 1998 to the same period in 1997, the higher balances can be attributed to increases in serviced retail and wholesale receivables, investments in securities, real estate mortgages, operating lease assets and receivables due from General Motors Corporation. Earning assets totaled $109.5 billion at March 31, 1998 compared to $104.5 billion and $99.5 billion at December 31 and March 31, 1997, respectively. The increase from year-end 1997 was primarily attributable to higher outstanding balances in retail and wholesale finance receivables as well as receivables due from General Motors Corporation. Finance receivables serviced by GMAC, including sold receivables, totaled $76.0 billion, $73.4 billion and $71.2 billion at March 31, 1998, December 31, 1997 and March 31, 1997, respectively. On-balance sheet consolidated finance receivables at March 31, 1998 totaled $64.6 billion, 7% and 1% above December 31 and March 31, 1997, respectively. The increases from the first quarter of 1997 and year-end 1997 are attributable to increased retail incentive programs sponsored by GM in the U.S. and Canada. Investment in operating lease assets, net of accumulated depreciation, totaled $26.2 billion at March 31, 1998, compared to $25.8 billion at year-end 1997, and $24.6 billion at March 31, 1997. The increase in balances from the quarters ended March 31, 1997 to March 31, 1998 can be attributed to additional lease incentive programs sponsored by GM during the first quarter of 1998. Investments in securities at March 31, 1998 totaled $7.7 billion, compared with $7.9 billion and $5.2 billion at December 31 and March 31, 1997, respectively. The $2.5 billion increase in the portfolio at the end of the first quarter of 1998 over the same period in 1997 is attributable to the acquisition of Integon by GMACI and continued growth at GMACMG. GMAC's due and deferred from receivable sales (net) totaled $258.6 million at March 31, 1998, compared with $690.5 million and $585.3 million at December 31 and March 31, 1997, respectively. The significant decline in the March 31, 1998 balance was primarily due to the upgrade in GMAC's short-term debt rating by Standard & Poor's Ratings Group in January 1998, which eliminated the requirement to segregate and hold in trust the collections on sold receivables. As of March 31, 1998, GMAC's total borrowings were $89.6 billion, compared with $86.7 billion and $81.3 billion at December 31 and March 31, 1997, respectively. The higher debt balances were used to fund increased asset levels. The Company's ratio of debt to total stockholder's equity at March 31, 1998, December 31, 1997 and March 31, 1997 was 9.9:1. GMAC and its subsidiaries maintain substantial bank lines of credit which totaled $40.0 billion at March 31, 1998, compared to $39.8 billion at year-end 1997 and $40.0 billion at March 31, 1997. The unused portion of these credit lines totaled $31.1 billion at March 31, 1998, $700 million higher than December 31, 1997, and $200 million lower than March 31, 1997. Included in the unused credit lines are a committed U.S. revolving credit facility of $10 billion which serves primarily as back-up for GMAC's unsecured commercial paper program and an $11.5 billion U.S. asset-backed commercial paper liquidity and receivables credit facility for New Center Asset Trust (NCAT), a non-consolidated limited purpose business trust established to issue asset-backed commercial paper. - 22 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows With Financing and Insurance Operations on an Equity Basis (Unaudited) Three Months Ended March 31, 1998 1997 (Dollars in Millions) Net cash provided by operating activities $2,896 $1,808 ----- ----- Cash flows from investing activities Expenditures for property (2,267) (1,724) Investments in other marketable securities - acquisitions (2,220) (6,199) Investments in other marketable securities - liquidations 3,490 4,608 Operating leases - acquisitions (1,413) (1,352) Operating leases - liquidations 1,385 1,001 Other (272) (104) ----- ------ Net cash used in investing activities (1,297) (3,770) ----- ----- Cash flows from financing activities Net increase in loans payable 564 93 Increase in long-term debt 915 154 Decrease in long-term debt (619) (30) Proceeds from issuing common stocks 233 206 Repurchases of common stocks (1,911) (1,761) Cash dividends paid to stockholders (357) (422) ------ ------ Net cash used in financing activities (1,175) (1,760) ----- ----- Effect of exchange rate changes on cash and cash equivalents (94) (203) Net increase (decrease) in cash and cash equivalents 330 (3,925) Cash and cash equivalents at beginning of the period 10,685 13,320 Cash and cash equivalents at end of the period $11,015 $9,395 Cash Flows With Financing and Insurance Operations on an Equity Basis Net cash provided by operating activities was $2.9 billion for the 1998 first quarter compared with $1.8 billion in the prior year quarter. The increase of $1.1 billion in cash provided by operating activities was primarily the result of changes in working capital balances. Net cash used in investing activities amounted to $1.3 billion in the 1998 first quarter compared with $3.8 billion in the prior year quarter. The decrease in net cash used in investing activities during the 1998 first quarter was primarily attributable to the level of investments in marketable securities. Net cash used in financing activities totaled $1.2 billion for the first quarter of 1998 compared with $1.8 billion for the prior year quarter. The decrease was primarily due to net increases in short and long-term debt. Dividends may be paid on common stocks only when, as and if declared by the GM Board of Directors (GM Board) in its sole discretion. GM's policy is to distribute dividends on its $1-2/3 par value common stock based on the outlook and indicated capital needs of the business. On May 4, 1998, the GM Board declared a quarterly cash dividend of $0.50 per share on $1-2/3 par value common stock, payable June 10, 1998. The GM Board also declared quarterly dividends on the Series B, Series D, and Series G Depositary Shares of $0.57, $0.495, and $0.57 per share, respectively, payable August 1, 1998. With respect to Class H common stock, which was recapitalized on December 17, 1997, no cash dividends will be paid at this time in order to allow the earnings of Hughes to be retained for investment in its telecommunications and space businesses. Cash Flows for GMAC Cash provided by operating activities totaled $3.6 billion and $2.9 billion during the three months ended March 31, 1998 and 1997, respectively. The increase in cash generated by operating activities was predominantly attributable to higher amounts due to GM. Cash used for investing activities during the first quarter of 