-----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, F/EGDzz/MS5Q8N6LZSk/lRbyr8NWWkgveJkA6l+K4wfYfrAViDRui3gomlrojuWi /zGo1WVxhtyH0zJpnZJbsA== 0000040730-99-000072.txt : 19990721 0000040730-99-000072.hdr.sgml : 19990721 ACCESSION NUMBER: 0000040730-99-000072 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990720 ITEM INFORMATION: FILED AS OF DATE: 19990720 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: 99667202 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 SECOND QUARTER EARNINGS RELEASE 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) July 19, 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 July 20, 1999, a news release was issued on the subject of second 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 second quarter earnings releases for Hughes Electronics Corporation (Hughes) dated July 19, 1999 and GM dated July 20, 1999. GM EARNS A RECORD $1.7 BILLION, OR $2.66 PER SHARE, IN THE SECOND QUARTER OF 1999 DETROIT -- General Motors Corp. (NYSE: GM) today reported record second-quarter income and earnings per share from continuing operations of $1.7 billion, or $2.66 diluted earnings per share of GM $1-2/3 par value common stock, in the second quarter of 1999. That compares with net income of $306 million, or $0.40 per share, in the strike-impacted second quarter of 1998. These results exclude Delphi Automotive Systems (NYSE: DPH), which was spun off as an independent company May 28, 1999. Delphi is now classified by GM as a discontinued operation and is treated as such in the balance of this release. Including Delphi's results in the second quarter through May 28, GM's consolidated net income totaled $1.9 billion, or $2.94 per share, compared with $389 million, or $0.52 per share in the second quarter of 1998. (All per-share amounts in this release are diluted unless otherwise noted.) "In one of the most intensely competitive markets in recent history, our North American automotive operations took advantage of the strong demand and recorded net income of $1.5 billion, despite the extremely tough pricing environment in this key region," said GM Chairman and Chief Executive Officer John F. Smith, Jr. "The continued strong performance of GM North America, and improved financial results from GM Europe and General Motors Acceptance Corporation (GMAC) in the second quarter offset challenges in other business sectors and automotive regions, which through intensive structural-cost reductions performed in line with our expectations. The consolidated results show the strength of our globally integrated company," Smith said. Consolidated net sales and revenues in the second quarter of 1999 totaled $45.1 billion, compared with $37.3 billion for the second 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 $16.7 billion at June 30, 1999, compared with $11.0 billion at June 30, 1998, and $16.2 billion at March 31, 1999. These cash amounts exclude GM's financing and insurance operations. "While maintaining an appropriate cash position, we continued to fund our new product programs, pursue strategic acquisitions and alliances to take advantage of growth opportunities, and followed through on our shareholder-value initiatives, including the May 28 tax-free spin-off of Delphi to GM stockholders, and our ongoing share-repurchase program," Smith said. - 2 - During the second quarter and through July 19, 1999, GM repurchased 7.5 million shares of its $1-2/3 par value common stock worth $520 million. Combined with earlier repurchases, this completes 58 percent of the corporation's most recent $4 billion stock-repurchase program initiated in March of 1998. Since January 1997, GM has repurchased approximately 115 million shares of GM $1-2/3 par value common stock worth $7.3 billion, or about 15.2 percent of the total shares outstanding. The corporation's 1999 second-quarter return on net assets (RONA) for continuing operations on an annualized basis, excluding Hughes, was 16.3 percent. "We're pleased with this result but recognize that we need to continue improving our RONA performance to meet our target of a 12.5-percent annualized return on net assets over the automotive business cycle," Smith said. Following is a summary of income from GM's business segments in the second quarter of 1999, compared with the strike-impacted prior-year period (see Highlights for additional information): ($ in Millions) Second Quarter Net Income (Loss) 1999 1998 ---- ---- GM North America $1,473 ($194) GM Europe $187 $124 GM Latin America/Africa/Mid-East ($38) $48 GM Asia Pacific ($81) ($36) Other Automotive $10 $34 --- --- Total Automotive $1,551 ($24) GMAC $391 $365 Hughes ($92) $56 Other ($116) ($91) ------ ----- Total Income from Continuing Operations $1,734 $306 GM Automotive's net margin was 4.2 percent in the second quarter of 1999, compared with a net-margin loss of 0.1 percent in the same period last year. GM North America's net margin was 5.1 percent in the second quarter of 1999, continuing a positive trend and marking the third consecutive quarter that the net margin exceeded the corporation's 5-percent objective. "GM North America's product lineup continued to score with consumers, with sales during June the best monthly performance for GM in more than ten years," said GM President and Chief Operating Officer G. Richard Wagoner, Jr. "The North American market is red hot and brutally competitive. But the results show that our focus on cost reduction and success in the marketplace lead to continued strong financial results. We continue to make fundamental improvements in quality and cost competitiveness, and we're determined to intensify these efforts to maintain strong profitability even in an unforgiving pricing environment." Wagoner said, "We are seeing our momentum build in the United States, and we're especially pleased that our market share topped 30 percent in the last month of the quarter. We're committed to profitably sell all the vehicles we can possibly make and grow our market share. "We expect that our newly introduced products like the all-new Chevrolet Impala and Buick LeSabre -- the first two among a total of 14 new introductions during 1999 -- are really going to help us in the marketplace," he said. - 3 - GM Europe continued to build market momentum during the second quarter of 1999, ending with a 10.0-percent market share for the period, up from 9.2 percent in the second quarter of 1998. The first half of 1999 represents an all-time high sales volume for the Opel/Vauxhall brand. "The second-quarter improvement resulted from strong sales of the all-new Opel/Vauxhall Zafira as well as increased Astra sales," Wagoner said. The Latin America/Africa/Mid East region continues to be affected by an economic downturn. "We improved operating efficiencies as well as increased our unit sales and market share during the quarter, compared with the first quarter this year," Wagoner said. "However, the overriding economic situation continued to impact overall financial results." In the Asia-Pacific region, although the Japanese market remains depressed, there are signs of economic recovery elsewhere. "We are particularly pleased with the progress of our major project in Shanghai, China," Wagoner said. "Regular production started on schedule in April, quality levels are excellent, and market reception to the Buick model produced there has been so good that we had to increase build schedules for the year, with production through September already sold out. In addition, we recently reached an agreement to begin production of minivans in calendar-year 2000." GMAC reported consolidated net income of $391 million in the second quarter of 1999, compared with $365 million earned in the prior-year period. The increase was led by a strong improvement in results by GMAC's mortgage operations. "The continued strong performance of our finance and insurance operations, combined with increased synergies between GMAC and our automotive operations, give us a competitive advantage in the