-----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, LxlthmOHaoZFKjlH/YV6ngu8TY83+okAO1u6J5MK3164C2wRXB8dolyhcXxTnaHe EP294uAqtBv9kodiSHNwgw== 0000950124-96-002243.txt : 19960517 0000950124-96-002243.hdr.sgml : 19960517 ACCESSION NUMBER: 0000950124-96-002243 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960515 SROS: CSX SROS: NASD SROS: NYSE SROS: PHLX SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: GENERAL MOTORS CORP CENTRAL INDEX KEY: 0000040730 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLES & PASSENGER CAR BODIES [3711] IRS NUMBER: 380572515 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-00143 FILM NUMBER: 96567574 BUSINESS ADDRESS: STREET 1: 767 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10153-0075 BUSINESS PHONE: 3135565000 10-Q 1 FORM 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549-1004 ------------------------------ FORM 10-Q /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1996 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 1-143 GENERAL MOTORS CORPORATION (Exact name of registrant as specified in its charter) STATE OF DELAWARE 38-0572515 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 767 FIFTH AVENUE, NEW YORK, NEW YORK 10153-0075 3044 WEST GRAND BOULEVARD, DETROIT, MICHIGAN 48202-3091 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (313)-556-5000 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes /X/. No / /. As of March 31, 1996, there were outstanding 756,164,456 shares of the issuer's $1 2/3 par value common stock, 485,708,417 shares of Class E $0.10 par value common stock, and 97,922,437 shares of Class H $0.10 par value common stock. 2 GENERAL MOTORS CORPORATION AND SUBSIDIARIES INDEX
PAGE NO. -------- Part I -- Financial Information (Unaudited) Item 1. Financial Statements Consolidated Statement of Income................................................ 3 Consolidated Balance Sheet...................................................... 5 Condensed Consolidated Statement of Cash Flows.................................. 7 Notes to Consolidated Financial Statements...................................... 8 Item 2. Management's Discussion and Analysis....................................... 13 Part II -- Other Information Item 1. Legal Proceedings.......................................................... 28 Item 6. Exhibits and Reports on Form 8-K........................................... 28 Signatures........................................................................... 29 Exhibit 11 Computation of Earnings Per Share Attributable to Common Stocks for the Three Months Ended March 31, 1996 and 1995......................................... 30 Exhibit 12 Computation of Ratios of Earnings to Fixed Charges for the Three Months Ended March 31, 1996 and 1995...................................................... 32 Exhibit 99(a) Electronic Data Systems Corporation and Subsidiaries Consolidated Financial Statements and Management's Discussion and Analysis............................................................... 33 (b) Hughes Electronics Corporation and Subsidiaries Consolidated Financial Statements and Management's Discussion and Analysis............................................................... 42 Exhibit 27 Financial Data Schedule (for SEC information only)
2 3 PART I GENERAL MOTORS CORPORATION AND SUBSIDIARIES ITEM 1. FINANCIAL STATEMENTS CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
THREE MONTHS ENDED MARCH 31, ---------------------- 1996 1995 --------- --------- (DOLLARS IN MILLIONS) Net Sales and Revenues Manufactured products................................................ $34,657.5 $37,477.4 Financial services................................................... 3,179.2 2,717.4 Computer systems services............................................ 2,404.7 1,878.3 Other income (Note 3)................................................ 1,420.7 1,211.9 --------- --------- Total Net Sales and Revenues.................................... 41,662.1 43,285.0 --------- --------- Costs and Expenses Cost of sales and other operating charges, exclusive of items listed below............................................................. 31,742.2 31,951.9 Selling, general, and administrative expenses........................ 3,293.5 3,097.1 Interest expense..................................................... 1,457.1 1,489.0 Depreciation of real estate, plants, and equipment................... 2,358.8 2,031.0 Amortization of special tools........................................ 760.7 868.2 Amortization of intangible assets.................................... 61.1 50.3 Other deductions (Note 3)............................................ 413.6 317.8 --------- --------- Total Costs and Expenses........................................ 40,087.0 39,805.3 --------- --------- Income before Income Taxes............................................. 1,575.1 3,479.7 Income taxes........................................................... 555.6 1,325.7 --------- --------- Income before cumulative effect of accounting change................... 1,019.5 2,154.0 Cumulative effect of accounting change (Note 4)........................ -- (51.8) --------- --------- Net Income............................................................. 1,019.5 2,102.2 Dividends on preference stocks......................................... 20.3 72.0 --------- --------- Income on Common Stocks................................................ $ 999.2 $ 2,030.2 ========= =========
Reference should be made to the Notes to Consolidated Financial Statements. 3 4 GENERAL MOTORS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME -- CONCLUDED (UNAUDITED)
THREE MONTHS ENDED MARCH 31, -------------------- 1996 1995 ------ -------- (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) Earnings Attributable to Common Stocks (Note 10) $1 2/3 par value before cumulative effect of accounting change........ $714.0 $1,896.3 Cumulative effect of accounting change (Note 4)....................... -- (51.8) ------ -------- Net earnings attributable to $1 2/3 par value......................... $714.0 $1,844.5 ====== ======== Net earnings attributable to Class E.................................. $209.2 $ 122.4 ====== ======== Net earnings attributable to Class H.................................. $ 76.0 $ 63.3 ====== ======== Average number of shares of common stocks outstanding (in millions) $1 2/3 par value...................................................... 755.2 752.6 Class E............................................................... 463.2 300.0 Class H............................................................... 97.4 94.2 Earnings Per Share Attributable to Common Stocks (Note 10) $1 2/3 par value before cumulative effect of accounting change........ $0.94 $ 2.51 Cumulative effect of accounting change (Note 4)....................... -- (0.07) ------ -------- Net earnings attributable to $1 2/3 par value......................... $0.94 $ 2.44 ====== ======== Net earnings attributable to Class E.................................. $0.45 $ 0.42 ====== ======== Net earnings attributable to Class H.................................. $0.78 $ 0.67 ====== ======== Cash Dividends Per Share of Common Stocks (Note 10) $1 2/3 par value...................................................... $0.40 $0.20 Class E............................................................... $0.15 $0.13 Class H............................................................... $0.24 $0.23
Reference should be made to the Notes to Consolidated Financial Statements. 4 5 GENERAL MOTORS CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET ASSETS
MARCH 31, DEC. 31, MARCH 31, 1996 1995 1995 ----------- ---------- ----------- (UNAUDITED) (UNAUDITED) (DOLLARS IN MILLIONS) Cash and cash equivalents................................ $ 8,836.8 $ 11,044.3 $ 10,418.9 Other marketable securities.............................. 5,490.5 5,598.6 5,602.3 ---------- ---------- ---------- Total cash and marketable securities.............. 14,327.3 16,642.9 16,021.2 Finance receivables -- net............................... 59,092.5 59,806.5 57,867.9 Accounts and notes receivable -- net..................... 9,722.1 9,988.4 9,563.6 Inventories -- net (Note 5).............................. 12,561.4 11,529.5 11,404.7 Contracts in process -- net.............................. 2,708.9 2,469.2 2,647.3 Net equipment on operating leases........................ 27,770.6 27,702.3 26,188.8 Deferred income taxes.................................... 19,477.0 19,028.3 18,482.6 Property Real estate, plants, and equipment -- at cost.......... 74,451.0 73,652.3 72,166.2 Less accumulated depreciation.......................... 44,414.9 44,083.2 44,144.4 ---------- ---------- ---------- Net real estate, plants, and equipment.............. 30,036.1 29,569.1 28,021.8 Special tools -- net................................... 8,294.1 8,170.7 7,556.8 ---------- ---------- ---------- Total property.................................... 38,330.2 37,739.8 35,578.6 Intangible assets -- net................................. 11,453.9 11,428.6 11,803.1 Other assets -- net...................................... 21,104.8 21,862.4 21,615.0 ---------- ---------- ---------- Total Assets...................................... $ 216,548.7 $218,197.9 $ 211,172.8 ========== ========== ==========
Reference should be made to the Notes to Consolidated Financial Statements. 5 6 GENERAL MOTORS CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET - CONCLUDED LIABILITIES AND STOCKHOLDERS' EQUITY
MARCH 31, DEC. 31, MARCH 31, 1996 1995 1995 ----------- ---------- ----------- (UNAUDITED) (UNAUDITED) (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) Liabilities Accounts payable....................................... $ 11,743.2 $ 12,973.3 $ 13,247.7 Notes and loans payable................................ 82,647.0 83,323.5 76,300.9 Income taxes -- deferred and payable................... 3,249.6 3,231.6 3,491.7 Postretirement benefits other than pensions (Note 6)... 42,014.9 41,595.1 40,408.5 Pensions............................................... 5,251.4 6,842.3 6,804.2 Other liabilities and deferred credits................. 47,620.8 46,886.6 49,155.1 ---------- ---------- ---------- Total Liabilities................................. 192,526.9 194,852.4 189,408.1 ---------- ---------- ---------- Stocks Subject to Repurchase............................. -- -- 450.0 ---------- ---------- ---------- Stockholders' Equity Preference stocks Series B 9 1/8% Depositary Shares, $0.5, $0.5, and $1.1; Series C Depositary Shares, $-, $0.3, and $0.3; Series D 7.92% Depositary Shares, $0.1, $0.1, and $0.4; and Series G 9.12% Depositary Shares, $0.3, $0.3, and $0.6 in March 1996, December 1995, and March 1995 (Note 9)............................................ 0.9 1.2 2.4 Common stocks $1 2/3 par value (issued, 756,621,525; 753,008,273; and 747,629,128 shares)........................... 1,261.0 1,255.0 1,246.0 Class E (issued, 487,568,555; 442,812,166; and 442,432,315 shares) (Note 9)...................... 48.8 44.3 44.2 Class H (issued, 98,154,411; 97,152,014; and 80,236,772 shares)................................ 9.8 9.7 8.0 Capital surplus (principally additional paid-in capital)............................................ 19,114.1 18,870.9 19,244.7 Net income retained for use in the business............ 7,781.9 7,185.4 3,609.4 ---------- ---------- ---------- Subtotal.......................................... 28,216.5 27,366.5 24,154.7 Minimum pension liability adjustment................... (4,742.2) (4,736.3) (3,548.4) Accumulated foreign currency translation adjustments... 118.3 222.5 377.4 Net unrealized gains on investments in certain debt and equity securities................................... 429.2 492.8 331.0 ---------- ---------- ---------- Total Stockholders' Equity........................ 24,021.8 23,345.5 21,314.7 ---------- ---------- ---------- Total Liabilities and Stockholders' Equity........ $ 216,548.7 $218,197.9 $ 211,172.8 ========== ========== ==========
Reference should be made to the Notes to Consolidated Financial Statements. 6 7 GENERAL MOTORS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, -------------------------- 1996 1995 ---------- ---------- (DOLLARS IN MILLIONS) Net Cash Provided by Operating Activities......................... $ 2,394.7 $ 5,047.0 ---------- ---------- Cash Flows from Investing Activities Expenditures for real estate, plants, and equipment............. (1,478.9) (1,153.8) Expenditures for special tools.................................. (866.6) (725.3) Other........................................................... (545.0) 54.0 Change in other investing assets Investments in other marketable securities -- acquisitions... (5,129.2) (5,738.1) Investments in other marketable securities -- liquidations... 5,246.8 5,271.7 Finance receivables -- acquisitions.......................... (39,145.0) (42,056.7) Finance receivables -- liquidations.......................... 33,812.0 33,770.5 Proceeds from sales of finance receivables................... 5,876.2 6,051.6 Operating leases -- acquisitions............................. (5,212.3) (4,140.6) Operating leases -- liquidations............................. 3,755.3 1,646.7 ---------- ---------- Net Cash Used in Investing Activities...................... (3,686.7) (7,020.0) ---------- ---------- Cash Flows from Financing Activities Net increase (decrease) in short-term loans payable............. (2,385.9) 360.6 Increase in long-term debt...................................... 5,262.1 6,167.5 Decrease in long-term debt...................................... (3,483.7) (4,565.8) Repurchases of common and preference stocks..................... (0.2) (303.3) Proceeds from issuing common stocks............................. 195.1 112.0 Cash dividends paid to stockholders............................. (422.8) (278.6) ---------- ---------- Net Cash Provided by (Used in) Financing Activities........ (835.4) 1,492.4 ---------- ---------- Effect of Exchange Rate Changes on Cash and Cash Equivalents...... (80.1) (39.5) ---------- ---------- Net decrease in cash and cash equivalents......................... (2,207.5) (520.1) Cash and cash equivalents at beginning of the period.............. 11,044.3 10,939.0 ---------- ---------- Cash and cash equivalents at end of the period.................... $ 8,836.8 $ 10,418.9 ========== ==========
Reference should be made to the Notes to Consolidated Financial Statements. 7 8 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 1. FINANCIAL STATEMENT PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. In the opinion of management, all adjustments (consisting of only normal recurring items, except as discussed in Note 4), which are necessary for a fair presentation have been included. The results for interim periods are not necessarily indicative of results which may be expected for any other interim period or for the full year. For further information, refer to the consolidated financial statements and notes thereto included in General Motors' 1995 Annual Report on Form 10-K, as amended. Certain amounts for 1995 were reclassified to conform with the 1996 classifications. NOTE 2. EDS SPLIT-OFF On March 31, 1996, the General Motors Board of Directors (the GM Board) approved specific terms for a split-off of EDS to General Motors Class E shareholders in a tax-free exchange of stock, as well as a new 10-year agreement under which EDS would continue to be General Motors' principal provider of information-technology services. Under terms of the split-off proposal, each share of General Motors Class E common stock would be exchanged for one share of EDS common stock. In addition, EDS would make a one-time payment of $500 million to General Motors. This proposed payment enabled the GM Board to determine, in considering the overall terms, conditions and benefits of the split-off, that the transaction is fair to all classes of General Motors common stockholders. A joint solicitation statement/prospectus of General Motors and EDS has been filed with the Securities and Exchange Commission and is being distributed to General Motors common shareholders in order to secure their approval of the split-off proposal and related matters. If such approval is obtained, the split-off could occur before the end of the second quarter. No offering of securities of EDS in connection with the proposed split-off will be made other than by means of such prospectus. Statements about the effect of the proposed split-off are forward-looking statements which, by their nature, are subject to numerous uncertainties that could cause actual results to vary. NOTE 3. OTHER INCOME AND OTHER DEDUCTIONS Other income and other deductions consist of:
THREE MONTHS ENDED MARCH 31, --------------------- 1996 1995 -------- -------- (DOLLARS IN MILLIONS) Other Income Nonfinancing interest................................................ $ 400.4 $ 460.1 Insurance premiums................................................... 242.8 218.9 Gain on sale of interest in DIRECTV(R)............................... 120.3 -- Claims, commissions, and grants...................................... 74.3 95.3 Equity in earnings of associates, net................................ 33.9 46.8 Gain on the sale of finance receivables.............................. -- 19.9 Other................................................................ 549.0 370.9 -------- -------- Total Other Income.............................................. $1,420.7 $1,211.9 ======== ======== Other Deductions Provision for financing losses....................................... $ 155.2 $ 55.0 Insurance losses and loss adjustment expenses........................ 142.5 160.7 Other................................................................ 115.9 102.1 -------- -------- Total Other Deductions.......................................... $ 413.6 $ 317.8 ======== ========
8 9 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED (UNAUDITED) NOTE 4. NEW ACCOUNTING STANDARD AND ACCOUNTING CHANGE General Motors adopted Statement of Financial Accounting Standards (SFAS) No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, effective as of January 1, 1996. The effect of adoption was not material. The Emerging Issues Task Force (EITF) of the Financial Accounting Standards Board reached a consensus in November 1995 on its Issue No. 95-1 and concluded that a manufacturer must account for the sale of equipment as an operating lease if it guarantees the resale value of the equipment to the purchaser. Accordingly, the Corporation modified its revenue recognition policy on sales to daily rental car companies to conform to the consensus. Adoption of this consensus, effective January 1, 1995, resulted in an unfavorable cumulative effect of $51.8 million after-tax ($0.07 per share) attributable to $1 2/3 par value common stock, and increases in net equipment on operating leases of $4.4 billion and other liabilities and deferred credits of $4.6 billion. NOTE 5. INVENTORIES Major classes of inventories are as follows:
MARCH 31, DEC. 31, MARCH 31, 1996 1995 1995 --------- --------- --------- (DOLLARS IN MILLIONS) Productive material, work in process, and supplies -- net... $ 7,147.5 $ 6,570.4 $ 6,079.9 Finished product, service parts, etc. -- net 5,413.9 4,959.1 5,324.8 -------- -------- -------- Total inventories -- net............................... $12,561.4 $11,529.5 $11,404.7 ======== ======== ========
