l:\secfiles\10-Q\2ndqtr94\part1-94.doc 17
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549-1004
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE
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ACT OF 1934
For the quarterly period ended June 30, 1994
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE
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ACT OF 1934
For the transition period from to
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Commission file number 1-143
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GENERAL MOTORS CORPORATION
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(Exact name of registrant as specified in its charter)
STATE OF DELAWARE 38-0572515
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
767 Fifth Avenue, New York, New York 10153-0075
3044 West Grand Boulevard, Detroit, Michigan 48202-3091
- -------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (313)-556-5000
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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 June 30, 1994, there were outstanding 750,039,470 shares of the
issuer's $1-2/3 par value common stock, 260,673,505 shares of Class E $0.10
par value common stock and 92,268,354 shares of Class H $0.10 par value common
stock.
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GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Index
Page No.
--------
Part I - Financial Information
Item 1. Financial Statements
Statement of Consolidated Operations 3
Consolidated Balance Sheet 5
Condensed Statement of Consolidated Cash Flows 7
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis 12
Part II - Other Information
Item 1. Legal Proceedings 29
Item 4. Submission of Matters to a Vote of Security Holders 30
Item 6. Exhibits and Reports on Form 8-K 32
Signatures 33
Exhibit 11 Computation of Earnings Per Share Attributable
to Common Stocks for the Quarters and Six Months Ended
June 30, 1994 and 1993 34
Exhibit 12 Computation of Ratios of Earnings to Fixed Charges for
the Six Months Ended June 30, 1994 and 1993 38
Exhibit 99(a) Electronic Data Systems Corporation and Subsidiaries
Consolidated Financial Statements and Management's Discussion
and Analysis 39
(b) GM Hughes Electronics Corporation and Subsidiaries
Consolidated Financial Statements and Management's Discussion
and Analysis 45
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GENERAL MOTORS CORPORATION PART I
AND SUBSIDIARIES ITEM 1. FINANCIAL STATEMENTS
STATEMENT OF CONSOLIDATED OPERATIONS
Six Months Ended
Second Quarter June 30,
-------------------- --------------------
1994 1993 1994 1993
-------------------- --------------------
(Dollars in Millions)
Net Sales and Revenues
Manufactured products $35,555.1 $31,539.1 $68,353.4 $61,706.6
Financial services 2,304.7 2,219.8 4,467.7 4,487.6
Computer systems services 1,453.3 1,240.6 2,828.8 2,454.5
Other income (Note 1) 1,079.1 1,250.6 2,237.7 2,165.6
-------- -------- -------- --------
Total Net Sales and Revenues 40,392.2 36,250.1 77,887.6 70,814.3
-------- -------- -------- --------
Costs and Expenses
Cost of sales and other
operating charges, exclusive
of items listed below 30,218.0 27,578.1 58,222.1 54,440.1
Selling, general, and
administrative expenses 3,024.8 2,830.4 5,729.4 5,556.6
Interest expense 1,350.2 1,444.9 2,552.2 2,980.4
Depreciation of real estate,
plants, and equipment 1,651.5 1,628.9 3,347.9 3,209.2
Amortization of special tools 764.6 690.8 1,525.6 1,327.0
Amortization of intangible
assets 59.4 82.3 123.3 156.5
Other deductions (Note 1) 237.5 462.2 848.8 681.6
-------- -------- -------- --------
Total Costs and Expenses 37,306.0 34,717.6 72,349.3 68,351.4
-------- -------- -------- --------
Income before Income Taxes 3,086.2 1,532.5 5,538.3 2,462.9
United States, foreign, and
other income taxes 1,163.4 643.4 2,003.7 1,060.6
-------- -------- -------- --------
Income before cumulative
effect of accounting change 1,922.8 889.1 3,534.6 1,402.3
Cumulative effect of accounting
change (Note 3) - - (758.1) -
-------- -------- -------- --------
Net Income 1,922.8 889.1 2,776.5 1,402.3
Dividends on preferred
and preference stocks 89.7 89.0 176.5 183.2
-------- -------- -------- --------
Income on Common Stocks $1,833.1 $800.1 $2,600.0 $1,219.1
======== ======== ======== ========
Certain 1993 amounts were reclassified to conform with 1994 classifications.
Reference should be made to the Notes to Financial Statements.
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GENERAL MOTORS CORPORATION
AND SUBSIDIARIES
Six Months Ended
Second Quarter June 30,
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1994 1993 1994 1993
--------------- -----------------
(Dollars in Millions
Except Per Share Amounts)
Earnings Attributable to
Common Stocks (Note 5)
$1-2/3 par value before cumulative
effect of accounting change $1,665.3 $662.4 $3,027.4 $962.9
Cumulative effect of accounting change
(Note 3) - - (751.3) -
------- ----- ------- -----
Net earnings attributable
to $1-2/3 par value $1,665.3 $662.4 $2,276.1 $962.9
------- ----- ------- -----
Net earnings attributable to Class E $106.5 $87.7 $198.6 $161.8
------- ----- ------- -----
Class H before cumulative effect
of accounting change $61.3 $50.0 $132.1 $94.4
Cumulative effect of accounting change
(Note 3) - - (6.8) -
---- ---- ----- ----
Net earnings attributable
to Class H $61.3 $50.0 $125.3 $94.4
---- ---- ----- ----
Average number of shares of common stocks
outstanding (in millions)
$1-2/3 par value 733.1 707.9 729.2 707.7
Class E 260.1 236.7 259.0 235.7
Class H 91.7 86.0 91.2 89.1
Earnings Per Share Attributable
to Common Stocks (Note 5)
$1-2/3 par value before cumulative
effect of accounting change $2.23 $0.92 $4.07 $1.34
Cumulative effect of accounting change
(Note 3) - - (1.05) -
---- ---- ---- ----
Net earnings attributable to
$1-2/3 par value $2.23 $0.92 $3.02 $1.34
---- ---- ---- ----
Net earnings attributable to Class E $0.41 $0.37 $0.77 $0.69
---- ---- ---- ----
Class H before cumulative effect of
accounting change $0.67 $0.58 $1.45 $1.05
Cumulative effect of accounting change
(Note 3) - - (0.08) -
---- ---- ---- ----
Net earnings attributable to
Class H $0.67 $0.58 $1.37 $1.05
---- ---- ---- ----
Cash Dividends Per Share of Common
Stocks (Note 5)
$1-2/3 par value $0.20 $0.20 $0.40 $0.40
Class E $0.12 $0.10 $0.24 $0.20
Class H $0.20 $0.18 $0.40 $0.36
Reference should be made to the Notes to Financial Statements.
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GENERAL MOTORS CORPORATION
AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET
June 30, Dec. 31, June 30,
ASSETS 1994 1993 1993
- -----------------------------------------------------------------------------
(Dollars in Millions)
Cash and cash equivalents $13,642.8 $13,790.5 $11,841.9
Other marketable securities 4,735.8 4,172.2 4,159.0
--------- --------- ---------
Total cash and marketable securities 18,378.6 17,962.7 16,000.9
--------- --------- ---------
Finance receivables - net 53,930.6 53,874.7 60,180.5
--------- --------- ---------
Accounts and notes receivable (less
allowances) 9,197.5 6,389.2 6,943.5
--------- --------- ---------
Inventories (less allowances) (Note 6) 10,060.7 8,615.1 9,868.4
--------- --------- ---------
Contracts in process (less advances and
progress payments) 2,693.7 2,376.8 2,413.0
--------- --------- ---------
Net equipment on operating leases (less
accumulated depreciation) 16,646.4 13,095.3 12,002.6
--------- --------- ---------
Deferred income taxes 20,868.9 20,798.1 18,799.1
--------- --------- ---------
Other assets (less allowances) 19,811.6 17,757.3 15,429.2
--------- --------- ---------
Property
Real estate, plants, and equipment-at cost 68,694.1 67,966.4 68,678.2
Less accumulated depreciation 42,517.3 41,725.5 42,143.6
--------- --------- ---------
Net real estate, plants, and equipment 26,176.8 26,240.9 26,534.6
Special tools - at cost (less amortization) 7,550.7 7,983.9 7,883.3
--------- --------- ---------
Total property 33,727.5 34,224.8 34,417.9
--------- --------- ---------
Intangible assets - at cost (less
amortization) 13,114.7 13,106.9 9,344.4
--------- --------- ---------
Total Assets $198,430.2 $188,200.9 $185,399.5
========= ========= =========
Certain June 1993 amounts were reclassified to conform with 1994
classifications.
Reference should be made to the Notes to Financial Statements.
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GENERAL MOTORS CORPORATION
AND SUBSIDIARIES
June 30, Dec. 31, June 30,
LIABILITIES AND STOCKHOLDERS' EQUITY 1994 1993 1993
- -----------------------------------------------------------------------------
(Dollars in Millions Except
Per Share Amounts)
Liabilities
Accounts payable $10,619.3 $10,276.5 $9,335.3
Notes and loans payable 72,403.3 70,441.2 74,158.1
United States, foreign, and other income
taxes - deferred and payable 3,491.8 2,409.3 3,617.5
Postretirement benefits other than
pensions (Note 4) 38,795.9 37,920.0 36,692.2
Pensions 22,801.5 22,631.6 13,810.2
Other liabilities and deferred credits 40,827.6 38,474.8 40,669.4
--------- --------- ---------
Total Liabilities 188,939.4 182,153.4 178,282.7
--------- --------- ---------
Stocks Subject to Repurchase (Note 7) 450.0 450.0 450.0
--------- --------- ---------
Stockholders' Equity
Preference stocks (E $0.10 series, $0.3
in June 1993; Series A Conversion,
$1.8 in December 1993 and June 1993
(Note 8); Series B 9-1/8% Depositary
Shares, $1.1; Series C Depositary
Shares, $0.3; Series D 7.92% Depositary
Shares, $0.4; and Series G 9.12%
Depositary Shares, $0.6 in June 1994,
December 1993, and June 1993) 2.4 4.2 4.5
Common stocks
$1-2/3 par value (issued, 750,098,491,
720,105,471, and 709,695,220 shares) 1,250.2 1,200.2 1,182.8
Class E (issued, 266,503,861, 263,089,320,
and 244,876,994 shares) 26.7 26.3 24.5
Class H (issued, 77,376,419, 75,705,433,
and 72,560,300 shares) 7.7 7.6 7.3
Capital surplus (principally additional
paid-in capital) 12,856.0 12,003.4 11,223.3
Net income retained for use in the
business (accumulated deficit)(Note 9) 207.1 (2,002.9) (2,528.6)
--------- --------- ---------
Subtotal 14,350.1 11,238.8 9,913.8
Minimum pension liability adjustment (5,311.2) (5,311.2) (2,925.3)
Accumulated foreign currency translation
adjustments and net unrealized gains
on certain investments in debt
and equity securities (Notes 3 and 10) 1.9 (330.1) (321.7)
--------- --------- ---------
Total Stockholders' Equity 9,040.8 5,597.5 6,666.8
--------- --------- ---------
Total Liabilities and Stockholders' Equity $198,430.2 $188,200.9 $185,399.5
========= ========= =========
Certain June 1993 amounts were reclassified to conform with 1994
classifications.