marketplace," Smith said. GMAC announced plans to acquire the asset-based lending and factoring business of The Bank of New York (BNY). The acquired business unit, BNY Financial Corporation and its affiliates, is one of the leading asset-based lending and factoring operations in North America and the United Kingdom with nearly 3,000 clients worldwide. "This acquisition should provide GMAC with a solid platform to become an industry leader in commercial finance," Smith said. GMAC also announced plans to purchase Arriva Automotive Solutions Limited (AAS), one of the United Kingdom's leading contract hire providers. The acquisition will give GMAC significant full-service leasing capability in the UK contract hire market. AAS has approximately 70,000 fleet vehicles under contract hire and fleet management arrangements. Hughes Electronics' net loss in the second quarter of 1999 totaled $92 million, compared with income of $56 million in the second quarter of 1998. Revenues increased nearly 30 percent to $1.8 billion for the second quarter of 1999, from $1.4 billion in the prior-year period. Second-quarter-1999 results were adversely impacted by a $125 million pretax charge related to the previously announced increased development costs and schedule delays at Hughes Space and Communications Company. - 4 - The revenue increase at Hughes was primarily driven by DIRECTV(R) subscription growth. "Hughes took major steps during the quarter toward achieving its vision of being the premier provider of integrated entertainment and information services with the acquisitions of United States Satellite Broadcasting Company, Inc. (USSB), and the PRIMESTAR medium-power satellite business, which added significantly to the subscriber base," Smith said. In addition, Hughes announced a strategic alliance with America Online (NYSE: AOL), the world's leading interactive services company, to develop and market uniquely integrated digital entertainment and Internet services nationwide. Under the agreement, America Online made a $1.5 billion investment in a General Motors security, which GM has invested in Hughes for infrastructure enhancements. "This alliance should enable Hughes to accelerate its rate of growth in the expanding telecommunications market, as it jointly develops new content and interactive services for the U.S. market and elsewhere in the world," Smith said. As a result of AOL's investment, General Motors and Hughes have decided not to proceed with the previously planned public offering of $500 million of Class H common stock nor GM's $500 million equity investment in Hughes. GM North America's second-quarter-1998 results included an unfavorable impact of $890 million after taxes, or $1.32 per share, related to major production losses caused by strikes at two GM component plants in Flint, Mich. GM Europe's second-quarter-1998 results include the unfavorable $44 million after-tax, or $0.07 per share, effect of a special charge related to work-schedule modifications at Opel Belgium. In this news release, use of the words expect, should, believe, plan, intensify, overcome 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 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). # # # - 5 - HIGHLIGHTS - Q2 Financial Results (Dollars in Millions Except Per Share Amounts) Three Months Ended June 30, --------------------- 1999 1998 --------- --------- Net sales and revenues Manufactured products $39,261 $31,845(2) Financial services 3,571 3,420 Other income 2,235 2,007 ------ ------ Total net sales and revenues $45,067 $37,272 ------ ------ Income from continuing operations $1,734(5) $306(1)(2) Income from discontinued operations 184 83 ------ ------ Consolidated net income $1,918 $389 Net profit margin from continuing operations 3.8% 0.8% ............................................................. Earnings Attributable to Common Stocks $1-2/3 par value Continuing operations $1,754(5) $275(1)(2) Discontinued operations 184 83 ------ ------ $1-2/3 par value $1,938 $358 Class H $(27) $15 ............................................................. Basic Earnings Per Share Attributable to Common Stocks $1-2/3 par value Continuing operations $2.71(5) $0.41(1)(2) Discontinued operations 0.28 0.13 ------ ------ $1-2/3 par value $2.99 $0.54 Class H $(0.23) $0.14 ............................................................. Diluted Earnings Per Share Attributable to Common Stocks $1-2/3 par value Continuing operations $2.66(5) $0.40(1)(2) Discontinued operations 0.28 0.12 ------ ------ $1-2/3 par value $2.94 $0.52 Class H $(0.23) $0.14 ............................................................. 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 June 30, Dec. 31, June 30, 1999 1998 1998 -------- ------- -------- $1-2/3 par value $20.02 $20.00 $21.02 Class H $12.01 $12.00 $12.61 ............................................................. See footnotes beginning on page 9. continues - 6 - HIGHLIGHTS - Q2 Consolidated Net Income (Dollars in Millions) Income/(Loss) Three Months Ended June 30, ---------------------- 1999 1998 -------- -------- GM North America (GMNA) $1,473 $(194)(2) GM Europe (GME) 187 124 (1) GM Latin America/Africa/Mid-East (GMLAAM) (38) 48 GM Asia/Pacific (GMAP) (81) (36) Other Automotive 10 34 ----- ---- Total GM Automotive (GMA) $1,551 $(24) Hughes (6) (92) 56 Other (150) (120) ----- ---- Total Automotive, Electronics and Other Operations $1,309 $(88) GMAC $391 $365 Other 34 29 ----- ---- Total Financing and Insurance Operations $425 $394 ----- ---- Income from continuing operations $1,734(5) $306(1)(2) Income from discontinued operations 184 83 ----- ---- Consolidated Net Income $1,918 $389 ===== ==== Three Months Ended June 30, 1999 -------------------------------- GMNA GME GMLAAM GMAP ----- ------ ------ ------ Reported -------- Revenues $28,673 $6,881 $1,206 $687 ------ ----- ----- --- Pre-tax income (loss) $2,122 $272 $(87) $(36) Income tax expense (benefit) 670 84 (33) (13) Equity income (loss) and minority interests 21 (1) 16 (58) ----- ----- ----- --- Net income (loss) $1,473 $187 $(38) $(81) ===== ===== ===== === Net profit (loss) margin 5.1% 2.7% (3.2%) (11.8%) Effective income tax rate 31.6% 30.9% 37.9% 36.1% Three Months Ended June 30, 1998 -------------------------------- GMNA(2) GME(1) GMLAAM GMAP ----- ------ ------ ------ Reported -------- Revenues $21,904 $6,227 $2,193 $756 ------ ----- ----- --- Pre-tax (loss) income $(335) $244 $17 $4 Income tax (benefit) expense (124) 129 (10) 4 Equity income (loss) and minority interests 17 9 21 (36) ----- ----- ----- --- Net (loss) income $(194) $124 $48 $(36) ==== ==== === === Net (loss) profit margin (0.9%) 2.0% 2.2% (4.8%) Effective income tax rate 37.0% 52.9% (58.8%)100.0% See footnotes beginning on page 9. continues - 7 - HIGHLIGHTS - Q2 Operating Information Three Months Ended June 30, --------------------- 1999 1998 ------- ------- Worldwide Wholesale Sales (units in 000s) United States: Cars 664 549 Trucks 699 476 ------ ------ Total United States 1,363 1,025 Canada and Mexico 174 166 ------ ------ Total GM North America 1,537 1,191 ------ ------ GME 556 589 GMLAAM 136 180 GMAP 98 98 ------ ------ Total International 790 867 ------ ------ Total Worldwide 2,327 2,058 ====== ====== .................................................... Vehicle Unit Deliveries (units in 000s) United States Chevrolet - Cars 240 286 - Trucks 476 494 Pontiac 178 168 GMC 149 147 Buick 127 119 Oldsmobile 101 96 Saturn 66 66 Cadillac 56 49 Other 3 8 ------ ------ Total United States 1,396 1,433 Canada and Mexico 178 193 ------ ------ Total GM North America 1,574 1,626 ------ ------ GME 538 451 GMLAAM 131 177 GMAP 109 118 ------ ------ Total International 778 746 ------ ------ Total Worldwide 2,352 2,372 ====== ====== .................................................... Market share United States Cars 30.2% 32.1% Trucks 28.8% 30.9% Total 29.5% 31.6% Total North America 29.3% 31.1% Total Europe 10.0% 9.2% Latin America 20.2% 20.3% Asia and Pacific 4.0% 4.6% Total