-----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, Q3OQpJ/p+QAw4g00qqhXLxWtd5YZg6mybec5ohqNJLI+ahZUO/Pj3Yq19mZBLJpH 64vAONF6nBlM4GQrcSknFQ== 0000040730-99-000029.txt : 19990416 0000040730-99-000029.hdr.sgml : 19990416 ACCESSION NUMBER: 0000040730-99-000029 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990414 ITEM INFORMATION: FILED AS OF DATE: 19990415 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GENERAL MOTORS CORP CENTRAL INDEX KEY: 0000040730 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLES & PASSENGER CAR BODIES [3711] IRS NUMBER: 380572515 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-00143 FILM NUMBER: 99594459 BUSINESS ADDRESS: STREET 1: 100 RENAISSANCE CTR CITY: DETROIT STATE: MI ZIP: 48265-1000 BUSINESS PHONE: 3135565000 MAIL ADDRESS: STREET 1: 3044 W GRAND BOULEVARD CITY: DETROIT STATE: MI ZIP: 48202-3091 8-K 1 GM, HUGHES, DELPHI PRESS RELEASES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549-1004 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported) April 14, 1999 ---------------- GENERAL MOTORS CORPORATION ----------------------------------------------------- (Exact name of registrant as specified in its charter) STATE OF DELAWARE 1-143 38-0572515 - ---------------------------- ----------------------- ------------------- (State or other jurisdiction (Commission File Number) (I.R.S. Employer of incorporation) Identification No.) 100 Renaissance Center, Detroit, Michigan 48265-1000 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 -------------- - 1 - ITEM 5. OTHER EVENTS On April 15, 1999, a news release was issued on the subject of first quarter consolidated earnings for General Motors Corporation (GM). The news release did not include certain financial statements, related footnotes and certain other financial information that will be filed with the Securities and Exchange Commission as part of GM's Quarterly Report on Form 10-Q. The following are the first quarter earnings releases for Hughes Electronics Corporation (Hughes) dated April 14, 1999 and GM and Delphi Automotive Systems (Delphi) dated April 15, 1999. GM POSTS RECORD QUARTERLY FINANCIAL RESULTS DETROIT -- General Motors Corp. (GM) today reported an all-time quarterly record of $3.10 basic earnings per share of GM $1-2/3 par value common stock in the first quarter of 1999 on consolidated net income of $2.1 billion. That compares with net income of $1.6 billion, or $2.31 per share, in the first quarter of 1998. The results include Delphi Automotive Systems, which as announced on Monday is being spun off as an independent company. Delphi, which is reporting its results separately today, is now classified by GM as a discontinued operation and is treated as such in the balance of this release. Excluding Delphi, net income and earnings per share from continuing operations were an all-time quarterly record of $1.8 billion, or $2.73 basic earnings per share. That compares with $1.4 billion, or $1.96 per share, for continuing operations in the first quarter of 1998. (See Highlights for diluted earnings-per-share amounts.) "We're continuing to build momentum by leveraging the strength of the entire General Motors organization," said GM Chairman and Chief Executive Officer John F. Smith, Jr. "We're particularly pleased with the strong performance of GM North America and General Motors Acceptance Corporation (GMAC) in the first quarter of 1999. The financial performance of our other automotive regions and Hughes Electronics Corporation was in line with our expectations." Consolidated net sales and revenues in the first quarter of 1999 totaled $42.4 billion, compared with $40.0 billion for the first quarter of 1998. Cash, marketable securities and assets of the Voluntary Employees' Beneficiary Association (VEBA) trust invested in fixed-income securities ($3.0 billion) totaled $16.2 billion at March 31, 1999, compared with $15.4 billion at March 31, 1998, and $13.1 billion at Dec. 31, 1998. These cash amounts exclude GM's financing and insurance operations. "In addition to our focus on strong operating results, we are also continuing to implement our shareholder-value initiatives, including the ongoing share-repurchase program, and the spin-off of Delphi to stockholders," Smith said. During the first quarter of 1999, General Motors repurchased approximately 5 million shares of GM $1-2/3 par value common stock worth $480 million, completing 45 percent of the corporation's most recent $4 billion repurchase program. Since January 1997, GM has repurchased approximately 107 million shares of GM $1-2/3 par value common stock worth $6.8 billion, or about 14 percent of the total shares outstanding. Following is a summary of income from GM's business segments in the first quarter of 1999, compared with the prior-year period (see Highlights for additional information): - 2 - ($ in Millions) First Quarter Net Income (Loss) 1999 1998 ---- ---- Automotive, Electronics and Other GM North America $1,408 $841 GM Europe $174 $99 GM Latin America/Africa/Mid-East ($25) $53 GM Asia Pacific ($60) $6 Other Automotive $13 ($7) Total Automotive $1,510 $992 Hughes $78 $54 Other ($141) ($42) Total Automotive, Electronics, and Other $1,447 $1,004 ($ in Millions) First Quarter Net Income (Loss) 1999 1998 ---- ---- Financing and Insurance GMAC $392 $349 Other Financing and Insurance ($19) $15 Total Financing & Insurance $373 $364 Total Income from Continuing Operations $1,820 $1,368 GM Automotive's net income totaled $1.5 billion in the first quarter of 1999, compared with $1.0 billion in the first quarter of 1998. The net margin was 4.4 percent in the first quarter of 1999 -- up significantly from the net margin of 3.0 percent in the same period last year. GM North America led this improvement with a net margin of 5.2 percent -- the second consecutive quarter that net margins exceeded the corporation's 5-percent net margin objective -- compared with 3.2 percent in the first quarter of 1998. With record quarterly profitability at its mortgage operations, GMAC reported first-quarter-1999 consolidated net income of $392 million, up 12 percent from $349 million earned in the first quarter of 1998, resulting in the best overall quarter for GMAC since 1991. "Our finance and insurance operations are significant from the standpoint of their contribution to our financial strength, but they also help us leverage strength in the marketplace as a result of the synergies generated by partnerships with our automotive operations," Smith said. The corporation's 1999 first-quarter return on net assets (RONA) for continuing operations on an annualized basis, excluding Hughes, was 15.3 percent, compared with 11.5 percent in the first quarter of 1998. "The RONA performance in the first quarter of 1999 is indicative of the results we need going forward to meet our target of a 12.5-percent annualized return on net assets," Smith said. "GM North America benefited from excellent consumer acceptance of our new products, including the Chevrolet Silverado, GMC Sierra, Cadillac Escalade, Oldsmobile Alero, Pontiac Grand Am and Saab 9-5," said GM President and Chief Operating Officer G. Richard Wagoner, Jr. "The financial results reflect our continued efforts to improve product quality and increase manufacturing efficiency. Combined with our unrelenting cost-reduction activities, these factors allowed us to meet the intense competitive price pressure." GM vehicle deliveries in the United States totaled 1,158,000 units in the first quarter of 1999, an increase of 5.9 percent from the 1,094,000 units of the first quarter of 1998. As a result of the exceptionally strong market, despite the increase in sales, GM's 1999 first quarter U.S. vehicle market share was 28.8 percent, down from 30.2 percent in the first quarter of 1998. - 3 - "With the seven new vehicle entries in 1998, and an additional 14 new product launches in 1999, we expect to build momentum in the market," Wagoner said. "We have also announced plans