Reference should be made to the Notes to Financial Statements.
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GENERAL MOTORS CORPORATION
AND SUBSIDIARIES CONDENSED STATEMENT OF CONSOLIDATED CASH FLOWS
Six Months Ended June 30,
-------------------------
1994 1993
-------------------------
(Dollars in Millions)
Net Cash Provided by Operating Activities $5,847.7 $9,301.7
-------- --------
Cash Flows from Investing Activities
Expenditures for real estate, plants, and
equipment (1,775.6) (1,578.6)
Expenditures for special tools (989.6) (1,298.1)
Other 580.4 (1.7)
Change in other investing assets
Investments in other marketable securities -
acquisitions (6,868.0) (7,013.1)
Investments in other marketable securities -
liquidations 6,310.1 6,879.7
Finance receivables - acquisitions (80,015.6) (55,528.1)
Finance receivables - liquidations 77,624.9 55,129.9
Finance receivables - other (281.8) (434.9)
Proceeds from sales of finance receivables 2,453.4 6,548.9
Operating leases - net (4,970.1) (2,064.2)
-------- --------
Net Cash Provided by (Used in)
Investing Activities (7,931.9) 639.8
-------- --------
Cash Flows from Financing Activities
Net increase (decrease) in short-term
loans payable 1,125.4 (5,856.1)
Increase in long-term debt 9,158.0 5,062.5
Decrease in long-term debt (8,686.7) (7,394.3)
Cash dividends paid to stockholders (566.5) (546.1)
Other 902.2 (435.6)
-------- --------
Net Cash Provided by (Used in)
Financing Activities 1,932.4 (9,169.6)
-------- --------
Effect of Exchange Rate Changes on Cash and Cash
Equivalents 4.1 (8.6)
-------- --------
Net increase (decrease) in cash and cash equivalents (147.7) 763.3
Cash and cash equivalents at beginning of
the period 13,790.5 11,078.6
-------- --------
Cash and cash equivalents at end of the period $13,642.8 $11,841.9
======== ========
Certain 1993 amounts were reclassified to conform with 1994 classifications.
Reference should be made to the Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
In the opinion of management, the interim financial statements reflect all
adjustments, consisting of only normal recurring items (with the exception of
the accounting changes in 1994 to adopt Statement of Financial Accounting
Standards (SFAS) No. 112, Employers' Accounting for Postemployment Benefits,
SFAS No. 114, Accounting by Creditors for Impairment of a Loan, and SFAS No.
115, Accounting for Certain Investments in Debt and Equity Securities, as
described in Note 3), which are necessary for a fair presentation of the
results for the interim periods presented. The results for interim periods
are not necessarily indicative of results which may be expected for any other
interim period or for the full year. These financial statements should be
read in conjunction with the consolidated financial statements, the
significant accounting policies, and the other notes to the consolidated
financial statements included in the Corporation's 1993 Annual Report to the
SEC on Form 10-K.
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<PAGE>8
GENERAL MOTORS CORPORATION
AND SUBSIDIARIES
Note 1.
Other income and other deductions consist of:
Second Quarter Six Months
----------------- ------------------
1994 1993 1994 1993
----------------- ------------------
(Dollars in Millions)
Other Income
Insurance premiums $220.0 $202.1 $432.8 $392.7
Interest 386.9 471.3 706.4 845.5
Equity in earnings (losses)
of associates, net 73.8 (35.6) 48.2 (149.9)
Claims, commissions, and grants 92.8 72.6 194.3 125.0
Gain on the sale of finance receivables 19.8 76.9 19.8 250.8
Mortgage servicing revenue 40.7 86.9 99.5 161.2
Other 245.1 376.4 736.7* 540.3
------- ------- ------- -------
Total Other Income $1,079.1 $1,250.6 $2,237.7 $2,165.6
======= ======= ======= =======
Other Deductions
Insurance losses and loss adjustment
expenses $178.0 $147.4 $341.4 $296.6
Provision for financing losses 54.8 118.9 118.9 175.9
Other 4.7 195.9 388.5* 209.1
------- ------- ------- -------
Total Other Deductions $237.5 $462.2 $848.8 $681.6
======= ======= ======= =======
* Other includes gains and losses on the sale of assets in the first quarter
of 1994. The net impact of these sales of assets was not material.
Note 2.
Financial data of General Motors Acceptance Corporation (GMAC) and its
subsidiaries were as follows:
Second Quarter Six Months
----------------- ------------------
1994 1993 1994 1993
----------------- ------------------
(Dollars in Millions)
Net financing revenue and other $1,158.2 $1,378.9 $2,313.4 $2,645.9
Net income including the unfavorable
cumulative effect of accounting
change of $7.4 million in
six months 1994 $216.1 $285.4 $433.6 $569.5
Cash dividends paid to GM $250.0 $250.0 $500.0 $500.0
Note 3.
Effective January 1, 1994, the Corporation adopted SFAS No. 112,
Employers' Accounting for Postemployment Benefits. The Standard requires
accrual of the costs of benefits provided to former or inactive employees
after employment, but before retirement. The unfavorable cumulative effect of
adopting this Standard was $1,220.1 million ($758.1 million after tax), or
$751.3 million ($1.05 per share) attributable to $1-2/3 par value common stock
and $6.8 million ($0.08 per share) attributable to GM Class H common stock.
The effect at Electronic Data Systems Corporation is not material and there is
no effect on GM Class E common stock earnings. The non-cash charge is
primarily related to GM's extended-disability benefit program in the U.S.
which, under the new accounting Standard, will be accrued on a service-driven
basis. The ongoing effect in subsequent periods is not expected to be
material.
The Corporation also adopted SFAS No. 114, Accounting by Creditors for
Impairment of a Loan, effective January 1, 1994. SFAS No. 114 requires a
creditor to evaluate the collectibility of both contractual interest and
principal of all receivables when assessing the need for a loss accrual.
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<PAGE>9
GENERAL MOTORS CORPORATION
AND SUBSIDIARIES
There was no impact on the consolidated financial position or results of
operations as a result of adoption. The Corporation's loans primarily consist
of large groups of smaller-balance homogeneous loans which are collectively
evaluated for impairment and to which this Standard does not apply. However,
certain loans of the Corporation affected by this Standard are currently
carried at the lower of book value or the fair value of the collateral. The
net book value of such loans at June 30, 1994 was $209.5 million, net of a
$172.2 million valuation reserve.
Also effective January 1, 1994, the Corporation adopted SFAS No. 115,
Accounting for Certain Investments in Debt and Equity Securities, which
resulted in a $241.0 million after-tax increase in Stockholders' Equity. This
Standard requires the recording at fair value of debt securities which are not
expected to be held to maturity and equity securities which have a readily
determinable fair value. The primary effect of this Standard for the
Corporation relates to debt securities held by Motors Insurance Corporation
and certain equity securities. The ongoing effect on the second quarter and
six months ended June 30, 1994 resulted in a $53.0 million and a $153.7
million, respectively, after-tax decrease in Stockholders' Equity.
Note 4.
The Corporation has disclosed in the financial statements certain amounts
associated with estimated future postretirement benefits other than pensions
and characterized such amounts as "accumulated postretirement benefit
obligations", "liabilities", or "obligations". Notwithstanding the recording
of such amounts and the use of these terms, the Corporation does not admit or
otherwise acknowledge that such amounts or existing postretirement benefit
plans of the Corporation (other than pensions) represent legally enforceable
liabilities of the Corporation.
Note 5.
Earnings per share attributable to common stocks have been determined based
on the relative amounts available for the payment of dividends to holders of
$1-2/3 par value, Class E, and Class H common stocks. The allocation of
earnings attributable to such common stocks and the calculation of the related
amounts per share are computed by considering the weighted average number of
common shares outstanding and common stock equivalents, to the extent the
effect of such equivalents is not antidilutive. Operations of the incentive
plans and the assumed exercise of stock options do not have a material
dilutive effect on earnings per share at this time.
Dividends on the $1-2/3 par value common stock are declared out of the
earnings of GM and its subsidiaries, excluding the Available Separate
Consolidated Net Income of EDS and GMHE. Dividends on the Class E and Class H
common stocks are declared out of the Available Separate Consolidated Net
Income of EDS and GMHE, respectively, since the acquisition by GM.
The Available Separate Consolidated Net Income of EDS and GMHE is determined
quarterly and is equal to the separate consolidated net income of EDS and
GMHE, respectively, excluding the effects of purchase accounting adjustments
arising at the time of acquisition, multiplied by a fraction, the numerator of
which is the weighted average number of shares of Class E or Class H common
stock outstanding during the period and the denominator of which was 481.7
million shares for Class E and 399.9 million shares for Class H during the
second quarter of 1994. Comparable denominators for the second quarter of
1993 were 480.5 million shares for Class E and 399.9 million shares for
Class H.
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<PAGE>10
GENERAL MOTORS CORPORATION
AND SUBSIDIARIES
The denominators used in determining the Available Separate Consolidated Net
Income of EDS and GMHE 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 GMHE. In this regard, the Board has generally caused the denominators
to decrease as shares are purchased by EDS or GMHE, and to increase as such
shares are used, at EDS or GMHE expense, for EDS or GMHE employee benefit
plans or acquisitions.
Dividends may be paid on common stocks only when, as, and if declared by the
Board of Directors in its sole discretion. The Board's policy with respect to
$1-2/3 par value common stock is to distribute dividends based on the outlook
and the indicated capital needs of the business. The current policy of the
Board with respect to the Class E and Class H common stocks is to pay cash
dividends approximately equal to 30% and 35% of the Available Separate
Consolidated Net Income of EDS and GMHE, respectively, for the prior year.
Notwithstanding the current dividend policy, the Board of Directors declared a
dividend on the Class H Common Stock for each of the quarters of 1993 which
was more than 35% of the Available Separate Consolidated Net Income of GMHE
for the prior year.
Note 6.
Major classes of inventories are as follows:
June 30, Dec. 31, June 30,
1994 1993 1993
-----------------------------------
(Dollars in Millions)
Productive material, work in process,
and supplies $5,409.2 $4,671.9 $5,060.8
Finished product, service parts, etc. 4,651.5 3,943.2 4,807.6
-------- ------- -------
Total inventories (less allowances) $10,060.7 $8,615.1 $9,868.4
======== ======= =======
Note 7.