Worldwide 16.5% 17.3% ..................................................... U.S. Retail/Fleet Mix % Fleet Sales - Cars 25.6% 22.3% % Fleet Sales - Trucks 16.5% 14.1% Total vehicles 21.2% 18.4% .................................................... Days Supply of Inventory - U.S. Cars 64 51 Trucks 75 53 ..................................................... Capacity Utilization % U.S. and Canada (2-shift rated)(3)93.8% N/A ..................................................... GMNA Net Price (%) (0.2%) (2.6%) ..................................................... See footnotes beginning on page 9. continues - 8 - HIGHLIGHTS - Q2 Other Financial Information (Dollars in Millions Except Per Share Amounts) Three Months Ended June 30, ---------------------- 1999 1998 --------- ---------- Depreciation and Amortization (4) Depreciation $1,269 $901 Amortization of special tools 635 519 Amortization of intangible assets 48 24 ------ ----- Total $1,952 $1,444 ====== ===== .................................................... Worldwide Employment at June 30 (in 000s) GMNA 227 231 GME 83 81 GMLAAM 22 26 GMAP 10 9 Hughes 18 15 GMAC 26 22 Other 11 9 ------ ------ Total 397 393 ====== ====== .................................................... Worldwide Payrolls $5,584 $5,048 .................................................... (1) The second-quarter 1998 results included a pre-tax charge of $74 million ($44 million after-tax, or $0.07 basic per share of $1-2/3 par value common stock), related to work schedule modifications at Opel Belgium. (2) GM North America's second-quarter-1998 results included an unfavorable impact of $890 million after taxes, or $1.32 per share, related to major production losses caused by strikes at two GM component plants in Flint, Michigan. (3) GM changed its method of calculating capacity utilization from mass relief to tag relief in 1999. Quarterly 1998 figures are not available, however capacity utilization for Calendar Year 1998 was 77.2% using the new methodology. (4) Amounts exclude depreciation and amortization charges incurred by the financing and insurance operations. (5) Records for income and EPS are based upon reported amounts adjusted to exclude the effects of significant dispositions not classified as discontinued operations. (6) Excludes the effects of purchase accounting adjustments related to General Motors' acquisition of Hughes in 1985, and in 1999 excludes series A Preferred Stock dividends payable to General Motors. - 9 - HIGHLIGHTS - Q2 Financial Results (Dollars in Millions Except Per Share Amounts) Six Months Ended June 30, --------------------- 1999 1998 --------- --------- Net sales and revenues Manufactured products $75,881 $66,738(2) Financial services 7,080 6,730 Other income 4,541 3,828 ------ ------ Total net sales and revenues $87,502 $77,296 ------ ------ Income from continuing operations $3,554(6) $1,674(1)(2) Income from discontinued operations 426 319 ------ ------ Consolidated net income $3,980 $1,993 Net profit margin from continuing operations 4.1% 2.2% .................................................................. Earnings Attributable to Common Stocks $1-2/3 par value Continuing operations $3,535(6) $1,613(1)(2) Discontinued operations 426 319 ------ ------ $1-2/3 par value $3,961 $1,932 Class H $(4) $29(3) ............................................................. Basic Earnings Per Share Attributable to Common Stocks $1-2/3 par value Continuing operations $5.44(6) $2.37(1)(2) Discontinued operations 0.65 0.48 ------ ------ $1-2/3 par value $6.09 $2.85 Class H $(0.04) $0.27(3) ............................................................. Diluted Earnings Per Share Attributable to Common Stocks $1-2/3 par value Continuing operations $5.33(6) $2.33(1)(2) Discontinued operations 0.64 0.46 ------ ------ $1-2/3 par value $5.97 $2.79 Class H $(0.04) $0.27(3) ............................................................. Cash Dividends Per Share of Common Stocks $1-2/3 par value $1.00 $1.00 Class H $ - $ - ............................................................. See footnotes beginning on page 13. continues - 10 - HIGHLIGHTS - Q2 Consolidated Net Income (Dollars in Millions) Income/(Loss) Six Months Ended June 30, ------------------------ 1999 1998 -------- -------- GM North America (GMNA) $2,881 $647(2) GM Europe (GME) 361 223(1) GM Latin America/Africa/Mid-East (GMLAAM) (63) 101 GM Asia/Pacific (GMAP) (141) (30) Other Automotive 23 27 ----- ----- Total GM Automotive (GMA) $3,061 $968 Hughes (7) (14) 110(3) Other (291) (162) ----- ----- Total Automotive, Electronics and Other Operations $2,756 $916 GMAC $783 $714 Other 15 44 ----- ----- Total Financing and Insurance Operations $798 $758 ----- ----- Income from continuing operations $3,554(6) $1,674(1)(2) Income from discontinued operations 426 319 ----- ----- Consolidated Net Income $3,980 $1,993 ===== ===== Six Months Ended June 30, 1999 -------------------------------- GMNA GME GMLAAM GMAP ----- ------ ------ ------ Reported -------- Revenues $55,991 $13,015 $2,228 $1,307 ------ ------ ----- ----- Pre-tax income (loss) $4,219 $553 $(145) $(61) Income tax expense (benefit) 1,335 189 (69) (19) Equity (loss) income and minority interests (3) (3) 13 (99) ----- ----- ----- --- Net income (loss) $2,881 $361 $(63) $(141) ===== ===== ===== === Net profit (loss) margin 5.1% 2.8% (2.8%) (10.8%) Effective income tax rate 31.6% 34.2% 47.6% 31.1% Six Months Ended June 30, 1998 -------------------------------- GMNA(2) GME(1) GMLAAM GMAP ----- ------ ------ ------ Reported -------- Revenues $47,793 $11,624 $4,217 $1,484 ------ ----- ----- --- Pre-tax income (loss) $889 $447 $33 $(4) Income tax expense (benefit) 262 220 (29) 4 Equity income (loss) and minority interests 20 (4) 39 (22) ----- ----- ----- --- Net income (loss) $647 $223 $101 $(30) ===== ===== ===== === Net profit (loss) margin 1.4% 1.9% 2.4% (2.0%) Effective income tax rate 29.5% 49.2% (87.9%)(100.0%) See footnotes beginning on page 13. continues - 11 - HIGHLIGHTS - Q2 Operating Information Six Months Ended June 30, ---------------------- 1999 1998 --------- ---------- Worldwide Wholesale Sales (units in 000s) United States: Cars 1,335 1,123 Trucks 1,336 1,068 ------ ------ Total United States 2,671 2,191 Canada and Mexico 368 346 ------ ------ Total GM North America 3,039 2,537 ------ ------ GME 1,025 1,009 GMLAAM 258 358 GMAP 191 213 ------ ------ Total International 1,474 1,580 ------ ------ Total Worldwide 4,513 4,117 ====== ====== .................................................... Vehicle Unit Deliveries (units in 000s) United States Chevrolet - Cars 451 495 - Trucks 853 872 Pontiac 332 290 GMC 270 264 Buick 235 215 Oldsmobile 195 169 Saturn 117 117 Cadillac 87 92 Other 18 13 ------ ------ Total United States 2,558 2,527 Canada and Mexico 330 331 ------ ------ Total GM North America 2,888 2,858 ------ ------ GME 1,048 943 GMLAAM 256 350 GMAP 209 253 ------ ------ Total International 1,513 1,546 ------ ------ Total Worldwide 4,401 4,404 ====== ====== .................................................... Market share United States Cars 30.6% 31.4% Trucks 27.7% 30.5% Total 29.2% 30.9% Total North America 29.0% 30.5% Total Europe 9.8% 9.5% Latin America 19.7% 20.1% Asia and Pacific 3.6% 4.5% Total Worldwide 15.7% 16.3% ..................................................... U.S. Retail/Fleet Mix % Fleet Sales - Cars 28.0% 23.9% % Fleet Sales - Trucks 15.3% 15.0% Total vehicles 22.0% 19.7% ..................................................... Capacity Utilization % U.S. and Canada (2-shift rated)(4)90.3% N/A ..................................................... See footnotes beginning on page 13. continues - 12 - HIGHLIGHTS - Q2 Other Financial Information (Dollars in Millions Except Per Share Amounts) Six Months Ended June 30, ---------------------- 1999 1998 --------- ---------- Depreciation and Amortization (5) Depreciation $2,071 $1,796 Amortization of special tools 1,254 1,082 Amortization of intangible assets 79 49 ----- ----- Total $3,404 $2,927 ===== ===== .................................................... Worldwide Payrolls $10,981 $10,318 .................................................... (1) The second-quarter 1998 results included a pre-tax charge of $74 million ($44 million after-tax, or $0.07 basic per share of $1-2/3 par value common stock), related to work schedule modifications at Opel Belgium. (2) GM North America's second-quarter-1998 results included an unfavorable impact of $890 million after taxes, or $1.32 per share, related to major production losses caused by strikes at two GM component plants in Flint, Michigan. (3) 1998 results exclude the cumulative effect of accounting change of $9 million due to Hughes' adoption of SOP 98-5. GM had reported the $9 million change in fourth quarter 1998 results and Hughes reported the change as a restatement of first quarter 1998 results. (4) GM changed its method of calculating capacity utilization from mass relief to tag relief in 1999. Quarterly 1998 figures are not available, however capacity utilization for Calendar Year 1998 was 77.2% using the new methodology. (5) Amounts exclude depreciation and amortization charges incurred by the financing and insurance operations. (6) Records for income and EPS are based upon reported amounts adjusted to exclude the effects of significant dispositions not classified as discontinued operations. (7) Excludes the effects of purchase accounting adjustments related to General Motors' acquisition of Hughes in 1985, and in 1999 excludes series A Preferred Stock dividends payable to General Motors. - 13 - CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Three Months Ended Six Months Ended June 30, June 30, -------- -------- 1999 1998 1999 1998 ---- ---- ---- ---- (Dollars in Millions Except Per Share Amounts) GENERAL MOTORS CORPORATION AND SUBSIDIARIES Manufactured products sales and revenues $39,261 $31,845 $75,881 $66,738 Financing revenues 3,571 3,420 7,080 6,730 Other income 2,235 2,007 4,541 3,828 ------- ------- ------- ------- Total net sales and revenues 45,067 37,272 87,502 77,296 ------ ------ ------ ------ Cost of sales and other operating expenses, exclusive of items listed below 32,284 27,724 62,950 57,329 Selling, general and administrative expenses 4,502 4,102 8,324 7,612 Depreciation and amortization expense 3,227 2,648 5,951 5,355 Interest expense 1,794 1,691 3,639 3,261 Other expenses 476 596 914 1,145 ------- ------- ------- ------- Total costs and expenses 42,283 36,761 81,778 74,702 Income from continuing operations before income taxes and minority interests 2,784 511 5,724 2,594 Income tax expense 956 159 1,985 854 Minority interests (7) - (21) (10) Losses of nonconsolidated associates (87) (46) (164) (56) ----- ---- ------ ------- Income from continuing operations 1,734 306 3,554 1,674 Income from discontinued operations 184 83 426 319 ------ ---- ------ ------ Net income 1,918 389 3,980 1,993 Dividends on preference stocks (7) (16) (23) (32) ------- ---- ------ ------ Earnings on common stocks $1,911 $373 $3,957 $1,961 ===== === ===== ===== Basic earnings per share attributable to common stocks $1-2/3 par value common stock Continuing operations $2.71 $0.41 $5.44 $2.37 Discontinued operations 0.28 0.13 0.65 0.48 ---- ---- ---- ---- Earnings per share attributable to $1-2/3 par value $2.99 $0.54 $6.09 $2.85 ===== ===== ===== ===== Earnings per share attributable to Class H $(0.23) $0.14 $(0.04) $0.27 ====== ===== ====== ===== Diluted earnings per share attributable to common stocks $1-2/3 par value common stock Continuing operations $2.66 $0.40 $5.33 $2.33 Discontinued operations 0.28 0.12 0.64 0.46 ---- ---- ---- ---- Earnings per share attributable to $1-2/3 par value $2.94 $0.52 $5.97 $2.79 ===== ===== ===== ===== Earnings per share attributable to Class H $(0.23) $0.14 $(0.04) $0.27 ====== ===== ====== ===== - 14 - CONSOLIDATED STATEMENTS OF INCOME - Concluded (Unaudited) Three Months Ended Six Months Ended June 30, June 30, -------- -------- 1999 1998 1999 1998 ---- ---- ---- ---- (Dollars in Millions) AUTOMOTIVE, ELECTRONICS AND OTHER OPERATIONS Manufactured products sales and revenues $39,261 $31,845 $75,881 $66,738 Other income 856 826 1,759 1,503 ------ ------ ------ ------ Total net sales and revenues 40,117 32,671 77,640 68,241 ------ ------ ------ ------ Cost of sales and other operating expenses, exclusive of items listed below 32,284 27,724 62,950 57,329 Selling, general and administrative expenses 3,370 3,086 6,111 5,655 Depreciation and amortization expense 1,952 1,444 3,404 2,927 ------ ------ ------ ------- Total operating costs and expenses 37,606 32,254 72,465 65,911 ------ ------ ------ ------ Interest expense 180 277 374 472 Other expenses 149 186 207 376 Net expense (income) from transactions with Financing and Insurance Operations 66 6 160 (12) ------ ------ ------ ------ Income (loss) from continuing operations before income taxes and minority interests 2,116 (52) 4,434 1,494 Income tax expense (benefit) 720 (6) 1,508 522 Minority interests - 4 (6) - Losses of nonconsolidated associates (87) (46) (164) (56) ----- -- ------ ---- Income (loss) from continuing operations 1,309 (88) 2,756 916 Income from discontinued operations 184 83 426 319 ------ -- ------ --- Net income (loss) - Automotive, Electronics and Other Operations $1,493 $(5) $3,182 $1,235 ===== = ===== ===== Three Months Ended Six Months Ended June 30, June 30, 1999 1998 1999 1998 ---- ---- ---- ---- (Dollars in Millions) FINANCING AND INSURANCE OPERATIONS Financing revenues $3,571 $3,420 $7,080 $6,730 Insurance, mortgage and other income 1,379 1,181 2,782 2,325 ----- ----- ----- ----- Total revenues and other income 4,950 4,601 9,862 9,055 ----- ----- ----- ----- Interest expense 1,614 1,414 3,265 2,789 Depreciation and amortization expense 1,275 1,204 2,547 2,428 Operating and other expenses 1,132 1,016 2,213 1,957 Provisions for financing losses 111 128 230 229 Insurance losses and loss adjustment expenses 216 282 477 540 ----- ----- ----- ----- Total costs and expenses 4,348 4,044 8,732 7,943 ----- ----- ----- ----- Net (income) expense from transactions with Automotive, Electronics and Other Operations (66) (6) (160) 12 ---- ----- ------ ------- Income before income taxes 668 563 1,290 1,100 Income tax expense 236 165 477 332 Minority interests (7) (4) (15) (10) ----- ----- ---- ---- Net income - Financing and Insurance Operations $425 $394 $798 $758 ==== ==== ==== ==== - 15 - CONSOLIDATED BALANCE SHEETS June 30, June 30, 1999 Dec. 31, 1998 GENERAL MOTORS CORPORATION AND SUBSIDIARIES (Unaudited) 1998 (Unaudited) ---------- ------ ----------- ASSETS (Dollars in Millions) Automotive, Electronics and Other Operations Cash and cash equivalents $11,997 $9,728 $7,569 Marketable securities 1,666 402 463 ------- ------ ------ Total cash and marketable securities 13,663 10,130 8,032 Accounts and notes receivable (less allowances) 6,349 4,750 3,845 Inventories (less allowances) 10,766 10,437 11,317 Net assets of discontinued operations - 77 359 Equipment on operating leases (less accumulated depreciation) 6,394 4,954 4,754 Deferred income taxes and other current assets 6,232 10,051 5,841 Net receivable from Financing and Insurance Operations - - - ------ ------ ------ Total current assets 43,404 40,399 34,148 Equity in net assets of nonconsolidated associates 1,691 950 1,098 Property - net 31,509 32,222 30,451 Intangible assets - net 11,934 9,994 11,330 Deferred income taxes 18,297 14,967 17,883 Other assets 14,016 16,062 15,085 ------ ------ ------ Total Automotive, Electronics and Other Operations assets 120,851 114,594 109,995 Financing and Insurance Operations Cash and cash equivalents 2,694 146 164 Investments in securities 8,499 8,748 7,932 Finance receivables - net 74,305 70,436 59,875 Investment in leases and other receivables 33,451 32,798 32,130 Other assets 16,660 18,807 12,688 Net receivable from Automotive, Electronics and Other Operations 478 816 1,154 ------ ------ ------ Total Financing and Insurance Operations