NOTE 6. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS General Motors has disclosed in the consolidated financial statements certain amounts associated with estimated future postretirement benefits other than pensions and characterized such amounts as "accumulated postretirement benefit obligations", "liabilities", or "obligations". Notwithstanding the recording of such amounts and the use of these terms, General Motors does not admit or otherwise acknowledge that such amounts or existing postretirement benefit plans of General Motors (other than pensions) represent legally enforceable liabilities of General Motors. NOTE 7. PLANT CLOSINGS AND RESTRUCTURING RESERVES General Motors previously recorded charges to realign GM-NAO's plant capacity and to provide for a reduction of Hughes' worldwide employment, a major facilities consolidation, and a reevaluation of certain non-strategic businesses. The following table summarizes the activity in the GM-NAO plant closings (excluding environmental) and Hughes restructuring reserves for the period from January 1, 1994 to March 31, 1996: Balance at January 1, 1994 (Dollars in Millions).................................. $4,151.7 1994 charges against reserves................................................... (722.6) Discount of people related liabilities.......................................... (401.9) Additions to the reserve by Hughes.............................................. 35.0 Reclassification from environmental clean-up liability.......................... 41.4 -------- Balance at December 31, 1994...................................................... 3,103.6 1995 charges against reserves................................................... (706.7) Adjustments to discount for effects of accretion and change in interest rates... 215.4 -------- Balance at December 31, 1995...................................................... 2,612.3 1996 first quarter charges against reserves..................................... (116.5) Adjustment to discount for effect of accretion.................................. 24.7 -------- Balance at March 31, 1996......................................................... $2,520.5 ========
General Motors and Hughes periodically evaluate the reserve balances and estimated future expenditures to assess the assumptions used and the period over which such costs are expected to be incurred. 9 10 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED (UNAUDITED) NOTE 8. CONTINGENT LIABILITIES The Corporation and its subsidiaries are subject to potential liability under government regulations and various claims and legal actions which are pending or may be asserted against them. Some of the pending actions purport to be class actions. The aggregate ultimate liability of the Corporation and its subsidiaries under these government regulations, and under these claims and actions, was not determinable at March 31, 1996. In the opinion of management, such liability is not expected to have a material adverse effect on the Corporation's consolidated operations or financial position. NOTE 9. SERIES C PREFERENCE STOCK CONVERSION AND REDEMPTION During the 1996 first quarter, approximately 44.7 million shares of Class E common stock were issued upon conversion of approximately 3.2 million shares of Series C Preference Stock (represented by depositary shares). The remaining 6,784 shares of Series C Preference Stock were redeemed on February 22, 1996 for $3.6 million of cash, or $524.20 per share of Series C Preference Stock ($52.42 per depositary share). NOTE 10. EARNINGS PER SHARE ATTRIBUTABLE TO AND DIVIDENDS ON COMMON STOCKS Earnings per share attributable to common stocks was determined based on the relative amounts available for the payment of dividends to holders of $1 2/3 par value, Class E, and Class H common stocks. The allocation of earnings attributable to such common stocks and the calculation of the related amounts per share were computed by considering the weighted average number of common shares outstanding. Beginning in 1996, common stock equivalents were not considered as they are not material. The Available Separate Consolidated Net Income of Electronic Data Systems Corporation (EDS) and Hughes Electronics Corporation (Hughes) is determined quarterly and is equal to the separate consolidated net income of EDS and Hughes, respectively, excluding the effects of purchase accounting adjustments arising at the time of the respective acquisition, multiplied by a fraction, the numerator of which is a number equal to the weighted average number of shares of Class E (463.2 million during the first quarter of 1996) or Class H (97.4 million during the first quarter of 1996) common stock outstanding during the period and the denominator of which was 484.4 million for Class E common stock and 399.9 million for Class H common stock during the first quarter of 1996. Comparable numerators for the first quarter of 1995 were 300.0 million for Class E common stock and 94.2 million for Class H common stock. Comparable denominators for the first quarter of 1995 were 482.4 million for Class E common stock and 399.9 million for Class H common stock. The denominators used in determining the Available Separate Consolidated Net Income of EDS and Hughes are adjusted as deemed appropriate by the Board of Directors to reflect subdivisions or combinations of the Class E and Class H common stocks and to reflect certain transfers of capital to or from EDS and Hughes. The Board's discretion to make such adjustments is limited by criteria set forth in the Corporation's Certificate of Incorporation. In this regard, the Board has generally caused the denominators to decrease as shares are purchased by EDS or Hughes, and to increase as such shares are used, at EDS or Hughes expense, for EDS or Hughes employee benefit plans or acquisitions. Dividends on the $1 2/3 par value common stock are declared out of the earnings of GM and its subsidiaries, excluding the Available Separate Consolidated Net Income of EDS and Hughes. Dividends on the Class E and Class H common stocks are declared out of the Available Separate Consolidated Net Income of EDS and Hughes, respectively, earned since the respective acquisition by the Corporation. Dividends may be paid on common stocks only when, as, and if declared by the Board of Directors in its sole discretion. The Board's policy with respect to $1 2/3 par value common stock is to distribute dividends based on the outlook and the indicated capital needs of the business. The current policy of the Board with respect to the Class E and Class H common stocks is to pay quarterly cash dividends at an annual rate approximately equal to 30% and 35% of the Available Separate Consolidated Net Income of EDS and Hughes, respectively, for the prior year. 10 11 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED (UNAUDITED) NOTE 11. Summary financial data of General Motors Acceptance Corporation (GMAC) and its subsidiaries were as follows: CONDENSED GMAC CONSOLIDATED STATEMENT OF INCOME
THREE MONTHS ENDED MARCH 31, -------------------- 1996 1995 -------- -------- (DOLLARS IN MILLIONS) Financing Revenue Retail and lease financing............................................. $ 957.5 $ 750.4 Operating leases....................................................... 1,738.3 1,433.0 Wholesale and term loans............................................... 483.4 534.0 -------- -------- Total financing revenue............................................. 3,179.2 2,717.4 Interest and discount.................................................... 1,239.7 1,219.8 Depreciation on operating leases......................................... 1,150.7 989.7 -------- -------- Net financing revenue............................................... 788.8 507.9 Insurance premiums earned................................................ 297.5 271.3 Other income............................................................. 447.1 499.0 -------- -------- Net financing revenue and other..................................... 1,533.4 1,278.2 Expenses................................................................. 1,026.1 847.5 -------- -------- Income before income taxes.......................................... 507.3 430.7 Income taxes............................................................. 198.2 175.8 -------- -------- Net Income.......................................................... $ 309.1 $ 254.9 ======== ========
CONDENSED GMAC CONSOLIDATED BALANCE SHEET
MARCH 31, DEC. 31, MARCH 31, 1996 1995 1995 --------- --------- --------- (DOLLARS IN MILLIONS) Cash and cash equivalents................................... $ 1,361.6 $ 1,448.6 $ 1,655.7 Investments in securities................................... 4,319.2 4,328.2 4,244.8 Finance receivables -- net.................................. 59,632.4 60,404.9 58,357.7 Net investment in operating leases.......................... 22,875.9 22,134.9 19,207.3 Notes receivable from General Motors........................ -- -- 1,242.2 Other assets................................................ 6,870.7 7,330.9 6,802.9 --------- --------- --------- Total Assets........................................... $95,059.8 $95,647.5 $91,510.6 ========= ========= ========= Short-term debt............................................. $43,297.3 $43,871.8 $35,347.8 Accounts payable and other liabilities...................... 12,763.6 12,455.8 14,584.8 Long-term debt.............................................. 30,709.4 31,050.6 33,438.2 Stockholder's equity........................................ 8,289.5 8,269.3 8,139.8 --------- --------- --------- Total Liabilities and Stockholder's Equity............. $95,059.8 $95,647.5 $91,510.6 ========= ========= =========
11 12 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONCLUDED (UNAUDITED) CONDENSED GMAC CONSOLIDATED STATEMENT OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, ------------------------ 1996 1995 ---------- ---------- (DOLLARS IN MILLIONS) Net Cash Provided by Operating Activities............................ $ 1,880.8 $ 3,492.9 ---------- ---------- Cash Flows from Investing Activities Finance receivables-acquisitions..................................... (39,145.0) (42,056.7) Finance receivables-liquidations..................................... 33,812.0 33,770.5 Notes receivable from General Motors................................. -- (161.7) Operating leases -- acquisitions..................................... (4,207.6) (3,302.0) Operating leases -- liquidations..................................... 2,256.0 1,214.8 Investments in securities -- acquisitions............................ (2,887.2) (3,613.6) Investments in securities -- liquidations............................ 2,893.3 3,403.8 Proceeds from sales of receivables -- wholesale...................... 5,876.2 3,989.1 Proceeds from sales of receivables -- retail......................... -- 2,062.5 Due and deferred from receivable sales............................... 243.7 (47.7) Other................................................................ 257.7 232.9 ---------- ---------- Net Cash Used in Investing Activities........................... (900.9) (4,508.1) ---------- ---------- Cash Flows from Financing Activities Debt with original maturities 90 days and over -- proceeds........................................................ 9,847.3 15,714.9 -- liquidations.................................................... (11,202.6) (13,676.7) Debt with original maturities less than 90 days -- net change........ 536.6 (500.5) Cash dividends paid to General Motors................................ (250.0) (200.0) ---------- ---------- Net Cash Provided by (Used in) Financing Activities............. (1,068.7) 1,337.7 ---------- ---------- Effect of exchange rate changes on cash and cash equivalents......... 1.8 (6.3) ---------- ---------- Net increase (decrease) in cash and cash equivalents................. (87.0) 316.2 Cash and cash equivalents at beginning of the period................. 1,448.6 1,339.5 ---------- ---------- Cash and cash equivalents at end of the period....................... $ 1,361.6 $ 1,655.7 ========== ==========
* * * * * * 12 13 GENERAL MOTORS CORPORATION AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS The following management's discussion and analysis should be read in conjunction with the management's discussion and analysis included in the Corporation's 1995 Annual Report to the SEC on Form 10-K, as amended, (the 1995 Form 10-K) and management's discussion and analysis relating to Electronic Data Systems Corporation (EDS) and Hughes Electronics Corporation (Hughes) included in Exhibits 99(a) and 99(b), respectively, to the 1995 Form 10-K. The competitive position and environmental matters discussions included in Part I, Item 1 of the 1995 Form 10-K are specifically incorporated by reference herein. GM-NAO/DELPHI FINANCIAL HIGHLIGHTS
THREE MONTHS ENDED MARCH 31, ----------------------- 1996 1995 --------- --------- (DOLLARS IN MILLIONS) Net Sales............................................................. $23,565.1 $27,449.6 --------- --------- Pre-tax Income (Loss)................................................. (387.4) 1,589.3 Income Taxes (Benefit)................................................ (172.3) 563.1 Earnings of Nonconsolidated Affiliates................................ 19.8 31.8 Cumulative effect of accounting change................................ -- (51.8)(1) --------- --------- Net Income (Loss)................................................ $ (195.3) $ 1,006.2 ========= ========= Net Profit (Loss) Margin(2)...................................... (0.8)% 3.7%
- ------------------------- (1) In November 1995, the provisions of Issue No. 95-1 of the Emerging Issues Task Force (EITF) of the Financial Accounting Standards Board were retroactively adopted to January 1, 1995, which had an unfavorable impact of $51.8 million. (2) Net profit (loss) margin represents net income (loss) as a percent of net sales. VEHICLE UNIT DELIVERIES OF CARS AND TRUCKS -- GM-NAO
THREE MONTHS ENDED MARCH 31, -------------------------------------------------------------- 1996 1995 ----------------------------- ----------------------------- GM AS GM AS A % OF A % OF INDUSTRY GM INDUSTRY INDUSTRY GM INDUSTRY -------- ----- -------- -------- ----- -------- (UNITS IN THOUSANDS) United States Cars........................................ 2,050 661 32.2% 2,028 664 32.7% Trucks...................................... 1,643 491 29.9% 1,536 474 30.9% ----- ----- ----- ----- Total United States...................... 3,693 1,152 31.2% 3,564 1,138 31.9% Other North America........................... 331 103 31.1% 353 105 29.7% ----- ----- ----- ----- Total North America...................... 4,024 1,255 31.2% 3,917 1,243 31.7% ===== ===== ===== ===== Wholesale Sales -- GM-NAO Cars........................................ 657 938 Trucks...................................... 509 592 ----- ----- Total.................................... 1,166 1,530 ===== =====
13 14 GENERAL MOTORS CORPORATION AND SUBSIDIARIES GM-NAO/DELPHI FINANCIAL REVIEW GM-NAO/Delphi, which represents the combined results of GM-NAO and Delphi Automotive Systems, reported a net loss of $195.3 million for the 1996 first quarter, compared to net income of $1,006.2 million in the same prior year period. The 1996 first quarter results included an $870 million after-tax loss from a 17-day strike at two component plants in Dayton, Ohio that temporarily shutdown 26 of General Motors' 29 assembly plants in North America and certain automotive component plants. The strike also caused an additional $30 million after-tax loss at the Delco Electronics unit of Hughes Electronics Corporation resulting in a total after-tax loss of $900 million. Net income reported for the 1995 first quarter was restated to reflect the impact of General Motors' adoption, retroactive to January 1, 1995, of EITF Issue No. 95-1, which reduced previously reported net income by $51.8 million. Net sales for the 1996 first quarter were $23,565.1 million, down $3,884.5 million, or 14.2%, compared to the same 1995 period. The net sales decrease resulted from a 364,000 unit reduction in wholesale sales and increased sales incentives, partially offset by an increase in Delphi's non-GM-NAO vehicle sales. The decrease in wholesale sales resulted from the unfavorable impact of the strike and lower pre-strike production necessary to balance U.S. vehicle inventories. General Motors vehicle deliveries in North America were 1,255,000 units in the 1996 first quarter, which resulted in a market share of 31.2%, down slightly from 31.7% for the first quarter of 1995. Despite the unfavorable impact of the strike, General Motors maintained its position as the number one vehicle producer in North America. GM-NAO/Delphi reported a pre-tax loss of $387.4 million in the 1996 first quarter compared to pre-tax income of $1,589.3 million in the comparable 1995 period. The year-over-year reduction in pre-tax results reflected the impact of lower volume, higher incentives, and increased design and engineering costs associated with new product development. These unfavorable items were partially offset by continued manufacturing cost reductions and lower pension and interest expense. The manufacturing cost reductions resulted from GM-NAO's and Delphi's commitment to reduce costs, increase the flexibility of operations, and improve the quality of products and services. The lower pension expense in the 1996 first quarter reflected the improved funding of the U.S. pension plans, while the reduced interest expense resulted from a reduction in interest accrued on outstanding tax matters, reflecting the 1995 resolution of various income tax issues. GMIO FINANCIAL HIGHLIGHTS
THREE MONTHS ENDED MARCH 31, -------------------- 1996 1995 -------- -------- (DOLLARS IN MILLIONS) Net Sales................................................................ $8,997.5 $8,191.6 -------- -------- Pre-tax Income........................................................... 576.6 842.5 Income Taxes............................................................. 170.4 347.5 Earnings of Nonconsolidated Affiliates................................... 25.4 27.1 -------- -------- Net Income GM Europe.............................................................. 284.9 328.4 Other International.................................................... 146.7 193.7 -------- -------- Total Net Income.................................................... $ 431.6 $ 522.1 ======== ======== Net Profit Margin................................................... 4.8% 6.4%
14 15 GENERAL MOTORS CORPORATION AND SUBSIDIARIES VEHICLE UNIT DELIVERIES OF CARS AND TRUCKS -- GMIO
THREE MONTHS ENDED MARCH 31, ---------------------------------------------------------- 1996 1995 --------------------------- --------------------------- GM AS GM AS A % OF A % OF INDUSTRY GM INDUSTRY INDUSTRY GM INDUSTRY -------- --- -------- -------- --- -------- (UNITS IN THOUSANDS) International Europe........................................... 4,356 487 11.2% 4,172 465 11.1% Latin America, Africa and the Middle East (LAAMO)........................................ 935 163 17.4% 1,004 146 14.5% Asian and Pacific................................ 3,549 158 4.4% 3,514 140 4.0% ----- --- ----- --- Total International....................... 8,840 808 9.1% 8,690 751 8.6% ===== === ===== === Wholesale Sales -- GMIO Cars 588 591 Trucks 204 175 --- --- Total..................................... 792 766 === ===