Stocks Subject to Repurchase at June 30, 1994 consist of 15 million shares
of Class H common stock subject to put options issued to the Howard Hughes
Medical Institute and exercisable under most circumstances at $30 per share on
March 1, 1995. The Corporation holds an option to call the Institute's shares
until February 28, 1995 at $37.50 per share.
Note 8.
General Motors converted all 17,825,000 outstanding shares of its Series A
Conversion Preference Stock (Preference Equity Redemption Cumulative Stock or
PERCS) into shares of GM $1-2/3 par value common stock on June 18, 1994. GM
originally issued this stock in June 1991 at a price of $41.375 per share.
Holders of the Preference Stock received 0.992435 shares of GM $1-2/3 par
value common stock for each share of Preference Stock called for conversion,
plus $0.1655 in cash in payment of the accrued and unpaid dividend (covering
the June 1 to June 18 period). Fractional shares of GM $1-2/3 par value
common stock were paid in cash. When all preference stock has been converted,
a total of 17.7 million shares of GM $1-2/3 par value common stock will have
been issued in this conversion.
The exchange of 0.992435 share of GM $1-2/3 par value common stock for each
PERCS was equivalent to the call price of $53.79 per share divided by $54.20,
which was the average daily closing price on the New York Stock Exchange of
the GM $1-2/3 par value common stock for the five consecutive trading days
ending on the "determination date" of June 1, 1994. The determination date
was the second trading day immediately preceding the "notice of conversion"
date of June 3, 1994.
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<PAGE>11
GENERAL MOTORS CORPORATION
AND SUBSIDIARIES
Note 9.
At June 30, 1994, December 31, 1993, and June 30, 1993, consolidated net
income retained for use in the business (accumulated deficit) attributable to
the common stocks was as follows:
June 30, Dec. 31, June 30,
1994 1993 1993
-----------------------------------
(Dollars in Millions)
$1-2/3 par value ($2,095.3) ($4,080.1) ($4,371.8)
Class E 1,480.7 1,344.3 1,189.0
Class H 821.7 732.9 654.2
------- ------- -------
Total $207.1 ($2,002.9) ($2,528.6)
======= ======= =======
The Corporation's capital surplus plus net income retained for use in the
business (less accumulated deficit) at June 30, 1994, December 31, 1993, and
June 30, 1993, as allocated pursuant to GM's Certificate of Incorporation, was
as follows:
June 30, Dec. 31, June 30,
1994 1993 1993
-----------------------------------
(Dollars in Millions)
$1-2/3 par value $7,502.7 $4,870.0 $4,243.7
Class E 3,516.6 3,243.8 2,753.8
Class H 2,043.8 1,886.7 1,697.2
-------- -------- -------
Total $13,063.1 $10,000.5 $8,694.7
======== ======== =======
However, consistent with Delaware law, which governs the amount legally
available for the payment of dividends on the Corporation's common stock, the
Board of Directors has determined that such amount is materially higher than
the Corporation's capital surplus plus net income retained for use in the
business (less accumulated deficit).
Note 10.
At June 30, 1994, December 31, 1993, and June 30, 1993, accumulated foreign
currency translation adjustments were ($224.3) million, ($494.4) million, and
($498.9) million, respectively, and net unrealized gains on marketable equity
securities of General Motors' insurance subsidiaries amounted to $138.9
million, $164.3 million and $177.2 million, respectively. In addition, the
favorable cumulative effect of adopting SFAS No. 115 effective January 1, 1994
was $241.0 million and the unrealized loss incurred during the six months
ended June 30, 1994 was $153.7 million.
Note 11.
The Corporation and its subsidiaries are subject to potential liability
under government regulations and various claims and legal actions which are
pending or may be asserted against them. Some of the pending actions purport
to be class actions. The aggregate ultimate liability of the Corporation and
its subsidiaries under these government regulations, and under these claims
and actions, was not determinable at June 30, 1994. 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.
* * * * *
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<PAGE>12
GENERAL MOTORS CORPORATION
AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations
The following management's discussion and analysis should be read in
conjunction with the management's discussion and analysis included in the
Corporation's 1993 Annual Report to the SEC on Form 10-K. The competitive
position and environmental matters discussions included in Part I, Item 1 of
the 1993 Form 10-K are specifically incorporated by reference herein.
General Motors Corporation reported record earnings in the second quarter of
1994, reflecting continued robust performance in its international operations,
improved profitability in North America and solid results from the
Corporation's major subsidiaries. GM's consolidated net income totaled
$1,922.8 million, or $2.23 per share of GM $1-2/3 par value common stock, in
the second quarter of 1994. That compares with $889.1 million, or $0.92 per
share of GM $1-2/3 par value common stock, in the same period last year.
GM's sales and revenues totaled a record $40,392.2 million in the second
quarter of 1994, an increase of 11.4% compared with the $36,250.1 million in
the second quarter of 1993. Gross profit margin - with General Motors
Acceptance Corporation (GMAC) on an equity basis - was 18.5%, compared with
16.0% in the comparable period last year. The net profit margin was 5.2% in
the second quarter of 1994, compared with 2.7% in the second quarter last
year.
GM's North American Operations (NAO) are on track to achieve the 1994
commitment to be profitable at the net-income level for the calendar year,
even with the significant adverse impact of the first-quarter accounting
charge for Statement of Financial Accounting Standards (SFAS) No. 112,
Employers' Accounting for Postemployment Benefits. Even though GM has been
short of product in some market segments, many of GM's car and truck models
are receiving enthusiastic reviews by dealers and customers, helping GM build
sales momentum not only overseas but also in North America where GM enjoyed
its best six-month sales performance since 1990. GM expects the enthusiastic
reviews of its new products to continue during the second half of the year as
11 all-new vehicles enter its 1995 lineup, including the Chevrolet Lumina and
Monte Carlo, Buick's Riviera, the Aurora from Oldsmobile and new sport-utility
offerings from Chevrolet and GMC Truck.
Results for the first six months of 1994 show consolidated net income of
$2,776.5 million, or $3.02 per share of GM $1-2/3 par value common stock,
including the $758.1 million unfavorable effect of the SFAS No. 112 accounting
charge in the first quarter. Excluding the impact of the accounting charge,
income for the six-month period was $3,534.6 million, or $4.07 per share of GM
$1-2/3 par value common stock. That compares with $1,402.3 million, or $1.34
per share of GM $1-2/3 par value common stock, for the first half of 1993.
Sales and revenues totaled $77,887.6 million in the 1994 period, an increase
of 10.0%, or $7,073.3 million, over 1993 sales and revenues of $70,814.3
million.
After preference stock dividend payments and the apportionment of earnings
attributable to GM Class E and Class H common stock, the income attributable
to $1-2/3 par value common stock in the 1994 second quarter amounted to
$1,665.3 million or $2.23 per share, compared with second quarter 1993 income
of $662.4 million or $0.92 per share. In the first six months of 1994, such
income was $2,276.1 million or $3.02 per $1-2/3 par value share, compared with
$962.9 million or $1.34 per share in the 1993 period. Excluding the first
quarter accounting charge, six-month 1994 earnings amounted to $3,027.4
million, an improvement of $2,064.5 million ($2.73 per $1-2/3 par value share)
over the 1993 six months.
Second quarter 1994 worldwide wholesale vehicle sales totaled 2,274,000
units, 8.5% more than the 1993 second quarter level of 2,096,000 units,
reflecting higher sales in all regions, as shown in the table on the next
page. Worldwide wholesale vehicle sales of 4,354,000 units during the first
six months of 1994 were up 277,000 units, or 6.8%, over the year ago period.
- 12 -
<PAGE>13
GENERAL MOTORS CORPORATION
AND SUBSIDIARIES
Second Quarter Six Months
-------------- --------------
Worldwide Wholesale Sales 1994 1993 1994 1993
-------------- --------------
(Units in Thousands)
United States
Cars 877 837 1,666 1,577
Trucks 512 457 1,008 935
----- ----- ----- -----
Total United States 1,389 1,294 2,674 2,512
Other North America 147 139 300 270
----- ----- ----- -----
Total North America 1,536 1,433 2,974 2,782
Overseas 738 663 1,380 1,295
----- ----- ----- -----
Total All Sources 2,274 2,096 4,354 4,077
===== ===== ===== =====
During the 1994 second quarter, GM vehicle deliveries of cars and trucks
worldwide were 2,302,000 units, compared with 2,266,000 units in the same
period last year, an increase of 1.6%. Worldwide GM vehicle deliveries of
cars and trucks during the first six months of 1994 were 4,344,000 units, 7.9%
above the 4,028,000 units delivered in the comparable 1993 period.
Following are highlights of 1994 second-quarter and six-month financial
performance by GM's major business sectors:
Six Months Ended
Second Quarter June 30,
------------------ --------------------
Major Business Sector Results 1994 1993(1) 1994 1993(1)
- ------------------------------ ------------------ --------------------
(Dollars in Millions)
North American Automotive Operations (NAO)
Income (Loss) Before
Accounting Change $723.0 ($33.4) $1,233.6 ($203.1)
Cumulative Effect of
Accounting Change - - (707.7) -
------- ----- ------- -------
NAO Income (Loss) 723.0 (33.4) 525.9 (203.1)
------- ----- ------- -------
International Automotive Operations
Income 543.4 305.7 968.6 446.3
------- ----- ------- -------
GMAC
Income Before Accounting
Change 216.1 285.4 441.0 569.5
Cumulative Effect of
Accounting Change - - (7.4) -
------- ----- ------- -------
GMAC Income 216.1 285.4 433.6 569.5
------- ----- ------- -------
EDS Earnings 197.3 178.1 369.0 329.5
------- ----- ------- -------
GMHE
Earnings Before Accounting
Change 267.3 232.0 579.8 421.3
Cumulative Effect of
Accounting Change - - (30.4) -
------- ----- ------- -------
GMHE Earnings 267.3 232.0 549.4 421.3
------- ----- ------- -------
Other (2)
Loss Before Accounting
Change (24.3) (78.7) (57.4) (161.2)
Cumulative Effect of
Accounting Change - - (12.6) -
------- ----- ------- -------
Other Loss (24.3) (78.7) (70.0)
(161.2)
------- ----- ------- -------
Consolidated Net Income (CNI) $1,922.8 $889.1 $2,776.5 $1,402.3
======= ===== ======= =======
CNI Before Accounting Change $1,922.8 $889.1 $3,534.6 $1,402.3
======= ===== ======= =======
(1) Certain amounts for 1993 were reclassified to conform with 1994 sector
structure.