assets 136,087 131,751 113,943 ------- ------- ------- Total assets $256,938 $246,345 $223,938 ======== ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Automotive, Electronics and Other Operations Accounts payable (principally trade) $15,814 $13,542 $10,311 Loans payable 854 1,204 1,907 Accrued expenses 34,530 30,548 29,239 Net payable to Financing and Insurance Operations 478 816 1,154 ------- ------- ------- Total current liabilities 51,676 46,110 42,611 Long-term debt 7,408 7,118 6,935 Postretirement benefits other than pensions 34,317 33,503 32,925 Pensions 3,149 4,410 2,925 Other liabilities and deferred income taxes 17,928 17,807 17,794 ------ ------ ------ Total Automotive, Electronics and Other Operations liabilities 114,478 108,948 103,190 Financing and Insurance Operations Accounts payable 4,786 4,148 3,982 Debt 110,135 107,753 91,081 Deferred income taxes and other liabilities 10,517 9,661 9,174 Net payable to Automotive, Electronics and Other Operations - - - ------ ------ ------ Total Financing and Insurance Operations liabilities 125,438 121,562 104,237 Minority interests 591 563 510 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 $1-2/3 par value common stock (issued, 645,004,212, 655,008,344 and 655,007,825 shares) 1,075 1,092 1,092 Class H common stock (issued, 112,425,599, 106,159,776 and 105,731,028 shares) 11 11 11 Capital surplus (principally additional paid-in capital) 15,533 12,661 12,773 Retained earnings 5,045 6,984 6,706 ------- ------- ------- Subtotal 21,664 20,749 20,583 Accumulated foreign currency translation adjustments (1,987) (1,089) (1,249) Net unrealized gains on securities 561 481 507 Minimum pension liability adjustment (4,027) (5,089) (4,062) ------ ------ ------ Accumulated other comprehensive loss (5,453) (5,697) (4,804) ----- ----- ----- Total stockholders' equity 16,211 15,052 15,779 -------- -------- -------- Total liabilities and stockholders' equity $256,938 $246,345 $223,938 ======= ======= ======== - 16 - CONSOLIDATED BALANCE SHEETS - Concluded June 30, June 30, 1999 Dec. 31, 1998 AUTOMOTIVE, ELECTRONICS AND OTHER OPERATIONS (Unaudited) 1998 (Unaudited) ---------- ------ ----------- ASSETS (Dollars in Millions) Cash and cash equivalents $11,997 $9,728 $7,569 Marketable securities 1,666 402 463 ------- ------ ------ Total cash and marketable securities 13,663 10,130 8,032 Accounts and notes receivable (less allowances) 6,349 4,750 3,845 Inventories (less allowances) 10,766 10,437 11,317 Net assets of discontinued operations - 77 359 Equipment on operating leases (less accumulated depreciation) 6,394 4,954 4,754 Deferred income taxes and other current assets 6,232 10,051 5,841 Net receivable from Financing and Insurance Operations - - - ------- ------ ------ Total current assets 43,404 40,399 34,148 Equity in net assets of nonconsolidated associates 1,691 950 1,098 Property - net 31,509 32,222 30,451 Intangible assets - net 11,934 9,994 11,330 Deferred income taxes 18,297 14,967 17,883 Other assets 14,016 16,062 15,085 ------ ------ ------ Total Automotive, Electronics and Other Operations assets $120,851 $114,594 $109,995 ======== ======== ======== LIABILITIES AND GM INVESTMENT Accounts payable (principally trade) $15,814 $13,542 $10,311 Loans payable 854 1,204 1,907 Accrued expenses 34,530 30,548 29,239 Net payable to Financing and Insurance Operations 478 816 1,154 ------ ------ ------- Total current liabilities 51,676 46,110 42,611 Long-term debt 7,408 7,118 6,935 Postretirement benefits other than pensions 34,317 33,503 32,925 Pensions 3,149 4,410 2,925 Other liabilities and deferred income taxes 17,928 17,807 17,794 ------ ------ ------ Total Automotive, Electronics and Other Operations liabilities 114,478 108,948 103,190 Minority interests 524 511 467 GM investment in Automotive, Electronics and Other Operations 5,849 5,135 6,338 ----- ----- ----- Total Automotive, Electronics and Other Operations liabilities and GM investment $120,851 $114,594 $109,995 ======== ======== ======== June 30, June 30, 1999 Dec. 31, 1998 FINANCING AND INSURANCE OPERATIONS (Unaudited) 1998 (Unaudited) ---------- ------ ----------- ASSETS (Dollars in Millions) Cash and cash equivalents $2,694 $146 $164 Investments in securities 8,499 8,748 7,932 Finance receivables - net 74,305 70,436 59,875 Investment in leases and other receivables 33,451 32,798 32,130 Other assets 16,660 8,807 12,688 Net receivable from Automotive, Electronics and Other Operations 478 816 1,154 -------- -------- -------- Total Financing and Insurance Operations assets $136,087 $131,751 $113,943 ======== ======== ======== LIABILITIES AND GM INVESTMENT Accounts payable $4,786 $4,148 $3,982 Debt 110,135 107,753 91,081 Deferred income taxes and other liabilities 10,517 9,661 9,174 Net payable to Automotive, Electronics and Other Operations - - - ------- ------- ------- Total Financing and Insurance Operations liabilities 125,438 121,562 104,237 Minority interests 67 52 43 GM investment in Financing and Insurance Operations 10,582 10,137 9,663 ------ ------ ----- Total Financing and Insurance Operations liabilities and GM investment $136,087 $131,751 $113,943 ======== ======== ======== - 17 - CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Six Months Ended June 30, ------------------------- 1999 1998 -------- ------ (Dollars in Millions) GENERAL MOTORS CORPORATION AND SUBSIDIARIES Net cash provided by operating activities $21,342 $4,405 Cash flows from investing activities Expenditures for property (3,125) (3,827) Investments in other marketable securities - acquisitions (13,739) (12,969) Investments in other marketable securities - liquidations 12,168 16,766 Mortgage servicing rights - acquisitions (662) (742) Mortgage servicing rights - liquidations 4 7 Finance receivables - acquisitions (90,613) (78,491) Finance receivables - liquidations 67,691 58,991 Proceeds from sales of finance receivables 18,683 17,356 Operating leases - acquisitions (12,814) (12,379) Operating leases - liquidations 6,896 7,556 Investments in companies, net of cash acquired (2,684) (424) Other 121 (185) ------ ------ Net cash used in investing activities (18,074) (8,341) ------ ----- Cash flows from financing activities Net (decrease) increase in loans payable (6,035) 2,464 Increase in long-term debt 17,681 11,019 Decrease in long-term debt (9,360) (7,591) Repurchases of common and preference stocks (1,868) (3,071) Proceeds from issuing common stocks 299 343 Proceeds from issuing preference stocks 1,500 - Cash dividends paid to stockholders (673) (702) ------ ------ Net cash provided by financing activities 1,544 2,462 ----- ----- Effect of exchange rate changes on cash and cash equivalents (123) (67) ------ ------ Net cash provided by (used in) continuing operations 4,689 (1,541) Net cash provided by (used in) discontinued operations 128 (999) ------ ------ Net increase (decrease) in cash and cash equivalents 4,817 (2,540) Cash and cash equivalents at beginning of the period 9,874 10,273 ------ ------ Cash and cash equivalents at end of the period $14,691 $7,733 ====== ===== - 18 - CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - Concluded (Unaudited)