GMIO FINANCIAL REVIEW General Motors' International Operations (GMIO) recorded net income of $431.6 million, or 4.8% of net sales, in the first quarter of 1996 compared with net income of $522.1 million, or 6.4% of net sales, in the first quarter of 1995. The lower net income for the quarter was largely due to unfavorable product mix and currency-exchange movements, as well as continued cost pressures in Latin America. Total net sales for GMIO increased by $805.9 million, or 9.8%, to $8,997.5 million for the first quarter of 1996, compared to $8,191.6 million in the prior year period. The increased net sales reflected higher volume worldwide, partially offset by unfavorable product mix in Europe and Latin America. In spite of the increasingly competitive international market environment, GMIO achieved an increase in market penetration during the 1996 first quarter compared to the same period in 1995. At the pre-tax level, GMIO recorded income of $576.6 million, down $265.9 million from the prior year period when pre-tax income was $842.5 million. The decrease in pre-tax income resulted from wage escalation and material price increases in Latin America, exchange losses (primarily due to the devaluation of the Brazilian Real and Venezuelan Bolivar), and unfavorable product mix, partially offset by the effect of favorable volume worldwide. Looking at the regional split of net income, GMIO's reduced net income resulted from lower income for GM Europe (GME) as well as the remainder of GMIO's operations. GME's net income was $284.9 million, compared to $328.4 million for the 1995 first quarter. The lower first quarter 1996 net income for GME resulted from unfavorable product mix, primarily due to the Vectra launch, offset by the favorable impact of increased volume. The remainder of GMIO's operations reported net income of $146.7 million, a reduction of $47.0 million compared to 1995. The decrease for the remainder of GMIO resulted from unfavorable exchange, continued cost pressures, and unfavorable product mix (high availability of the Corsa and the Vectra launch in Brazil), partially offset by increased volume. 15 16 GENERAL MOTORS CORPORATION AND SUBSIDIARIES GENERAL MOTORS ACCEPTANCE CORPORATION (GMAC) FINANCIAL HIGHLIGHTS
THREE MONTHS ENDED MARCH 31, ---------------------- 1996 1995 --------- --------- (DOLLARS IN MILLIONS) Financing revenue Retail and lease financing........................................... $ 957.5 $ 750.4 Operating leases..................................................... 1,738.3 1,433.0 Wholesale and term loans............................................. 483.4 534.0 --------- --------- Total financing revenue........................................... 3,179.2 2,717.4 Interest and discount.................................................. 1,239.7 1,219.8 Depreciation on operating leases....................................... 1,150.7 989.7 --------- --------- Net financing revenue............................................. 788.8 507.9 Other income and insurance premiums earned............................. 744.6 770.3 --------- --------- Net financing revenue and other................................... 1,533.4 1,278.2 Expenses............................................................... 1,026.1 847.5 --------- --------- Pre-tax income......................................................... 507.3 430.7 Income taxes........................................................... 198.2 175.8 --------- --------- Net Income........................................................ $ 309.1 $ 254.9 ========= ========= Net Income from Financing Operations................................... $ 271.8 $ 216.3 Net Income from Insurance Operations................................... 37.3 38.6 --------- --------- Net Income........................................................ $ 309.1 $ 254.9 ========= ========= Average Earning Assets................................................. $91,168.2 $84,667.7 Return on Average Equity............................................... 14.8% 12.7%
16 17 GENERAL MOTORS CORPORATION AND SUBSIDIARIES GMAC FINANCIAL REVIEW GMAC provides a broad range of financial and insurance services to General Motors' customers. General Motors encourages reference to the GMAC Quarterly Report on Form 10-Q for the period ended March 31, 1996 filed separately with the Securities and Exchange Commission. GMAC's consolidated first quarter income for 1996 totaled $309.1 million, a 21% increase over the first quarter of 1995. Improved North American financing margins, principally in the retail finance receivables and operating lease portfolios, as well as higher earnings from mortgage operations, contributed significantly to the 26% increase in net income from financing operations over comparable 1995 results. During the three months ended March 31, 1996, GMAC financed 26.1% of new General Motors vehicles delivered in the U.S., up from 23.7% during the same period last year. Special rate financing and the use of incentives with leasing programs sponsored by General Motors were the primary contributors to the higher penetration of retail financing over the prior year period, partially offset by a continued decline in fleet transaction participation. Increased volume from improved penetration contributed significantly to financing revenues totaling 17% above 1995 results. In the United States, wholesale inventory financing was provided on 720,000 and 1,005,000 new General Motors vehicles, representing 69.5% and 72.7% of all General Motors sales to dealers during the first quarter of 1996 and 1995, respectively. The decline in wholesale unit financing from the prior year period is predominantly attributable to a temporary interruption of General Motors' North American vehicle production during the latter half of March 1996 due to parts shortages caused by a labor strike at two components plants. GMAC's worldwide cost of funds for the first quarter of 1996 averaged 6.74%, a decrease of 42 basis points from the first quarter of 1995. Total borrowing costs for U.S. operations averaged 6.64% for the first quarter compared to 7.07% for the same period in 1995. These improvements are attributable to two factors: 1) a lower general level of short term interest rates as the U.S. prime lending rate averaged 8.34% during the quarter, 49 basis points below 1995; and 2) a greater proportion of floating rate short-term funding in GMAC's funding mix in 1996 from a year earlier. The $255.2 million quarter-to-quarter improvement in consolidated net financing revenue and other income was partially offset by a $178.6 million increase in total expenses. The largest contributor to the higher expenses was the $155.2 million provision for financing losses, an increase of $100.2 million over the first quarter of 1995, predominantly resulting from additional allowance requirements and higher vehicle charge-off experience in the U.S. In addition, other expenses totaled $870.9 million, a 10% increase over the prior year period, reflecting higher salaries and benefits and general operating costs. 17 18 GENERAL MOTORS CORPORATION AND SUBSIDIARIES EDS FINANCIAL HIGHLIGHTS
THREE MONTHS ENDED MARCH 31, -------------------- 1996 1995 -------- -------- (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) Systems and other contracts revenues Outside customers...................................................... $2,404.7 $1,878.3 GM and affiliates...................................................... 962.2 898.0 -------- -------- Total Systems and Other Contracts Revenues.......................... 3,366.9 2,776.3 -------- -------- Pre-tax income........................................................... 341.9 307.5 Income Taxes............................................................. 123.1 110.7 -------- -------- Separate Consolidated Net Income....................................... $ 218.8 $ 196.8 ======== ======== Net Earnings Attributable to Class E Common Stock on a Per Share Basis... $0.45 $0.42 Cash dividends per share of Class E common stock......................... $0.15 $0.13
EDS FINANCIAL REVIEW Electronic Data Systems Corporation (EDS) reported first-quarter earnings totaling $218.8 million for the 1996 period, or $0.45 per share of GM Class E common stock. That compares with $196.8 million earned in the first quarter of 1995, or $0.42 per share. EDS performance in the first quarter of 1996 reflects continued growth in non-GM business, which was up 28% in the period, compared with the first quarter of 1995. The non-GM business accounted for more than 71% of EDS' total revenues in the first quarter of 1996. In connection with the proposed split-off of EDS from General Motors, the parties would enter into a new master services agreement for an initial term of 10 years. Based on currently available information and assuming that the new master services agreement had been effective as of January 1, 1996, EDS believes that revenues generated from services performed for General Motors in 1996 would be slightly lower than those generated from such services in 1995. In addition, EDS expects that the contemplated changes in its arrangements with General Motors could reduce its 1996 earnings per share by as much as $.07 to $.14 (including $.03 in the first quarter of 1996). If the split-off occurs, EDS expects to record approximately $0.08 per share in additional split-off costs in 1996, of which $0.03 per share is attributable to interest costs related to the $500 million inter-company payment and $0.05 per share is attributable to one-time split-off expenses. To further enhance its competitiveness, EDS announced on April 1, 1996, that it is implementing several actions, and considering others, designed to maintain and improve operating efficiencies and accelerate its move to user-centered computing. In connection therewith, EDS also announced the implementation of a voluntary early retirement offer and involuntary severance arrangements affecting between 4,000 and 5,000 employees and designed to reduce labor costs and change the skill mix of EDS' workforce. EDS is also in the process of evaluating certain aspects of its business to identify any redundant facilities and related assets that may no longer fit its long-term strategic objectives. EDS estimates that the actions described in the preceding paragraph could result in a nonrecurring charge in the second quarter of 1996 in the range of $500 million to $750 million on a pre-tax basis. EDS expects that the restructuring actions will result in savings commencing in the second half of 1996. Earnings per share attributable to GM Class E common stock are based on the Available Separate Consolidated Net Income of EDS as described in Note 10 to the Financial Statements. Reference should be made to EDS' Management's Discussion and Analysis in Exhibit 99(a) which is incorporated herein by reference. 18 19 GENERAL MOTORS CORPORATION AND SUBSIDIARIES HUGHES FINANCIAL HIGHLIGHTS
THREE MONTHS ENDED MARCH 31, ---------------------- 1996 1995 -------- -------- (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) Net Sales Outside customers................................................... $2,438.9 $2,162.6 GM and affiliates................................................... 1,174.7 1,404.2 -------- -------- Total Net Sales.................................................. 3,613.6 3,566.8 Other Income -- net................................................... 123.1 12.0 -------- -------- Total Revenues................................................... 3,736.7 3,578.8 -------- -------- Pre-tax Income........................................................ 472.5 403.3 Income Taxes.......................................................... 191.4 165.4 -------- -------- Net Income....................................................... $ 281.1 $ 237.9 ======== ======== Earnings Used for Computation of Available Separate Consolidated Net Income (1)........................................................... $ 311.7 $ 268.9 ======== ======== Net Earnings Attributable to Class H Common Stock on a Per Share Basis............................................................... $0.78 $0.67 Cash Dividends Per Share of Class H Common Stock...................... $0.24 $0.23
- ------------------------- (1) Excludes amortization of GM purchase accounting adjustments of $30.6 million and $31.0 million for the first quarters of 1996 and 1995, respectively, related to GM's acquisition of Hughes Aircraft Company. SEGMENT HIGHLIGHTS*
THREE MONTHS ENDED MARCH 31, ---------------------- 1996 1995 -------- -------- (DOLLARS IN MILLIONS) Automotive Electronics Revenues............................................................ $1,271.8 $1,496.2 Net Sales........................................................... $1,260.2 $1,472.7 Operating Profit(1)................................................. $ 159.3 $ 255.4 Operating Profit Margin(2).......................................... 12.6% 17.3% Telecommunications and Space Revenues............................................................ $ 936.4 $ 646.7 Net Sales........................................................... $ 821.0 $ 656.6 Operating Profit(1)................................................. $ 74.5 $ 31.5 Operating Profit Margin(2).......................................... 9.1% 4.8% Aerospace and Defense Systems Revenues............................................................ $1,512.4 $1,385.0 Net Sales........................................................... $1,502.2 $1,383.1 Operating Profit(1)................................................. $ 157.9 $ 153.5 Operating Profit Margin(2).......................................... 10.5% 11.1%
- ------------------------- * The summary excludes purchase accounting adjustments related to GM's acquisition of Hughes Aircraft Company. (1) Net Sales less Total Costs and Expenses other than Interest Expense. (2) Operating Profit as a percentage of Net Sales. 19 20 GENERAL MOTORS CORPORATION AND SUBSIDIARIES HUGHES FINANCIAL REVIEW Hughes Electronics reported net income of $281.1 million for the first quarter of 1996 compared to $237.9 million for the first quarter of 1995. Excluding amortization of purchase accounting adjustments related to GM's acquisition of Hughes Aircraft Company, Hughes' Earnings Used for Computation of Available Separate Consolidated Net Income was $311.7 million for the first quarter of 1996 compared to $268.9 million for the same period in 1995. The increase in quarterly earnings primarily reflects improved performance in the Telecommunications and Space segment and the $71.6 million after-tax gain related to the sale of a 2.5% interest in DIRECTV(R) to AT&T offset in part by the impact in the Automotive Electronics segment of the strike at two GM component plants in Dayton, Ohio amounting to approximately $30 million after-tax. First quarter revenues increased 4.4% between 1995 and 1996, due to revenue increases in the Telecommunications and Space and Aerospace and Defense Systems segments, partially offset by lower revenues in the Automotive Electronics segment. The 44.8% Telecommunications and Space segment revenue increase was due to DIRECTV subscriber growth, increased Galaxy(R) satellite transponder sales, and the $120.3 million pre-tax gain from the sale of a 2.5% equity interest in DIRECTV to AT&T. The increase in revenues from the Aerospace and Defense Systems segment was principally due to additional revenues resulting from the 1995 acquisitions of CAE-Link and Magnavox Electronic Systems Company. The 15.0% decline in Automotive Electronics revenues was principally the result of the strike. Operating profit, excluding amortization of purchase accounting adjustments related to GM's acquisition of Hughes Aircraft Company, declined 9.5% between the first quarter of 1995 and the first quarter of 1996. The operating profit margin was 10.7% for the first quarter of 1996 compared to 11.9% for the same period in 1995. The decreases were primarily a result of the impact at Delco Electronics of lower GM production volumes principally resulting from the strike, partially offset by increased Galaxy satellite transponder sales and reduced DIRECTV operating losses. 20 21 GENERAL MOTORS CORPORATION AND SUBSIDIARIES RESULTS OF OPERATIONS WITH GMAC ON AN EQUITY BASIS To facilitate analysis, the following financial statements present financial data for the Corporation's manufacturing, wholesale marketing, defense, electronics, and computer service operations with the financing and insurance operations reflected on an equity basis. This is the same basis and format used in years prior to the Corporation's adoption of SFAS No. 94, Consolidation of All Majority-owned Subsidiaries. CONSOLIDATED STATEMENT OF INCOME WITH GMAC ON AN EQUITY BASIS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, ---------------------- 1996 1995 --------- --------- (DOLLARS IN MILLIONS) Net Sales and Revenues(1) $37,162.8 $39,450.1 --------- --------- Costs and Expenses Cost of sales and other operating charges, exclusive of items listed below............................................................. 31,736.2 31,951.6 Selling, general, and administrative expenses........................ 2,757.2 2,632.0 Depreciation of real estate, plants, and equipment................... 1,198.2 1,034.8 Amortization of special tools........................................ 760.7 868.2 Amortization of intangible assets.................................... 38.2 37.0 --------- --------- Total Costs and Expenses........................................ 36,490.5 36,523.6 --------- --------- Operating Income....................................................... 672.3 2,926.5 Other income less income deductions.................................... 593.4 373.8 Interest expense....................................................... (231.4) (298.0) --------- --------- Income before Income Taxes............................................. 1,034.3 3,002.3 Income taxes........................................................... 357.4 1,150.0 --------- --------- Income after Income Taxes.............................................. 676.9 1,852.3 Earnings of nonconsolidated affiliates................................. 342.6 301.7 --------- --------- Income before cumulative effect of accounting change................... 1,019.5 2,154.0 Cumulative effect of accounting change(2).............................. -- (51.8) --------- --------- Net Income...................................................... $ 1,019.5 $ 2,102.2 ========= ========= Net Profit Margin............................................... 2.7% 5.3%
- ------------------------- (1) Includes sales to nonconsolidated affiliates of $362.6 million and $278.6 million, respectively. (2) Effective January 1, 1995, the Corporation adopted the provisions of EITF Issue No. 95-1, resulting in an unfavorable cumulative effect of $51.8 million, or $0.07 per share of $1 2/3 par value common stock. 21 22 GENERAL MOTORS CORPORATION AND SUBSIDIARIES RESULTS OF OPERATIONS WITH GMAC ON AN EQUITY BASIS -- CONTINUED General Motors Corporation's 1996 first quarter consolidated net income totaled $1,019.5 million, or $0.94 per share of GM $1 2/3 par value common stock. That represents a decline of $1,082.7 million, compared with the $2,102.2 million net income, or $2.44 per share of GM $1 2/3 par value common stock, in the year-ago period. The decrease in first quarter 1996 consolidated net income resulted from lower net income from the automotive sectors, partially offset by net income improvement for GMAC, EDS, and Hughes. Highlights of 1996 first-quarter financial performance by GM's major business sectors are shown below.