(2) Includes Power Products and Defense and purchase accounting adjustments.
- 13 -
<PAGE>14
GENERAL MOTORS CORPORATION
AND SUBSIDIARIES
In the second quarter of 1994, NAO reported net income of $723.0 million
compared with a loss of $33.4 million in the second quarter of 1993. The
$756.4 million improvement is attributable to a variety of factors including
higher unit volume as well as progress in certain cost containment
initiatives.
NAO's net margin was 2.7% in the second quarter of 1994, compared with a
loss of 0.1% in the prior-year period. NAO is still considerably short,
however, of its 5% annual net-margin target.
GM's share of the total U.S. vehicle market in the second quarter of 1994
was 33.1%, compared with 34.8% in the second quarter of 1993. GM's share of
total U.S. car deliveries was 34.5% in the second quarter, compared with 36.5%
in the previous year's second quarter. The Corporation's share of truck
deliveries was 31.0% compared with a 32.1% in the same period last year,
primarily due to capacity constraints. The decline in overall market share
was due primarily to inventory constraints resulting from new-model start-up
and higher-than-expected-demand for several key vehicle lines.
Six-month 1994 NAO earnings were $525.9 million, an improvement of $729.0
million over the 1993 first half loss, despite the unfavorable effect of the
$707.7 million accounting charge in the 1994 first quarter. Even with the
tight inventory for some models, truck deliveries during the first half of the
year were the best for any six-month period in GM's history with record-
breaking deliveries each month.
GM's International Automotive Operations (IO) posted significant financial
gains in the second quarter of 1994. Net income totaled $543.4 million in the
second quarter of 1994, compared with 1993's second-quarter earnings of $305.7
million. The results reflected significantly improved profitability in
Europe, and continued strong results in Latin America. The net margin was
7.5% in the 1994-second-quarter period, an improvement of 2.9 percentage
points from the 4.6% net margin in the year-ago period. The margin levels
achieved in the international sector reflect continued cost cutting and strong
market performance despite the somewhat weak economic conditions in Europe.
GM's car and truck market share in Europe increased to 12.8% in the second
quarter of 1994, compared with 12.5% in the second quarter last year. GM's
Opel/Vauxhall models remained in the number-one position in the Western
European car market.
Six month 1994 IO income was $968.6 million compared to $446.3 million in
the first half of 1993, with net margins increasing from 3.4% in the 1993
period to 7.2% in the 1994 six-month period. In Western Europe, GM's
Opel/Vauxhall product line is number-one with sales increasing 7.2% in the
first half of the year, compared with the same period last year. Capacity
expansion is planned to meet the strong demand for Opel Corsa models.
Registrations of Opel Corsa models in Europe rose by approximately 112,300
units during the first half of the year, compared with the same period in
1993. In order to meet the strong demand for Corsas, production at the
Eisenach plant in Germany is scheduled to be increased by September to 640
units a day on a three-shift operation. Combined with units built at the
plant in Zaragoza, Spain, Corsa daily production will top 2,400 units in
Europe. In addition to sales in Europe, 50,000 Corsas are planned for export
to countries such as: Mexico, Australia, Taiwan, Thailand, Iran, Chile,
Egypt, and Israel. Corsa models are also built in Brazil and will be produced
in Mexico beginning next year. Worldwide sales of the Saab lineup were up
significantly - 26.2% - in the first half of 1994 compared with the same
period last year.
In Latin America, unit sales increased during the first six months of 1994,
compared with the first half of last year, marking the fourth straight year of
sales increases in the region. In spite of capacity constraints, total GM
vehicle sales in Latin America were up 4.3% in the first six months of 1994,
- 14 -
<PAGE>15
GENERAL MOTORS CORPORATION
AND SUBSIDIARIES
compared with the year-earlier period, as industry sales in that region
continued at a record pace. GM sales in Brazil were up 12.5%. GM do Brasil
began production of the Corsa in March at an existing plant in Brazil, and
production was quickly sold out for the rest of the year.
GMAC reported second-quarter-1994 earnings of $216.1 million, compared with
$285.4 million in the prior-year period. GMAC's results in the second quarter
of 1994, when compared with the same period a year ago, primarily reflect a
decline in mortgage originations and competitive pricing pressures at its
mortgage subsidiary, and the absence of the non-recurring capital gains
recorded at its insurance unit in the 1993 period. For the first six months
of 1994, GMAC's consolidated net income totaled $433.6 million, $135.9 million
below the same period last year.
Electronic Data Systems Corporation (EDS) reported record earnings for the
second quarter of 1994, with net income totaling $197.3 million, or $0.41 per
share of GM Class E common stock. That compares with earnings of $178.1
million, or $0.37 per share of Class E common stock, in the second quarter of
1993. Second quarter 1994 revenues increased to $2,334.0 million from
$2,090.5 million in the second quarter of 1993. Revenues from EDS' non-GM
business were up nearly 18% over 1993 second-quarter levels. New contract
signings reached nearly $4 billion in the second quarter of 1994. Record six
month EDS earnings of $369.0 million resulted in record earnings per Class E
share of $0.77, compared with $329.5 million or $0.69 per share a year
earlier.
GM Hughes Electronics Corporation (GMHE) earned $267.3 million in the second
quarter of 1994, or $0.67 per share of GM Class H common stock. That compares
with earnings of $232.0 million in the second quarter of 1993, or $0.58 per
share of GM Class H common stock. Revenues for the 1994 period were $3,535.9
million, a 6.7% increase over the $3,315.4 million in the 1993 quarter. The
second-quarter financial performance reflects strong sales and operating
income in the Automotive Electronics segment, and higher operating income in
the Defense Electronics business segment due to continued cost reductions.
For the first six months of 1994, GMHE earnings were $549.4 million, including
the $30.4 million unfavorable effect of SFAS No. 112, or $1.37 per share of GM
Class H common stock, on revenues of $7,123.2 million. In the first half of
1993, earnings were $421.3 million, or $1.05 per share of GM Class H common
stock, on revenues of $6,496.6 million.
As detailed in the table below, second quarter 1994 worldwide employment
averaged 701,000 men and women, a 3.0% decrease from the 723,000 in the second
quarter of 1993, adjusted to reflect NCRS. Worldwide payrolls were $8,004.9
million, compared with $7,669.0 million in the comparable 1993 period. Six
month average worldwide employment decreased by 33,000 men and women from the
1993 six-month period, while first half 1994 worldwide payrolls totaled
$15,831.4 million, a 4.6% increase from 1993 first half payrolls of $15,128.9
million.
Second Quarter Six Months
-------------- -------------
1994 1993 1994 1993
-------------- -------------
(in thousands)
Average Worldwide Employment
GM (excluding units listed below) 527 542 522 545
GMAC 18 18 18 18
EDS 73 72 71 72
GMHE 77 85 77 86
NCRS 6 6 6 6
--- --- --- ---
Average Number of Employees 701 723 694 727
=== === === ===
- 15 -
<PAGE>16
GENERAL MOTORS CORPORATION
AND SUBSIDIARIES
Selling, general, and administrative expenses, with GMAC on an equity basis,
in the second quarter and first six months of 1994 were $162.2 million and
$219.0 million, respectively, above the second quarter and six-month 1993
amounts. On a percent of sales basis, selling, general, and administrative
expenses were 6.8% in the second quarter and 6.9% in the first six months of
1994, down from the 7.2% in the second quarter and 7.3% in the six-month
period of 1993.
General Motors Acceptance Corporation
GMAC serves the financing and insurance needs of GM customers. The GMAC
Second Quarter 1994 Quarterly Report on Form 10-Q filed with the Securities
and Exchange Commission is hereby incorporated by reference.
Consolidated net income from GMAC financing and Motors Insurance Corporation
(MIC) insurance operations totaled $216.1 million for the second quarter of
1994, compared with $285.4 million earned in the second quarter of 1993. For
the first six months of 1994, net income totaled $433.6 million, a decrease of
$135.9 million from the same period last year. Earnings for the first six
months of 1994 reflect an unfavorable first quarter after-tax charge of $7.4
million related to the cumulative effect on income resulting from the
implementation of SFAS No. 112.
Net income from financing operations, including GMAC Mortgage Corporation
(GMACM) results, totaled $184.6 million for the 1994 second quarter. The
$29.0 million decrease from the same period last year can be primarily
attributed to GMAC's mortgage operations, reflecting both the industry-wide
decline in mortgage originations, specifically refinancings, brought about by
rising interest rates, and competitive pricing pressures. For the first six
months of 1994, net financing income (excluding the cumulative impact of SFAS
No. 112) totaled $377.4 million in comparison to $463.9 million during the
same period in 1993. In addition to the lower GMACM income noted above, lower
earnings were also experienced due to lower average levels of retail and
wholesale assets. During the second quarter of 1994, GMAC financed or leased
worldwide 510,000 new passenger cars and trucks, a decrease of 5.9% from the
comparable 1993 period. In the United States, GMAC financed or leased 333,000
new vehicles during the second quarter of 1994 and 732,000 new vehicles for
the first six months of 1994 compared with 398,000 and 675,000 new vehicles in
the second quarter and first six months of 1993, respectively. The decrease
in retail and lease unit financing reflects continued intense competitive
pressures within a robust sales environment. Outside the United States, GMAC
financed or leased 177,000 new vehicles in the second quarter of 1994 and
320,000 new vehicles for the first six months of 1994 compared with 143,000
and 268,000 new vehicles in the second quarter and first six months of 1993,
respectively.
Net income from insurance operations was $31.5 million for the second
quarter of 1994, a $40.3 million decrease as compared to the second quarter of
1993. For the first six months of 1994, net income from insurance operations
(excluding the cumulative impact of SFAS No. 112) was $63.6 million, compared
with $105.6 million for the same period in 1993. The decline in net income
reflects non-recurring capital gains in the first half of 1993 which more than
offset improved underwriting results.
Financing revenue totaled $2,304.7 million and $4,467.7 million for the
second quarter and first six months of 1994, respectively, $84.9 million
greater than the amount reported for the comparable 1993 quarter and $19.9
million below the amount recorded for the 1993 six month period. The decrease
from the respective 1993 six month period is primarily attributable to lower
earning rates, partially offset by an increase in leasing revenues resulting
from continued growth in operating lease activity. Interest and discount
expense totaled $2,055.3 million for the first six months of 1994, a decrease
of 18.5% from the comparable period in 1993. The average cost of funds
- 16 -
<PAGE>17
GENERAL MOTORS CORPORATION
AND SUBSIDIARIES
worldwide for the second quarter of 1994 declined to 6.53%, a decrease of 42
basis points from a year earlier. The worldwide cost of funds averaged 6.53%
for the first six months of 1994, down 47 basis points from a year ago. Total
borrowing costs for United States operations averaged 6.31% for the second
quarter and 6.28% for the first six months of 1994, compared with 6.48% and
6.51%, respectively, for the same 1993 periods.