to further increase our production capacity for full-size truck products to meet the strong and growing demand for these exceptional vehicles." GM Europe gained market momentum during the first quarter of 1999, ending with 10.2 percent market share in the month of March. Market share for the first quarter of 1999 was 9.6 percent, slightly down from 9.8 percent in the first quarter of 1998. "The late-quarter improvement resulted from the introduction of the new Opel/Vauxhall Zafira and Vectra models," Wagoner said. "As the all-new Zafira continues its successful startup we would expect further improvement in market penetration." The Latin America/Africa/Mid East region continues to be affected by economic turmoil and uncertainties, "but we are proud of our quick responses to reduce costs, realign capacity and strengthen our competitive position," Wagoner said. "GM's investments in this region are track and we continue to expect significant long-term growth and profit opportunity." In the Asia-Pacific region, while the economic situation is also somewhat uncertain, GM's investment in China is progressing on schedule. "The money we're spending now in the region is a smart investment in an area of the world where we expect markets to grow at a phenomenal rate over the long term," Wagoner said. Reflecting continued record subscriber growth in its DirecTV business, Hughes' income in the first quarter of 1999 totaled $78 million, compared with $54 million in the first quarter of 1998. Revenues increased 12.5 percent to $1.5 billion for the first quarter of 1999, from $1.3 billion in the prior-year period. In this news release, use of the words expects, intends, believes, plans and similar words are associated with forward-looking statements that are inherently subject to numerous risks and uncertainties. Accordingly, there can be no assurance that the results described in such forward-looking statements will be realized. The principal risk factors that may cause actual results to differ materially from those expressed in forward-looking statements contained in this news release are described in various documents filed by GM and Delphi with the U.S. Securities and Exchange Commission, including GM's Annual Report on Form 10-K for the year ended Dec. 31, 1998, (at page II-22); Delphi's Annual Report on Form 10-K for the year ended Dec. 31, 1998, (at page 54). # # # HIGHLIGHTS ATTACHED - 4 - HIGHLIGHTS - Q1 Financial Results (Dollars in Millions Except Per Share Amounts) Three Months Ended March 31, ---------------------- 1999 1998 ---------------------------- --------- --------- Net sales and revenues Manufactured products $36,620 $34,893 Financial services 3,509 3,310 Other income 2,306 1,821 -------- -------- Total net sales and revenues $42,435 $40,024 -------- -------- Income from continuing operations 1,820(3) 1,368 Income from discontinued operations 242 236 -------- -------- Consolidated net income $2,062 $1,604 Net profit margin from continuing operations 4.3% 3.4% ............................................................. Earnings Attributable to Common Stocks $1-2/3 par value Continuing operations $1,783 $1,338 Discontinued operations 242 236 -------- -------- $1-2/3 par value $2,025 $1,574 Class H $21 $14 ............................................................. Basic Earnings Per Share Attributable to Common Stocks $1-2/3 par value Continuing operations $2.73(3) $1.96 Discontinued operations 0.37 0.35 -------- -------- $1-2/3 par value $3.10(3) $2.31 Class H (1) $0.20 $0.13 ............................................................. Diluted Earnings Per Share Attributable to Common Stocks $1-2/3 par value Continuing operations $2.68 $1.93 Discontinued operations 0.36 0.34 -------- -------- $1-2/3 par value $3.04 $2.27 Class H (1) $0.20 $0.13 ............................................................. Cash Dividends Per Share of Common Stocks $1-2/3 par value $0.50 $0.50 Class H $ - $ - ............................................................. Book Value Per Share of Common Stocks March 31, Dec. 31, March 31, 1999 1998 1998 -------- ------- -------- $1-2/3 par value $22.24 $20.00 $22.13 Class H $13.34 $12.00 $13.28 ............................................................. See footnotes beginning on page 9. continues - 5 - HIGHLIGHTS - Q1 Consolidated Net Income (Dollars in Millions) Three Months Ended March 31, --------------------- 1999 1998 Income Income (Loss) (Loss) ------ ------ GM North America (GMNA) $1,408 $841 GM Europe (GME) 174 99 GM Latin America/Africa/Mid-East (GMLAAM) (25) 53 GM Asia/Pacific (GMAP) (60) 6 Other Automotive 13 (7) ----- ----- Total GM Automotive (GMA) 1,510 992 Hughes (1) 78 54 Other (141) (42) ----- ----- Total Automotive, Electronics and Other Operations 1,447 1,004 GMAC 392 349 Other (19) 15 ----- ----- Total Financing and Insurance Operations 373 364 ----- ----- Income from continuing operations 1,820 1,368 Income from discontinued operations 242 236 ----- ----- Consolidated Net Income $2,062 $1,604 ===== ===== continues - 6 - HIGHLIGHTS - Q1 Automotive Operations (Dollars in Millions) Three Months Ended March 31, 1999 -------------------------------- GMNA GME GMLAAM GMAP ----- ------ ------ ------ Reported -------- Revenues $27,318 $6,134 $1,022 $620 ------ ----- ----- --- Pre-tax income (loss) 2,097 281 (58) (25) Income tax expense (benefit) 665 105 (36) (6) Equity (loss) income and minority interests (24) (2) (3) (41) ----- ----- ----- --- Net income (loss) $1,408 $174 $(25) $(60) ===== ===== ===== === Net profit (loss) margin 5.2% 2.8% (2.4%) (9.7%) Effective income tax rate 31.7% 37.4% 62.1% 24.0% Three Months Ended March 31, 1998 -------------------------------- GMNA GME GMLAAM GMAP ----- ------ ------ ------ Reported -------- Revenues $25,889 $5,397 $2,024 $728 ------ ----- ----- --- Pre-tax income (loss) 1,224 203 16 (8) Income tax expense (benefit) 386 91 (19) - Equity (loss) income and minority interests 3 (13) 18 14 ----- ----- ----- --- Net income $841 $99 $53 $6 ===== ===== ===== === Net profit margin 3.2% 1.8% 2.6% 0.8% Effective income tax rate 31.5% 44.8% (118.8%) 0.0% See footnotes beginning on page 9. continues - 7 - HIGHLIGHTS - Q1 Operating Information Three Months Ended March 31, ---------------------- 1999 1998 --------- ---------- Worldwide Wholesale Sales (units in 000s) United States: Cars 671 574 Trucks 637 592 ------ ------ Total United States 1,308 1,166 Canada and Mexico 186 171 ------ ------ Total GM North America 1,494 1,337 ------ ------ GME 470 421 GMLAAM 122 178 GMAP 92 115 ------ ------ Total International 684 714 ------ ------ Total Worldwide 2,178 2,051 ====== ====== .................................................... Vehicle Unit Deliveries (units in 000s) United States Chevrolet - Cars 212 208 - Trucks 376 378 Pontiac 153 123 GMC 121 117 Buick 107 96 Oldsmobile 94 72 Saturn 51 51 Cadillac 36 43 Other 8 6 ------ ------ Total United States 1,158 1,094 Canada and Mexico 144 129 ------ ------ Total GM North America 1,302 1,223 ------ ------ GME 510 492 GMLAAM 125 173 GMAP 99 124 ------ ------ Total International 734 789 ------ ------ Total Worldwide 2,036 2,012 ====== ====== .................................................... Market share United States Cars 31.1% 30.5% Trucks 26.5% 29.9% Total 28.8% 30.2% Total North America 29.0% 30.0% Total Europe 9.6% 9.8% Latin America 19.2% 19.8% Asia and Pacific 3.2% 4.2% Total Worldwide 14.9% 15.3% ..................................................... U.S. Retail/Fleet Mix % Fleet Sales - Cars 30.7% 26.1% % Fleet Sales - Trucks 13.9% 16.2% Total vehicles 23.0% 21.3% .................................................... Days Supply of Inventory - U.S. Cars 76 83 Trucks 84 94 ..................................................... Capacity Utilization % U.S. and Canada (2-shift rated) 94.2% 89.0% ..................................................... GMNA Net Price (%) (0.8%) (1.9%) ..................................................... See