1998 totaled $6.4 billion, a $600 million increase over the same period in 1997, as a result of an increase in notes receivable from GM, lower proceeds from sales of wholesale receivables and increased net acquisitions of operating leases, partially offset by higher finance receivable liquidations and lower investment in securities acquisitions. Cash provided by financing activities during the three months ended March 31, 1998 and 1997 totaled $2.9 billion and $2.8 billion, respectively. A lower dividend paid to GM in the first quarter of 1998 was the primary factor contributing to the change. - 23 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES Employment and Payrolls March 31, 1998 1997 Worldwide Employment (in thousands) GM-NAO 233 242 Delphi 206 210 GMIO 116 112 GMAC 22 18 Hughes 15 15 Other 10 10 ---- ---- Total employees 602 607 === === Worldwide payrolls - (in billions) $7.0 $7.1 Employment and payroll amounts reported for 1997 have been adjusted to reflect the changes to GM's organizational structure resulting from the Hughes Transactions. As such, Delphi reported amounts include Delco and Hughes reported amounts exclude Delco and Hughes Defense. New Accounting Standards In the first quarter of 1998, the AICPA's Accounting Standards Executive Committee issued Statement of Position (SOP) 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use. SOP 98-1 provides guidance on the capitalization of software developed for internal use. GM will adopt SOP 98-1 on January 1, 1999, as required. Management is currently assessing the impact of this SOP on the financial statements of the Corporation. In February 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 132, Employers' Disclosures about Pensions and Other Postretirement Benefits. SFAS No. 132 requires an entity to disclose certain information about pensions and other postretirement benefits. GM has determined that the adoption of this new accounting standard will require more information in GM's consolidated financial statements regarding pensions and other postretirement benefits. The effect of adopting this new accounting standard will not be material to GM's consolidated financial statements when adopted for this fiscal year, as required. * * * * * * - 24- GENERAL MOTORS CORPORATION AND SUBSIDIARIES PART II ITEM 1. LEGAL PROCEEDINGS (a) Material pending legal proceedings, other than ordinary routine litigation incidental to the business, to which the Corporation became, or was, a party during the quarter ended March 31, 1998 or subsequent thereto, but before the filing of this report are summarized below. Other Matters As previously reported, Hughes has maintained a suit against the U.S. Government since September 1973 regarding the Government's infringement and use of a Hughes patent (the "Williams Case") covering "Velocity Control and Orientation of a Spin Stabilized Body," principally satellites. On April 7, 1998, the Court of Appeals for the Federal Circuit (CAFC) affirmed its previous decision in the Williams case and its award of $114 million in damages. The CAFC ruled that the conclusions reached in the Williams case were consistent with the U.S. Supreme Court's findings in the Warner-Jenkinson case. On or before May 24, 1998, the U.S. Government may petition the CAFC for a rehearing. Hughes is unable to estimate the duration of any appeal effort on behalf of the U.S. Government. While no amount has been recorded in the financial statements of Hughes to reflect the $114 million award or the interest accumulating thereon, a resolution of this issue could result in a gain that would be material to the earnings of GM attributable to Class H common stock. *** As previously reported, in connection with the matter of Jacobson, et al v. Hughes Aircraft Co., et al, plaintiffs in that action had sought to obtain increased retirement benefits from excess assets in the Hughes Non-Bargaining Retirement Plan. On January 23, 1997, the U.S. Court of Appeals for the Ninth Circuit reversed and remanded a decision of the U.S. District Court in Los Angeles in which the District Court had dismissed the plaintiffs' complaint without leave to amend, for failure to state a claim. In February 1998, Hughes filed a writ of certiorari in the U.S. Supreme Court seeking that court's review of the Ninth Circuit decision. On April 27, 1998, the Supreme Court granted Hughes' petition for writ of certiorari; Hughes anticipates that oral argument will be heard this fall. *** As previously reported, on January 29, 1997, the Corporation was served with a putative Class Action Complaint filed in the Circuit Court of the Sixteenth Judicial Circuit in Kane County, Illinois, purporting to bring claims on behalf of Illinois purchasers of new vehicles which experienced peeling paint. The case, Karpowicz et al. v. General Motors Corp., was subsequently removed to the United States District Court for the Northern District of Illinois. On March 25, 1998, that Court granted GM's motion for summary judgment dismissing all remaining claims asserted by the named plaintiff. On April 8, 1998, the Corporation was served with a putative nationwide class action filed in the Circuit Court of Cook County, Illinois, Chancery Division (Craig Friedman, Robert Bengston and Debra Bengston v. General Motors Corporation). The named plaintiffs purport to represent a class of all persons who now or formerly owned or leased a 1986 through 1997 model year GM vehicle which was painted without a primer surfacer layer and which subsequently experienced paint delamination and asserts claims for breach of contract, breach of warranty, and violation of the Michigan Consumer Protection Act on behalf of that class. The Complaint also identifies a similar putative class limited to Illinois residents for the purpose of asserting a claim under the Illinois Deceptive Trade Practices Act. Plaintiffs allege that vehicles painted using a "high build electrocoat" instead of both a "bottom layer electrocoat applied directly to the sheet metal" and "a spray primer" are subject to paint delamination (peeling) as well as "softening, chipping, and other damage." Plaintiffs seek unquantified compensatory damages, punitive damages, pre-judgment interest, costs, and attorneys' fees. No determination has yet been made as to whether this case may proceed as a class action. * * * - 25 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES ITEM 1. LEGAL PROCEEDINGS - Concluded As previously reported, a purported class action, pending in federal court in Laredo, Texas, alleges that the Type III door latches used in 1978 to 1986 model GM vehicles are defective. Plaintiffs are seeking to represent a class of Texas purchasers. On February 27, 1998, a purported statewide class action was filed on