Depreciation expense on operating leases, primarily GMAC's SmartLease
program, amounted to $765.4 million for the second quarter of 1994, compared
with $660.5 million for the same period in 1993. For the first six months of
1994, depreciation expense on operating leases totaled $1,454.1 million
compared to $1,287.9 million for the first six months of 1993, with the
increase attributable to continued successful marketing of the SmartLease
program in the United States and Canada.
Other income, including gains on receivable sales, as well as servicing fees
and other income related to sold finance receivables, amounted to $378.0
million and $789.5 million for the second quarter and first six months of
1994, compared with $758.0 million and $1,411.0 million, respectively, for the
same periods of 1993. The decreases are primarily attributable to a quarter-
to-quarter decrease of $160.3 million and a six months decrease of $314.3
million due to lower interest and service fees from General Motors as a result
of the termination of the financing agreement whereby GM had previously
assumed some dealer wholesale inventory financing. This reduction is offset
by increased financing revenues on wholesale receivables. Furthermore,
capital gains at MIC decreased $57.0 million and $129.3 million for the
quarter and six month periods ended June 30, 1994, primarily reflecting non-
recurring capital gains recorded during the first six months of 1993.
Other operating expenses, including salaries and benefits and insurance
losses and loss adjustment expenses, totaled $745.2 million for the second
quarter and $1,457.2 million for the first six months of 1994, $19.7 million
and $38.2 million lower than the respective comparable 1993 periods. The
decrease is primarily attributable to lower losses incurred on commercial
lines and lower commission expenses for originated mortgages.
The provision for losses on finance receivables, including both retained and
sold receivables, totaled $54.8 million for the second quarter of 1994,
compared to $118.9 million in the same period of 1993. For the first six
months of 1994, provision for losses on finance receivables totaled $118.9
million as compared to $175.9 million for the first six months of 1993. Total
net chargeoffs for the second quarter and first six months of 1994 were $54.6
million and $104.7 million, respectively, as compared to $71.2 million and
$178.1 million in the second quarter and first six months of 1993.
Consolidated earning assets totaled $79,098.6 million at June 30, 1994,
virtually unchanged from $79,199.9 million at June 30, 1993 and up $4,314.8
million from the December 31, 1993 level of $74,783.8 million. The increase
from year-end can be largely attributed to an increase in operating lease
assets due to the continued acceptance and popularity of the SmartLease
program. Operating lease assets, net of depreciation, offered principally
under the GMAC SmartLease program, increased to $14,658.9 million at June 30,
1994 from $11,363.5 million and $10,422.7 million at December 31, 1993 and
June 30, 1993, respectively. The increase primarily reflects growth in the
U.S. and Canadian markets, driven by continued consumer acceptance of leasing
and enhanced manufacturer's subvented programs.
Cash and cash equivalents, which primarily include short term borrowed funds
in excess of requirements invested in short-term marketable securities,
totaled $2,345.7 million at June 30, 1994. This compared to $4,028.1 million
at December 31, 1993 and $3,498.8 million at June 30, 1993. The decrease is
due to a strategy that has been undertaken to reduce cash and cash equivalents
as a direct result of the Company's continued good access to the capital
markets. At June 30, 1994, consolidated worldwide retail finance receivables,
- 17 -
<PAGE>18
GENERAL MOTORS CORPORATION
AND SUBSIDIARIES
net of unearned income, totaled $28,816.2 million, virtually unchanged from
$28,656.3 million at June 30, 1993 but up $2,758.2 million from year-end 1993.
The Company continues to utilize an asset securitization program as an
alternative funding source and as a result sold retail receivables with
principal in the United States aggregating $1.2 billion during the six month
period ended June 30, 1994.
Consolidated worldwide leasing and lease financing receivables, net of
unearned income, at June 30, 1994 were $3,309.9 million, down $469.0 million
and $1,884.9 million from December 31, 1993 and June 30, 1993, respectively.
These reductions are primarily reflective of General Motors reduction in fleet
sales to daily rental companies and the resultant GMAC fleet financing
reduction.
Wholesale receivables financed by GMAC, primarily dealer vehicle
inventories, were $18,765.9 million at June 30, 1994, compared to $20,673.6
million at December 31, 1993 and $13,324.3 million at June 30, 1993.
Wholesale receivables at the end of the second quarter of 1994, as compared to
the asset levels at June 30, 1993, reflects the resumption by GMAC of dealer
wholesale inventory previously financed by General Motors, partially offset by
lower levels of dealer inventory and sales of wholesale finance receivables.
The Company sold wholesale receivables, which it also continues to service,
totaling $1.4 billion to outside investors during the first quarter of 1994.
GMAC's total borrowings were $64,411.0 million at June 30, 1994, compared
with $65,927.5 million at June 30, 1993 and $62,773.2 million at December 31,
1993. Approximately 81% represented funding for operations in the United
States, with the remaining 19% of borrowings being split equally between
Canada, Germany, and other countries. Total short-term notes worldwide at
June 30, 1994 amounted to $20,215.2 million, up from $17,733.8 million at
December 31, 1993 and $16,617.1 million at June 30, 1993.
Summary Financial Data - GMAC
Condensed GMAC Consolidated Six Months Ended
Statement of Income Second Quarter June 30,
---------------- -----------------
1994 1993 1994 1993
---------------- -----------------
(Dollars in Millions)
Financing Revenue
Retail and lease financing $769.2 $962.9 $1,506.5 $1,951.4
Leasing 1,133.3 948.1 2,185.6 1,888.8
Wholesale and term loans 402.2 308.8 775.6 647.4
------- ------- ------- -------
Total financing revenue 2,304.7 2,219.8 4,467.7 4,487.6
Interest and discount 1,045.3 1,221.5 2,055.3 2,521.5
Depreciation on operating leases 765.4 660.5 1,454.1 1,287.9
------- ------- ------- -------
Net financing revenue 494.0 337.8 958.3 678.2
Insurance premiums earned 286.2 283.1 565.6 556.7
Other income 378.0 758.0 789.5 1,411.0
------- ------- ------- -------
Net Financing Revenue and Other 1,158.2 1,378.9 2,313.4 2,645.9
Expenses 814.1 918.5 1,608.9 1,732.8
------- ------- ------- -------
Income before income taxes 344.1 460.4 704.5 913.1
Income taxes 128.0 175.0 263.5 343.6
------- ------- ------- -------
Income before cumulative effect of
accounting change 216.1 285.4 441.0 569.5
Cumulative effect of accounting change - - (7.4)* -
------- ------- ------- -------
Net Income $216.1 $285.4 $433.6 $569.5
======= ======= ======= =======
*Effective January 1, 1994, GMAC adopted SFAS No. 112.
Certain amounts for 1993 have been reclassified to conform with 1994
classifications.
- 18 -
<PAGE>19
GENERAL MOTORS CORPORATION
AND SUBSIDIARIES
Condensed GMAC Consolidated
Balance Sheet June 30, Dec. 31, June 30,
1994 1993 1993
------------------------------------
(Dollars in Millions)
Cash and cash equivalents $2,345.7 $4,028.1 $3,498.8
Investments in securities 3,495.3 3,449.7 3,439.0
Finance receivables - net 54,282.1 54,134.8 50,858.8
Receivables - General Motors Corporation1,390.1 1,355.5 9,929.1
Other assets 21,934.4 17,782.7 17,061.0
-------- -------- --------
Total Assets $83,447.6 $80,750.8 $84,786.7
======== ======== ========
Short-term debt $33,758.5 $35,084.4 $36,671.0
Accounts payable and other
liabilities (including
GM and affiliates - $2,902.0,
$2,487.5 and $2,829.2) 11,235.0 10,125.3 10,657.5
Long-term debt 30,652.5 27,688.8 29,256.5
Stockholder's equity 7,801.6 7,852.3 8,201.7
-------- -------- --------
Total Liabilities and
Stockholder's Equity $83,447.6 $80,750.8 $84,786.7
======== ======== ========
Certain amounts for June 1993 have been reclassified to conform with 1994
classifications.
Condensed GMAC Consolidated Six Months Ended
Statement of Cash Flows June 30,
--------------------
1994 1993
--------------------
(Dollars in Millions)
Net Cash Provided by Operating Activities $2,611.7 $2,487.9
-------- --------
Cash Flows from Investing Activities
Finance receivables-acquisitions (80,015.6) (55,528.1)
-liquidations 77,624.9 55,129.9
Notes receivable from General Motors Corporation (34.6) 1,634.1
Operating leases-acquisitions (6,252.2) (3,300.1)
-liquidations 1,633.6 1,335.9
Investments in securities-acquisitions (5,633.6) (6,115.4)
-liquidations 5,542.4 5,856.8
Proceeds from sales of receivables 2,453.4 6,548.9
Due and deferred from receivable sales (730.5) (95.8)
Other 322.8 565.7
-------- --------
Net Cash Provided by (Used in) Investing Activities (5,089.4) 6,031.9
-------- --------
Cash Flows from Financing Activities
Debt with original maturities 90 days and over
-proceeds 26,744.2 18,120.9
-liquidations (27,024.3) (24,691.7)
Debt with original maturities less than 90 days
-net change 1,579.3 (1,817.1)
Cash dividends paid to GM (500.0) (500.0)
-------- --------
Net Cash Provided by (Used in) Financing Activities 799.2 (8,887.9)
-------- --------
Effect of exchange rate changes on cash
and cash equivalents (3.9) (4.2)
-------- --------
Net decrease in cash and cash equivalents (1,682.4) (372.3)
Cash and cash equivalents at beginning of the period 4,028.1 3,871.1
-------- --------
Cash and cash equivalents at end of the period $2,345.7 $3,498.8
======== ========
Certain amounts for 1993 have been reclassified to conform with 1994
classifications.
- 19 -
<PAGE>20
GENERAL MOTORS CORPORATION
AND SUBSIDIARIES
Electronic Data Systems Corporation
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 5
to the Financial Statements. Reference should be made to EDS' Management's
Discussion and Analysis in Exhibit 99(a) which is incorporated herein by
reference.
EDS financial statements do not include the amortization of the $2,179.5
million initial cost to GM of EDS customer contracts, computer software
programs, and other intangible assets, including goodwill, arising from the
acquisition of EDS by GM in 1984. This cost, plus the $343.2 million cost of
contingent notes purchased in 1986, less certain income tax benefits, was
assigned principally to intangible assets, including goodwill, and is being
amortized by GM over the estimated useful lives of the assets acquired. The
costs assigned to customer contracts and computer software programs were fully
amortized prior to 1992. Such amortization is charged against Other Sector
Income.