footnotes beginning on page 9. Continues - 8 - HIGHLIGHTS - Q1 Other Financial Information (Dollars in Millions Except Per Share Amounts) Three Months Ended March 31, ---------------------- 1999 1998 --------- ---------- Depreciation and Amortization (2) Depreciation $802 $895 Amortization of special tools 619 563 Amortization of intangible assets 31 25 ------ ----- Total $1,452 $1,483 ====== ===== .................................................... Worldwide Employment at March 31 (in 000s) GMNA 222 233 GME 81 78 GMLAAM 23 28 GMAP 10 10 Hughes 16 15 GMAC 24 22 Other 11 10 ------ ------ Total 387 396 ====== ====== .................................................... Worldwide Payrolls $5,397 $5,270 .................................................... (1) 1998 results exclude the cumulative effect of accounting change of $9 million due to Hughes' adoption of SOP 98-5. GM has reported the $9 million change in fourth quarter 1998 results and Hughes reported the change as a restatement of first quarter 1998 results. (2) Amounts exclude depreciation and amortization charges incurred by the financing and insurance operations. (3) Records for income and EPS are based upon reported amounts adjusted to exclude the effects of significant dispositions not classified as discontinued operations. - 9 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Three Months Ended March 31, --------- 1999 1998 ---- ---- (Dollars in Millions Except Per Share Amounts) GENERAL MOTORS CORPORATION AND SUBSIDIARIES Manufactured products sales and revenues $36,620 $34,893 Financing revenues 3,509 3,310 Other income 2,306 1,821 ------- ------- Total net sales and revenues 42,435 40,024 ------ ------ Cost of sales and other operating charges, exclusive of items listed below 30,666 29,605 Selling, general and administrative expenses 3,822 3,510 Depreciation and amortization expense 2,724 2,707 Interest expense 1,845 1,570 Other expenses 438 549 -------- -------- Total costs and expenses $39,495 $37,941 Income from continuing operations before income taxes and minority interests 2,940 2,083 Income tax expense 1,029 695 Minority interests (14) (10) (Losses) earnings of nonconsolidated associates (77) (10) ------- ------- Income from continuing operations $1,820 $1,368 Income from discontinued operations 242 236 ----- ----- Net income 2,062 1,604 ----- ----- Premium on exchange of preference stocks - - Dividends on preference stocks (16) (16) ------- ------ Earnings on common stocks $2,046 $1,588 ===== ===== Basic earnings per share attributable to common stocks $1-2/3 par value common stock Continuing operations $2.73 $1.96 Discontinued operations 0.37 0.35 ---- ---- Earnings per share attributable to $1-2/3 par value $3.10 $2.31 ==== ==== Earnings per share attributable to Class H $0.20 $0.13 ==== ==== Diluted earnings per share attributable to common stocks $1-2/3 par value common stock Continuing operations $2.68 $1.93 Discontinued operations 0.36 0.34 ---- ---- Earnings per share attributable to $1-2/3 par value $3.04 $2.27 ==== ==== Earnings per share attributable to Class H $0.20 $0.13 ==== ==== - 10 - CONSOLIDATED STATEMENTS OF INCOME - Concluded Three Months Ended March 31, --------- 1999 1998 ---- ---- (Dollars in Millions Except Per Share Amounts) AUTOMOTIVE, ELECTRONICS AND OTHER OPERATIONS Manufactured products sales and revenues $36,620 $34,893 Other income 903 677 -------- -------- Total net sales and revenues 37,523 35,570 ------ ------ Cost of sales and other operating charges, exclusive of items listed below 30,666 29,605 Selling, general and administrative expenses 2,741 2,569 Depreciation and amortization expense 1,452 1,483 ------- ------- Total operating costs and expenses 34,859 33,657 ------ ------ Other expenses 58 190 Interest expense 194 195 Net expense (income) from transactions with Financing and Insurance Operations 94 (18) -------- ------- Income from continuing operations before income taxes and minority interests 2,318 1,546 Income tax expense 788 528 Minority interests (6) (4) (Losses) earnings of nonconsolidated associates (77) (10) ------- ------ Income from continuing operations 1,447 1,004 Income from discontinued operations 242 236 ------ ----- Net income - Automotive, Electronics and Other Operations $1,689 $1,240 ===== ===== Three Months Ended March 31, --------- 1999 1998 ---- ---- (Dollars in Millions Except Per Share Amounts) FINANCING AND INSURANCE OPERATIONS Financing revenues $3,509 $3,310 Insurance, mortgage and other income 1,403 1,144 ----- ----- Total revenues and other income 4,912 4,454 ----- ----- Interest expense 1,651 1,375 Depreciation and amortization expense 1,272 1,224 Operating and other expenses 1,081 941 Provisions for financing losses 119 101 Insurance losses and loss adjustment expenses 261 258 ------ ------ Total costs and expenses 4,384 3,899 ----- ----- Net (income) expense from transactions with Automotive, Electronics and Other Operations (94) 18 ----- ----- Income before income taxes 622 537 Income tax expense 241 167 Minority interests (8) (6) ----- ----- Net income - Financing and Insurance Operations $373 $364 === === . - 11 - CONSOLIDATED BALANCE SHEETS March 31, March 31, 1999 Dec. 31, 1998 (Unaudited) 1998 (Unaudited) ----------- ---- ----------- GENERAL MOTORS CORPORATION AND SUBSIDIARIES ASSETS (Dollars in Millions) Automotive, Electronics and Other Operations Cash and cash equivalents $12,081 $9,728 $10,030 Marketable securities 1,137 402 2,386 ------- ------- ------- Total cash and marketable securities 13,218 10,130 12,416 Accounts and notes receivable (less allowances) 4,686 4,750 4,426 Inventories (less allowances) 11,566 10,437 11,149 Net assets of discontinued operations 3,191 77 219 Equipment on operating leases (less accumulated depreciation) 6,048 4,954 4,554 Deferred income taxes and other current assets 9,537 10,051 6,125 Net receivable from Financing and Insurance Operations - - 840 Total current assets 48,246 40,399 39,729 Equity in net assets of nonconsolidated associates 1,659 950 936 Property - net 31,636 32,222 29,903 Intangible assets - net 10,170 9,994 10,639 Deferred income taxes 15,410 14,967 18,172 Other assets 13,565 16,062 15,379 ------ ------ ------ Total Automotive, Electronics and Other Operations assets 120,686 114,594 114,758 Financing and Insurance Operations Cash and cash equivalents 502 146 483 Investments in securities 8,703 8,748 7,815 Finance receivables - net 73,839 70,436 62,748 Investment in leases and other receivables 32,707 32,798 30,935 Other assets 14,959 18,807 12,794 Net receivable from Automotive, Electronics and Other Operations 339 816 - ------ ------ ------ Total Financing and Insurance Operations assets 131,049 131,751 114,775 ------- ------- ------- Total assets $251,735 $246,345 $229,533 ======== ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Automotive, Electronics and Other Operations Accounts payable (principally trade) $16,162 $13,542 $12,721 Loans payable 869 1,204 1,276 Accrued expenses 33,210 30,548 31,424 Net payable to Financing and Insurance Operations 339 816 - ------ ------ ------ Total current liabilities 50,580 46,110 45,421 Long-term debt 7,011 7,118 5,796 Postretirement benefits other than pensions 34,416 33,503 34,027 Pensions 3,761 4,410 3,341 Other liabilities and deferred income taxes 17,768 17,807 17,805 ------ ------ ------ Total Automotive, Electronics and Other Operations liabilities 113,536 108,948 106,390 Financing and Insurance Operations Accounts payable 4,405 4,148 3,501 Debt 106,379 107,753 91,500 Deferred income taxes and other liabilities 9,954 9,661 9,520 Net payable to Automotive, Electronics and Other Operations - - 840 ------ ------ ------ Total Financing and Insurance Operations liabilities 120,738 121,562 105,361 Minority interests 580 563 678 General Motors - obligated mandatorily redeemable preferred securities of subsidiary trusts holding solely junior subordinated debentures of General Motors Series D 79 79 79 Series G 141 141 143 