behalf of Alabama owners of 1987 Chevrolet S-10 Blazers with Type III door latches in state court in Walker County, Alabama. Johnny M. McLain v. General Motors. Plaintiff alleges that the door latches are defective and claims fraudulent concealment, implied debt, and strict liability. The Complaint seeks a declaratory judgment that the door latches are defective, an injunction requiring a recall and unspecified monetary damages. GM has removed the case to the federal court in Alabama. No determination has been made that either case can be maintained as a class action. * * * As previously reported, three purported class actions have been filed against General Motors, as well as a number of other vehicle manufacturers and dealers, claiming that the front seat air bags installed in 1993 to 1997 model vehicles are defective. In the Alabama case, the court has vacated an order conditionally certifying a nationwide class which had been entered at the time the case was filed. No determination has been made that any of the cases can be maintained as a class action. * * * * * * ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS. Exhibit Number Exhibit Name Page No. - -------------- ------------ -------- 99 Hughes Electronics Corporation Financial Statements and Management's Discussion and Analysis of Financial Condition and Results of Operations 27 27 Financial Data Schedule (for SEC information only) (b) REPORTS ON FORM 8-K. Four reports on Form 8-K, dated January 9, 1998, January 26, 1998, February 9, 1998, and March 2, 1998, were filed during the quarter ended March 31, 1998 reporting matters under Item 5, Other Events, and reporting certain agreements under Item 7, Financial Statements, Pro Forma Financial Information, and Exhibits. * * * * * * SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. GENERAL MOTORS CORPORATION -------------------------- (Registrant) By Date May 13, 1998 /s/Peter R. Bible - ----------------- ----------------- (Peter R. Bible, Chief Accounting Officer) - 26 - EX-99 2 EXHIBIT 99 HUGHES ELECTRONICS CORPORATION FINANCIAL STATEMENTS AND MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS STATEMENT OF INCOME AND AVAILABLE SEPARATE CONSOLIDATED NET INCOME (Unaudited) Three Months Ended March 31, 1998 1997 ---- ---- (Dollars in Millions Except Per Share Amounts) Revenues Product sales $692.1 $683.2 Direct broadcast, leasing and other services 598.9 340.8 -------- -------- Total revenues 1,291.0 1,024.0 ------- ------- Operating costs and expenses Cost of products sold 542.3 554.8 Broadcast programming and other costs 264.8 163.8 Selling, general and administrative expenses 302.6 222.0 Depreciation and amortization 97.7 50.3 Amortization of GM purchase accounting adjustments 5.3 5.3 ---------- ------- Total operating costs and expenses 1,212.7 996.2 ------- ----- Operating profit 78.3 27.8 Interest income 37.5 2.0 Interest expense (3.0) (15.1) Other, net (34.3) (9.1) ----- ----- Income from continuing operations before income taxes and minority interests 78.5 5.6 Income taxes 31.4 2.2 Minority interests in net losses of subsidiaries 1.3 14.2 ----- ---- Income from continuing operations 48.4 17.6 Income from discontinued operations, net of taxes - 1.0 ------- ----- Net income 48.4 18.6 Adjustments to exclude the effect of GM purchase accounting adjustments 5.3 5.3 ----- ----- Earnings Used for Computation of Available Separate Consolidated Net Income $53.7 $23.9 ==== ==== Available Separate Consolidated Net Income Average number of shares of General Motors Class H Common Stock outstanding (in millions) (numerator) 104.1 100.4 Class H dividend base (in millions) (denominator) 399.9 399.9 Available Separate Consolidated Net Income $14.0 $6.0 ==== === Earnings Attributable to General Motors Class H Common Stock on a Per Share Basis $0.13 $0.06 ==== ==== Reference should be made to the Notes to Financial Statements. - 27 - HUGHES ELECTRONICS CORPORATION BALANCE SHEET March 31, 1998 December 31, ASSETS (Unaudited) 1997 (Dollars in Millions) Current Assets Cash and cash equivalents $2,499.5 $2,783.8 Accounts and notes receivable (less allowances) 740.9 662.8 Contracts in process, less advances and progress payments of $39.0 and $50.2 623.1 575.6 Inventories 511.6 486.4 Prepaid expenses and other, including deferred income taxes of $87.2 and $93.2 326.2 297.3 -------- -------- Total Current Assets 4,701.3 4,805.9 Satellites, net 2,921.3 2,643.4 Property, net 885.0 889.7 Net Investment in Sales-type Leases 302.4 337.6 Intangible Assets, net of accumulated amortization of $340.2 and $318.3 2,932.9 2,954.8 Investments and Other Assets 1,160.7 1,132.4 --------- --------- Total Assets $12,903.6 $12,763.8 ======== ======== LIABILITIES AND STOCKHOLDER'S EQUITY Current Liabilities Accounts payable $ 510.4 $ 472.8 Advances on contracts 222.8 209.8 Deferred revenues 112.9 110.6 Accrued liabilities 597.4 689.4 -------- -------- Total Current Liabilities 1,443.5 1,482.6 Long-Term Debt 787.6 637.6 Deferred Gains on Sales and Leasebacks 161.2 191.9 Accrued Operating Leaseback Expense 54.5 100.2 Postretirement Benefits Other Than Pensions 155.2 154.8 Other Liabilities and Deferred Credits 722.3 706.4 Deferred Income Taxes 612.2 570.8 Commitments and Contingencies Minority Interests 605.1 607.8 Stockholder's Equity Capital stock and additional paid-in capital 8,325.6 8,322.8 Net income retained for use in the business 55.5 7.1 Subtotal 8,381.1 8,329.9 Minimum pension liability adjustment (34.8) (34.8) Accumulated unrealized gains on securities 20.8 21.4 Accumulated foreign currency translation adjustments (5.1) (4.8) ---- ----- Accumulated other comprehensive loss (19.1) (18.2) --------- --------- Total Stockholder's Equity 8,362.0 8,311.7 --------- --------- Total Liabilities and Stockholder's Equity $12,903.6 $12,763.8 ======== ======== Reference should be made to the Notes to Financial Statements. - 28 - HUGHES ELECTRONICS CORPORATION CONDENSED STATEMENT OF CASH FLOWS (Unaudited) Three Months Ended March 31, 1998 1997 ---- ---- (Dollars in Millions) Cash Flows from Operating Activities Net cash used in continuing operations $(38.7) $(226.0) Net cash used by discontinued operations - (0.4) ------- ------- Net Cash Used in Operating Activities (38.7) (226.4) ---- ----- Cash Flows from Investing Activities Investment in companies (8.4) (1.6) Expenditures for property (38.1) (36.4) Increase in satellites (270.1) (57.7) Early buy-out of satellite under sale and leaseback (96.6) - Proceeds from disposal of property 17.6 - ------ ------- Net Cash Used in Investing Activities (395.6) (95.7) ----- ---- Cash Flows from Financing Activities Long-term debt borrowings 875.0 - Repayment of long-term debt (725.0) - Contributions from Parent Company - 326.4 --------- ----- Net Cash