Six Months Ended June 30, ------------------------- 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 $12,803 $8,539 $368 $4,037 Cash flows from investing activities Expenditures for property (3,019) (106) (3,753) (74) Investments in other marketable securities - acquisitions (3,119) (10,620) (4,466) (8,503) Investments in other marketable securities - liquidations 1,855 10,313 7,815 8,951 Mortgage servicing rights - acquisitions - (662) - (742) Mortgage servicing rights - liquidations - 4 - 7 Finance receivables - acquisitions - (90,613) - (78,491) Finance receivables - liquidations - 67,691 - 58,991 Proceeds from sales of finance receivables - 18,683 - 17,356 Operating leases - acquisitions (4,613) (8,201) (3,042) (9,337) Operating leases - liquidations 2,889 4,007 2,815 4,741 Investments in companies, net of cash acquired (2,558) (126) (409) (15) Net investing activity with Financing and Insurance Operations 75 - 150 - Other (876) 997 (1,049) 864 ------ ------ ----- ------ Net cash used in investing activities (9,366) (8,633) (1,939) (6,252) ----- ----- ----- ----- Cash flows from financing activities Net (decrease) increase in loans payable (393) (5,642) 898 1,566 Increase in long-term debt 2,433 15,248 2,648 8,371 Decrease in long-term debt (2,130) (7,230) (1,079) (6,512) Net financing activity with Automotive, Electronics and Other Operations - (75) - (150) Repurchases of common and preference stocks (1,868) - (3,071) - Proceeds from issuing common stocks 299 - 343 - Proceeds from issuing preference stocks 1,500 - - - Cash dividends paid to stockholders (673) - (702) - --- ----- --- ------ Net cash (used in) provided by financing activities (832) 2,301 (963) 3,275 --- ----- --- ----- Effect of exchange rate changes on cash and cash equivalents (126) 3 (67) - Net transactions with Automotive/Financing Operations (338) 338 1,473 (1,473) ----- ----- ----- ----- Net cash provided by (used in) continuing operations 2,141 2,548 (1,128) (413) Net cash provided by (used in) discontinued operations 128 - (999) - ----- ----- ---- ----- Net increase (decrease) in cash and cash equivalents 2,269 2,548 (2,127) (413) Cash and cash equivalents at beginning of the period 9,728 146 9,696 577 ----- ----- ----- --- Cash and cash equivalents at end of the period $11,997 $2,694 $7,569 $164 ====== ===== ===== ===
- 19 - Record DIRECTV Growth Highlights Second Quarter Hughes Results El Segundo, Calif., July 19, 1999--Hughes Electronics Corporation (Hughes), the world's leading provider of digital television entertainment, and satellite and wireless systems and services, today reported second quarter 1999 revenues increased 29.7% to $1,776.0 million, compared with $1,369.0 million in the second quarter of 1998. "Our revenue growth reflects our transformation into a high-growth, subscriber-driven, services company," said Michael T. Smith, Hughes chairman and chief executive officer. "As a result of our merger with United States Satellite Broadcasting Company, Inc., the purchase of the PRIMESTAR medium-power satellite business and the Tempo high-power satellite assets, plus our alliance with America Online, Inc., we took major strides toward achieving our vision of being the premier provider of integrated entertainment and information services. With more than 60% growth over last year, we had our best second quarter ever for new DIRECTV(R) subscribers in the United States, and our best quarter ever for sales of DIRECTV receiving equipment manufactured by Hughes Network Systems. We also saw growth at PanAmSat due to increased revenues from operating leases." EBITDA(1) for the second quarter of 1999 was $63.2 million and EBITDA margin(1) was 3.6%, compared to EBITDA of $178.4 million and EBITDA margin of 13.0% in the second quarter of 1998. The decline in EBITDA was principally due to the previously announced increased development costs and schedule delays experienced by Hughes Space and Communications Company (HSC), which resulted in a second quarter 1999 pre-tax charge (after intercompany eliminations) of $125.0 million. This decline was partially offset by improved EBITDA at Hughes Network Systems (HNS) and PanAmSat. "Although our company's overall EBITDA declined principally due to the increased costs incurred by HSC," Smith added, "we again had positive EBITDA in our DIRECTV U.S. business and expect it to achieve significant EBITDA growth going forward." Hughes had a second quarter 1999 loss(2) of $92.3 million, compared to earnings(2) of $56.1 million in the same period for 1998. This resulted in a loss per share, including the effect of preferred stock dividends, of $0.23 in the second quarter of 1999 versus earnings per share (EPS) of $0.14 in the second quarter of 1998. The change in earnings and EPS was primarily attributable to the decline in EBITDA (described above), higher depreciation and amortization expenses related principally to the United States Satellite Broadcasting Company, Inc. (USSB) and PRIMESTAR transactions and increased PanAmSat satellite expenditures, and an increase in net interest expense. - 20 - Six-Month Financial Review For the first half of 1999, revenues increased 21.3% to $3,227.8 million, compared to $2,660.0 million in the first half of 1998. This growth was primarily the result of record subscriber growth in the company's DIRECTV U.S. business, as well as additional revenues resulting from the USSB and PRIMESTAR transactions. HNS also contributed to the revenue growth through its record sales of DIRECTV receiving equipment. EBITDA for the first six months of 1999 was $149.4 million and EBITDA margin was 4.6%, compared to EBITDA of $359.7 million and EBITDA margin of 13.5% in the same period of 1998. The declines were principally due to the aforementioned $125.0 million pre-tax charge related to the Company's satellite manufacturing unit, and a first quarter 1999 pre-tax charge of $92.0 million resulting from the termination of the Asia-Pacific Mobile Telecommunications (APMT) satellite system contract due to export licenses not being issued. These declines were partially offset by EBITDA improvements by the Company's DIRECTV businesses, HNS and PanAmSat. In the first half of 1999, Hughes incurred a loss of $14.0 million and a loss per share, including the effect of preferred stock dividends, of $0.04, compared to earnings of $100.6 million and EPS of $0.25 for the same period in 1998. The decline was principally due to the reduced EBITDA, higher depreciation and amortization expenses related principally to the USSB and PRIMESTAR transactions and increased PanAmSat satellite expenditures, and an increase in net interest expense. These declines were partially offset by an after-tax gain of $94.3 million ($154.6 million pre-tax) related to the settlement of the Williams patent infringement case(3). Segment Financial Review: Second Quarter 1999 Direct-To-Home Broadcast Second quarter revenues for the segment more than doubled to $870.2 million from $401.5 million in the second quarter of 1998. The segment had negative EBITDA of $6.8 million compared with negative EBITDA of $16.7 million in the second quarter of 1998. United States: DIRECTV reported quarterly revenues of $778 million, more than twice last year's second quarter revenues of $368 million. The increase was due to strong subscriber growth and higher monthly revenue per subscriber, as well as additional revenues resulting from the USSB and PRIMESTAR transactions. DIRECTV added 369,000 net new subscribers in the quarter, excluding subscribers added through the USSB and PRIMESTAR transactions. This compared to 227,000 net new subscribers in the second quarter of 1998, or a 63% increase on the same basis. As of June 30, 1999, DIRECTV had approximately 7.4 million subscribers. The principal second quarter changes in net subscribers are shown below: - 21 - Total, March 31, 1999 4,762,000 Second Quarter 1999 Results: - Net new DIRECTV (high-power service) subscribers 369,000 - Former USSB-only subscribers 145,000 - Subscribers converted to DIRECTV (high-power service) from "PRIMESTAR by DIRECTV" (medium-power service) 25,000 - Remaining "PRIMESTAR by DIRECTV" (medium-power service) subscribers 2,074,000 ---------- Total, June 30, 1999 7,375,000 ========== EBITDA for the second quarter of 1999 was $13 million compared to $12 million in the preceding year's second quarter. This increase was due to EBITDA contributions from the USSB and PRIMESTAR transactions, which were mostly offset by higher marketing and advertising expenses. Latin America and Japan: Hughes' DIRECTV business in Latin America generated $77 million in revenues for the quarter compared with $32 million in the second quarter of 1998. This increase was due to continued subscriber growth and additional revenues resulting from the consolidation of SurFin Ltd.