Stockholders' equity Preference stocks 1 1 1 $1-2/3 par value common stock (issued, 649,568,145, 655,008,344 and 669,314,625 shares) 1,083 1,092 1,116 Class H common stock (issued, 106,641,918, 106,159,776 and 104,769,861 shares) 11 11 10 Capital surplus (principally additional paid-in capital) 13,276 12,661 13,786 Retained earnings 8,703 6,984 6,664 ------- ------- ------- Subtotal 23,074 20,749 21,577 Accumulated foreign currency translation adjustments (1,782) (1,089) (1,172) Net unrealized gains on securities 458 481 539 Minimum pension liability adjustment (5,089) (5,089) (4,062) ------ ------ ------ Accumulated other comprehensive loss (6,413) (5,697) (4,695) ----- ----- ----- Total stockholders' equity 16,661 15,052 16,882 -------- -------- -------- Total liabilities and stockholders' equity $251,735 $246,345 $229,533 ======= ======= ======= - 12 - CONSOLIDATED BALANCE SHEETS - Concluded March 31, March 31, 1999 Dec. 31, 1998 (Unaudited) 1998 (Unaudited) ----------- ---- ----------- AUTOMOTIVE, ELECTRONICS AND OTHER OPERATIONS (Dollars in Millions) ASSETS Cash and cash equivalents $12,081 $9,728 $10,030 Marketable securities 1,137 402 2,386 ------- -------- ------- Total cash and marketable securities 13,218 10,130 12,416 Accounts and notes receivable (less allowances) 4,686 4,750 4,426 Inventories (less allowances) 11,566 10,437 11,149 Net assets of discontinued operations 3,191 77 219 Equipment on operating leases (less accumulated depreciation) 6,048 4,954 4,554 Deferred income taxes and other current assets 9,537 10,051 6,125 Net receivable from Financing and Insurance Operations - - 840 ------ ------ ------ Total current assets 48,246 40,399 39,729 Equity in net assets of nonconsolidated associates 1,659 950 936 Property - net 31,636 32,222 29,903 Intangible assets - net 10,170 9,994 10,639 Deferred income taxes 15,410 14,967 18,172 Other assets 13,565 16,062 15,379 ------ ------ ------ Total Automotive, Electronics and Other Operations assets $120,686 $114,594 $114,758 ======== ======== ======== LIABILITIES AND GM INVESTMENT Accounts payable (principally trade) $16,162 $13,542 $12,721 Loans payable 869 1,204 1,276 Accrued expenses 33,210 30,548 31,424 Net payable to Financing and Insurance Operations 339 816 - ------ ------ ------ Total current liabilities 50,580 46,110 45,421 Long-term debt 7,011 7,118 5,796 Postretirement benefits other than pensions 34,416 33,503 34,027 Pensions 3,761 4,410 3,341 Other liabilities and deferred income taxes 17,768 17,807 17,805 ------ ------ ------ Total Automotive, Electronics and Other Operations liabilities 113,536 108,948 106,390 Minority interests 520 511 636 GM investment in Automotive, Electronics and Other Operations 6,630 5,135 7,732 ------ ------ ------ Total Automotive, Electronics and Other Operations liabilities and GM investment $120,686 $114,594 $114,758 ======== ======== ======== March 31, March 31, 1999 Dec. 31, 1998 (Unaudited) 1998 (Unaudited) ----------- ---- ----------- FINANCING AND INSURANCE OPERATIONS (Dollars in Millions) ASSETS Cash and cash equivalents $502 $146 $483 Investments in securities 8,703 8,748 7,815 Finance receivables - net 73,839 70,436 62,748 Investment in leases and other receivables 32,707 32,798 30,935 Other assets 14,959 18,807 12,794 Net receivable from Automotive, Electronics and Other Operations 339 816 - ------ ------ ------ Total Financing and Insurance Operations assets $131,049 $131,751 $114,775 ======== ======== ======== LIABILITIES AND GM INVESTMENT Accounts payable $4,405 $4,148 $3,501 Debt 106,379 107,753 91,500 Deferred income taxes and other liabilities 9,954 9,661 9,520 Net payable to Automotive, Electronics and Other Operations - - 840 ------ ------ ------ Total Financing and Insurance Operations liabilities 120,738 121,562 105,361 Minority interests 60 52 42 GM investment in Financing and Insurance Operations 10,251 10,137 9,372 ------ ------ ------ Total Financing and Insurance Operations liabilities and GM investment $131,049 $131,751 $114,775 ======== ======== ======== - 13 - CONSOLIDATED STATEMENTS OF CASH FLOWS Three Months Ended March 31, ---------------------------- 1999 1998 ---- ---- (Dollars in Millions) GENERAL MOTORS CORPORATION AND SUBSIDIARIES Net cash provided by operating activities $16,064 $5,324 Cash flows from investing activities Expenditures for property (1,384) (1,996) Investments in other marketable securities - acquisitions (7,553) (5,545) Investments in other marketable securitie - liquidations 6,344 7,141 Mortgage servicing rights - acquisitions (327) (153) Mortgage servicing rights - liquidations - 29 Finance receivables - acquisitions (42,969) (41,800) Finance receivables - liquidations 31,921 32,556 Proceeds from sales of finance receivables 7,375 5,143 Operating leases - acquisitions (5,518) (5,127) Operating leases - liquidations 3,595 3,462 Investments in companies, net of cash acquired (514) (211) Other (170) (711) ----- ----- Net cash used in investing activities (9,200) (7,212) ----- ----- Cash flows from financing activities Net increase in loans payable (7,047) 2,019 Increase in long-term debt 7,970 6,428 Decrease in long-term debt (3,980) (4,143) Repurchases of common and preference stocks (979) (1,911) Proceeds from issuing common stocks 284 233 Cash dividends paid to stockholders (343) (357) ----- ----- Net cash provided by financing activities (4,095) 2,269 ----- ----- Effect of exchange rate changes on cash and cash equivalents (188) (85) ----- ----- Net cash (used in) provided by continuing operations 2,581 296 Net cash provided by discontinued operations 128 (56) ----- ----- Net (decrease) increase in cash and cash equivalents 2,709 240 Cash and cash equivalents at beginning of the year 9,874 10,273 ----- ------ Cash and cash equivalents at end of the year $12,583 $10,513 ======= ======= - 14 - CONSOLIDATED STATEMENTS OF CASH FLOWS - Concluded
Three Months Ended March 31, ---------------------------- 1999 1998 ----------------------- ------------------------- Automotive, Financing Automotive, Financing Electronics and Electronics and and Other Insurance and Other Insurance --------- --------- --------- --------- (Dollars in Millions) Net cash provided by operating activities $9,188 $6,876 $3,014 $2,310 Cash flows from investing activities Expenditures for property (1,345) (39) (1,967) (29) Investments in other marketable securities - acquisitions (1,813) (5,740) (2,007) (3,538) Investments in other marketable securities - liquidations 1,077 5,267 3,281 3,860 Mortgage servicing rights - acquisitions - (327) - (153) Mortgage servicing rights - liquidations - - - 29 Finance receivables - acquisitions - (42,969) - (41,800) Finance receivables - liquidations - 31,921 - 32,556 Proceeds from sales of finance receivables - 7,375 - 5,143 Operating leases - acquisitions (2,465) (3,053) (1,413) (3,714) Operating leases - liquidations 1,281 2,314 1,384 2,078 Investments in companies, net of cash acquired (514) - (211) - Net investing activity with Financing and Insurance Operations 75 - 75 - Other (1,162) 992 (236) (475) ----- ----- ------ ----- Net cash used in investing activities (4,866) (4,259) (1,094) (6,043) ------ ------ ------ ------ Cash flows from financing activities Net increase (decrease) in loans payable (485) (6,562) 835 1,184 Increase in long-term debt 411 7,559 913 5,515 Decrease in long-term debt (320) (3,660) (635) (3,508) Net financing activity with Automotive, Electronics and Other Operations - (75) - (75) Repurchases of common and preference stocks (979) - (1,911) - Proceeds from issuing common stocks 284 - 233 - Cash dividends paid to stockholders (343) - (357) - ------ ------ ------ ------ Net cash (used in) provided by financing activities (1,432) (2,738) (922) 3,116 ------ ------ ------ ------ Effect of exchange rate changes on cash and cash equivalents (188) - (87) 2 Net transactions with Automotive Financing Operations (477) 477 (521) 521 ------ ------ ------ ------ Net cash provided by (used in) continuing operations 2,225 356 390 (94) Net cash provided by discontinued operations 128 - (56) - ------ ------ ------ ------ Net increase (decrease) in cash and cash equivalents 2,353 356 334 (94) Cash and cash equivalents at beginning of the year 9,728 146 9,696 577 ------ ------ ------ ------ Cash and cash equivalents at end of the year $12,081 $502 $10,030 $483 ======= ==== ======= ====