THREE MONTHS ENDED MARCH 31, ------------------ MAJOR BUSINESS SECTOR RESULTS 1996 1995 ------ ------ (DOLLARS IN MILLIONS) GM-NAO/Delphi............................................................ $ (195) $1,006 GMIO..................................................................... 432 522 GMAC..................................................................... 309 255 EDS...................................................................... 219 197 Hughes................................................................... 312 269 Other*................................................................... (57) (147) ------ ------ Consolidated Net Income................................................ $1,020 $2,102 ====== ======
- ------------------------- * Includes Allison Transmission Division, GM Locomotive Group, and purchase accounting adjustments. First quarter 1996 net sales and revenues were $37,162.8 million, down $2,287.3 compared to the same period in the prior year. The continued growth in net sales and revenues for GMIO, EDS, and Hughes was more than offset by the decrease in net sales for GM-NAO/Delphi. The net sales decrease for GM- NAO/Delphi was primarily a result of decreased wholesale sales in North America, as wholesale sales in North America for the 1996 first quarter were unfavorable to the 1995 first quarter by approximately 364,000 units, 240,000 of which were attributable to the 17-day strike at the component plants in Dayton, Ohio. The remaining decrease resulted from lower pre-strike production used to balance U.S. vehicle inventories. The gross margin percentage for the 1996 first quarter was 14.6% compared to 19.0% in the comparable prior year period. The year-over-year change in the gross margin resulted from decreased volume and higher incentives in North America; an unfavorable product mix in Europe and Latin America; and unfavorable exchange and continued cost pressures in Latin America. Other operating expenses for the first quarter of 1996 totaled $4,754.3 million, up slightly compared to $4,572.0 million in the comparable 1995 period. The year-over-year increase resulted from higher depreciation expense, increases for EDS and Hughes due to growth, and increased costs associated with the Vectra launch in the international markets. Other income less income deductions amounted to $593.4 million for the 1996 first quarter compared to $373.8 million in the first quarter of 1995. Included in the amount reported for 1996 is the pre-tax gain of $120.3 million associated with the sale of a 2.5% equity interest in DIRECTV to AT&T. On an after-tax basis, the gain amounted to $71.6 million, or $0.07 per share of GM $1 2/3 par value common stock and $0.18 per share of GM Class H common stock. Interest expense for the 1996 first quarter declined $66.6 million, or 22.3%, compared to the comparable 1995 period. The year-over-year decline was primarily attributable to lower interest accruals relative to the outstanding tax issues that were resolved in the 1995 fourth quarter and interest rate declines on a year-over-year basis. General Motors adopted Statement of Financial Accounting Standards (SFAS) No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, effective as of January 1, 1996. The effect of adoption was not material. Adoption of EITF Issue No. 95-1, effective January 1, 1995, resulted in an unfavorable cumulative effect on 1995 first quarter results of $51.8 million after-tax ($0.07 per share) attributable to $1 2/3 par value common stock. Primarily due to the unfavorable impact of the strike, General Motors net profit margin was 2.7% for the first quarter of 1996 compared to 5.3% for the first quarter of 1995. 22 23 GENERAL MOTORS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEET WITH GMAC ON AN EQUITY BASIS (UNAUDITED)
MARCH 31, DEC. 31, MARCH 31, 1996 1995 1995 ---------- ---------- ---------- (DOLLARS IN MILLIONS) ASSETS Cash and cash equivalents.......................................... $ 7,474.5 $ 9,595.7 $ 8,913.0 Other marketable securities........................................ 1,171.3 1,270.4 1,357.5 ---------- ---------- ---------- Total cash and marketable securities............................. 8,645.8 10,866.1 10,270.5 Accounts and notes receivable -- net Trade............................................................ 8,407.6 8,513.7 8,505.1 Nonconsolidated affiliates....................................... 2,077.9 2,256.8 3,893.8 Inventories -- net................................................. 12,561.4 11,529.5 11,404.7 Contracts in process -- net........................................ 2,708.9 2,469.2 2,647.3 Net equipment on operating leases.................................. 3,908.6 4,392.6 4,392.6 Deferred income taxes and other.................................... 5,817.9 5,820.3 6,868.5 ---------- ---------- ---------- Total Current Assets........................................... 44,128.1 45,848.2 47,982.5 Equity in Net Assets of Nonconsolidated Affiliates................. 9,669.1 9,983.0 9,616.5 Deferred Income Taxes.............................................. 17,119.3 16,783.2 15,337.3 Other Investments and Miscellaneous Assets......................... 13,486.2 13,757.5 15,205.0 Property -- Net.................................................... 38,196.6 37,609.6 35,474.1 Intangible Assets -- Net........................................... 11,288.3 11,261.8 11,628.2 ---------- ---------- ---------- Total Assets................................................... $133,887.6 $135,243.3 $135,243.6 ========== ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable................................................... $ 9,409.4 $ 10,975.7 $ 11,205.4 Loans payable...................................................... 2,018.9 2,434.7 1,335.2 Income taxes payable............................................... -- 126.9 815.5 Accrued liabilities and customer deposits.......................... 29,430.8 29,920.4 31,602.9 Stocks subject to repurchase....................................... -- -- 450.0 ---------- ---------- ---------- Total Current Liabilities...................................... 40,859.1 43,457.7 45,409.0 Long-Term Debt..................................................... 6,619.7 5,967.8 6,179.7 Payable to GMAC.................................................... -- -- 1,392.0 Capitalized Leases................................................. 163.4 166.2 139.2 Postretirement Benefits Other Than Pensions........................ 39,409.7 39,001.0 37,840.2 Pensions........................................................... 5,251.4 5,744.9 4,243.7 Other Liabilities and Deferred Income Taxes........................ 15,961.2 16,058.9 17,075.1 Deferred Credits................................................... 1,601.3 1,501.3 1,650.0 Stockholders' Equity............................................... 24,021.8 23,345.5 21,314.7 ---------- ---------- ---------- Total Liabilities and Stockholders' Equity..................... $133,887.6 $135,243.3 $135,243.6 ========== ========== ==========
LIQUIDITY AND CAPITAL RESOURCES WITH GMAC ON AN EQUITY BASIS General Motors' cash position at the end of the 1996 first quarter reflects the unfavorable impact of the Dayton strike and an $800 million pension contribution. Nonetheless, General Motors' cash position remained strong, as cash and marketable securities at March 31, 1996 amounted to $8,645.8 million compared with $10,866.1 million at December 31, 1995 and $10,270.5 million at March 31, 1995. It continues to be a goal of General Motors to increase its cash and marketable securities during 1996 to accumulate $13 billion of cash and marketable securities in order to continue to fund its operations throughout the next downturn in the business cycle. The reduction in accounts and notes receivable from nonconsolidated affiliates primarily reflects a change in the payment terms from GMAC to General Motors for wholesale finance receivables. During the first three months of 1996, loans payable and long-term debt increased $236.1 million to $8,638.6 million at March 31, 1996 from a balance of $8,402.5 million at December 31, 1995. The increase in loans payable and long-term debt reflected General Motors' overall liability management program, which comprehends prefunding future debt maturities when interest rates are low. Net liquidity, calculated as cash and marketable securities less the total of loans payable, long-term debt and capitalized leases, declined by $2,453.6 million compared to December 31, 1995 and $2,772.6 million on a year-over-year basis. The decline from December 31, 1995 was primarily a result of the impact of the strike and the first quarter 1996 pension contribution. The year-over-year decline also reflected the impact of the $1.3 billion preference stock buy-back which occurred in the second quarter of 1995, as well as cash pension contributions of $2.3 billion made in the second and third quarters of 1995. Book value per share of $1 2/3 par value common stock increased to $26.67 at the end of the 1996 first quarter from $24.37 at the end of 1995. Book value per share of Class E common stock increased to $3.40 from $3.11 at the end of 1995 and book value per share of Class H common stock increased to $13.35 from $12.20 at the end of 1995. 23 24 GENERAL MOTORS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS WITH GMAC ON AN EQUITY BASIS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, ------------------------- 1996 1995 --------- --------- (DOLLARS IN MILLIONS) Net Cash Provided by (Used in) Operating Activities........................... $ (394.9) $ 1,552.0 --------- --------- Cash Flows from Investing Activities Expenditures for real estate, plants, and equipment......................... (1,434.9) (1,131.3) Expenditures for special tools.............................................. (866.6) (725.3) Change in other investing assets Investments in other marketable securities -- acquisitions................ (2,241.0) (2,121.9) Investments in other marketable securities -- liquidations................ 2,340.1 2,009.4 Operating leases -- acquisitions.......................................... (1,002.0) (524.0) Operating leases -- liquidations.......................................... 1,499.2 117.4 Other....................................................................... 56.0 (104.5) --------- --------- Net Cash Used in Investing Activities......................................... (1,649.2) (2,480.2) --------- --------- Cash Flows from Financing Activities Increase in long-term debt.................................................. 1,885.2 349.4 Decrease in long-term debt.................................................. (1,236.7) (252.0) Repurchases of common and preference stocks................................. (0.2) (303.3) Cash dividends paid to stockholders......................................... (422.8) (278.6) Other....................................................................... (220.7) 627.5 --------- --------- Net Cash Provided by Financing Activities..................................... 4.8 143.0 --------- --------- Effect of Exchange Rate Changes on Cash and Cash Equivalents.................. (81.9) (33.2) --------- --------- Net decrease in cash and cash equivalents..................................... (2,121.2) (818.4) Cash and cash equivalents at beginning of the period.......................... 9,595.7 9,731.4 --------- --------- Cash and cash equivalents at end of the period................................ $ 7,474.5 $ 8,913.0 ========= =========
CASH FLOWS WITH GMAC ON AN EQUITY BASIS Net cash used in operating activities was $394.9 million for the 1996 first quarter, compared to net cash provided by operating activities of $1,552.0 million in the 1995 period. The use of cash for operating activities during the first quarter of 1996 resulted from lower net income, decreases in accounts payable and accrued liabilities, and an $800 million pension contribution. Net cash used in investing activities amounted to $1,649.2 million in the 1996 first quarter compared to net cash used of $2,480.2 million in the comparable 1995 period. The reduction in net cash used in investing activities during the 1996 first quarter was primarily attributable to increased cash provided by operating lease liquidations, partially offset by increased capital expenditures. The increase in operating lease liquidations resulted from more vehicles being taken out of service and sold at auction than were placed into service, as the strike during the 1996 first quarter had an unfavorable impact on the number of vehicles acquired for operating lease purposes. Expenditures for real estate, plants, and equipment and special tools totaled $2,301.5 million in the 1996 first quarter compared to $1,856.6 million in the first quarter of 1995. Net cash provided by financing activities totaled $4.8 million for the 1996 first quarter compared to $143.0 million for the comparable 1995 period. During the 1996 period, the net increase in long-term debt and proceeds from issuing common stocks for benefit plan purposes were virtually offset by cash dividends paid to stockholders and a net decrease in loans payable. The net cash provided by financing activities in the 1995 first quarter reflected a net increase in long-term debt and loans payable, partially offset by cash used to repurchase common stocks and pay dividends to stockholders. During the 1996 first quarter, approximately 44.7 million shares of Class E common stock were issued upon conversion of approximately 3.2 million shares of Series C Preference Stock (represented by depositary shares). The remaining 6,784 shares of Series C Preference Stock were redeemed on February 22, 1996 for $3.6 million of cash, or $524.20 per share of Series C Preference Stock ($52.42 per depositary share). In connection with Delphi's lean manufacturing efforts and competitive market pressures, it is developing plans to close one facility, seeking a partner for a second, and soliciting proposals for the sale of three additional facilities. In addition, evaluations are continuing on the appropriate plans for other Delphi facilities. The plans were not yet finalized at March 31, 1996 and, therefore, the costs associated with the plans are expected to be recognized in the future when firm plans are adopted. 24 25 GENERAL MOTORS CORPORATION AND SUBSIDIARIES LIQUIDITY AND CAPITAL RESOURCES FOR GMAC At March 31, 1996, GMAC owned assets and serviced automotive receivables totaling $104.3 billion, a decline of $2.3 billion from year-end 1995, but $0.4 billion above the comparable prior year period. Earning assets totaled $91.5 billion at March 31, 1996 compared to $92.0 billion and $88.1 billion at December 31 and March 31, 1995, respectively. The decline from year-end 1995 is principally attributable to reduced wholesale finance receivables caused by the aforementioned temporary interruption of General Motors' vehicle production during the latter half of March 1996. The higher earning asset levels over March 31, 1995 reflects growth of the retail finance receivables and operating lease portfolios, combined with GMAC's reduced utilization of asset securitizations to fund its business activities. As of March 31, 1996, GMAC's total borrowings were $74.0 billion, a slight decrease from $74.9 billion at December 31, 1995, but an increase from $68.8 billion at March 31, 1995. The higher quarter-to-quarter borrowings outstanding were used to fund increased earning asset levels and reduce accounts payable and other liabilities. GMAC's ratio of debt to total stockholder's equity at March 31, 1996 was 8.9:1 compared to 9.1:1 at December 31, 1995 and 8.5:1 at March 31, 1995. GMAC and its subsidiaries maintain substantial bank lines of credit which totaled $40.4 billion at March 31, 1996, compared to $40.0 billion at year-end 1995 and $37.5 billion at March 31, 1995. The unused portion of these credit lines totaled $31.6 billion at March 31, 1996, $1.2 billion and $2.8 billion higher than December 31 and March 31, 1995, respectively. CASH FLOW FOR GMAC Cash provided by operating activities during the three months ended March 31, 1996 totaled $1.9 billion, a decrease of $1.6 billion from the comparable 1995 period. The decrease in cash generated by operating activities is predominantly attributable to amounts due to General Motors for vehicle shipments to dealers under GMAC wholesale finance agreements. During the first quarter of 1996, settlement terms between GMAC and General Motors relating to certain wholesale financing of sales of General Motors' products were changed from expiration of transit time to shipment date. Cash used for investing activities during the first quarter of 1996 totaled $0.9 billion, $3.6 billion less than the same period in 1995 as a result of reduced wholesale financing acquisitions due to the aforementioned interruption of General Motors' vehicle production. Changes in debt outstanding were the principal attributes for cash flows from financing activities totaling ($1.1) billion during the first quarter of 1996 and $1.3 billion in 1995. Reference should be made to the condensed GMAC financial statements included in Note 11 to the Consolidated Financial Statements. EDS SPLIT-OFF On March 31, 1996, the General Motors Board of Directors (the GM Board) approved specific terms for a split-off of EDS to General Motors Class E shareholders in a tax-free exchange of stock, as well as a new 10-year agreement under which EDS would continue to be General Motors' principal provider of information-technology services. Under terms of the split-off proposal, each share of General Motors Class E common stock would be exchanged for one share of EDS common stock. In addition, EDS would make a one-time payment of $500 million to General Motors. This proposed payment enabled the GM Board to determine, in considering the overall terms, conditions and benefits of the split-off, that the transaction is fair to all classes of General Motors common stockholders. A joint solicitation statement/prospectus of General Motors and EDS has been filed with the Securities and Exchange Commission and is being distributed to General Motors common shareholders in order to secure their approval of the split-off proposal and related matters. If such approval is obtained, the split-off could occur before the end of the second quarter. No offering of securities of EDS in connection with the proposed split-off will be made other than by means of such prospectus. Statements about the effect of the proposed split-off are forward-looking statements which, by their nature, are subject to numerous uncertainties that could cause actual results to vary. 25 26 GENERAL MOTORS CORPORATION AND SUBSIDIARIES SECURITY RATING UPGRADES In April 1996, Standard & Poor's Corporation (S&P) raised EDS' long-term debt rating from A to A+. The S&P A+ credit rating is the fifth highest of 10 investment grade ratings available from S&P for long-term debt, based on a strong capacity to pay interest and repay principal, although somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher rated categories. In addition, Duff & Phelps Credit Rating Company (D&P) upgraded EDS' long-term debt rating from A+ to AA-, the fourth highest within the 10 investment grade ratings available from D&P for long-term debt. D&P's AA- rating indicates high credit quality and a strong likelihood of timely payment of principal and interest. At the same time, it also reaffirmed EDS' commercial paper rating at D-1. In April 1996, Fitch Investors Service (Fitch) announced its expectation to raise EDS' long-term debt rating from A+ to AA- if the proposed split-off from General Motors is completed. Fitch's AA- rating is the fourth highest within the 10 investment grade ratings available from Fitch for long-term debt and is assigned to bonds considered to be of very high credit quality based on the obligor's very strong ability to pay interest and repay principal. Fitch also announced its expectation to upgrade EDS' commercial paper rating from F-1 to F-1+ if the split-off is completed. Fitch's F-1+ rating is the highest of four investment grade ratings available, indicating exceptionally strong credit quality and the strongest degree of assurance for timely payment. Both ratings have been removed from FitchAlert. DIVIDENDS A first quarter cash dividend on $1 2/3 par value common stock of $0.40 per share was paid on March 9, 1996. On May 6, 1996, the Board of Directors declared a cash dividend on $1 2/3 par value common stock of $0.40 per share for the second quarter of 1996 payable June 10, 1996. This dividend declaration raises cash dividends in the first six months of 1996 to $0.80 per share, compared with $0.50 per share in the comparable 1995 period. A first quarter cash dividend on Class E common stock of $0.15 per share was paid on March 9, 1996. On May 6, 1996, the Board of Directors also declared a cash dividend of $0.15 per share on Class E common stock payable June 10, 1996. This continues the level established in the first quarter of 1996 and raises cash dividends in the first six months of 1996 to $0.30 per share, compared with $0.26 per share in the comparable 1995 period. A first quarter cash dividend on Class H common stock of $0.24 per share was paid on March 9, 1996. On May 6, 1996, the Board of Directors also declared a cash dividend of $0.24 per share on Class H common stock payable June 10, 1996. This continues the level established in the first quarter of 1996 and raises cash dividends in the first six months of 1996 to $0.48 per share, compared with $0.46 per share in the comparable 1995 period. SFAS NO. 87 AND SFAS NO. 106 At year-end 1995, GM's total worldwide net unfunded pension position decreased to $6.6 billion ($3.0 billion U.S. and $3.6 billion non-U.S.) from $12.6 billion at the end of 1994. In the first quarter of 1996, General Motors made further cash contributions of $800 million to its U.S. pension plans. Under SFAS No. 87, Employers' Accounting for Pensions, any year-to-year movement in the rate of interest on long-term, high quality corporate bonds necessitates a change in the discount rate used to calculate the actuarial present value of pension plan obligations. The increase in long-term interest rates which occurred in the U.S. between December 31, 1995 (the latest measurement date of General Motors' pension plans) and March 31, 1996, if it were to be maintained through year-end 1996, would lead to General Motors' use of a 1996 year-end discount rate approximately 75 basis points above that used at the last measurement date. GM's reported unfunded pension position would be affected by such a change in interest rates, as well as by contributions during the year, the actual return on pension investments and various other factors. A change in 26 27 the unfunded pension position would also affect the minimum pension liability adjustment to stockholders' equity. The change in long-term interest rates described above similarly impacts the calculation of the Corporation's postretirement health care obligations under SFAS No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions. There has been a 25 basis point increase in long-term corporate bond rates between October 1, 1995 (the most recent valuation date) and March 31, 1996. However, a change to the accumulated postretirement benefit obligation would have no impact on GM's stockholders' equity in 1996 and no cash impact. Neither the estimated decrease in the Corporation's unfunded pension obligations under SFAS No. 87 nor the estimated decrease in the Corporation's postretirement obligations under SFAS No. 106 would have an impact on the earnings to be reported by the Corporation for 1996. However, in accordance with applicable accounting standards, any change in these obligations would impact the Corporation's 1997 and subsequent years' earnings as non-cash increases/decreases in pension and other postretirement benefit expense. EMPLOYMENT AND PAYROLLS
THREE MONTHS ---------------------- 1996 1995 -------- -------- Worldwide Employment at March 31 (In Thousands) GM-NAO/Delphi....................................................... 430 432 GMIO................................................................ 109 104 GMAC................................................................ 17 17 EDS................................................................. 95 84 Hughes.............................................................. 83 79 Other............................................................... 11 18 -------- -------- Total Number of Employees........................................ 745 734 ======== ======== Worldwide Payroll ($ in Millions)..................................... $8,623.3 $8,417.5
* * * * * * 27 28 PART II GENERAL MOTORS CORPORATION AND SUBSIDIARIES ITEM 1. LEGAL PROCEEDINGS Material pending legal proceedings, other than ordinary routine litigation incidental to the business, to which the Corporation became, or was, a party during the quarter ended March 31, 1996, or subsequent thereto, but before the filing of this report are summarized below. OTHER MATTER Two previously reported suits, Stephen A. Solomon v. General Motors Corporation, et al. and TRV Holdings Company v. General Motors Corporation, et al., have been consolidated and a consolidated amended complaint was filed on April 2, 1996. On May 10, 1996, a second amended and supplemental consolidated complaint was filed in the suit in order, among other things, to add a purported double derivative claim on behalf of EDS against persons alleged to be directors of EDS and directors of the Corporation. The amended complaint alleges that the solicitation of consents with respect to the proposed split-off of EDS is wrongfully coercive and the solicitation statement being used in connection therewith is materially deficient. In addition to seeking damages and an injunction against the proposed split-off, the second amended complaint seeks an order appointing independent representatives to act on behalf of and protect the interests of EDS and the holders of Class E common stock. In addition, with respect to the previously reported suit, Melvin Ward, et al. v. General Motors Corporation, et al., an amended complaint was filed on May 9, 1996 to seek additional relief declaring that the solicitation statement being used in connection with the proposed split-off of EDS is materially false, misleading and coercive and that the consents thereby obtained from the holders of Class E common stock are void. The amended complaint also seeks damages and an injunction against the proposed split-off. General Motors believes that the suits are without merit and intends to defend them vigorously. * * * ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits.
EXHIBIT NUMBER EXHIBIT NAME PAGE NO. - -------------- --------------------------------------------------------------------- -------- 11 Computation of Earnings Per Share Attributable to Common Stocks for the Three Months Ended March 31, 1996 and 1995. ................... 30 12 Computation of Ratios of Earnings to Fixed Charges for the Three Months Ended March 31, 1996 and 1995. ............................. 32 99(a) Electronic Data Systems Corporation and Subsidiaries Consolidated Financial Statements and Management's Discussion and Analysis. ......................................................... 33 (b) Hughes Electronics Corporation and Subsidiaries Consolidated Financial Statements and Management's Discussion and Analysis. ......................................................... 42 27 Financial Data Schedule (for SEC information only)
(b) Reports on Form 8-K. Three reports on Form 8-K, dated January 29, 1996, February 26, 1996, and March 12, 1996, were filed during the quarter ended March 31, 1996 reporting press releases under Item 5, Other Events, and audited consolidated financial statements and agreements under Item 7, Exhibits. * * * * * * 28 29 GENERAL MOTORS CORPORATION AND SUBSIDIARIES SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. GENERAL MOTORS CORPORATION -------------------------------------- (Registrant) By /s/ LEON J. KRAIN -------------------------------------- (Leon J. Krain, Vice President Date May 15, 1996 and Group Executive) - -------------------- By /s/ WALLACE W. CREEK -------------------------------------- Date May 15, 1996 (Wallace W. Creek, Comptroller) - -------------------- 29 EX-11 2 EXHIBIT 11 1 EXHIBIT 11 GENERAL MOTORS CORPORATION AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE ATTRIBUTABLE TO COMMON STOCKS
THREE MONTHS ENDED MARCH 31, 1996 --------------------------------- CLASS CLASS $1 2/3 PAR E H VALUE COMMON COMMON COMMON STOCK STOCK STOCK ------------- ------ ------ (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) Net income attributable to stocks............................. $734.3 $209.2 $76.0 Dividends on preference stocks................................ 20.3 -- -- ------ ------ ----- Earnings attributable to common stocks........................ 714.0 209.2 76.0 Dividends on common stocks.................................... 307.3 72.0 23.4 ------ ------ ----- Undistributed earnings attributable to common stocks.......... $406.7 $137.2 $52.6 ====== ====== ===== Weighted average shares outstanding (in millions)............. 755.2 463.2 97.4 ====== ====== ===== Per Share Data Earnings per share attributable to undistributed earnings on common stocks............................................... $0.54 $0.30 $0.54 Dividends..................................................... 0.40 0.15 0.24 ----- ----- ----- $0.94 $0.45 $0.78 Earnings per share attributable to common stocks.............. ===== ===== =====
Note: The difference between fully diluted and primary earnings per share is immaterial. 30 2 GENERAL MOTORS CORPORATION AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE ATTRIBUTABLE TO COMMON STOCKS -- CONCLUDED
THREE MONTHS ENDED MARCH 31, 1995 ----------------------------------- CLASS CLASS $1 2/3 PAR E H VALUE COMMON COMMON COMMON STOCK STOCK STOCK ------------- ------ ------ (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) Net income before cumulative effect of accounting change attributable to stocks.................................... $1,968.3 $122.4 $63.3 Dividends on preference stocks.............................. 72.0 -- -- -------- ------ ----- Earnings attributable to common stocks...................... 1,896.3 122.4 63.3 Dividends on common stocks.................................. 150.8 34.2 21.6 -------- ------ ----- Undistributed earnings...................................... 1,745.5 88.2 41.7 Adjustments Change in earnings attributable to each class of common stock related to the assumed exercise of stock options*............................................... (1.7) -- 1.7 Dividends on assumed common stock transactions............ (0.5) -- (0.6) -------- ------ ----- Adjusted earnings attributable to common stocks............. $1,743.3 $ 88.2 $42.8 ======== ====== ===== Weighted average shares outstanding (in millions)........... 752.6 300.0 94.2 Adjustment Assumed exercise of dilutive stock options*............... 2.6 -- 2.4 -------- ------ ----- Adjusted weighted average shares outstanding................ 755.2 300.0 96.6 ======== ====== ===== Per Share Data Earnings per share attributable to undistributed earnings on common stocks before cumulative effect of accounting change.................................................... $2.31 $0.29 $0.44 Cumulative effect of accounting change at January 1, 1995... (0.07) -- -- Dividends................................................... 0.20 0.13 0.23 ----- ----- ----- $2.44 $0.42 $0.67 Earnings per share attributable to common stocks............ ===== ===== =====
Note: The difference between fully diluted and primary earnings per share is immaterial. * The assumed exercise of stock options reflected by these adjustments has no effect on Class E or Class H common stock earnings per share, because to the extent that shares of Class E or Class H common stock deemed to be outstanding would increase, such increased shares would also increase the numerator of the fraction used to determine Available Separate Consolidated Net Income. 31 EX-12 3 EXHIBIT 12 1 EXHIBIT 12 GENERAL MOTORS CORPORATION AND SUBSIDIARIES COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
THREE MONTHS ENDED MARCH 31, --------------------- 1996 1995 -------- -------- (DOLLARS IN MILLIONS) Income before cumulative effect of accounting change.................... $1,019.5 $2,154.0 Income taxes............................................................ 555.6 1,325.7 Equity in income of associates.......................................... (17.2) (14.8) Amortization of capitalized interest.................................... 13.7 12.7 -------- -------- Income before income taxes, undistributed income of associates, and amortization of capitalized interest.................................. 1,571.6 3,477.6 -------- -------- Fixed charges included in net income Interest and related charges on debt.................................. 1,457.1 1,439.0 Portion of rentals deemed to be interest.............................. 151.2 144.6 -------- -------- Total fixed charges included in net income......................... 1,608.3 1,583.6 -------- -------- Earnings available for fixed charges.................................... $3,179.9 $5,061.2 ======== ======== Fixed charges Fixed charges included in net income.................................. $1,608.3 $1,583.6 Interest capitalized in the period.................................... 6.8 8.6 -------- -------- Total fixed charges................................................ $1,615.1 $1,592.2 ======== ======== 1.97 3.18 Ratios of earnings to fixed charges..................................... ======== ========
32 EX-27 4 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM GENERAL MOTORS CORPORATION MARCH 31, 1996 CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO FIRST QUARTER 1996 FORM 10-Q. 0000040730 GENERAL MOTORS CORPORATION 1,000,000 3-MOS DEC-31-1996 JAN-01-1996 MAR-31-1996 8,837 5,491 68,815 0 12,561 0 82,745 44,415 216,549 0 82,647 0 1 1,320 22,701 216,549 34,658 41,662 31,742 34,862 61 155 1,457 1,575 556 1,020 0 0 0 1,020 0.94 0
EX-99.A 5 EXHIBIT 99(A) 1 EXHIBIT 99(A) ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS AND MANAGEMENT'S DISCUSSION AND ANALYSIS - -------------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF INCOME (IN MILLIONS EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
THREE MONTHS ENDED MARCH 31, -------------------- 1996 1995 -------- -------- Systems and other contracts revenues GM and affiliates...................................................... $ 962.2 $ 898.0 Outside customers...................................................... 2,404.7 1,878.3 -------- -------- Total revenues...................................................... 3,366.9 2,776.3 -------- -------- Costs and expenses Cost of revenues....................................................... 2,698.1 2,176.1 Selling, general, and administrative................................... 309.9 281.0 -------- -------- Total costs and expenses............................................ 3,008.0 2,457.1 -------- -------- Operating income......................................................... 358.9 319.2 Interest and other income, net........................................... (17.0) (11.7) -------- -------- Income before income taxes............................................... 341.9 307.5 Provision for income taxes............................................... 123.1 110.7 -------- -------- Separate Consolidated Net Income......................................... $ 218.8 $ 196.8 ======== ======== Available Separate Consolidated Net Income (Note 2) Average number of shares of GM Class E common stock outstanding (Numerator)............................................................ 463.2 300.0 Class E dividend base (Denominator)...................................... 484.4 482.4 Available Separate Consolidated Net Income............................... $209.2 $122.4 ====== ====== Earnings Attributable to GM Class E Common Stock on a Per Share Basis (Note 2)............................................................... $0.45 $0.42 ====== ======
Reference should be made to the Notes to Consolidated Financial Statements. 33 2 ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (IN MILLIONS)
MARCH 31, DECEMBER 31, 1996 1995 ----------- ------------ (UNAUDITED) ASSETS Current assets Cash and cash equivalents....................................... $ 935.9 $ 548.9 Marketable securities........................................... 84.7 89.7 Accounts receivable, net........................................ 2,779.2 2,872.0 Accounts receivable from GM and affiliates...................... 343.1 297.0 Inventories..................................................... 184.9 181.2 Prepaids and other.............................................. 406.7 392.7 --------- --------- Total current assets....................................... 4,734.5 4,381.5 --------- --------- Property and equipment, at cost less accumulated depreciation of $3,410.4 at March 31, 1996 and $3,319.4 at December 31, 1995.... 3,262.0 3,242.4 --------- --------- Operating and other assets Land held for development, at cost.............................. 105.8 105.1 Investment in leases and other.................................. 1,516.9 1,573.5 Software, goodwill, and other intangibles, net.................. 1,496.6 1,529.9 --------- --------- Total operating and other assets........................... 3,119.3 3,208.5 --------- --------- Total Assets...................................................... $11,115.8 $10,832.4 ========= ========= LIABILITIES AND STOCKHOLDER'S EQUITY Current liabilities Accounts payable................................................ $ 530.9 $ 603.9 Accrued liabilities............................................. 1,551.6 1,704.5 Deferred revenue................................................ 633.7 629.3 Income taxes.................................................... 146.9 75.9 Notes payable................................................... 238.7 247.8 --------- --------- Total current liabilities.................................. 3,101.8 3,261.4 --------- --------- Deferred income taxes............................................. 749.0 739.7 --------- --------- Notes payable..................................................... 2,109.2 1,852.8 --------- --------- Stockholder's equity Common stock, without par value; authorized 1,000.0 shares. Issued and outstanding 485.7 shares at March 31, 1996 and 483.7 shares at December 31, 1995............................ 559.9 517.7 Retained earnings............................................... 4,595.9 4,460.8 --------- --------- Total stockholder's equity................................. 5,155.8 4,978.5 --------- --------- Total Liabilities and Stockholder's Equity........................ $11,115.8 $10,832.4 ========= =========