Summary Financial Data - EDS Six Months Ended
Second Quarter June 30,
---------------- -----------------
1994 1993 1994 1993
---------------- -----------------
(Dollars in Millions
Except Per Share Amounts)
Revenues
Systems and other contracts
GM and affiliates $856.2 $834.8 $1,697.9 $1,680.7
Outside customers 1,453.3 1,240.6 2,828.8 2,454.5
Interest and other income 24.5 15.1 46.6 28.5
------- ------- ------- -------
Total Revenues 2,334.0 2,090.5 4,573.3 4,163.7
Costs and Expenses 2,025.8 1,812.3 3,996.8 3,648.9
Income Taxes 110.9 100.1 207.5 185.3
------- ------- ------- -------
Separate Consolidated Net Income $197.3 $178.1 $369.0 $329.5
======= ======= ======= =======
Available Separate Consolidated Net Income*
Average number of shares of Class
E common stock outstanding
(in millions) (Numerator) 260.1 236.7 259.0 235.7
Class E dividend base (in millions)
(Denominator) 481.7 480.5 481.5 480.1
Available Separate Consolidated
Net Income $106.5 $87.7 $198.6 $161.8
===== ==== ===== =====
Earnings Attributable to Class E
Common Stock on a Per Share Basis $0.41 $0.37 $0.77 $0.69
==== ==== ==== ====
Cash dividends per share of Class E
common stock $0.12 $0.10 $0.24 $0.20
==== ==== ==== ====
* Available Separate Consolidated Net Income is determined quarterly.
- 20 -
<PAGE>21
GENERAL MOTORS CORPORATION
AND SUBSIDIARIES
GM Hughes Electronics Corporation
Earnings per share attributable to GM Class H common stock are based on
the Available Separate Consolidated Net Income of GMHE as described in Note 5
to the Financial Statements. Reference should be made to GMHE's Management's
Discussion and Analysis in Exhibit 99(b) which is incorporated herein by
reference.
Summary Financial Data - GMHE Six Months Ended
Second Quarter June 30,
------------------ ------------------
1994 1993 1994 1993
------------------ ------------------
(Dollars in Millions
Except Per Share Amounts)
Revenues
Net sales
Outside customers $2,195.5 $2,188.1 $4,496.4 $4,298.0
GM and affiliates 1,322.3 1,121.3 2,582.2 2,181.0
Other income-net 18.1 6.0 44.6 17.6
------- ------- ------- -------
Total Revenues 3,535.9 3,315.4 7,123.2 6,496.6
Costs and Expenses 3,135.3 2,967.0 6,245.3 5,868.8
Income Taxes 164.2 147.3 360.0 268.4
------- ------- ------- -------
Income before cumulative
effect of accounting change 236.4 201.1 517.9 359.4
Cumulative effect of accounting
change - - (30.4)(1) -
------- ------- ------- -------
Net Income 236.4 201.1 487.5 359.4
Adjustments to exclude the effect
of GM purchase accounting
adjustments related to Hughes(2) 30.9 30.9 61.9 61.9
------- ------- ------- -------
Earnings Used for
Computation of Available Separate
Consolidated Net Income $267.3 $232.0 $549.4 $421.3
======= ======= ======= =======
Available Separate Consolidated
Net Income (3)
Average number of shares of Class H
common stock outstanding
(in millions) (Numerator) 91.7 86.0 91.2 89.1
Class H dividend base (in millions)
(Denominator) 399.9 399.9 399.9 399.9
Available Separate Consolidated
Net Income $61.3 $50.0 $125.3 $94.4
==== ==== ===== =====
Earnings Attributable to Class H
Common Stock on a Per Share Basis
Before cumulative effect of
accounting change $0.67 $0.58 $1.45 $1.05
Cumulative effect of accounting
change - - (0.08)(1) -
---- ---- ---- ----
Net earnings attributable
to Class H common stock $0.67 $0.58 $1.37 $1.05
==== ==== ==== ====
Cash dividends per share of Class H
common stock $0.20 $0.18 $0.40 $0.36
==== ==== ==== ====
(1) Effective January 1, 1994, GMHE adopted SFAS No. 112 ($30.4 million or
$0.08 per share).
(2) Amortization of intangible assets arising from GM's acquisition of
Hughes.
(3) Available Separate Consolidated Net Income is determined quarterly.
- 21 -
<PAGE>22
GENERAL MOTORS CORPORATION
AND SUBSIDIARIES
Liquidity and Capital Resources
Cash and cash equivalents, including GMAC, at June 30, 1994 amounted to
$13,642.8 million compared with $13,790.5 million at December 31, 1993 and
$11,841.9 million at June 30, 1993. The slight decrease in 1994 was due to an
excess of net cash used in investing activities over the net cash provided by
operating and financing activities. Net cash provided by operating activities
was $5,847.7 million in the first six months of 1994, compared to $9,301.7
million in the 1993 period, reflecting lower proceeds on sales of mortgage
loans and increases in accounts receivable, inventories, and other investments
and miscellaneous assets, partially offset by higher net income before the
accounting change, lower purchases of mortgage loans, and higher income taxes
payable.
Net cash used in investing activities in the 1994 period amounted to
$7,931.9 million, consisting primarily of capital expenditures and the net
increase in equipment on operating leases. Net cash provided by investing
activities amounted to $639.8 million in 1993 primarily due to the net
reduction in finance receivables (resulting from sales of finance receivables)
exceeding capital expenditures and the net increase in equipment on operating
leases. Total capital expenditures were $2,765.2 million in the first six
months of 1994 compared with $2,876.7 million in the 1993 period. Net cash
provided by financing activities of $1,932.4 million in the 1994 six-month
period primarily reflected the net increase in short-term loans payable of
$1,125.4 million and $902.2 million proceeds from issuing common stocks. Net
cash used in financing activities of $9,169.6 million in the 1993 period
primarily reflected the net decrease in short-term loans payable of $5,856.1
million and a net decrease in long-term debt of $2,331.8 million.
During the first six months of 1994, notes and loans payable increased
$1,962.1 million to $72,403.3 million at June 30, 1994 from a balance of
$70,441.2 million at December 31, 1993 reflecting primarily a net increase in
short-term loans payable. GM's fully consolidated ratio of debt to
stockholders' equity (excluding stocks subject to repurchase) was 8.01 to 1 at
June 30, 1994 compared to 12.58 to 1 at December 31, 1993.
On April 19, 1994, Standard & Poor's Corporation (S&P) revised its ratings
outlook from negative to positive and reaffirmed its ratings of General Motors
Corporation and related entities. S&P currently rates the senior debt of GM,
GMAC, and GMHE as BBB+. The commercial paper of GMAC, GMHE, and EDS is
currently rated A-2. GM's preference stock is rated BBB.
A security rating is not a recommendation to buy, sell, or hold securities
and may be subject to revision or withdrawal at any time by the assigning
rating organization. Each rating should be evaluated independently of any
other rating.
The Corporation's operating cash flow was strong in the second quarter of
1994. With GMAC on an equity basis, cash and marketable securities totaled
$12,643.4 million at the end of the second quarter, compared with $9,546.6
million at the end of March, $10,485.0 million at December 31, 1993, and
$9,063.2 million at June 30, 1993. As part of the overall plan to reduce GM's
unfunded pension liability, on July 27, 1994, the Corporation contributed $2.5
billion in cash to its U.S. pension plans, bringing total cash contributions
for the year to $4.4 billion. GM's cash position continues to strengthen and
GM plans to maintain all-important future product programs utilizing improved
capital-spending efficiencies, while at the same time improving the balance
sheet. Ongoing financial objectives include: restoring profitability to
North American Operations, reducing GM's unfunded pension liability,
containing health-care costs and improving GM's credit ratings.
GM and certain of its subsidiaries and affiliates maintain various
syndicated bank credit facilities which in aggregate provide $26.8 billion of
committed credit availability. Of this amount, $3.0 billion is directly
available to the Corporation and the remainder is available to GMAC and its
subsidiaries and affiliates and other GM subsidiaries and affiliates
worldwide.
- 22 -
<PAGE>23
GENERAL MOTORS CORPORATION
AND SUBSIDIARIES
The Corporation's policy is to distribute dividends on its $1-2/3 par
value common stock based on the outlook and indicated capital needs of the
business. With respect to Class E and Class H common stocks, the
Corporation's current policy is to pay aggregate annual cash dividends
approximately equal to 30% and 35% of the Available Separate Consolidated Net
Income of EDS and GMHE, respectively, for the prior year. In February 1994,
the Board of Directors increased the quarterly dividends on Class E common
stock from $0.10 per share to $0.12 per share and on Class H common stock from
$0.18 per share to $0.20 per share. Notwithstanding the current dividend
policy, the Board of Directors declared a dividend on the Class H common stock
of $0.18 per share for each of the quarters of 1993, which was more than 35%
of the Available Separate Consolidated Net Loss of GMHE for 1992.
A second quarter cash dividend on $1-2/3 par value common stock of $0.20
per share was paid on June 10, 1994. On August 8, 1994, the Board of
Directors declared a cash dividend of $0.20 per share on $1-2/3 par value
common stock for the third quarter of 1994 payable September 10, 1994. The
dividend continues the level established in the fourth quarter of 1992, and
brings 1994 cash dividends to $0.60 per share, the same as in 1993.
A second quarter cash dividend on Class E common stock of $0.12 per share
was paid on June 10, 1994. On August 8, 1994, the Board of Directors also
declared a cash dividend of $0.12 per share on Class E common stock payable
September 10, 1994. This continues the level established in the first quarter
of 1994 and brings 1994 cash dividends to $0.36 per share compared with $0.30
per share in 1993.
A second quarter cash dividend on Class H common stock of $0.20 per share
was paid on June 10, 1994. On August 8, 1994, the Board of Directors also
declared a cash dividend of $0.20 per share on Class H common stock payable
September 10, 1994. This continues the level in effect since the first
quarter of 1994 and brings 1994 cash dividends to $0.60 per share, compared
with $0.54 per share in 1993.
General Motors converted all 17,825,000 outstanding shares of its Series A
Conversion Preference Stock (Preference Equity Redemption Cumulative Stock or
PERCS) into shares of GM $1-2/3 par value common stock on June 18, 1994. GM
originally issued this stock in June 1991 at a price of $41.375 per share.
Holders of the Preference Stock received 0.992435 shares of GM $1-2/3 par
value common stock for each share of Preference Stock called for conversion,
plus $0.1655 in cash in payment of the accrued and unpaid dividend (covering
the June 1 to June 18 period). Fractional shares of GM $1-2/3 par value
common stock were paid in cash. When all preference stock has been converted,
a total of 17.7 million shares of GM $1-2/3 par value common stock will have
been issued in this conversion.