- 15 - Hughes REPORTS First quarter 1999 Results Record DIRECTV Subscriber Growth Fuels Revenues El Segundo, Calif., April 14, 1999--Hughes Electronics Corporation reported today that its financial results for the first quarter of 1999 reflected continued record subscriber growth in its DIRECTV(R) businesses. "Our leadership in the direct-to-home market is a key growth and value driver for Hughes," said Michael T. Smith, Hughes chairman and chief executive officer. "Our revenue growth was driven by continued record DIRECTV subscriber growth--for both the United States and Latin America--and we've turned the corner with positive EBITDA(1) for domestic DIRECTV." Revenues for the quarter were $1,451.8 million, compared with $1,291.0 million in the first quarter of 1998, a 12.5% increase. EBITDA, excluding a 1999 one-time item, was $178.2 million versus $181.3 million for the same period in 1998. EBITDA margin on the same basis was 12.3% for the first quarter of 1999 compared to 14.0% in the first quarter of 1998. The one-time item was a $92.0 million pre-tax charge resulting from the termination of the Asia Pacific Mobile Telecommunications (APMT) satellite system contract due to export licenses not being issued. "DIRECTV, PanAmSat, Hughes Space and Communications, and Hughes Network Systems all attained EBITDA growth in the quarter," Smith said. This EBITDA growth in the business segments was more than offset by increased investment in the Spaceway(TM) high-speed broadband operations for North America, and increased intercompany business resulting in higher corporate eliminations. As a result, consolidated EBITDA and EBITDA margin declined. Earnings(2) were $78.3 million ($0.20 earnings per share, or EPS) in the first quarter of 1999 versus $44.5 million ($0.11 EPS) in the same period last year. First quarter earnings, excluding one-time items, were $40.1 million in 1999 compared to $53.7 million in the same period for 1998, resulting in EPS of $0.10 and $0.13 for first quarter 1999 and 1998, respectively. The declines in earnings and EPS (excluding one-time items) were primarily due to lower interest income and higher depreciation and amortization expenses. One-time items in the first quarter of 1999 were a $94.3 million after-tax ($154.6 million pre-tax) gain related to the settlement of the Williams patent infringement case(3) and a $56.1 million after-tax ($92.0 million pre-tax) charge related to the APMT contract termination. The one-time item in the first quarter of 1998 was a $9.2 million after-tax charge for the cumulative effect of an accounting change mandated by the American Institute of Certified Public Accountants for the write-off of previously capitalized start-up costs. Segment Financial Review Direct-To-Home Broadcast First quarter revenues increased 43.5% to $556.6 million from $387.9 million in the first quarter of 1998. The increase resulted from continued strong subscriber growth, as well as strong average monthly revenue per subscriber in the United States. The domestic DIRECTV business achieved quarterly revenues of $474 million, a 34% increase over last year's first quarter revenues of $353 million. DIRECTV had its best-ever first quarter with 304,000 net new subscribers in the United States, which compared to 227,000 in the first quarter of 1998. Total domestic DIRECTV subscribers were 4,762,000 as of March 31, 1999. - 16 - The DIRECTV business in Latin America also enjoyed its best first quarter ever as it nearly doubled revenues, reaching $61 million compared with $31 million in the first quarter of 1998. With 70,000 net new subscribers added in the first quarter of 1999, an 84% increase over the 38,000 acquired in the same period last year, total DIRECTV subscribers in Latin America climbed to 554,000 as of March 31, 1999. In addition, DIRECTV Japan(TM), which is 42% owned by Hughes, added 29,000 subscribers in the quarter for a total of 260,000 subscribers at the end of the first quarter of 1999. The segment's EBITDA in the first quarter was $3.9 million compared with a negative EBITDA of $9.1 million in the first quarter of 1998. Domestic DIRECTV's EBITDA rose to $25 million in the quarter compared to $8 million last year as strong revenue growth outpaced increased marketing and advertising expenses. This gain was partially offset by a larger negative EBITDA in the quarter ($20 million in 1999 versus $13 million in 1998) in Latin America, which was primarily due to the increased cost of the new higher-capacity Galaxy VIII-i satellite and increased advertising expenditures. Satellite Services First quarter 1999 revenues were $193.5 million compared with $193.0 million in the prior year's period. Increased operating lease revenue, resulting primarily from growth in data and Internet-related service agreements, was mostly offset by lower transponder sales and sales-type lease revenue. EBITDA in the quarter was $145.9 million compared with $140.2 million last year. EBITDA margin increased to 75.4% versus 72.6% in last year's first quarter. The increases in EBITDA and EBITDA margin were principally due to lower satellite leaseback expenses resulting from the exercise of certain early buy-out options under sale-leaseback agreements during the first quarter of 1999. Satellite Systems For the first quarter of 1999, revenues increased to $630.3 million from revenues of $624.3 million for the same period in 1998. Increased sales to commercial customers including Thuraya Satellite Telecommunications, ICO Global Communications and PanAmSat were largely offset by lower sales on government contracts such as UHF Follow-on and Tracking and Data Relay Satellites (TDRS). Excluding Hughes Space and Communications' 1999 first quarter pre-tax charge of $81.0 million related to the termination of the APMT contract, EBITDA increased 21.0% to $79.6 million from $65.8 million in the first quarter of 1998. The increase included earnings adjustments in the current quarter on several commercial satellite contracts. As a result, EBITDA margin (excluding the one-time item) was 12.6% for the first quarter of 1999 compared to 10.5% in 1998. Network Systems First quarter revenues at Hughes Network Systems (HNS) rose 25.0% to $230.9 million versus $184.7 million in the same period last year. This increase was primarily due to higher sales of DIRECTV(TM) receiver equipment and satellite-based mobile telephone systems. As a result of this revenue growth, EBITDA, excluding a pre-tax charge of $11.0 million resulting from the termination of the APMT contract for which HNS was providing ground network equipment and handsets, grew to $5.1 million in the quarter, compared to a negative EBITDA of $3.4 million in the first quarter of 1998. EBITDA margin on the same basis was 2.2% compared to a negative EBITDA margin in the first quarter of 1998. - 17 - BALANCE SHEET The cash balance declined $562.1 million in the quarter to $780.0 million as of March 31, 1999, primarily due to working capital requirements, purchase of the Tempo ground-spare satellite, and early buy-out of PanAmSat's sale-leaseback agreements, which were partially offset by proceeds from the settlement of the Williams patent infringement case. Long-term debt increased $77.9 million to $856.6 million principally from an increase in PanAmSat's commercial paper program to fund its satellite fleet expansion and early sale-leaseback buy-out options. Hughes Electronics Corporation is a unit of General Motors Corp. The earnings of Hughes Electronics are used to calculate the earnings per share attributable to General Motors Class H common stock (NYSE ticker symbol: GMH). - ---------------------- (1) Hughes' definition of EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) is the sum of operating profit (loss) and depreciation and amortization. (2) Excludes the effects of purchase accounting adjustments related to General Motors' acquisition of Hughes in 1985. (3) Hughes was awarded a final judgement stemming from its long-running Williams patent infringement case, which was originally filed by Hughes in 1973. The award resulted from the repeated infringement by the U.S. Government over a span of two decades of a patent that revolutionized communications satellite attitude control and made the geosynchronous satellite practical. A payment was received in the first quarter of 1999 of $154.6 million and was recorded in "Other, net." - 18 - STATEMENT OF INCOME AND AVAILABLE SEPARATE CONSOLIDATED NET INCOME (Dollars in Millions Except Per Share Amounts) Three Months Ended March 31, --------- 1999 1998 ---- ---- Revenues Product sales $716.1 $692.1 Direct broadcast, leasing and other services 735.7 598.9 - ---------------------------------------------------------------------------- Total Revenues 1,451.8 1,291.0 - ---------------------------------------------------------------------------- Operating Costs and Expenses Cost of products sold 669.2 542.3 Broadcast programming and other costs 291.6 264.8 Selling, general, and administrative expenses 404.8 302.6 Depreciation and amortization 123.0 97.7 Amortization of GM purchase accounting adjustments (1) 5.3 5.3 - ---------------------------------------------------------------------------- Total Operating Costs and Expenses 1,493.9 1,212.7 - ---------------------------------------------------------------------------- Operating (Loss) Profit (42.1) 78.3 Interest income 13.6 37.5 Interest expense (6.9) (3.0) Other, net 137.7 (34.3) - ----------------------------------------------------------------------------- Income from Continuing Operations Before Income Taxes, Minority Interests and Cumulative Effect of Accounting Change 102.3 78.5 Income taxes 35.8 31.4 Minority interests in net losses of subsidiaries 6.5 1.3 - ---------------------------------------------------------------------------- Income from continuing operations before cumulative effect of accounting change 73.0 48.4 Cumulative effect of accounting change, net of taxes - (9.2) - ----------------------------------------------------------------------------- Net Income 73.0 39.2 Adjustments to exclude the effect of GM purchase accounting adjustments (1) 5.3 5.3 - ---------------------------------------------------------------------------- Earnings Used for Computation of Available Separate Consolidated Net Income $78.3 $44.5 ============================================================================ Available Separate Consolidated Net Income $20.3 $11.5 ============================================================================ Earnings Attributable to General Motors Class H Common Stock on a Per Share Basis $0.20 $0.11 ============================================================================ (1)Relates to General Motor's purchase of Hughes in 1985. - 19 - BALANCE SHEET (Dollars in Millions) March 31, December 31, ASSETS 1999 1998 - ---------------------------------------------------------------------------- 1998 - ---- Current Assets Cash and cash equivalents $780.0 $1,342.1 Accounts and notes receivable 849.3 922.4 Contracts in process 713.2 783.5 Inventories 578.8 471.5 Prepaid expenses, deferred income taxes and other 295.4 326.9 - ---------------------------------------------------------------------------- Total Current Assets 3,216.7 3,846.4 Satellites - Net 3,580.5 3,197.5 Property - Net 1,061.2 1,059.2 Net Investment in Sales-type Leases 167.9 173.4 Intangible Assets - Net 3,732.9 3,552.2 Investments and Other Assets 1,652.5 1,606.3 - ---------------------------------------------------------------------------- Total Assets $13,411.7 $13,435.0 ============================================================================ LIABILITIES AND STOCKHOLDER'S EQUITY Current Liabilities Accounts payable $710.2 $764.1 Advances on contracts 302.0 291.8 Deferred revenues 51.7 43.8 Current portion of long-term debt 170.3 156.1 Accrued liabilities 664.0 753.7 - ---------------------------------------------------------------------------- Total Current Liabilities 1,898.2 2,009.5 Long-Term Debt 856.6 778.7 Deferred Gains on Sales and Leasebacks 65.0 121.5 Accrued Operating Leaseback Expense 6.1 56.0 Postretirement Benefits Other Than Pensions 151.2 150.7 Other Liabilities and Deferred Credits 846.0 811.1 Deferred Income Taxes 651.9 643.9 Minority Interests 485.6 481.7 Stockholder's Equity 8,451.1 8,381.9 - ---------------------------------------------------------------------------- Total Liabilities and Stockholder's Equity $13,411.7 $13,435.0 ============================================================================ Holders of GM Class H common stock have no direct rights in the equity or assets of Hughes, but rather have rights in the equity and assets of General Motors (which includes 100% of the stock of Hughes). - 20 - PRO FORMA SELECTED SEGMENT DATA* (Dollars in Millions) Three Months Ended March 31, --------- 1999 1998 - -------------------------------------------------------------------------- DIRECT-TO-HOME BROADCAST Total Revenues $556.6 $387.9 EBITDA (1) $3.9 $(9.1) EBITDA Margin 0.7% N/A Operating Loss $(23.4) $(31.6) Depreciation and Amortization $27.3 $22.5 Capital Expenditures (2) $77.6 $13.7 - -------------------------------------------------------------------------- SATELLITE SERVICES Total Revenues $193.5 $193.0 EBITDA (1) $145.9 $140.2 EBITDA Margin (1) 75.4% 72.6% Operating Profit $79.1 $85.7 Depreciation and Amortization $66.8 $54.5 Capital Expenditures (3) $339.8 $249.6 - -------------------------------------------------------------------------- SATELLITE SYSTEMS Total Revenues $630.3 $624.3 EBITDA (1) (4) $(1.4) $65.8 EBITDA Margin (1) N/A 10.5% Operating (Loss) Profit (4) $(14.4) $55.1 Depreciation and Amortization $13.0 $10.7 Capital Expenditures $12.3 $10.7 - -------------------------------------------------------------------------- NETWORK SYSTEMS Total Revenues $230.9 $184.7 EBITDA (1) (4) $(5.9) $(3.4) Operating Loss (4) $(17.8) $(11.9) Depreciation and Amortization $11.9 $8.5 Capital Expenditures $2.2 $4.8 - -------------------------------------------------------------------------- ELIMINATIONS and OTHER Total Revenues $(159.5) $(98.9) EBITDA (1) $(56.3) $(12.2) Operating Loss $(60.3) $(13.7) Depreciation and Amortization $4.0 $1.5 Capital Expenditures $(32.2) $125.9 - -------------------------------------------------------------------------- TOTAL Total Revenues $1,451.8 $1,291.0 EBITDA (1) (4) $86.2 $181.3 EBITDA Margin (1) 5.9% 14.0% Operating (Loss) Profit (4) $(36.8) $83.6 Depreciation and Amortization $123.0 $97.7 Capital Expenditures $399.7 $404.7 ========================================================================== * The Financial Statements reflect the application of purchase accounting adjustments related to GM's acquisition of Hughes. However, as provided in the General Motors 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. In order to provide additional analytical data, the above unaudited pro forma selected segment data, which exclude the purchase accounting adjustments related to GM's acquisition of Hughes, are presented. (1)Hughes' definition of EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) is the sum of operating profit (loss) and depreciation and amortization. EBITDA margin is calculated by dividing EBITDA by total revenues. (2)Includes expenditures related to satellites amounting to $53.0 million in the first quarter of 1999. (3)Includes expenditures related to satellites amounting to $189.7 million and $145.6 million in 1999 and 1998, respectively. Also included in the 1999 and 1998 amounts are $141.3 million and $96.6 million, respectively, related