Reference should be made to the Notes to Consolidated Financial Statements. 34 3 ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN MILLIONS) (UNAUDITED)
THREE MONTHS ENDED MARCH 31, ---------------------- 1996 1995 --------- --------- Net Cash Provided by Operating Activities.............................. $ 512.1 $ 127.9 --------- --------- Cash Flows from Investing Activities Proceeds from sale of marketable securities.......................... 26.0 42.7 Proceeds from investment in leases and other assets.................. 80.8 5.8 Payments for purchase of property and equipment...................... (244.4) (259.3) Payments for investment in leases and certain other assets........... (90.4) (130.9) Payments related to acquisitions, net of cash acquired............... (38.0) (40.9) Payments for purchase of software and other intangibles.............. (29.5) 4.0 Payments for purchase of marketable securities....................... (21.7) (10.8) Other................................................................ 3.8 2.4 --------- --------- Net cash used in investing activities................................ (313.4) (387.0) --------- --------- Cash Flows from Financing Activities Proceeds from notes payable.......................................... 1,484.9 1,752.5 Payments on notes payable............................................ (1,236.8) (1,583.9) Net increase in current notes payable with maturities less than 90 days.............................................................. -- 48.8 Employee stock transactions and related tax benefit.................. 20.1 14.7 Cash dividends paid to GM............................................ (72.6) (62.6) --------- --------- Net cash provided by financing activities............................ 195.6 169.5 --------- --------- Effect of Exchange Rate Changes on Cash and Cash Equivalents........... (7.3) 3.1 --------- --------- Net Increase (Decrease) in Cash and Cash Equivalents................... 387.0 (86.5) Cash and Cash Equivalents at Beginning of Period....................... 548.9 608.2 --------- --------- Cash and Cash Equivalents at End of Period............................. $ 935.9 $ 521.7 ========= =========
Reference should be made to the Notes to Consolidated Financial Statements. 35 4 ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 1. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. In the opinion of management, all adjustments (consisting of only normal recurring items) which are necessary for a fair presentation have been included. The results for interim periods are not necessarily indicative of results which may be expected for any other interim period or for the full year. For further information, refer to the consolidated financial statements and notes thereto included in General Motors' 1995 Annual Report on Form 10-K, as amended. NOTE 2. The effects of purchase accounting adjustments reflected in General Motors' Consolidated Financial Statements that are applicable to EDS were not material to EDS' Consolidated Statements of Income for the three month periods ended March 31, 1996 and 1995. At March 31, 1996, the remaining carrying value of such purchase accounting adjustments would not be material to EDS' Consolidated Financial Statements. Earnings Attributable to GM Class E Common Stock on a Per Share Basis have been determined based on the relative amounts available for the payment of dividends to holders of GM Class E common stock. Holders of GM Class E common stock have no direct rights in the equity or assets of EDS, but rather have rights in the equity and assets of GM (which includes 100% of the stock of EDS). Dividends on the GM Class E common stock are declared out of the Available Separate Consolidated Net Income of EDS earned since the acquisition of EDS by GM. The Available Separate Consolidated Net Income of EDS is determined quarterly and is equal to the separate consolidated net income of EDS, excluding the effects of purchase accounting adjustments arising from the acquisition of EDS, multiplied by a fraction, the numerator of which is a number equal to the weighted average number of shares of GM Class E common stock outstanding during the period and the denominator of which was 484.4 million during the first quarter of 1996. The comparable denominator for the first quarter of 1995 was 482.4 million. The denominator used in determining the Available Separate Consolidated Net Income of EDS is adjusted as deemed appropriate by the GM Board of Directors to reflect subdivisions or combinations of the GM Class E common stock and to reflect certain transfers of capital to or from EDS. The GM Board's discretion to make such adjustments is limited by criteria set forth in GM's Certificate of Incorporation. In 1988, EDS initiated a program to repurchase 11.0 million shares of GM Class E common stock in order to meet certain future requirements of EDS' employee benefit plans. As of December 31, 1989, the Company had purchased 11.0 million shares of GM Class E common stock to be distributed to key employees under the provisions of the 1984 Plan. The GM Board has generally caused the denominator used in calculating the Available Separate Consolidated Net Income of EDS to decrease as shares are purchased and to increase as shares are used for the employee benefit plans. The current GM Board policy is to pay quarterly cash dividends on the GM Class E common stock, when, as, and if declared by the GM Board in its sole discretion, at an annual rate approximately equal to 30% of the Available Separate Consolidated Net Income of EDS for the prior year. * * * * * 36 5 ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS GENERAL EDS is a provider of information technology ("IT") services using computer and communication technologies to meet the business needs of its clients. EDS offers its clients a continuum of services, including the management and operation of computers, networks, information systems, information processing facilities, business operations, and related personnel, as well as management consulting services. PROPOSED SPLIT-OFF OF EDS The GM Board of Directors has approved a split-off (the "Split-Off") of EDS to the holders of General Motors' Class E Common Stock in a transaction that is tax-free for U.S. federal income tax purposes. GM's Board believes that the Split-Off is in the best interest of and is fair to GM and the holders of each of the three outstanding classes of GM common stock. The Split-Off has been submitted for approval by the common stockholders of GM and, if approved, is expected to be consummated in the second quarter of 1996. The Split-Off is intended to accomplish three principal objectives from the perspective of EDS and the holders of Class E Common Stock: (i) to remove limitations on EDS' ability to participate in major strategic alliances (including mergers and acquisitions which can be effected using EDS Common Stock); (ii) to remove limitations on EDS' ability to obtain additional business from and establish new customer relationships with companies that compete with GM or its subsidiaries; and (iii) to enhance EDS' access to the capital necessary for investment in its future growth. In connection with the Split-Off, the GM Board of Directors approved a Master Services Agreement (the "Master Services Agreement") to be entered into between EDS and GM with respect to IT services to be provided after the Split-Off, as well as a special payment to be made by EDS to GM (the "Special Inter-Company Payment"). If the Split-Off is not consummated, EDS will continue as an indirect wholly owned subsidiary of GM and no Special Inter-Company Payment will be made. Under such circumstances, the existing agreements and arrangements between GM and EDS with respect to IT services (the "Existing IT Services Agreements") will continue with such changes as GM and EDS may from time to time agree upon or as the GM Board of Directors, upon recommendation of its Capital Stock Committee, may from time to time determine to be fair to all classes of GM common stockholders. No agreement has been reached between GM and EDS regarding any changes to the Existing IT Services Agreements, which would take effect if the Split-Off is not approved by GM stockholders or is not consummated for any other reason. GM management has advised EDS management that in such an eventuality it would seek substantial changes in the Existing IT Services Agreements, including implementation of substantially all of the changes provided for by the Master Services Agreement. Neither the GM Board of Directors nor its Capital Stock Committee has determined whether to require such changes to the Existing IT Services Agreements if the Split-Off is not consummated, but they anticipate considering such changes if such circumstances arise. In this regard, EDS management believes that substantial changes would be made to the Existing IT Services Agreements in 1996 even in the absence of the Split-Off. The Master Services Agreement and certain related agreements between GM and EDS with respect to IT services to be provided after the Split-Off (collectively, the "IT Services Agreements") contemplate that EDS would continue to serve as GM's principal supplier of IT services for a term of ten years, which may be extended by agreement of the parties, and that the IT services to be provided by EDS after the Split-Off will generally be similar to those provided to GM under the Existing IT Services Agreements. Certain of the existing service arrangements applicable to particular units, sectors or other organizations within GM will be 37 6 ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES extended for additional terms of between approximately one and three years beyond their current expiration dates. In addition, under the IT Services Agreements, EDS will provide certain plant floor automation services in North America that it has not previously provided. The IT Services Agreements also provide that certain significant changes will be made to the pricing and terms under which EDS will provide IT services to GM after the Split-Off. Among other things, the IT Services Agreements provide that the rates charged by EDS to GM for certain information processing activities and communications services will be reduced and that the parties will work together to achieve increased targets for structural cost reductions. GM will also be given the right to competitively bid and, subject to certain restrictions, outsource a limited portion of its IT service requirements to third party providers. In addition, beginning in 1997, the payment terms relating to IT services provided by EDS will be revised over a two-year period to extend the due dates for payments from GM. The GM Board of Directors believes that the changes reflected in the IT Services Agreements are necessary (i) in light of the fact that, after the Split-Off, EDS will no longer be a subsidiary of GM and the Capital Stock Committee of the GM Board of Directors will no longer be able to monitor the IT service arrangements between the parties; (ii) to reflect the evolutionary nature of the GM-EDS customer relationship and the IT services industry; and (iii) to provide additional assurances to GM, as EDS' largest customer, that the IT services performed by EDS will remain competitive. Based on currently available information and assuming that the IT Services Agreements had been effective as of January 1, 1996, EDS believes that revenues generated from services performed for GM in 1996 would be slightly lower than those generated from such services in 1995. In addition, EDS expects that the contemplated changes in its arrangements with GM could reduce its 1996 earnings per share by as much as $.07 to $.14 (including $.03 in the first quarter of 1996). The long-term impact of the terms of the IT Services Agreements cannot be precisely quantified at present, although such terms may have an adverse effect on operating margins unless EDS is able to effect reductions in the costs of providing services to GM. Although EDS plans to implement certain cost reduction measures, there can be no assurance as to the extent, if any, to which such measures will mitigate the possible adverse impact on its operating margins. In general, there can be no assurance that the terms of the IT Services Agreements would not have a material adverse effect in the long-term on the results of operations of EDS. The Special Inter-Company Payment will be paid by EDS to GM at such time, if any, as the Split-Off occurs. The amount of the Special Inter-Company Payment will be $500.0 million. Interest costs related to the Special Inter-Company Payment are expected to be approximately $.03 per share in 1996. In addition to the Special Inter-Company Payment, EDS expects to incur approximately $35.0 million, or approximately $.05 per share in 1996, of one-time costs in connection with the formulation and implementation of the Split-Off. Certain of these costs will be incurred only if the Split-Off is consummated. In arriving at the amount of the $500.0 million Special Inter-Company Payment, the parties took into account the fact that GM would provide EDS an allowance of $50.0 million relating to the resolution of various uncertain, contingent or other matters arising out of the separation of GM and EDS. Statements about the effect of the proposed Split-Off and the impact of the agreement relating to IT Services after the proposed Split-Off are forward-looking statements, which by their nature are subject to numerous uncertainties that could cause actual results to vary. Further information about the terms of the proposed Split-Off is set forth in a joint solicitation statement and prospectus of GM and EDS filed with the Securities and Exchange Commission, which has been distributed to GM common stockholders in connection with the submission of the Split-Off for approval by such stockholders. RESTRUCTURING ACTIVITIES On April 1, 1996, EDS announced that it is taking certain actions and considering others to maintain and improve operating efficiencies and accelerate EDS' move towards "user-centered" computing. In connection therewith, EDS also announced the implementation of a voluntary early retirement offer and involuntary severance arrangements affecting between 4,000 and 5,000 employees and designed to both reduce labor costs and change the skill mix of EDS' workforce. Communication of the terms of these arrangements to employees began on April 1 and will continue during the second quarter of 1996. It is expected that substantially all of these workforce reductions would be completed by December 1996. 38 7 ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES As part of its overall goal to improve operating efficiencies, EDS is also in the process of evaluating certain aspects of its business to identify any redundant facilities and related assets that may no longer fit its long-term strategic objectives. Accordingly, the actions under consideration could include the elimination by EDS of certain business functions and consolidation of certain related facilities. EDS will incur a pre-tax non-recurring charge in the second quarter of 1996 in connection with the restructuring actions discussed above. The amount of the aggregate charge (including the employee related actions, asset writedowns, and other actions being considered) will depend on the number of employees who elect to accept early retirement offers and the determination of which EDS business functions and related facilities would be eliminated or consolidated. EDS estimates that all such actions could result in an aggregate pre-tax non-recurring charge in the second quarter of 1996 in the range of $500.0 million to $750.0 million (between $.66 and $.99 per share, after tax). A portion of the contemplated charge will be of a non-cash nature, the amount of which has not yet been determined. EDS expects that any restructuring actions implemented by it will result in savings commencing in the second half of 1996. The restructuring activities discussed above are not contingent upon the approval or consummation of the Split-Off. Statements about the effect of EDS' actions and the possible amount of a non-recurring charge are forward-looking statements which by their nature are subject to numerous uncertainties that could cause actual results to vary. NEW ACCOUNTING STANDARDS The Financial Accounting Standards Board (FASB) has issued Statement of Financial Accounting Standards (SFAS) No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, which became effective for fiscal years beginning in 1996. The Statement requires that long-lived assets and certain identifiable intangibles to be held and used be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, and for the measurement of loss to be based on the fair value of the asset. In addition, long-lived assets and certain identifiable intangibles to be disposed of are generally to be reported at the lower of the carrying amount or fair value less selling costs. As discussed above, EDS is in the process of evaluating certain aspects of its business to identify any redundant facilities and related assets which may no longer fit its long-term strategic objectives. This evaluation is expected to be completed in the second quarter of 1996. The effects of initially adopting SFAS No. 121 as of January 1, 1996, were not material to EDS' Consolidated Financial Statements. RESULTS OF OPERATIONS Revenues. Total systems and other contracts revenues for the quarter ended March 31, 1996, rose $590.6 million, or 21%, over the corresponding quarter in 1995 to $3,366.9 million. Revenues from outside customers (systems and other contracts revenues not attributable to GM and its affiliates) for the quarter ended March 31, 1996, rose 28% to $2,404.7 million compared to $1,878.3 million for the same period in 1995. Revenues from outside customers comprised 71% and 68% of total revenues for the three months ended March 31, 1996 and 1995, respectively. While it is anticipated that GM will continue to contribute a significant portion of total systems and other contracts revenues, EDS expects the percentage of revenues from GM and its affiliates to continue to decline as revenues from outside customers continue to increase. 