Provided by Financing Activities 150.0 326.4 ----- ----- Net (decrease) increase in cash and cash equivalents (284.3) 4.3 Cash and cash equivalents at beginning of the year 2,783.8 6.7 ------- ----- Cash and cash equivalents at end of the year $2,499.5 $11.0 ======= ==== Reference should be made to the Notes to Financial Statements. - 29 - HUGHES ELECTRONICS CORPORATION NOTES TO FINANCIAL STATEMENTS (Unaudited) Note 1. Basis of Presentation The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial reporting. In the opinion of management, all adjustments (consisting only of normal recurring items) which are necessary for a fair presentation have been included. The results for interim periods are not necessarily indicative of results which may be expected for any other interim period or for the full year. For further information, refer to the financial statements and notes thereto included in the General Motors ("GM") 1997 Annual Report on Form 10-K, as amended. GM purchase accounting adjustments relate to GM's purchase of Hughes Aircraft Company in 1985. On December 17, 1997, Hughes Electronics Corporation ("Hughes Electronics") and GM, the parent of Hughes Electronics, completed a series of transactions (the "Hughes Transactions") designed to address strategic challenges facing the three principal businesses of Hughes Electronics and unlock stockholder value in GM. The Hughes Transactions included the tax-free spin-off of the defense electronics business ("Hughes Defense") to holders of GM $1-2/3 par value and Class H common stocks, followed immediately by the merger of Hughes Defense with Raytheon Company ("Raytheon"). Concurrently, Delco Electronics Corporation ("Delco"), the automotive electronics business, was transferred to GM's Delphi Automotive Systems unit. Finally, GM Class H common stock was recapitalized into a GM tracking stock linked to the remaining telecommunications and space businesses. For the periods prior to the consummation of the Hughes Transactions on December 17, 1997, Hughes Electronics, consisting of its defense electronics, automotive electronics and telecommunications and space businesses, is hereinafter referred to as former Hughes. In connection with the recapitalization of Hughes Electronics on December 17, 1997, the telecommunications and space businesses of former Hughes, consisting principally of its direct-to-home broadcast, satellite services, satellite manufacturing and network systems businesses, were contributed to the recapitalized Hughes Electronics. Such telecommunications and space businesses, both before and after the recapitalization, are hereinafter referred to as Hughes. The accompanying financial statements and footnotes pertain only to Hughes and do not include balances of former Hughes related to Hughes Defense or Delco. Prior to the Hughes Transactions, the Hughes businesses were effectively operated as divisions of former Hughes. The March 31, 1997 financial statements include allocations of corporate expenses from former Hughes, including research and development, general management, human resources, financial, legal, tax, quality, communications, marketing, international, employee benefits and other miscellaneous services. These costs and expenses have been charged to Hughes based either on usage or using allocation methodologies primarily based upon total revenues, certain tangible assets and payroll expenses. Management believes the allocations were made on a reasonable basis; however, they may not necessarily reflect the financial position, results of operations or cash flows of Hughes on a stand-alone basis in the future. Also, the interest expense in the Statement of Income and Available Separate Consolidated Net Income ("Statement of Income") for March 31, 1997 included an allocated share of total former Hughes' interest expense. Note 2. Inventories Major Classes of Inventories March 31, December 31, (Dollars in Millions) 1998 1997 ---- ---- Productive material and supplies $77.2 $57.5 Work in process 312.7 328.5 Finished goods 121.7 100.4 ----- ----- Total $511.6 $486.4 ===== ===== - 30 - HUGHES ELECTRONICS CORPORATION NOTES TO FINANCIAL STATEMENTS--Continued (Unaudited) Note 3. Comprehensive Income Hughes adopted Statement of Financial Accounting Standards ("SFAS") No. 130, Reporting Comprehensive Income, which established standards for reporting and displaying comprehensive income and its components in an annual financial statement that is displayed with the same prominence as other financial statements. This statement also requires that an entity report a total for comprehensive income in condensed financial statements of interim periods. Hughes' total comprehensive income was as follows: Three Months Ended March 31, (Dollars in Millions) 1998 1997 ---- ---- Net income $48.4 $18.6 Other comprehensive (loss) income: Foreign currency translation adjustments (0.3) 0.1 Unrealized loss on securities (0.6) - ----- ------- Other comprehensive (loss) income (0.9) 0.1 ----- ----- Total comprehensive income $47.5 $18.7 ==== ==== Note 4. Earnings Per Share Attributable to GM Class H Common Stock and Available Separate Consolidated Net Income Earnings per share attributable to GM Class H common stock is determined based on the relative amounts available for the payment of dividends to holders of 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). Amounts available for the payment of dividends on GM Class H common stock are based on the available separate consolidated net income of Hughes. 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 GM's 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 (104.1 million and 100.4 million during the first quarters of 1998 and 1997, respectively) and the denominator of which was 399.9 million during the first quarters of 1998 and 1997. For 1997, available separate consolidated net income and earnings attributable to General Motors Class H common stock are presented on a pro forma basis. Prior to the Hughes Transactions, such amounts were calculated based on the financial performance of former Hughes. Since the financial statements for the three months ended March 31, 1997 relate only to the telecommunications and space businesses of former Hughes, they do not reflect the earnings attributable to the GM Class H common stock on a historical basis. The pro forma presentation is used, therefore, to present the financial results which would have been achieved for 1997 relative to the GM Class H common stock had they been calculated based on the performance of the telecommunications and space businesses of former Hughes. Earnings per share represent basic earnings per share. There is no dilutive effect resulting from the assumed exercise of stock options, since the exercise of stock