Book value per share of $1-2/3 par value common stock increased to $6.65
at the end of the 1994 second quarter from $1.65 at the end of 1993. Book
value per share of Class E common stock increased to $0.85 from $0.21 at the
end of 1993 and book value per share of Class H common stock increased to
$3.33 from $0.83 at the end of 1993.
Under SFAS No. 87, Employers' Accounting for Pensions, any year-to-year
movement in the rate of interest on long-term, high-quality corporate bonds
necessitates a change in the discount rate used to calculate the actuarial
present value of the plans' obligations. This annual requirement to reset the
discount rate in line with movements in market interest rates can result in
considerable volatility of the discount rate and consequently in the amount of
the plans' obligations under SFAS No. 87. The measurement date on which the
Corporation's year-end funded status is based is October 1 for its principal
U.S. plans. The Corporation's worldwide unfunded pension liability at
December 31, 1993, as calculated under SFAS No. 87, increased by a net of $8.3
billion, from $14.0 billion at December 31, 1992 to $22.3 billion. The single
- 23 -
<PAGE>24
GENERAL MOTORS CORPORATION
AND SUBSIDIARIES
largest cause of this increase in GM's unfunded liability was the general
decline in long-term interest rates which in the U.S. were at their lowest
level in approximately 20 years. The approximate 145 basis point increase in
long-term interest rates in the U.S. which has occurred since the last
measurement date of GM's pension plans and June 30, 1994, if maintained, would
decrease GM's reported unfunded pension liabilities at year-end 1994 by over
$7 billion. Other factors that influence the unfunded pension liability
include the actual pension plan contributions and return on pension
investments during the year, the expected normal growth in the pension
liability, and actual employee turnover, retirement, and mortality experience.
Assuming the foregoing estimated decrease in the unfunded liability
occurs, the Corporation estimates that its minimum pension liability
adjustment to stockholders' equity would decrease by about $2 billion at
December 31, 1994, from the $5.3 billion adjustment reported at year-end 1993
to approximately $3.3 billion. Since June 30, long-term interest rates have
decreased slightly (roughly, 5 basis points), which if maintained would
marginally reduce the improvement in GM's unfunded pension liability and
adjustment to stockholders' equity outlined above.
On May 11, 1994, the Corporation reached an agreement with the Pension
Benefit Guaranty Corporation (PBGC) which could lead to incremental cash and
stock contributions of approximately $10 billion to its U.S. hourly pension
plan in the near term. The funding proposal includes $4 billion in cash plus
a contribution of approximately 177 million shares of Class E common stock.
At the August 10 NYSE closing price of $35.63, 177 million shares of Class E
common stock would have a value of $6.3 billion. GM has already satisfied its
1994 Employee Retirement Income Security Act (ERISA) minimum funding
obligation with a cash contribution of $1.9 billion to its U.S. hourly pension
plan in the first quarter of 1994. The funding proposal would be in addition
to this ERISA minimum contribution. On July 27, 1994, GM contributed $2.5
billion in cash to its U.S. pension plans bringing total cash contributions
for the year to $4.4 billion. Subject to certain approvals, GM may designate
the additional $2.5 billion cash contribution as part of the funding required
under the PBGC agreement.
GM's ability to make the contribution as planned is contingent upon
receiving approval from the U.S. Department of Labor (DOL), and other
conditions. GM has filed its application with the DOL. Under the terms of
the agreement with the PBGC, GM will defer the use of funding credits that
would result from the incremental cash and stock contributions. Consequently,
GM will continue to make regular cash contributions to its pension plans over
the next several years. The PBGC agreement also provides flexibility to GM by
granting a release of EDS from liability, if any, to the PBGC under GM's U.S.
pension plans in the event EDS were to leave the GM corporate group under
certain circumstances. In addition, GM will seek relief from the excise tax
that can apply when large contributions are made to pension plans. The PBGC
reform bill (HR3396) proposes this relief. If GM obtains the necessary
government approval, the stock contribution would require approval by the GM
Board of Directors. No assurances can be given at this time that the
approvals will be obtained.
The increase 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. The 145 basis point increase in long-term corporate bond rates
that had occurred during the last nine months would decrease GM's accumulated
postretirement benefit obligation, which was $45.6 billion at December 31,
1993, by approximately $8 billion. Further, any change in the accumulated
postretirement benefit obligation would have no impact on GM's stockholders'
equity in 1994 and no cash impact. Although the same interest rate factors
affect the accounting liabilities for pensions and other postretirement
benefits, the estimated decrease related to SFAS No. 106 could also be
- 24 -
<PAGE>25
GENERAL MOTORS CORPORATION
AND SUBSIDIARIES
affected by national health care reform initiatives. The potential impact of
national health care reform on the Corporation's health care liability cannot
be reasonably estimated until such time as legislative parameters are
finalized.
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 1994. However, in accordance
with applicable accounting standards, any change in these obligations would
impact the Corporation's 1995 and subsequent years' earnings as non-cash
increases/decreases in pension and other postretirement benefit expense.
- 25 -
<PAGE>26
GENERAL MOTORS CORPORATION
AND SUBSIDIARIES
GENERAL MOTORS OPERATIONS WITH GMAC ON AN EQUITY BASIS
In order to facilitate analysis, the following financial statements
present financial data for the Corporation's manufacturing, wholesale
marketing, defense, electronics, and computer service operations with the
financing and insurance operations reflected on an equity basis. This is the
same basis and format used in years prior to GM's adoption of SFAS No. 94,
Consolidation of All Majority-owned Subsidiaries.
Statement of Six Months Ended
Consolidated Operations Second Quarter June 30,
-------------------- --------------------
With GMAC on an Equity Basis 1994 1993 1994 1993
-------------------- --------------------
(Dollars in Millions)
Net Sales and Revenues (1)
Manufactured products $35,588.7 $31,570.2 $68,424.8 $61,763.3
Computer systems services 1,519.5 1,304.9 2,964.1 2,584.5
-------- -------- -------- --------
Total Net Sales and Revenues 37,108.2 32,875.1 71,388.9 64,347.8
-------- -------- -------- --------
Costs and Expenses
Cost of sales and other operating
charges, exclusive of items
listed below 30,242.4 27,601.9 58,281.9 54,485.3
Selling, general, and
administrative expenses 2,538.0 2,375.8 4,903.4 4,684.4
Depreciation of real estate,
plants, and equipment 947.7 958.6 1,884.0 1,900.5
Amortization of special tools 764.6 690.8 1,525.6 1,327.0
Amortization of intangible assets 45.3 47.6 90.5 95.0
-------- -------- -------- --------
Total Costs and Expenses 34,538.0 31,674.7 66,685.4 62,492.2
-------- -------- -------- --------
Operating Income 2,570.2 1,200.4 4,703.5 1,855.6
Other income less income
deductions - net 428.1 290.8 627.2 612.8
Interest expense (330.0) (383.7) (545.1) (768.8)
-------- -------- -------- --------
Income before Income Taxes 2,668.3 1,107.5 4,785.6 1,699.6
Income taxes 1,035.4 468.2 1,740.2 716.9
-------- -------- -------- --------
Income after Income Taxes 1,632.9 639.3 3,045.4 982.7
Earnings of nonconsolidated
affiliates 289.9 249.8 481.8 419.6
-------- -------- -------- --------
Income (before cumulative
effect of accounting change) 1,922.8 889.1 3,527.2 1,402.3
Cumulative effect of accounting
change (2) - - (750.7) -
-------- -------- -------- --------
Net Income $1,922.8 $889.1 $2,776.5 $1,402.3
======== ======== ======== ========
Certain 1993 amounts were reclassified to conform with 1994 classifications.
(1) Includes sales to nonconsolidated affiliates of $289.6 million and $259.1
million in the second quarter and $579.4 million and $512.8 million in the
six months of 1994 and 1993, respectively, including $66.2 million and
$64.3 million in computer systems services revenues for the second quarter
and $135.3 million and $130.0 million for the six months.
(2) Effective January 1, 1994, the Corporation adopted SFAS No. 112,
Employers' Accounting for Postemployment Benefits. Not included is the
unfavorable cumulative effect on GMAC earnings of $7.4 million of adopting
SFAS No. 112 because the cumulative effect is included in earnings of
nonconsolidated affiliates.
- 26 -
<PAGE>27
GENERAL MOTORS CORPORATION
AND SUBSIDIARIES
Consolidated Balance Sheet June 30, Dec. 31, June 30,
With GMAC on an Equity Basis ASSETS 1994 1993 1993
-----------------------------------
(Dollars in Millions)
Current Assets
Cash and cash equivalents $11,402.9 $9,762.5 $8,343.1
Other marketable securities 1,240.5 722.5 720.1
--------- --------- ---------
Total cash and marketable securities 12,643.4 10,485.0 9,063.2
Accounts and notes receivable
Trade 7,794.0 5,563.1 15,183.7
Nonconsolidated affiliates 3,512.6 2,955.2 3,402.2
Inventories 10,060.7 8,615.1 9,868.4
Contracts in process 2,693.7 2,376.8 2,413.0
Prepaid expenses and deferred
income taxes 8,496.6 8,036.3 7,054.7
--------- --------- ---------
Total Current Assets 45,201.0 38,031.5 46,985.2
Equity in Net Assets of
Nonconsolidated Affiliates 8,730.6 8,638.5 9,012.1
Deferred Income Taxes 15,053.0 14,874.1 13,651.6
Other Investments and Miscellaneous
Assets 13,481.2 12,586.4 9,835.1
Property - Net 33,622.1 34,103.9 34,316.9
Intangible Assets 12,753.2 12,746.1 8,916.9
--------- --------- ---------
Total Assets $128,841.1 $120,980.5 $122,717.8
========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $9,854.6 $9,546.5 $8,524.8
Loans payable 1,150.4 1,449.6 1,265.5
Income taxes payable 1,021.8 389.9 1,406.6
Accrued liabilities and deferred
income taxes (including current
portion of postretirement benefits
other than pensions) 23,925.9 23,823.3 24,764.6
Stocks subject to repurchase 450.0 - -
--------- --------- ---------
Total Current Liabilities 36,402.7 35,209.3 35,961.5
Long-Term Debt 6,841.7 6,218.4 6,965.0
Payable to GMAC* 1,495.9 1,355.5 9,929.1
Capitalized Leases 160.2 165.2 180.1
Postretirement Benefits Other Than
Pensions 36,278.6 35,423.6 34,270.7
Pensions 20,784.4 20,583.3 12,130.5
Other Liabilities and Deferred
Income Taxes 16,596.0 14,739.7 14,812.1
Deferred Credits 1,240.8 1,238.0 1,352.0
Stocks Subject to Repurchase - 450.0 450.0
Stockholders' Equity 9,040.8 5,597.5 6,666.8
--------- --------- ---------
Total Liabilities and
Stockholders' Equity $128,841.1 $120,980.5 $122,717.8
========= ========= =========
Certain June 1993 amounts were reclassified to conform with 1994
classifications.