(4), and Grupo Galaxy Mexicana, S.A. de C.V. (GGM)(4). The DIRECTV service in Latin America added 47,000 net new subscribers in the second quarter of 1999, compared to 49,000 acquired in the same period last year, bringing total DIRECTV subscribers in Latin America to 601,000 as of June 30, 1999. In the quarter, the Latin American DIRECTV operations reported negative EBITDA of $13 million compared to negative EBITDA of $26 million for the same period in 1998. This improvement was primarily due to higher revenue growth and EBITDA contributions resulting from the consolidation of SurFin. In addition, DIRECTV Japan reported a total of 291,200 subscribers at the end of the second quarter of 1999. Hughes' minority share of DIRECTV Japan's losses were $23 million for the quarter, compared with $16 million in the second quarter of 1998. These losses are reported in "Other, net" in the Statement of Income (Loss) and Available Separate Consolidated Net Income (Loss). - 22 - Satellite Services PanAmSat, which is 81% owned by Hughes, reported second quarter 1999 revenues of $200.4 million compared with $191.1 million in the prior year's period. The revenue growth was primarily due to a 2% increase in overall video services revenues, which grew to $142 million. This growth was driven by an increase in operating lease revenue principally from new revenues on the PAS-6B satellite, which were partially offset by lower revenues on the PAS-5 satellite as a result of a reduction in its usable capacity. In addition, telecommunications services revenue grew 19% to $47 million during the quarter, primarily due to the growth in data and Internet-related service agreements. EBITDA for the quarter was $151.0 million, a 13.4% increase over second quarter 1998 EBITDA of $133.1 million. EBITDA margin in the second quarter of 1999 was 75.3%, compared to 69.6% in the same period of 1998. The increases in EBITDA and EBITDA margin were principally due to lower leaseback expense resulting from the exercise of certain early buy-out opportunities under sale-leaseback agreements and a provision for loss recorded during the second quarter of 1998 related to the Galaxy IV satellite in-orbit failures. Satellite Systems Second quarter 1999 revenues declined to $553.8 million from $674.8 million for the same period in 1998. This variance was principally due to contract revenue adjustments and delayed revenue recognition related to the previously announced increased costs and schedule delays on several new product lines at HSC. The segment reported negative EBITDA of $119.6 million, compared to EBITDA of $71.5 million in the second quarter of 1998. This variance was due to a second quarter 1999 pre-tax charge, before intercompany eliminations, of $178.0 million related to the previously announced increased costs and schedule delays. Network Systems Second quarter 1999 revenues grew 53.9% at HNS, reaching $341.1 million versus $221.7 million in the same period last year. This was primarily due to increased sales of DIRECTV receiving equipment. HNS achieved EBITDA of $25.0 million in the quarter, compared to a negative EBITDA of $15.3 million in the second quarter of 1998. EBITDA margin in the second quarter of 1999 was 7.3%. The 1999 increase in EBITDA and EBITDA margin is primarily attributable to a second quarter 1998 provision of $26 million associated with the bankruptcy filing by a customer. - 23 - BALANCE SHEET From December 31, 1998 to June 30, 1999, the Company's consolidated cash balance declined $483.4 million to $858.7 million and long-term debt increased $460.9 million to $1,239.6 million. The principal cash requirements for the first six months were for the acquisition of PRIMESTAR's medium-power satellite business, purchase of the Tempo high-power satellite assets, early buy-out of certain PanAmSat satellite sale-leaseback agreements and working capital requirements. These requirements were partially offset by a $1.5 billion investment by America Online, Inc. (AOL) and the proceeds from the settlement of the Williams patent infringement case.(3) On June 21, 1999, Hughes and AOL announced a strategic alliance to develop and market uniquely integrated digital entertainment and Internet services nationwide. The alliance is expected to accelerate subscriber growth and revenue per subscriber for DIRECTV and the DirecPC(R) satellite-based broadband Internet delivery system. Under the agreement, AOL made a $1.5 billion investment in a General Motors Corp. (GM) preferred equity security, which carries a 6.25% coupon rate, that is automatically convertible to GM Class H common stock at a 24% premium in three years. Also in the second quarter of 1999, approximately 4.9 million new shares of GM Class H common stock were issued in conjunction with Hughes' acquisition of the PRIMESTAR medium-power satellite business. In July 1999, an additional 22.6 million new shares of GM Class H common stock were issued in connection with Hughes' merger with USSB. For purposes of calculating EPS, the additional 4.9 million shares were considered outstanding as of April 27, 1999, the 22.6 million shares were considered outstanding as of May 20, 1999 and the GM Class H dividend base was adjusted accordingly. Hughes Electronics Corporation is a unit of GM. The earnings of Hughes Electronics are used to calculate the earnings per share attributable to GMH (NYSE symbol) common stock. NOTE: Hughes Electronics Corporation believes that certain statements in this press release may constitute forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995. When used in this press release, the words "estimate," "plan," "project," "anticipate," "expect," "intend," "outlook," "believe," and other similar expressions are intended to identify forward-looking statements and information. Actual results of Hughes may differ materially from anticipated results as a result of certain risks and uncertainties, which include but are not limited to those associated with: (1) the failure to maintain leading technologies, (2) satellite failures, (3) manufacturing delays, (4) product demand and market acceptance, (5) ability to achieve cost reductions and successfully integrate acquired businesses, (6) regulatory approvals (including the failure to obtain export licenses), (7) pending litigation (including a pending grand jury investigation regarding export control laws) and (8) Year 2000 compliance. Hughes cautions that these important factors are not exclusive. - 24 - - ---------------------- (1) EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) is the sum of operating profit (loss) and depreciation and amortization. EBITDA margin is calculated by dividing EBITDA by total revenues. (2) Excludes the effects of purchase accounting adjustments related to General Motors' acquisition of Hughes in 1985. (3) Hughes was awarded a final judgement arising 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 of $154.6 million was received in the first quarter of 1999 and was recorded in "Other, net." (4) SurFin Ltd., provides financing for DIRECTV receiving equipment in Latin America. Grupo Galaxy Mexicana, S.A. de C.V. (GGM) is the local operating company providing DIRECTV service in Mexico. As a result of transactions that were completed in November 1998 (SurFin) and February 1999 (GGM), Hughes owns a majority position in each company. ### - 25 - STATEMENT OF INCOME (LOSS) AND AVAILABLE SEPARATE CONSOLIDATED NET INCOME (LOSS) (Dollars in Millions Except Per Share Amounts) Six Months Ended Second Quarter June 30, -------------- -------- 1999 1998 1999 1998 - --------------------------------------------------------------------------- Revenues Direct broadcast, leasing and other services $1,065.1 $606.4 $1,800.8 $1,205.3 Product sales 710.9 762.6 1,427.0 1,454.7 - ---------------------------------------------------------------------------- Total Revenues 1,776.0 1,369.0 3,227.8 2,660.0 - ---------------------------------------------------------------------------- Operating Costs and Expenses Cost of products sold 685.7 580.6 1,354.9 1,122.9 