options would not affect the GM Class H dividend base (denominator) used in calculating earnings per share. As Hughes has no other common stock equivalents that may impact the calculation, diluted earnings per share is not presented. Note 5. Other Postretirement Benefits 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. - 31 - HUGHES ELECTRONICS CORPORATION NOTES TO FINANCIAL STATEMENTS--Continued (Unaudited) Note 6. Acquisitions In May 1997, Hughes and PanAmSat, a leading provider of international satellite services, merged their respective satellite service operations into a new publicly-held company, which retained the name PanAmSat. Hughes contributed its Galaxy(R) satellite services business in exchange for a 71.5% interest in the new company. PanAmSat stockholders received a 28.5% interest in the new company and $1.5 billion in cash. For accounting purposes, the merger was treated by Hughes as an acquisition of 71.5% of PanAmSat and was accounted for using the purchase method. Accordingly, the purchase price was allocated to the net assets acquired, including intangible assets, based on estimated fair values at the date of acquisition. The purchase price exceeded the fair value of net assets acquired by $2.4 billion. In addition, the merger was treated as a partial sale of the Galaxy business by Hughes and resulted in a one-time pre-tax gain of $489.7 million ($318.3 million after-tax). In May 1998, Hughes purchased an additional 9.5% interest in PanAmSat for $851.4 million in cash, increasing Hughes' ownership interest from 71.5% to 81.0%. Note 7. Discontinued Operations On December 15, 1997, Hughes sold substantially all of the assets and liabilities of the Hughes Avicom International, Inc. ("Hughes Avicom") business to Rockwell Collins, Inc. for cash. Hughes Avicom is a supplier of products and services to the commercial airline market. The net operating results of Hughes Avicom through March 31, 1997 have been reported, net of applicable income taxes, as "Income from discontinued operations" and the net cash flows as "Net cash used by discontinued operations." Note 8. Segment Reporting Hughes adopted SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, which established standards for reporting information about operating segments in annual financial statements and requires selected information about operating segments in interim financial reports issued to stockholders. Operating Segments: (Dollars in Millions) Direct-To -Home Satellite Satellite Network Broadcast Services Manuf. Systems Other Elimin. Total For the Three Months Ended: March 31, 1998 External Revenues $387.9 $167.1 $553.7 $179.1 $3.2 - $1,291.0 Intersegment Revenues - 25.9 70.6 5.6 0.3 $(102.4) - - -------------------------------------------------------------------------------- Total Revenues $387.9 $193.0 $624.3 $184.7 $3.5 $(102.4)$1,291.0 - -------------------------------------------------------------------------------- Operating (Loss) Profit(1) $(31.6) $84.9 $55.1 $(11.9) $(10.8) $(7.4) $78.3 - -------------------------------------------------------------------------------- March 31, 1997 External Revenues $235.6 $103.9 $496.2 $182.4 $5.9 - $1,024.0 Intersegment Revenues - 23.7 63.1 0.1 0.5 $(87.4) - - ------------------------------------------------------------------------------- Total Revenues $235.6 $127.6 $559.3 $182.5 $6.4 $(87.4)$1,024.0 - -------------------------------------------------------------------------------- Operating (Loss) Profit(1) $(67.5) $67.5 $52.8 $(15.3) $2.7 $(12.4) $27.8 - -------------------------------------------------------------------------------- (1) Includes amortization arising from purchase accounting adjustments related to GM's acquisition of Hughes Aircraft Company amounting to $0.8 million in each of the three month periods for the Satellite Services segment and $4.5 million in each of the three month periods for Other. - 32 - HUGHES ELECTRONICS CORPORATION NOTES TO FINANCIAL STATEMENTS--Concluded (Unaudited) Note 8. Segment Reporting (Concluded) A reconciliation of operating profit shown on the prior page to income from continuing operations before income taxes and minority interests shown in the Statement of Income follows: Three Months Ended March 31, (Dollars in Millions) 1998 1997 ---- ---- Operating profit $78.3 $27.8 Interest income 37.5 2.0 Interest expense (3.0) (15.1) Other, net (34.3) (9.1) ------ ------ Income from continuing operations before income taxes and minority interests $78.5 $5.6 ==== === Note 9. Contingencies As a result of the Hughes Transactions, Hughes is subject to certain potential adjustments which could require amounts to be paid to or received from GM or Raytheon. In connection with the transfer of Delco to Delphi, a cash payment is to be made to the extent that the closing balance sheet reflects a "net investment amount" of Delco that deviates by more than $50 million from the targeted "net investment amount." As a result of the adjustments, Hughes expects that a payment will be made by Hughes to GM of approximately $300 million to $350 million. Similarly, in connection with the Hughes Defense merger with Raytheon, a payment will be made to the extent that the closing date balance sheet of Hughes Defense reflects an "adjusted net worth amount" that deviates by more than $50 million from a target amount. The amount payable to or from Raytheon, if any, is not determinable at this time. Any amounts payable or receivable resulting from these adjustments will be treated as equity transactions at the time the amounts are finalized. Hughes has maintained a suit against the U.S. Government since September 1973 regarding the Government's infringement and use of a Hughes patent (the "Williams Patent") covering "Velocity Control and Orientation of a Spin Stabilized Body," principally satellites. On April 7, 1998, the Court of Appeals for the Federal Circuit ("CAFC") affirmed its previous decision in the Williams case and its award of $114.0 million in damages. The CAFC ruled that the conclusions reached in the Williams case were consistent with the U.S. Supreme Court's findings in the Warner-Jenkinson case. On or before May 24, 1998 the U.S. Government may petition the CAFC for a rehearing. Hughes is unable to estimate the duration of any appeal effort on behalf of the U.S. Government. While no amount has been recorded in the financial statements of Hughes to reflect the $114.0 million award or the interest accumulating thereon, a resolution of this issue could result in a gain that would be material to the earnings of GM attributable to Class H common stock. - 33 - HUGHES ELECTRONICS CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following management's discussion and analysis should be read in conjunction with the Hughes