to the early buy-out of satellite sale-leasebacks. (4)First quarter 1999 includes a charge of $81.0 million and $11.0 million at Satellite Systems and Network Systems, respectively, for the termination of the Asia Pacific Mobile Telecommunications satellite systems contract due to export licenses not being issued. - 21 - DELPHI AUTOMOTIVE SYSTEMS REPORTS 12 PERCENT PRO FORMA INCREASE IN QUARTERLY EARNINGS Today Announces Significant Gas Direct Injection Sales Contract Troy, MICH. - A strong North American market coupled with aggressive cost-reduction more than offset the impact of the economic downturn in South America as Delphi Automotive Systems Corporation (NYSE:DPH) today reported net income for the first three months of 1999 grew to $284 million. Historical net income for the first quarter of 1998, as measured under generally accepted accounting principles (GAAP), was $236 million. However, the $236 million does not reflect the impact of the terms of the separation agreement between Delphi and General Motors Corporation (GM). After including the effect of the separation agreement, pro forma first quarter 1998 net income was $254 million. Thus, on a comparable basis, Delphi's first quarter 1999 net income of $284 million reflects a 12 percent increase over the 1998 level of $254 million. Earnings per share calculations are complicated by the changes in shares outstanding related to the steps involved in full separation from GM. Currently, Delphi has 565 million shares outstanding, reflecting 100 million shares issued in an initial public offering in February 1999, and 465 million shares owned by GM. Management considers 565 million shares to be the most widely used figure for analyzing Delphi's earnings per share.* Based on 565 million shares outstanding, 1999 earnings of $284 million and pro-forma 1998 earnings of $254 million, earnings per share were $0.50 for 1999, and $0.45 for 1998, an improvement of $0.05 over the same period in 1998. "Our first-quarter results reflect continued progress toward realization of our near-term and long-term business strategies," said J.T. Battenberg III, Delphi's chairman, chief executive officer and president. "Delphi continues to take cost out of operations through reductions in material and manufacturing costs, and re-alignment of the product portfolio. We expect further margin enhancement over the long term as we continue to improve operations while realizing the benefits of expanded sales to global vehicle manufacturers as a result of the separation from GM. Our objectives remain 5 percent net income margin, 10 percent annual non-GM sales growth and 12.5 percent RONA (Return on Net Assets)," said Battenberg. *Under GAAP, the shares issued in connection with the initial public offering of Delphi common stock would be excluded from 1998 and fractionally included in 1999, resulting in the use of 465 million shares in 1998 (EPS $0.51) and 521 million shares in 1999 (EPS $0.55). - 22 - Sales Consolidated net sales were $7.5 billion for the first three months of 1999 compared to $7.6 billion for the first three months of 1998. This reflects growth in sales revenue from ongoing operations and strong North American sales, offset by the impact of businesses divested in late 1998 and a decline in South American sales. Non-GM sales for the first three months of 1999 were up 12 percent - after adjusting to eliminate the 1998 sales of Delphi's seating, lighting, coil spring, and several smaller businesses, which were divested in 1998. "South America has been severely impacted by the crisis in Asia and Russia as well as the devaluation of the Brazilian Real," said Volker Barth, president of Delphi South America. "1999 volume projections are forecast to come in below 1998 levels, effecting sales and profitability, primarily as a result of Brazil's maxi-devaluation. However, Delphi remains committed to the region and our customer base. We believe the long-term fundamentals have not changed. Mercosur remains a market of significant growth potential," said Barth. Growth -- New Gas Direct Injection Contract Announced Announced today: Delphi won an order in March valued at over $100 million average annual revenue, to develop and supply a direct injection gasoline engine management system for a future GM vehicle program. During the quarter, Delphi's Dynamics & Propulsion sector earned new contracts from GM that total approximately $650 million in average annual revenue. "These contracts demonstrate our largest customer's confidence in our ability to innovate and provide product differentiation and new customer value," said Battenberg. Battenberg also noted that Delphi continues to receive greater numbers of bid opportunities, which he said is indicative of non-GM customer acceptance of products and technology from an independent Delphi. "Business bookings for the quarter reflect our strong business retention and growth efforts with GM and other customers," said Battenberg. Delphi's future business continued to grow during the quarter, with significant contracts awarded by the following European and Asian vehicle manufacturers: Volkswagen, Renault, Peugeot, BMW Rover, Volvo, Daewoo, Isuzu, and Honda. Program timing and contract details were not disclosed at the request of the customers. "Based on new business won this quarter, we remain confident in our forward revenue plans," said Battenberg. Cost Reduction Initiatives First-quarter cost reductions reflected the benefit of the previously announced seating, lighting, and coil spring divestitures, and infrastructure improvements. Ongoing material and manufacturing cost reduction initiatives more than offset the impact of a significant market downturn in South America. Further, Delphi benefited during the first quarter from previously implemented workforce and infrastructure reductions in South America consistent with declining volumes. Balance Sheet/Cash Flow Delphi's balance sheet at the end of the quarter reflected a cash balance of $1.1 billion, and debt and equity balances of $1.9 billion and $3.4 billion, respectively. "Significant improvement in liquidity allows continuing pursuit of our objectives for pension funding, while preserving flexibility for strategic growth initiatives," said Alan Dawes, Delphi's chief financial officer. - 23 - Bond Issue Later today, Delphi's investment banks will announce details of a term-debt offering, which will replace existing short-term bank facilities with longer term financing. Portfolio Restructuring In the first quarter, Delphi continued its process of portfolio restructuring aimed at improving margins, diversifying the customer base, and making investments in advanced technologies. "We continue to establish strategic partnerships and complete acquisitions with the goal of accessing new technology and technical capability, expanding customer relationships, and enhancing our global footprint. Our first quarter activities demonstrate our focused and aggressive portfolio improvement strategies," said Battenberg. Delphi expects international expansion to be a key driver of future growth. During the quarter, Delphi announced the opening of a wholly owned wiring harness facility in Morocco, in addition to a new facility to supply HVAC and chassis customers in India. In March, Delphi announced a strategic partnership with Gabriel de Mexico S.A. de C.V. to supply automotive damper and suspension modules to both vehicle manufacturers and the aftermarket in Mexico, which illustrates Delphi's commitment to footprint alignment, portfolio and market channel expansion. Seeking to enhance its position as a technology leader, Delphi announced plans to invest approximately $63 million in its Kokomo, Ind., operations to introduce the latest technology in custom automotive integrated circuits. Further, Delphi announced plans to make a significant investment in its Sandusky, Ohio facility to produce advanced wheel spindle bearings using lean manufacturing concepts. Delphi