39 8 ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES Costs and Expenses. Cost of revenues as a percentage of systems and other contracts revenues increased slightly to 80% for the three months ended March 31, 1996, compared with 78% for the corresponding period in 1995. Cost as a percentage of revenues has increased due to higher labor costs for skilled workforce and pricing pressures as a result of the increasingly competitive environment in which EDS operates. The increasingly competitive environment in which EDS operates results in part from a long-term trend of convergence occurring in the computing, communications and media/entertainment sectors of the information industry. EDS is addressing this environment in part through expected efficiencies to be gained from its restructuring activities described above and its value-added business approach. Selling, general and administrative expenses as a percentage of systems and other contracts revenues were 9% for the three months ended March 31, 1996, down from 10% in the corresponding period in 1995 due to the fixed nature of certain of these costs. Interest and other income, net. Interest and other income, net decreased $5.3 million in the first quarter of 1996 to $(17.0) million, compared with $(11.7) million in 1995. The primary reason for the decrease in 1996 was interest associated with the issuance in May 1995 of $350.0 million of 6.85% notes due May 15, 2000 (the "Five-year Notes") and $300.0 million of 7.125% notes due May 15, 2005 (the "Ten-year Notes"), as well as from other borrowings. These notes were issued in May 1995 and were used for general corporate purposes, including the repayment of outstanding commercial paper borrowings, property and equipment expenditures, acquisitions, and other contract-related investments to support business growth. Net Income. For the three month period ended March 31, 1996, EDS' separate consolidated net income increased 11% to $218.8 million from net income of $196.8 million for the corresponding period of the prior year. Earnings per share of GM Class E common stock rose from $.42 to $.45 for the first quarter of 1996 compared to the first quarter of 1995, based on EDS' Available Separate Consolidated Net Income as described in Note 2 to EDS' Consolidated Financial Statements. Earnings per share for the first quarter of 1996 were negatively impacted by $.03 per share as a result of certain rate adjustments retroactive to January 1, 1996, under the terms of the new 10-year Master Services Agreement to be entered into by EDS and GM in connection with the Split-Off. Return on assets decreased to 9.5% for the twelve-month period ending March 31, 1996, compared with 10.3% for the corresponding period in 1995. Return on assets has declined due to the increasing capital intensity of EDS' business and increased contract-related investments in computers and telecommunications equipment, software, and other property and equipment. Return on stockholder's equity decreased to 20.0% for the twelve-month period ending March 31, 1996, compared to 20.7% for the comparable period in 1995. EDS' effective tax rate remained constant at 36% for the three months ended March 31, 1996 and 1995. EDS and its customers may, from time to time, modify their contractual arrangements. For customer contracts accounted for under the percentage of completion method, such changes would be reflected in results of operations as a cumulative change in accounting estimate in the period the revisions are determined. Seasonality and Inflation. EDS' revenues vary over the calendar year, with the fourth quarter generally reflecting the highest revenues for the year due to certain EDS services that are purchased more heavily in the fourth quarter as a result of the spending patterns of several customers. In addition, revenues have generally increased from quarter to quarter as a result of new business added throughout the year. EDS believes that inflation generally had little effect on its results of operations for each of the years ended December 31, 1995, 1994, and 1993. LIQUIDITY AND CAPITAL RESOURCES At March 31, 1996, EDS held cash and cash equivalents of $935.9 million, had working capital of $1,632.7 million, and a current ratio of 1.5-to-1. This compares to cash equivalents of $548.9 million, $1,120.1 million in working capital and a current ratio of 1.3-to-1 at December 31, 1995. The increase in working capital was primarily in the area of cash and cash equivalents, as well as decreases in accounts payable and accrued liabilities. 40 9 ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES In May 1995, EDS issued Five-year and Ten-year notes. In addition, during the first quarter of 1996, EDS issued $265.0 million of commercial paper. EDS' capitalization at March 31, 1996, consisted of $2,109.2 million in noncurrent notes payable and $5,155.8 million in stockholder's equity (GM's equity in its indirectly wholly owned subsidiary, EDS). Total debt was $2,347.9 million at March 31, 1996, which consisted of short- and long-term notes payable. This compared with total debt of $2,100.6 million at December 31, 1995. The total debt-to-capital ratio (which includes current notes payable as a component of capital) was 31% at March 31, 1996, and 30% at December 31, 1995. The ratio of non-current debt to capital was 29% at March 31, 1996 and 27% at December 31, 1995. At March 31, 1996, EDS had unused uncommitted short-term lines of credit totaling $768.1 million and unused committed lines of credit of $2,500.0 million. The unused committed lines of credit of $2,500.0 million serve as a backup facility for EDS' commercial paper borrowings. At March 31, 1996, and December 31, 1995, EDS had total committed lines of credit of $2,515.5 million. Cash flows from operations increased $384.2 million during the first quarter of 1996 to $512.1 million compared with the first quarter of 1995 due primarily to a decrease in accounts receivable. Cash used in investing activities during the first quarter of 1996 was $313.4 million compared with $387.0 million in the corresponding period of last year. Net cash provided by financing activities was $195.6 million in the first quarter of 1996 compared with $169.5 million in the corresponding period of last year. EDS paid cash dividends to GM totaling $72.6 million for the first three months of 1996, and $62.6 million for the same period in 1995. EDS expects that its principal uses of funds for the foreseeable future will be for capital expenditures, debt repayments, working capital and costs associated with the Split-Off, as well as the payment of the Special Inter-Company Payment to GM. Capital expenditures may consist of purchases of computer and telecommunications equipment, buildings and facilities, land, and software, as well as acquisitions. EDS' projected capital expenditures for 1996 are approximately $1,400.0 million to $1,700.0 million. However, actual capital expenditures are somewhat dependent on acquisition and joint venture activities by EDS, as well as capital requirements for new business. EDS anticipates that cash flows from operations and unused borrowing capacity under its existing lines of credit will provide sufficient funds to meet its needs for at least the next year. The Existing IT Services Agreements provide for GM to pay EDS on the 15th day of the month in which services are provided with respect to a substantial portion of services. Under the IT Services Agreements, there will be a transition over a two-year period, beginning in 1997, to payment on the 20th day of the month following service for all agreements which do not already have payment terms at least that favorable to GM. These revised payment terms are expected to result in an increase in EDS' working capital requirements. EDS will obtain the funds for this working capital impact and for the Special Inter-Company Payment through borrowings under its existing commercial paper or bank credit facilities. EDS currently anticipates that it may seek to refinance such commercial paper or bank borrowings as part of its general plan to extend maturities of its indebtedness. The competitive environment and changing market forces are increasing the capital intensity of EDS' business. Increasing amounts of capital will be required by EDS in order to make investments in acquisitions, joint ventures, and strategic alliances in other parts of the information industry and in new product development. In addition, information technology customer contracts frequently now require front-end investments in computers and telecommunications equipment, software, and other property and equipment. For these reasons, EDS' ability to continue to access the capital markets on an efficient basis will become increasingly important to EDS' ability to compete effectively. The Split-Off is intended, among other things, to afford EDS more flexible access to capital markets to meet its growing needs without regard to competing considerations of GM and its affiliates. Following the Split-Off, EDS may over time incur substantially more debt than it has while a subsidiary of GM. As a result, EDS' financial leverage may increase in the future. To the extent that EDS would become more highly leveraged following the Split-Off, EDS may be required to pay higher interest rates on its outstanding borrowings. In order to provide the funds necessary for EDS' future acquisition and expansion goals, EDS expects that it might incur, from time to time, additional bank financing and/or issue equity or debt securities, depending on market and other conditions. * * * * * 41 EX-99.B 6 EXHIBIT 99(B) 1 EXHIBIT 99(B) HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS AND MANAGEMENT'S DISCUSSION AND ANALYSIS - -------------------------------------------------------------------------------- CONSOLIDATED STATEMENT OF INCOME AND AVAILABLE SEPARATE CONSOLIDATED NET INCOME (UNAUDITED)
THREE MONTHS ENDED MARCH 31, -------------------- 1996 1995 -------- -------- (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) Revenues Net sales Outside customers................................................... $2,438.9 $2,162.6 General Motors and affiliates....................................... 1,174.7 1,404.2 Other income -- net (Note 2)........................................... 123.1 12.0 -------- -------- Total Revenues.................................................... 3,736.7 3,578.8 -------- -------- Costs and Expenses Cost of sales and other operating charges, exclusive of items listed below............................................................... 2,796.5 2,777.0 Selling, general, and administrative expenses.......................... 300.3 248.5 Depreciation and amortization.......................................... 131.6 115.7 Amortization of GM purchase accounting adjustments related to Hughes Aircraft Company (Note 3)........................................... 30.6 31.0 Interest expense -- net................................................ 5.2 3.3 -------- -------- Total Costs and Expenses.......................................... 3,264.2 3,175.5 -------- -------- Income before Income Taxes............................................... 472.5 403.3 Income taxes............................................................. 191.4 165.4 -------- -------- Net Income............................................................... 281.1 237.9 Adjustments to exclude the effect of GM purchase accounting adjustments related to Hughes Aircraft Company (Note 3)............................ 30.6 31.0 -------- -------- Earnings Used for Computation of Available Separate Consolidated Net Income................................................................. $ 311.7 $ 268.9 ======== ======== Available Separate Consolidated Net Income (Note 3) Average number of shares of GM Class H Common Stock outstanding (in millions) (Numerator)............................................... 97.4 94.2 Class H dividend base (in millions) (Denominator)...................... 399.9 399.9 Available Separate Consolidated Net Income............................. $ 76.0 $ 63.3 ======== ======== Earnings Attributable to General Motors Class H Common Stock on a Per Share Basis (Note 3)................................................... $0.78 $0.67 ======== ========
Reference should be made to the Notes to Consolidated Financial Statements. 42 2 HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET
MARCH 31, DECEMBER 31, 1996 1995 ----------- ------------ (UNAUDITED) (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNT) ASSETS Current Assets Cash and cash equivalents.......................................... $ 986.7 $ 1,139.5 Accounts and notes receivable Trade receivables (less allowances)............................. 1,215.6 1,235.6 General Motors and affiliates................................... 148.5 146.7 Contracts in process, less advances and progress payments.......... 2,708.9 2,469.2 Inventories (less allowances) Productive material, work in process, and supplies.............. 1,297.9 1,060.4 Finished product................................................ 144.1 165.1 Prepaid expenses, including deferred income taxes.................. 600.0 594.3 --------- --------- Total Current Assets....................................... 7,101.7 6,810.8 Property -- Net...................................................... 2,790.8 2,739.2 Telecommunications and Other Equipment -- Net........................ 983.8 1,175.1 Intangible Assets, net of amortization............................... 3,568.6 3,573.7 Investments and Other Assets, including deferred income taxes -- principally at cost (less allowances).............................. 1,651.1 1,675.6 --------- --------- Total Assets......................................................... $16,096.0 $15,974.4 ========= ========= LIABILITIES AND STOCKHOLDER'S EQUITY Current Liabilities Accounts payable Outside......................................................... $ 739.4 $ 748.7 General Motors and affiliates................................... 53.5 52.2 Advances on contracts.............................................. 952.1 893.7 Notes and loans payable............................................ 116.4 432.5 Income taxes payable............................................... 251.3 190.8 Accrued liabilities................................................ 1,953.5 1,990.9 --------- --------- Total Current Liabilities.................................. 4,066.2 4,308.8 --------- --------- Long-Term Debt and Capitalized Leases................................ 269.1 258.8 --------- --------- Postretirement Benefits Other Than Pensions (Note 4)................. 1,617.9 1,610.6 --------- --------- Other Liabilities and Deferred Credits............................... 1,429.0 1,270.5 --------- --------- Stockholder's Equity Capital stock (outstanding, 1,000 shares, $0.10 par value) and additional paid-in capital...................................... 6,342.1 6,338.1 Net income retained for use in the business........................ 2,509.0 2,323.9 --------- --------- Subtotal................................................... 8,851.1 8,662.0 Minimum pension liability adjustment............................... (108.6) (108.6) Accumulated foreign currency translation adjustments............... (28.7) (27.7) --------- --------- Total Stockholder's Equity................................. 8,713.8 8,525.7 --------- --------- Total Liabilities and Stockholder's Equity........................... $16,096.0 $15,974.4 ========= =========
Reference should be made to the Notes to Consolidated Financial Statements. 43 3 HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, -------------------- 1996 1995 -------- -------- (DOLLARS IN MILLIONS) Net Cash Provided by (Used in) Operating Activities...................... $ (13.1) $ 143.0 -------- -------- Cash Flows from Investing Activities Investment in companies, net of cash acquired.......................... (28.7) (150.5) Expenditures for property and special tools............................ (135.3) (105.0) (Increase) decrease in telecommunications and other equipment.......... 22.1 (11.2) Proceeds from sale and leaseback of satellite transponders with General Motors Acceptance Corporation....................................... 252.0 -- Proceeds from disposal of property..................................... 16.7 26.5 (Increase) decrease in notes receivable................................ (2.2) 6.7 -------- -------- Net Cash Provided by (Used in) Investing Activities............... 124.6 (233.5) -------- -------- Cash Flows from Financing Activities Net decrease in notes and loans payable................................ (316.1) (15.6) Increase in long-term debt............................................. 10.3 11.1 Decrease in long-term debt............................................. -- (9.3) Proceeds from sale of minority interest in subsidiary.................. 137.5 -- Cash dividends paid to General Motors.................................. (96.0) (92.0) -------- -------- Net Cash Used in Financing Activities............................. (264.3) (105.8) -------- -------- Net decrease in cash and cash equivalents................................ (152.8) (196.3) Cash and cash equivalents at beginning of the period..................... 1,139.5 1,501.8 -------- -------- Cash and cash equivalents at end of the period........................... $ 986.7 $1,305.5 ======== ========