management's discussion and analysis included in the General Motors ("GM") 1997 Annual Report to the Securities Exchange Commission on Form 10-K, as amended. In addition, the following discussion excludes purchase accounting adjustments related to GM's acquisition of Hughes Aircraft Company (see Supplemental Data beginning on page 37). Statements made concerning expected financial performance, ongoing financial performance strategies, and possible future action which Hughes (as defined below) intends to pursue to achieve strategic objectives for each of its four principal business segments constitute forward-looking information. The implementation of these strategies and of such future actions and the achievement of such financial performance are each subject to numerous conditions, uncertainties and risk factors, and, accordingly, no assurance can be given that Hughes will be able to successfully accomplish its strategic objectives or achieve such financial performance. The principal important risk factors which could cause actual performance and future actions to differ materially from forward-looking statements made herein include economic conditions, product demand and market acceptance, government action, competition, ability to achieve cost reductions, technological risk, interruptions to production attributable to causes outside of Hughes' control, the success of satellite launches, in-orbit performance of satellites and Hughes' ability to access capital to maintain its financial flexibility. General On December 17, 1997, Hughes Electronics Corporation ("Hughes Electronics") and GM, the parent of Hughes Electronics, completed a series of transactions (the "Hughes Transactions") designed to address strategic challenges facing the three principal businesses of Hughes Electronics and unlock stockholder value in GM. The Hughes Transactions included the tax-free spin-off of the defense electronics business ("Hughes Defense") to holders of GM $1-2/3 par value and Class H common stocks, followed immediately by the merger of Hughes Defense with Raytheon Company. Concurrently, Delco Electronics Corporation ("Delco"), the automotive electronics business, was transferred to GM's Delphi Automotive Systems unit. Finally, GM Class H common stock was recapitalized into a GM tracking stock linked to the remaining telecommunications and space businesses. For the periods prior to the consummation of the Hughes Transactions on December 17, 1997, Hughes Electronics, consisting of its defense electronics, automotive electronics, and telecommunications and space businesses, is hereinafter referred to as former Hughes. In connection with the recapitalization of Hughes Electronics on December 17, 1997, the telecommunications and space businesses of former Hughes, consisting principally of its direct-to-home broadcast, satellite services, satellite manufacturing and network systems businesses, were contributed to the recapitalized Hughes Electronics. Such telecommunications and space businesses, both before and after the recapitalization, is hereinafter referred to as Hughes. The following discussion and accompanying financial statements pertain only to Hughes and do not pertain to balances of former Hughes related to Hughes Defense or Delco. Results of Operations Revenues. First quarter 1998 revenues increased 26.1% to $1,291.0 million compared with $1,024.0 million in the first quarter of 1997. The increase reflects continued record subscriber growth in the Direct-To-Home Broadcast segment, increased revenues in the Satellite Services segment resulting primarily from the May 1997 PanAmSat merger and increased revenues in the Satellite Manufacturing segment due to higher commercial satellite sales. Direct-To-Home Broadcast segment first quarter 1998 revenues increased 64.6% to $387.9 million from $235.6 million in the first quarter of 1997. The increase resulted from continued record subscriber growth, strong average monthly revenue per subscriber and low subscriber churn rates. Domestic DIRECTV propelled this growth with quarterly revenues of $353 million, a 55% increase over last year's first quarter revenues of $228 million. With its best-ever first quarter of 227,000 net new subscribers, total DIRECTV(R) subscribers grew to 3,528,000 in the United States as of March 31, 1998. Hughes' Latin American DIRECTV subsidiary, Galaxy Latin America ("GLA"), had first quarter revenues of $31 million compared with $8 million in 1997. With the addition of 38,000 net new subscribers in the first quarter, cumulative DIRECTV subscribers in Latin America were 338,000 as of March 31, 1998. The Satellite Services segment's first quarter 1998 revenues were up 51.3% to $193.0 million compared with $127.6 million in the prior year. The revenue growth was primarily due to the May 1997 PanAmSat merger and increased operating lease revenues for both video distribution and business communications services. - 34 - HUGHES ELECTRONICS CORPORATION For the first quarter of 1998, revenues for the Satellite Manufacturing segment increased 11.6% to $624.3 million from revenues of $559.3 million for the same period in 1997. The increase in revenue was principally due to higher commercial satellite sales to customers such as ICO Global Communications, Thuraya Satellite Telecommunications Company and PanAmSat Corporation. First quarter 1998 revenues for the Network Systems segment were $184.7 million compared with $182.5 million in the same period last year. Increased sales of private business networks and satellite-based mobile telephony equipment were mostly offset by lower sales of international wireless local loop telephone systems. Operating Profit. Operating profit rose sharply in the first quarter of 1998 to $83.6 million compared with $33.1 million in the first quarter of 1997. First quarter operating profit margin increased to 6.5% in 1998 from 3.2% in 1997. The increases were primarily due to continued increases in subscribers in the Direct-To-Home Broadcast segment and the 1997 PanAmSat merger and increased operating lease revenues in the Satellite Services segment. The operating loss in the Direct-To-Home Broadcast segment for the first quarter of 1998 was $31.6 million compared with an operating loss of $67.5 million in the first quarter of 1997. The lower operating loss in 1998 was principally due to increased subscriber revenues that more than offset higher sales and marketing expenditures. The first quarter 1998 operating loss in the domestic DIRECTV business was $10 million compared with $38 million in the first quarter of 1997, and GLA's first quarter operating loss for 1998 was $22 million compared with $30 million in the same period of 1997. With respect to the worldwide DIRECTV businesses, particularly in