and CD Radio announced an agreement to design and market an original equipment three-band audio system capable of processing digital satellite signals. Delphi broadened its position as truck equipment technology leader, announcing a strategic alliance with Allied Signal to develop and manufacture next generation ABS braking systems for the heavy duty truck market. Finally, in response to the economic crisis in South America, Delphi has re-sized the Delphi South America organization and has idled or sold selected manufacturing facilities in the region. Sector Financial Results ($ millions) Q1 1999 Q1 1998 Q1 1999 Q1 1998 Operating (Pro-Forma Basis) Sector Sales Sales Income Operating Income - ------------- ------- ------- --------- ----------------- Electronics & Mobile Communication $1,353 $1,283 $158 $129 Safety, Thermal & Electrical Architecture 2,713 3,090 216 211 Dynamics & Propulsion 3,534 3,366 124 97 Other* (131) (116) (41) (75) ----- ----- --- --- Total $7,469 $7,623 $457 $362 ===== ===== === === *Corporate and intra-company items - 24 - Full Separation General Motors Board of Directors on Monday, April 12 approved the complete separation of Delphi from GM by means of a tax-free spin-off. "With regard to stockholder initiatives, GM's decision to complete full divestiture of its ownership stake in Delphi in the second quarter allows us to begin immediately to execute a business strategy aimed at maximizing shareholder value," said Battenberg. "Complete separation from GM will help Delphi attract non-GM sales growth, strengthen our ability to partner and acquire strategic businesses, and continue to improve relations with our approximately 198,000 worldwide employees," said Battenberg. Delphi Automotive Systems (NYSE: DPH), with headquarters in Troy, Mich., USA, is a world leader in automotive component and systems technology. Delphi's 3 business sectors -- Dynamics and Propulsion; Safety, Thermal and Electrical Architecture; and Electronics and Mobile Communications -- provide comprehensive product solutions to complex customer needs. Delphi has approximately 198,000 employees and operates 168 wholly owned manufacturing sites, 40 joint ventures and 27 technical centers in 36 countries. Regional headquarters are located in Paris, Tokyo and Sao Paulo. Delphi can be found on the Internet at http://www.delphiauto.com. # # # Forward Looking Statements Delphi is subject to a number of factors that could cause actual results to differ from those anticipated in forward looking statements. All statements contained in this press release that are forward looking statements (including the possible benefits that could be achieved from a complete separation from General Motors) which, in certain instances, are identified by the words "expect", "anticipate", "estimate", "project" and similar expressions, are subject to numerous risks and uncertainties, many of which are outside Delphi's control. Accordingly, actual results may differ materially from those suggested in these forward looking statements. Further information concerning such risks and uncertainties is contained in Delphi's filings with the U.S. Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December, 31, 1998. HIGHLIGHTS ATTACHED - 25 - Highlights-Three months ended March 31, 1999 vs. pro forma three months ended March 31, 1998 comparison Three Months Ended March 31, 1999 1998(1) ---- ------- (in millions, except per share amounts) Net sales: General Motors and affiliates $ 5,853 $ 6,105 Other customers 1,616 1,518 ------- ------- Total net sales 7,469 7,623 Less operating expenses: Cost of sales, excluding items listed below 6,391 6,727 Selling, general and administrative 384 334 Depreciation and amortization 237 200 ------- ------- Operating income 457 362 Less interest expense 24 64 Other income, net 25 79 ------- ------- Income before income taxes 458 377 Income tax expense 174 123 ------- ------- Net income $ 284 $ 254 ======= ======= Gross margin 14.4% 11.8% Operating income margin 6.1% 4.7% Net income margin 3.8% 3.3% Basic and diluted earnings per share-actual (2) $ 0.55 N/A ====== Basic and diluted earnings per share-pro forma (3) $ 0.50 $ 0.45 ====== ====== (1) Results of operations for the three months ended March 31, 1998 have been adjusted to reflect the impact of the terms of our separation from GM. Overall the adjusted results reflect the net effect of lower employee benefit costs and higher other costs associated with operating Delphi as a stand-alone company. See the Reconciliation of actual to pro forma results for additional information. (2) Actual earnings per share are calculated using the weighted average shares outstanding during the period, resulting in 521 million shares outstanding during the three months ended March 31, 1999. (3) Pro forma earnings per share are presented as if the initial public stock offering of 100 million shares took place on January 1, 1998, resulting in 565 million shares outstanding during both periods presented. - 26 - Highlights- Three months ended March 31, 1998-Reconciliation of actual to pro forma results Three Months Ended March 31, 1998 Actual Adjustments Pro forma ------ ----------- --------- (in millions, except per share amounts) Net sales: General Motors and affiliates $ 6,105 $ 6,105 Other customers 1,518 1,518 ------- ------- Total net sales 7,623 7,623 Less operating expenses: Cost of sales, excluding items listed below 6,789 $ (62) (1) 6,727 Selling, general and administrative 300 34 (1) 334 Depreciation and amortization 200 200 ------- ------- ------- Operating income 334 28 362 Less interest expense 64 -- 64 Other income, net 79 -- 79 ------- ------- ------- Income before income taxes 349 28 377 Income tax expense 113 10 (2) 123 ------- ------- ------- Net income $ 236 $ 18 $ 254 ======= ======= ======= Basic and diluted earnings per share with 465 million shares outstanding $ 0.51 N/A ====== Basic and diluted earnings per share with 565 million shares outstanding N/A $ 0.45 ====== (1) The pro forma effect of lower employee benefit costs, due to GM's retention of certain retiree benefit obligations, favorably impacts both cost of sales and selling, general and administrative expenses. Selling, general and administrative expenses are also unfavorably impacted by the estimated incremental costs associated with operating Delphi as an independent company. (2) Income taxes were determined in accordance with SFAS No. 109, "Accounting for Income Taxes." For purposes of this pro forma presentation only, adjustments necessary to record the income tax effect of the pro forma adjustments assume a combined federal and state income tax rate of 38%. - 27 - Highlights-Liquidity and capital resources (dollars in millions) BALANCE SHEET DATA:
March 31, December 31, December 31, 1999 1998 1998 GAAP GAAP Pro forma ---- ---- --------- Cash and marketable securities $ 1,134 $ 1,000 $ 2,062 Debt 1,886 3,500 3,500 ------- --------- -------- Net Liquidity $ (752) $ (2,500) $ (1,438) ======== ========= ========= Pension obligations $ 2,208 $ 2,180 $ 2,180 Total stockholders' equity $ 3,351 $ 9 $ 3,171 RECONCILIATION OF NET LIQUIDITY: GAAP net liquidity at December 31, 1998 $ (2,500) Settlement of accounts receivable from GM (1,600) Extension of payment terms for accounts receivable from GM (2,100) Settlement of note payable to GM 3,141 Initial public offering proceeds 1,621 Pro forma net liquidity at December 31, 1998 (1,438) Net income $284 Depreciation and amortization 237 Capital expenditures (235) Other, net 343 ---- Adjusted operating cash flow less capital expenditures 629 Other investing activities 57 GAAP net liquidity at March 31, 1999 $ (752) =========
- 28 - SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. GENERAL MOTORS CORPORATION -------------------------- (Registrant) Date April 15, 1999 ----------------- By s/Peter R. Bible ------------------------------- (Peter R. Bible, Chief Accounting Officer) - 29 - -----END PRIVACY-ENHANCED MESSAGE-----