Reference should be made to the Notes to Consolidated Financial Statements. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 1. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. In the opinion of management, all adjustments (consisting of only normal recurring items) which are necessary for a fair presentation have been included. The results for interim periods are not necessarily indicative of results which may be expected for any other interim period or for the full year. For further information, refer to the consolidated financial statements and notes thereto included in General Motors' 1995 Annual Report on Form 10-K, as amended. NOTE 2. Other income -- net for the first quarter of 1996 includes a $120.3 million pre-tax gain from the sale of a 2.5% equity interest in DIRECTV(R) to AT&T. 44 4 HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONCLUDED (UNAUDITED) NOTE 3. Earnings attributable to General Motors Class H common stock on a per share basis have been determined based on the relative amounts available for the payment of dividends to holders of the GM Class H common stock. Holders of GM Class H common stock have no direct rights in the equity or assets of Hughes, but rather have rights in the equity and assets of GM (which includes 100% of the stock of Hughes). Dividends on the GM Class H common stock are declared by GM's Board of Directors out of the Available Separate Consolidated Net Income of Hughes earned since the acquisition of Hughes Aircraft Company (HAC) by GM. The Available Separate Consolidated Net Income of Hughes is determined quarterly and is equal to the separate consolidated net income of Hughes, excluding the effects of GM purchase accounting adjustments arising from the acquisition of HAC (Earnings Used for Computation of Available Separate Consolidated Net Income), multiplied by a fraction, the numerator of which is a number equal to the weighted average number of shares of GM Class H common stock outstanding during the period and the denominator of which was 399.9 million during the first quarters of 1996 and 1995. The denominator used to determine the Available Separate Consolidated Net Income of Hughes is adjusted as deemed appropriate by the GM Board of Directors to reflect subdivisions or combinations of the GM Class H common stock and to reflect certain transfers of capital to or from Hughes. The GM Board's discretion to make such adjustments is limited by criteria set forth in GM's Certificate of Incorporation. In this regard, the GM Board has generally caused the denominator to decrease as shares are purchased by Hughes, and to increase as such shares are used, at Hughes expense, for Hughes employee benefit plans or acquisitions. Dividends may be paid on GM Class H common stock only when, as, and if declared by the GM Board of Directors in its sole discretion. The current policy of the GM Board with respect to GM Class H common stock is to pay quarterly cash dividends at an annual rate approximately equal to 35% of the Available Separate Consolidated Net Income of Hughes for the prior year. NOTE 4. Hughes has disclosed in the financial statements certain amounts associated with estimated future postretirement benefits other than pensions and characterized such amounts as "accumulated postretirement benefit obligations", "liabilities", or "obligations". Notwithstanding the recording of such amounts and the use of these terms, Hughes does not admit or otherwise acknowledge that such amounts or existing postretirement benefit plans of Hughes (other than pensions) represent legally enforceable liabilities of Hughes. * * * * * MANAGEMENT'S DISCUSSION AND ANALYSIS The following discussion excludes the purchase accounting adjustments related to General Motors' acquisition of Hughes Aircraft Company (see Supplemental Data beginning on page 47). RESULTS OF OPERATIONS Hughes reported first quarter 1996 earnings of $311.7 million, a 15.9% increase from the $268.9 million reported in the first quarter of 1995. Earnings per share of GM Class H common stock increased 16.4% to $0.78 per share from $0.67 per share in the first quarter of 1995. First quarter 1996 earnings included a $71.6 million after-tax gain, or $0.18 per share of GM Class H common stock, related to the sale of a 2.5% equity interest in DIRECTV(R) to AT&T. Also affecting first quarter 1996 earnings was the negative impact of the 17-day strike at two GM component plants in Dayton, Ohio that resulted in the temporary shutdown of 26 of 29 GM North American assembly plants, amounting to approximately $30 million after-tax, or $0.08 per share of GM Class H common stock. 45 5 HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES Revenues for the first quarter of 1996 were $3,736.7 million, a 4.4% increase from the $3,578.8 million reported in the first quarter of 1995. Costs and expenses as a percentage of revenues decreased to 86.5% from 87.9% in the first quarter of 1995. Income taxes were $191.4 million, or 38.0% of income before income taxes, for the quarter compared with $165.4 million, or 38.1% of income before income taxes, in the comparable 1995 quarter. Operating profit was $385.2 million for the quarter ended March 31, 1996, a 9.5% decrease from the operating profit of $425.6 million reported during the comparable period in 1995. The operating profit margin was 10.7% for the quarter compared with 11.9% in the first quarter of 1995. The Automotive Electronics segment reported first quarter 1996 revenues of $1,271.8 million, a decrease of 15.0% from revenues of $1,496.2 million for the same period in 1995. The decline reflects a 24.6% decrease in GM vehicles produced in North America primarily as a result of the strike. This reduction more than offset a 25.6% increase in international and non-GM sales (from $195 million to $245 million) and a 7.0% increase in Hughes-supplied electronic content in GM vehicles produced in North America (from $868 per vehicle to $929 per vehicle). Operating profit decreased 37.6% in the quarter to $159.3 million from $255.4 million for the comparable period in 1995. The decline was primarily due to the lower production volumes, price reductions and the impact from continued investment in international expansion, in part offset by increased electronic content per vehicle and continued cost reduction efforts. As a result, first quarter operating profit margin declined to 12.6% from 17.3% in 1995. As the principal supplier of automotive electronics to General Motors' North American Operations unit, Hughes' sales of automotive electronics will continue to be heavily dependent on General Motors production of vehicles in North America, the level of Hughes-supplied electronic content per vehicle, and the price of such electronics. In addition, the global market for such products is highly competitive. In response to this competitive environment, the segment's strategy is to continue efforts to increase non-GM NAO sales, make strategic acquisitions and forge international alliances, reduce costs aggressively each year, and increase electronic functionality through a focus on safety, security, communications, and convenience. In order to achieve certain of these strategic objectives, the segment will seek to improve its systems capability both internally and by developing key design, manufacturing and marketing alliances and other relationships with mechanical and electrical automotive component suppliers. Telecommunications and Space segment revenues for the quarter ended March 31, 1996 were $936.4 million, an increase of 44.8% over revenues of $646.7 million reported in the prior year's first quarter. The growth was principally due to DIRECTV subscriber growth, a $120.3 million pre-tax gain recognized from the sale of 2.5% of DIRECTV to AT&T and higher Galaxy(R) satellite transponder sales. Operating profit in the first quarter of 1996 more than doubled to $74.5 million compared with $31.5 million reported in the same period in 1995. This increase was principally the result of higher Galaxy satellite transponder sales and reduced DIRECTV operating losses. As a result, first quarter operating profit margin increased to 9.1% in 1996 from 4.8% in 1995. The global telecommunications industry is experiencing a period of rapid growth and change providing industry participants with many opportunities for strategic growth. The Telecommunications and Space segment intends to continue to expand its offerings from being primarily a supplier of hardware to becoming a provider of hardware and video, voice, and data services worldwide. This strategy requires both significant capital investment in the coming years in order to maintain the segment's competitive position and to take advantage of the growth opportunities presented, as well as the formation of strategic alliances internationally to compete in the very competitive global marketplace. 46 6 HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES The Aerospace and Defense Systems segment reported revenues for the quarter of $1,512.4 million, a 9.2% increase over revenues of $1,385.0 million reported in the same period in 1995. The growth was principally due to additional revenues resulting from the 1995 acquisitions of CAE-Link and Magnavox Electronic Systems Company (Magnavox). Operating profit for the period increased 2.9% to $157.9 million compared with $153.5 million for the first quarter of 1995 primarily due to these revenue increases. The operating profit margin in the period declined to 10.5% from 11.1% in the first quarter of 1995 principally due to a continued shift from production programs to engineering and development programs. The continuing consolidation of businesses in the defense industry is resulting in increased competitive pressures for the Aerospace and Defense Systems segment that could impact future operating results. In response to this environment, the Hughes strategy is to strengthen its leadership positions through acquisitions, consolidations, realignments, and divestitures, strive to be the low-cost provider, use technology to capture market share, expand international sales, and broaden its customer base. LIQUIDITY AND CAPITAL RESOURCES Cash and cash equivalents at March 31, 1996 were $986.7 million, a decrease of $152.8 million from the $1,139.5 million reported at December 31, 1995. The decrease is primarily due to the repayment of a $302.7 million note payable related to the 1995 acquisition of Magnavox, cash dividends paid to General Motors of $96.0 million, and capital expenditures of $151.3 million, partially offset by cash proceeds from the sale of a minority interest in DIRECTV of $137.5 million and from the sale and leaseback of satellite transponders with General Motors Acceptance Corporation of $252.0 million. As a measure of liquidity, Hughes' current ratio (ratio of current assets to current liabilities) increased to 1.75 at March 31, 1996 from 1.58 at December 31, 1995. Working capital increased to $3,035.5 million at March 31, 1996 from $2,502.0 million at December 31, 1995. Capital expenditures, including expenditures for telecommunications and other equipment, were $151.3 million for the quarter ended March 31, 1996, compared with $114.5 million for the comparable period in 1995 reflecting increased expenditures in the Telecommunications and Space segment. Long-term debt and capitalized leases was $269.1 million at March 31, 1996, relatively unchanged from the $258.8 million at December 31, 1995. The ratio of long-term debt and capitalized leases to the total of such debt and pro forma stockholder's equity was 4.4% at March 31, 1996 and December 31, 1995. SUPPLEMENTAL DATA The Consolidated Financial Statements reflect the application of purchase accounting adjustments as described in Note 3 to the Consolidated Financial Statements. However, as provided in GM's Certificate of Incorporation, the earnings attributable to GM Class H common stock for purposes of determining the amount available for the payment of dividends on GM Class H common stock specifically excludes such adjustments. More specifically, amortization of these intangible assets associated with GM's purchase of Hughes Aircraft Company amounted to $30.6 million and $31.0 million for the first quarters of 1996 and 1995, respectively. Such amounts were excluded from the earnings available for the payment of dividends on GM Class H common stock and were charged against the earnings available for the payment of dividends on GM's $1 2/3 par value stock. Unamortized purchase accounting adjustments associated with GM's purchase of Hughes Aircraft Company were $2,815.2 million at March 31, 1996 and $2,845.8 million at December 31, 1995. In order to provide additional analytical data to the users of Hughes' financial information, supplemental data in the form of unaudited summary pro forma financial data are provided. Consistent with the basis on which earnings of Hughes available for the payment of dividends on the GM Class H common stock is determined, the pro forma data exclude purchase accounting adjustments related to General Motors' acquisition of Hughes Aircraft Company. Included in the supplemental data are certain financial ratios which provide measures of financial returns excluding the impact of purchase accounting adjustments. The pro forma data are not presented as a measure of GM's total return on its investment in Hughes. 47 7 HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES SUMMARY PRO FORMA FINANCIAL DATA* PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
THREE MONTHS ENDED MARCH 31, -------------------- 1996 1995 -------- -------- (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) Total Revenues........................................................... $3,736.7 $3,578.8 Total Costs and Expenses................................................. 3,233.6 3,144.5 -------- -------- Income before Income Taxes............................................... 503.1 434.3 Income taxes............................................................. 191.4 165.4 -------- -------- Earnings Used for Computation of Available Separate Consolidated Net Income................................................................. $ 311.7 $ 268.9 ======== ======== Earnings Attributable to General Motors Class H Common Stock on a Per Share Basis............................................................ $0.78 $0.67 ======== ========
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
MARCH 31, DECEMBER 31, 1996 1995 --------- ------------ (DOLLARS IN MILLIONS) ASSETS Total Current Assets.................................................. $ 7,101.7 $ 6,810.8 Property -- Net....................................................... 2,790.8 2,739.2 Telecommunications and Other Equipment -- Net......................... 983.8 1,175.1 Intangible Assets, Investments, and Other Assets -- Net............... 2,404.5 2,403.5 --------- --------- Total Assets.......................................................... $13,280.8 $13,128.6 ========= ========= LIABILITIES AND STOCKHOLDER'S EQUITY Total Current Liabilities............................................. $ 4,066.2 $ 4,308.8 Long-Term Debt and Capitalized Leases................................. 269.1 258.8 Postretirement Benefits Other Than Pensions, Other Liabilities, and Deferred Credits.................................................... 3,046.9 2,881.1 Total Stockholder's Equity**.......................................... 5,898.6 5,679.9 --------- --------- Total Liabilities and Stockholder's Equity**.......................... $13,280.8 $13,128.6 ========= =========
- ------------------------- * The summary excludes purchase accounting adjustments related to GM's acquisition of Hughes Aircraft Company. ** General Motors' equity in its wholly-owned subsidiary, Hughes. Holders of GM Class H common stock have no direct rights in the equity or assets of Hughes, but rather have rights in the equity and assets of GM (which includes 100% of the stock of Hughes). 48 8 HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES SUMMARY PRO FORMA FINANCIAL DATA* -- CONTINUED PRO FORMA SELECTED SEGMENT DATA (UNAUDITED)
THREE MONTHS ENDED MARCH 31, -------------------- 1996 1995 -------- -------- (DOLLARS IN MILLIONS) AUTOMOTIVE ELECTRONICS Revenues Amount................................................................. $1,271.8 $1,496.2 As a percentage of Hughes Revenues..................................... 34.0% 41.8% Net Sales................................................................ $1,260.2 $1,472.7 Operating Profit(1)...................................................... $ 159.3 $ 255.4 Operating Profit Margin(2)............................................... 12.6% 17.3% Depreciation and Amortization............................................ $ 48.8 $ 42.8 Capital Expenditures..................................................... $ 50.3 $ 52.9 TELECOMMUNICATIONS AND SPACE Revenues Amount................................................................. $ 936.4 $ 646.7 As a percentage of Hughes Revenues..................................... 25.1% 18.1% Net Sales................................................................ $ 821.0 $ 656.6 Operating Profit(1)...................................................... $ 74.5 $ 31.5 Operating Profit Margin(2)............................................... 9.1% 4.8% Depreciation and Amortization(3)......................................... $ 46.2 $ 37.2 Capital Expenditures(4).................................................. $ 70.3 $ 39.3 AEROSPACE AND DEFENSE SYSTEMS Revenues Amount................................................................. $1,512.4 $1,385.0 As a percentage of Hughes Revenues..................................... 40.5% 38.7% Net Sales................................................................ $1,502.2 $1,383.1 Operating Profit(1)...................................................... $ 157.9 $ 153.5 Operating Profit Margin(2)............................................... 10.5% 11.1% Depreciation and Amortization(3)......................................... $ 32.7 $ 29.5 Capital Expenditures..................................................... $ 28.5 $ 20.7 CORPORATE AND OTHER Operating Loss(1)........................................................ $ (6.5) $ (14.8)
- ------------------------- * The summary excludes purchase accounting adjustments related to GM's acquisition of Hughes Aircraft Company. (1) Net Sales less Total Costs and Expenses other than Interest Expense. (2) Operating Profit as a percentage of Net Sales. (3) Excludes amortization arising from purchase accounting adjustments related to GM's acquisition of Hughes Aircraft Company amounting to $5.3 million for the Telecommunications and Space segment, and $25.2 million for the Aerospace and Defense Systems segment in 1996 and 1995. (4) Includes expenditures related to telecommunications and other equipment amounting to $16.0 million and $9.5 million in 1996 and 1995, respectively. 49 9 HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES SUMMARY PRO FORMA FINANCIAL DATA* -- CONCLUDED PRO FORMA SELECTED FINANCIAL DATA (UNAUDITED)
THREE MONTHS ENDED MARCH 31, ----------------------- 1996 1995 -------- -------- (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) Operating profit..................................................... $ 385.2 $ 425.6 Income before income taxes........................................... $ 503.1 $ 434.3 Earnings used for computation of available separate consolidated net income............................................................. $ 311.7 $ 268.9 Average number of GM Class H dividend base shares(1)................. 399.9 399.9 Stockholder's Equity................................................. $5,898.6 $5,144.5 Dividends per share of GM Class H common stock....................... $0.24 $0.23 Working capital...................................................... $3,035.5 $2,731.4 Operating profit as a percent of net sales........................... 10.7% 11.9% Pre-tax income as a percent of net sales............................. 13.9% 12.2% Net income as a percent of net sales................................. 8.6% 7.5%
- ------------------------- * The summary excludes GM purchase accounting adjustments related to the acquisition of Hughes Aircraft Company. (1) Class H dividend base shares is used in calculating earnings attributable to GM Class H common stock on a per share basis. This is not the same as the average number of GM Class H shares outstanding, which was 97.4 million for the first quarter of 1996 and 94.2 million for the first quarter of 1995. * * * * * * * 50 -----END PRIVACY-ENHANCED MESSAGE-----