the United States, Hughes has implemented a number of strategic initiatives designed to expand its market share and enhance its competitive position. These include new distribution channels, expanded services, broader programming and marketing and other promotional strategies designed to address "barriers to entry" identified by consumers. The implementation of such strategies is likely to increase subscriber acquisition costs and, as a result, is likely to affect the timing and amount of revenues and the overall profitability of the DIRECTV businesses. However, Hughes believes that early capture of market share and the establishment of market leadership are important to the maximization of the long-term value of the DIRECTV businesses. The Satellite Services segment operating profit in the first quarter of 1998 rose 25.5% to $85.7 million from $68.3 million in 1997. The operating profit growth was due to the PanAmSat merger and increased operating lease revenues noted above. Operating profit margin for the first quarter of 1998 declined to 44.4% from 53.6% in the same period last year primarily as a result of goodwill amortization associated with the PanAmSat merger. First quarter 1998 operating profit for the Satellite Manufacturing segment increased 4.4% to $55.1 million from $52.8 million in the prior year. The increased operating profit was principally due to the higher commercial satellite sales noted above. Operating profit margin in the first quarter of 1998 declined to 8.8% from 9.4% in the prior year primarily due to increased costs related to the completion of certain satellite component contracts. The Network Systems segment operating loss in the first quarter of 1998 was $11.9 million compared with an operating loss of $15.3 million in the first quarter of 1997. The lower operating loss in the first quarter of 1998 was primarily due to higher revenues and profits on satellite-based mobile telephony equipment. Costs and Expenses. Selling, general and administrative expenses increased to $302.6 million in the first quarter of 1998 from $222.0 million in the same period of 1997. The increase resulted primarily from the PanAmSat merger, increased programming, marketing and subscriber acquisition costs in the Direct-To-Home Broadcast segment and marketing expenditures in the Network Systems segment. The increase in depreciation and amortization expense to $97.7 million in the first quarter of 1998 from $50.3 million in the same period of 1997, resulted from increased goodwill amortization related to the PanAmSat merger and additional satellite depreciation. Interest Income and Expense. Interest income increased to $37.5 million in the first quarter of 1998 compared with $2.0 million in the first quarter of 1997. The increase was due to the higher level of cash and cash equivalents resulting from the Hughes Transactions as well as the PanAmSat merger. Interest expense decreased $12.1 million in the first quarter of 1998 from the same period in 1997 due to the repayment of debt in conjunction with the Hughes Transactions. Other, net. The first quarter 1998 amount primarily relates to losses from unconsolidated subsidiaries of $28.9 million attributable principally to equity investments in American Mobile Satellite Corporation (AMSC), DIRECTV Japan and Surfin, Ltd. The first quarter 1997 amount includes losses from unconsolidated subsidiaries of $9.4 million, primarily related to AMSC. Income Taxes. The effective income tax rate was 37.5% in the first quarter of 1998 and 20.2% in the first quarter of 1997. The first quarter 1998 effective tax rate increase compared to the same period of 1997 reflects the nondeductible goodwill amortization related to the PanAmSat merger. In addition, the lower first quarter 1997 effective income tax rate reflects the effects of the foreign sales corporation benefit and R&E credits. - 35 - HUGHES ELECTRONICS CORPORATION Discontinued Operations. On December 15, 1997, Hughes sold substantially all of the assets and liabilities of the Hughes Avicom International, Inc. ("Hughes Avicom") business to Rockwell Collins, Inc. for cash. As a result, Hughes Avicom is treated as a discontinued operation in 1997. Net Earnings. 1998 first quarter earnings more than doubled to $53.7 million from $23.9 million in the first quarter of 1997. Earnings per share for the first quarter were $0.13 per share versus pro forma earnings per share of $0.06 in the first quarter of 1997. See Note 4 to the financial statements for further discussion regarding pro forma presentation. Liquidity and Capital Resources Cash and Cash Equivalents. Cash and cash equivalents were $2,499.5 million at March 31, 1998 compared to $2,783.8 million at December 31, 1997. The $284.3 million decline during the quarter was due to expenditures for PanAmSat satellites and general working capital requirements. Cash used in operating activities for the first quarter of 1998 was $38.7 million, compared to $226.4 million in the first quarter of 1997. First quarter 1998 continuing operations required less cash than the comparable period of 1997 primarily due to first quarter 1998 increases in net income and improved working capital. Net cash used in investing activities was $395.6 million for the three months ended March 31, 1998 and $95.7 million for the same period in 1997. The substantial increase in 1998 compared to 1997 resulted from a significant increase in expenditures for satellites and PanAmSat's early buy-out of a satellite sale-leaseback in January 1998. Net cash provided by financing activities was $150.0 million for the first quarter of 1998, compared with $326.4 million for first quarter 1997. The 1998 financing activities reflect PanAmSat's net borrowings for the quarter of $150.0 million. The 1997 financing activities resulted from former Hughes contributing $326.4 million to Hughes. Liquidity Measurement. As a measure of liquidity, the current ratio (ratio of current assets to current liabilities) at March 31, 1998 and December 31, 1997 was 3.26 and 3.24, respectively. Working capital decreased by $65.5 million to $3,257.8 million at March 31, 1998 from $3,323.3 million at December 31, 1997. Dividend Policy and Use of Cash. GM does not initially anticipate paying cash dividends to holders of GM Class H common stock. Hughes anticipates using its cash to fund 1998 capital expenditures for property and equipment, as well as spacecraft, of approximately $1.2 billion, the early buy-out of satellite sale-leasebacks and to fund additional equity investments. Additionally, Hughes may be required to make cash payments for purchase price adjustments related to the Hughes Transactions. Currently, a payment to GM is expected to be required in the amount of approximately $300 million to $350 