Broadcast programming and other costs 478.6 250.8 770.2 515.6 Selling, general and administrative expenses 548.5 359.2 953.3 661.8 Depreciation and amortization 159.8 100.2 282.8 197.9 Amortization of GM purchase accounting adjustments (1) 5.3 5.3 10.6 10.6 - ---------------------------------------------------------------------------- Total Operating Costs and Expenses 1,877.9 1,296.1 3,371.8 2,508.8 - ---------------------------------------------------------------------------- Operating Profit (Loss) (101.9) 72.9 (144.0) 151.2 Interest income 4.9 30.6 18.5 68.1 Interest expense (12.4) (2.9) (19.3) (5.9) Other, net (37.5) (35.1) 100.2 (69.4) - ----------------------------------------------------------------------------- Income (Loss) Before Income Taxes, Minority Interests and Cumulative Effect of Accounting Change (146.9) 65.5 (44.6) 144.0 Income tax provision (benefit) (42.5) 23.3 (6.7) 54.7 Minority interests in net losses of subsidiaries 6.8 8.6 13.3 9.9 - ---------------------------------------------------------------------------- Income (Loss) before cumulative effect of accounting change (97.6) 50.8 (24.6) 99.2 Cumulative effect of accounting change, net of taxes - - - (9.2) - ---------------------------------------------------------------------------- Net Income (Loss) (97.6) 50.8 (24.6) 90.0 Adjustments to exclude the effect of GM purchase accounting adjustments (1) 5.3 5.3 10.6 10.6 - ---------------------------------------------------------------------------- Earnings (Loss) excluding GM purchase Accounting adjustments (92.3) 56.1 (14.0) 100.6 Preferred Stock Dividends (1.6) - (1.6) - - --------------------------------------------------------------------------- Earnings (Loss) Used for Computation of Available Separate Consolidated Net Income (Loss) $(93.9) $56.1 $(15.6) $100.6 ============================================================================ Available Separate Consolidated Net Income (Loss) Average number of shares of General Motors Class H Common Stock outstanding (in millions) (Numerator) 121.0 105.2 113.6 104.7 Average Class H dividend base (in millions) (Denominator) 414.9 399.9 407.5 399.9 Available Separate Consolidated Net Income (Loss) $(27.4) $14.7 $(4.3) $26.2 ============================================================================ Earnings (Loss) Attributable to General Motors Class H Common Stock on a Per Share Basis - Basic and Diluted $(0.23) $0.14 $(0.04) $0.25 ============================================================================ (1) Relates to General Motors' purchase of Hughes in 1985. - 26 - BALANCE SHEET (Dollars in Millions) June 30, December 31, ASSETS 1999 1998 - ---------------------------------------------------------------------------- Current Assets Cash and cash equivalents $858.7 $1,342.1 Accounts and notes receivable 1,345.0 922.4 Contracts in process 690.6 783.5 Inventories 653.8 471.5 Prepaid expenses, deferred income taxes and other 591.5 326.9 - ---------------------------------------------------------------------------- Total Current Assets 4,139.6 3,846.4 Satellites - Net 3,515.8 3,197.5 Property - Net 1,303.0 1,059.2 Net Investment in Sales-type Leases 162.0 173.4 Intangible Assets - Net 7,420.0 3,552.2 Investments and Other Assets 1,732.6 1,606.3 - ---------------------------------------------------------------------------- Total Assets $18,273.0 $13,435.0 ============================================================================ LIABILITIES AND STOCKHOLDER'S EQUITY Current Liabilities Accounts payable $1,020.4 $764.1 Advances on contracts 178.0 291.8 Deferred revenues 94.7 43.8 Current portion of long-term debt 184.4 156.1 Accrued liabilities 1,542.2 753.7 - ---------------------------------------------------------------------------- Total Current Liabilities 3,019.7 2,009.5 Long-Term Debt 1,239.6 778.7 Deferred Gains on Sales and Leasebacks 59.6 121.5 Postretirement Benefits Other Than Pensions 153.9 150.7 Other Liabilities and Deferred Credits 1,495.1 867.1 Deferred Income Taxes 447.2 643.9 Minority Interests 502.2 481.7 Stockholder's Equity 11,355.7 8,381.9 - ---------------------------------------------------------------------------- Total Liabilities and Stockholder's Equity $18,273.0 $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). - 27 - PRO FORMA SELECTED SEGMENT DATA* (Dollars in Millions) Six Months Ended Second Quarter June 30, -------------- -------- 1999 1998 1999 1998 - ------------------------------------------------------------------------- DIRECT-TO-HOME BROADCAST Total Revenues $870.2 $401.5 $1,426.8 $789.4 EBITDA (1) $(6.8) $(16.7) $(2.9) $(25.8) Operating Loss $(68.4) $(40.2) $(91.8) $(71.8) Depreciation and Amortization $61.6 $23.5 $88.9 $46.0 Capital Expenditures (2) $78.2 $34.4 $155.8 $48.1 - -------------------------------------------------------------------------- SATELLITE SERVICES Total Revenues $200.4 $191.1 $393.9 $384.1 EBITDA (1) $151.0 $133.1 $296.9 $273.3 EBITDA Margin (1) 75.3% 69.6% 75.4% 71.2% Operating Profit $83.2 $74.4 $162.3 $160.1 Operating Profit Margin 41.5% 38.9% 41.2% 41.7% Depreciation and Amortization $67.8 $58.7 $134.6 $113.2 Capital Expenditures (3) $135.4 $164.7 $475.2 $414.3 - -------------------------------------------------------------------------- SATELLITE SYSTEMS Total Revenues $553.8 $674.8 $1,184.1 $1,299.1 EBITDA (1)(4) $(119.6) $71.5 $(121.0) $137.3 EBITDA Margin (1) N/A 10.6% N/A 10.6% Operating Profit (Loss) (4) $(133.0) $60.0 $(147.4) $115.1 Operating Profit Margin N/A 8.9% N/A 8.9% Depreciation and Amortization $13.4 $11.5 $26.4 $22.2 Capital Expenditures $22.8 $21.6 $35.1 $32.3 - -------------------------------------------------------------------------- NETWORK SYSTEMS Total Revenues $341.1 $221.7 $572.0 $406.4 EBITDA (1)(4) $25.0 $(15.3) $19.1 $(18.7) EBITDA Margin (1) 7.3% N/A 3.3% N/A Operating Profit (Loss) (4) $11.3 $(25.2) $(6.5) $(37.1) Operating Profit Margin 3.3% N/A N/A N/A Depreciation and Amortization $13.7 $9.9 $25.6 $18.4 Capital Expenditures $15.5 $10.9 $17.7 $15.7 - -------------------------------------------------------------------------- ELIMINATIONS and OTHER Total Revenues $(189.5) $(120.1) $(349.0) $(219.0) EBITDA (1) $13.6 $5.8 $(42.7) $(6.4) Operating Profit (Loss) $10.3 $9.2 $(50.0) $(4.5) Depreciation and Amortization $3.3 $(3.4) $7.3 $(1.9) Capital Expenditures $36.7 $10.0 $4.5 $135.9 - -------------------------------------------------------------------------- TOTAL Total Revenues $1,776.0 $1,369.0 $3,227.8 $2,660.0 EBITDA (1)(4) $63.2 $178.4 $149.4 $359.7 EBITDA Margin (1) 3.6% 13.0% 4.6% 13.5% Operating Profit (Loss) (4) $(96.6) $78.2 $(133.4) $161.8 Operating Profit Margin N/A 5.7% N/A 6.1% Depreciation and Amortization $159.8 $100.2 $282.8 $197.9 Capital Expenditures $288.6 $241.6 $688.3 $646.3 - -------------------------------------------------------------------------- See notes on next page. - 28 - * 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) 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 satellite expenditures amounting to $22.5 million and $75.5 million in the second quarter and first six months of 1999, respectively. (3) Includes satellite expenditures amounting to $125.9 million, $94.4 million, $315.6 million and $240.0 million, respectively. Also included are expenditures related to the early buy-out of satellite sale-leasebacks totaling $58.9 million for the second quarter of 1998 and $141.3 million and $155.5 million for the first six months of 1999 and 1998, respectively. (4) Amounts for the six months ended June 30, 1999 include charges of $81.0 million and $11.0 million for the Satellite Systems and Network Systems, respectively, relating to the termination of the Asia-Pacific Mobile Telecommunications satellite systems contract due to export licenses not being issued. 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 July 20, 1999 ----------------- By s/Peter R. Bible ------------------------------- (Peter R. Bible, Chief Accounting Officer) - 29 - -----END PRIVACY-ENHANCED MESSAGE-----