million, while the amount of a payment to or from Raytheon, if any, is not determinable at this time. In May 1998, Hughes purchased an additional 9.5% interest in PanAmSat for $851.4 million in cash, increasing Hughes' ownership interest in PanAmSat to 81.0%. Debt and Credit Facilities. Hughes maintains two unsecured revolving credit facilities, consisting of a $750 million multi-year facility and a $250 million 364-day facility. There were no borrowings against the credit facilities at March 31, 1998. In January 1998, PanAmSat borrowed $125.0 million under a bank borrowing agreement, principally for the purpose of exercising an early buy-out option on a satellite sale-leaseback agreement. Also in January 1998, PanAmSat completed a private placement debt offering for five, seven, ten and thirty year notes aggregating $750.0 million, the proceeds of which were used to repay outstanding bank borrowings of $725.0 million. Hughes believes that existing cash balances and amounts available under its credit facilities, will provide sufficient resources to meet currently identified working capital requirements, debt service and other cash needs. - 36 - HUGHES ELECTRONICS CORPORATION Supplemental Data The financial statements reflect the application of purchase accounting adjustments as previously discussed. However, as provided in GM's Restated 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 the intangible assets associated with GM's purchase of Hughes Aircraft Company amounted to $5.3 million for the first quarters of 1998 and 1997. Such amounts are excluded from the earnings available for the payment of dividends on GM Class H common stock and are charged against 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 $442.3 million at March 31, 1998 and $447.6 million at December 31, 1997. 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 the GM Class H common stock is determined, the pro forma data exclude purchase accounting adjustments related to GM's 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. - 37 - HUGHES ELECTRONICS CORPORATION Unaudited Summary Pro Forma Financial Data* Pro Forma Condensed Statement of Income Three Months Ended March 31, 1998 1997 (Dollars in Millions Except per Share Amounts) Total revenues $1,291.0 $1,024.0 Total operating costs and expenses 1,207.4 990.9 ------- ------- Operating profit 83.6 33.1 Non-operating income (loss) 0.2 (22.2) Income taxes 31.4 2.2 Minority interests in net losses of subsidiaries 1.3 14.2 Income from discontinued operations - 1.0 ------ ----- Earnings Used for Computation of Available Separate Consolidated Net Income $53.7 $23.9 ==== ==== Earnings Attributable to General Motors Class H Common Stock on a Per Share Basis $0.13 $0.06 ==== ==== Pro Forma Condensed Balance Sheet March 31, December 31, Assets 1998 1997 (Dollars in Millions) Total Current Assets $4,701.3 $4,805.9 Satellites, net 2,921.3 2,643.4 Property, net 885.0 889.7 Net Investment in Sales-type Leases 302.4 337.6 Intangible Assets, Investments and Other Assets, net 3,651.3 3,639.6 -------- -------- Total Assets $12,461.3 $12,316.2 ======== ======== Liabilities and Stockholder's Equity Total Current Liabilities $1,443.5 $1,482.6 Long-Term Debt 787.6 637.6 Postretirement Benefits Other Than Pensions, Other Liabilities and Deferred Credits 1,705.4 1,724.1 Minority Interests 605.1 607.8 Total Stockholder's Equity (1) 7,919.7 7,864.1 --------- --------- Total Liabilities and Stockholder's Equity (1) $12,461.3 $12,316.2 ======== ======== * The summary excludes purchase accounting adjustments related to GM's acquisition of Hughes Aircraft Company. 1997 earnings attributable to General Motors Class H common stock on a per share basis are presented on a pro forma basis for comparative purposes. See Note 4 to the financial statements for further discussion. (1)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 GM (which includes 100% of the stock of Hughes). - 38 - HUGHES ELECTRONICS CORPORATION Unaudited Summary Pro Forma Financial Data* - Continued Pro Forma Selected Segment Data Three Months Ended March 31, 1998 1997 (Dollars in Millions) Direct-To-Home Broadcast Total Revenues $387.9 $235.6 Operating Loss (31.6) (67.5) Depreciation and Amortization 22.5 18.3 Capital Expenditures 13.7 11.4 Satellite Services Total Revenues $193.0 $127.6 Operating Profit 85.7 68.3 Operation Profit Margin 44.4% 53.6% Depreciation and Amortization $54.5 $13.8 Capital Expenditures (1) 249.6 334.6 Satellite Manufacturing Total Revenues $624.3 $559.3 Operating Profit 55.1 52.8 Operation Profit Margin 8.8% 9.4% Depreciation and Amortization $10.7 $8.7 Capital Expenditures 10.7 15.6 Network Systems Total Revenues $184.7 $182.5 Operating Loss (11.9) (15.3) Depreciation and Amortization 8.5 7.2 Capital Expenditures 4.8 6.9 Eliminations and Other Total Revenues $(98.9) $(81.0) Operating Loss (13.7) (5.2) Depreciation and Amortization 1.5 2.3 Capital Expenditures 125.9 (274.5) * The summary excludes purchase accounting adjustments related to GM's acquisition of Hughes Aircraft Company. (1)Includes expenditures related to satellites amounting to $145.6 million in 1998 and $332.1 million in 1997. Also included in 1998 is $96.6 million related to the early buy-out of a satellite sale-leaseback. * * * * * * * - 39 - HUGHES ELECTRONICS CORPORATION Unaudited Summary Pro Forma Financial Data* - Concluded Pro Forma Selected Financial Data Three Months Ended March 31, 1998 1997 (Dollars in Millions) Operating profit $84 $33 Income from continuing operations before income taxes and minority interests 84 11 Earnings used for computation of available separate consolidated net income 54 24 Average number of GM Class H dividend base shares (1) 399.9 399.9 Stockholder's equity $7,920 $2,411 Working capital 3,258 525 Operating profit as a percent of revenues 6.5% 3.2% Income from continuing operations before income taxes and minority interests as a percent of revenues 6.5% 1.1% Net income as a percent of revenues 4.2% 2.3% * The summary excludes purchase accounting adjustments related to GM's acquisition of Hughes Aircraft Company. (1)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 104.1 million for the first quarter of 1998 and 100.4 million for the first quarter of 1997. * * * * * * * - 40 - EX-27 3
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM GENERAL MOTORS CORPORATION MARCH 31, 1998 CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO FIRST QUARTER 1998 FORM 10-Q. 0000040730 GENERAL MOTORS CORPORATION 1,000,000 U.S. DOLLARS 3-MOS DEC-31-1998 JAN-01-1998 MAR-31-1998 1 11,498 10,216 72,841 0 12,923 0 77,406 42,166 236,033 0 98,262 222 1 1,126 15,663 236,033 36,560 41,571 30,357 33,231 33 101 1,630 2,422 808 1,604 0 0 0 1,604 2.31 2.27
-----END PRIVACY-ENHANCED MESSAGE-----