* Reference should be made to the note on the next page.
- 27 -
<PAGE>28
GENERAL MOTORS CORPORATION
AND SUBSIDIARIES
* During 1986 through 1993, for marketing and financial reasons, GM assumed
part of the dealer inventory financing previously provided by GMAC. Primarily
to support these receivables, GM entered into a financing agreement with GMAC
which provided that GMAC would extend loans to GM up to a maximum of $17
billion which would bear interest at floating market rates. GMAC serviced
these receivables for GM for a fee. This financing agreement ensured that
GMAC's ongoing funding activities would continue, and returned to GMAC the
approximate amount of interest and fees it would have earned had it retained
the dealer inventory financing business. As of December 1, 1993, GMAC resumed
the financing of wholesale receivables and the amounts previously borrowed
under this agreement with GMAC were repaid. This financing agreement has been
terminated.
Condensed Statement of Consolidated Cash Flows Six Months Ended
With GMAC on an Equity Basis June 30,
-------------------
1994 1993
-------------------
(Dollars in Millions)
Net Cash Provided by Operating Activities $3,898.0 $6,820.7
-------- -------
Cash Flows from Investing Activities
Expenditures for real estate, plants,
and equipment (1,718.6) (1,529.9)
Expenditures for special tools (989.6) (1,298.1)
Change in other investing assets
Investments in other marketable
securities - acquisitions (1,233.4) (892.2)
Investments in other marketable
securities - liquidations 715.4 925.3
Finance receivables - (295.9)
Other 166.1 (151.1)
-------- -------
Net Cash Used in Investing Activities (3,060.1) (3,241.9)
-------- -------
Cash Flows from Financing Activities
Increase in long-term debt 684.1 700.2
Decrease in long-term debt (60.8) (591.7)
Net increase (decrease) in payable to GMAC 140.4 (1,634.1)
Proceeds from issuing common stocks 902.2 144.9
Cash dividends paid to stockholders (566.5) (546.1)
Other (304.9) (512.1)
-------- -------
Net Cash Provided by (Used in)
Financing Activities 794.5 (2,438.9)
-------- -------
Effect of Exchange Rate Changes on Cash
and Cash Equivalents 8.0 (4.4)
-------- -------
Net increase in cash and
cash equivalents 1,640.4 1,135.5
Cash and cash equivalents at beginning of
the period 9,762.5 7,207.6
-------- -------
Cash and cash equivalents at end of the period $11,402.9 $8,343.1
======== =======
Certain 1993 amounts were reclassified to conform with 1994 classifications.
* * * * * * * *
- 28 -
<PAGE>29
GENERAL MOTORS CORPORATION PART II
AND SUBSIDIARIES
ITEM 1. LEGAL PROCEEDINGS
(a) Material pending legal proceedings, other than ordinary routine litigation
incidental to the business, to which the Corporation became, or was, a party
during the quarter ended June 30, 1994 are summarized below.
Environmental Matter
On June 28, 1994, the Attorney General for the State of Michigan, on behalf
of the Michigan Department of Natural Resources (DNR), filed a complaint in
Circuit Court of the 30th Judicial Circuit in Ingham County, Michigan alleging
that several of GM's plants released polychlorinated biphenyls (commonly
referred to as "PCBs") into the Saginaw River thereby causing damage to
natural resources in the river and Saginaw Bay. The complaint also named the
City of Saginaw and Bay City as defendants. The State has not asserted that
it is seeking fines or penalties and no amount is specified in the complaint
as damages, but the State is seeking reimbursement of all its past and future
response costs, including enforcement costs, and natural resource damages
relating to the Saginaw River and Bay. In this regard, representatives of the
State have indicated that the State will be seeking "tens of millions of
dollars" in damages as well as several million dollars in past response costs.
GM is currently in discussions with representatives of the Michigan Attorney
General and the DNR regarding this matter.
GM has also been advised that the U.S. Department of Interior ("DOI") may be
conducting an investigation of these matters and any related damage to the
environment, and that DOI may pursue independent claims against GM, the City
of Saginaw and Bay City.
* * *
Other Matters
In connection with the previously reported matter in which Hughes Aircraft
Company ("Hughes") had a suit pending against the U.S. Government in the U.S.
Court of Claims where Hughes was seeking reasonable and entire compensation
for the unauthorized manufacture and use by the United States of the invention
claimed in a Hughes patent (the "Williams Patent"), the Court issued a
decision on June 17, 1994 awarding Hughes damages of $114 million. Hughes
believes that the record supports a higher royalty rate, and, accordingly, on
August 3, 1994 filed a notice of appeal pursuant to which Hughes will be
seeking a higher award. Hughes is unable to estimate the duration of these
appeal efforts.
* * *
With respect to the previously reported Government investigation, individual
product liability claims and lawsuits and class actions relating to alleged
safety defects in 1973-1987 Chevrolet and GMC full-size pickup trucks (the
"C/K pickup trucks"), the following developments are reported:
(i) With respect to the July 1993 submission to the Philadelphia Federal
Court and a state court in Texas of a nationwide class action settlement of
the C/K pickup truck class actions, the approval of that settlement by both
courts and the appeal of its approval by certain objectors, the Texas Court of
Appeals in Texarkana on June 22, 1994 reversed the approval of the settlement
affecting Texas residents. GM is appealing that reversal in the Texas Supreme
Court. GM believes that it has a sound basis for prevailing in its appeal.
The Philadelphia Federal Court approval of substantially the same settlement
is on appeal in the U.S. Third Circuit Court of Appeals.
(ii) With respect to the previously reported matter, CROWDER, ET AL V. GENERAL
MOTORS CORPORATION, this case has been transferred to the Federal Court in
Philadelphia where further proceedings have been stayed pending the decision
of the U.S. Third Circuit Court of Appeals on the approval of the class action
settlement noted above.
* * *
- 29 -
<PAGE>30
GENERAL MOTORS CORPORATION
AND SUBSIDIARIES
On June 1, 1994, the Corporation was informed by prosecutors with the U.S.
Department of Justice ("DOJ") that the Corporation's wholly-owned subsidiary,
Delco Electronics Corporation ("Delco Electronics"), is a target for criminal
prosecution and subject to civil suit in connection with allegations that
Delco Electronics is responsible for the transportation of hazardous wastes
from its MAQUILADORA plant in Reynosa, Mexico into the United States. The
related Government investigation is focused on four shipments of recyclable
hazardous wastes during the period 1987-1990 which allegedly violated the U.S.
Resource Conservation and Recovery Act ("RCRA") and the treaty with Mexico
which established the MAQUILADORA industry. Representatives of the DOJ have
not indicated what fines, penalties or other damages they may seek to recover
in their continued pursuit of this matter.
* * *
Other Pending Legal Proceedings Reported
in Previous 1994 Quarterly Report
Reference is made to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1994.
(b) Previously reported legal proceedings which have been terminated, either
during the quarter ended June 30, 1994, or subsequent thereto, but before the
filing of this report are summarized below.
Other Matters
With respect to the previously reported matter wherein Electronic Data
Systems Corporation ("EDS") had filed suit against Computer Associates
International, Inc. ("Computer Associates") and a counter-claim had been
asserted against EDS by Computer Associates, the parties agreed to dismiss,
with prejudice, all of the claims pending against one another. An order by
the Court dismissing, with prejudice, both parties' claims was entered on May
19, 1994. The cost of the litigation and its settlement did not have a
material effect on EDS.
* * *
With respect to the Grand Jury investigation in Boston, Massachusetts
relating to the circumstances behind the delivery and quality of certain
components of two missile guidance systems which Hughes had sold to the U.S.
Government, Hughes has been notified by the Government that the investigation
has been concluded and that no charges will be brought against the company.
* * *
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of stockholders of the Registrant was held on May 20,
1994.
Proxies for the meeting were solicited pursuant to Regulation 14A under the
Securities Exchange Act of 1934, there was no solicitation in opposition to
the management's nominees as listed in Item No. 1 in the proxy statement, and
all of such nominees were elected.
The results of the voting by the stockholders for directors is presented
below.
Percent
Number of Total
Director of Votes Voting
- -------- ----------- --------
Anne L. Armstrong For 595,860,359 99.0%
Withheld 5,804,388 1.0%
John H. Bryan For 596,514,015 99.1%
Withheld 5,150,732 0.9%
Thomas E. Everhart For 596,397,834 99.1%
Withheld 5,266,914 0.9%
- 30 -
<PAGE>31
GENERAL MOTORS CORPORATION
AND SUBSIDIARIES
Percent
Number of Total
Director (concluded) of Votes Voting
- -------- ----------- --------
Charles T. Fisher, III For 596,354,770 99.1%
Withheld 5,309,978 0.9%
William E. Hoglund For 596,533,996 99.1%
Withheld 5,130,752 0.9%
J. Willard Marriott, Jr. For 596,315,089 99.1%
Withheld 5,349,659 0.9%
Ann D. McLaughlin For 596,058,098 99.1%
Withheld 5,606,650 0.9%
Paul H. O'Neill For 596,469,109 99.1%
Withheld 5,195,639 0.9%
Edmund T. Pratt, Jr. For 595,919,266 99.0%
Withheld 5,745,482 1.0%
John G. Smale For 596,163,387 99.1%
Withheld 5,501,361 0.9%
John F. Smith, Jr. For 596,461,312 99.1%
Withheld 5,203,436 0.9%
Louis W. Sullivan For 595,656,535 99.0%
Withheld 6,008,212 1.0%
Dennis Weatherstone For 596,532,820 99.1%
Withheld 5,131,928 0.9%
Thomas H. Wyman For 596,231,937 99.1%
Withheld 5,432,811 0.9%
Two proposals (designated Item Nos. 2 and 3) were submitted by the Board
of Directors and seven proposals (designated Item Nos. 4 through 10) were
submitted by stockholders. The proposals and the results of the voting by the
stockholders are presented below.
Percent
Number of Total
of Votes Voting
----------- --------
Items submitted by Board of Directors:
- ------------------------------------
2. To ratify the selection of Deloitte For 596,130,261 99.1%
& Touche as independent public Against 2,640,254 0.4%
accountants for the year 1994. Abstain 2,894,235 0.5%
3 To amend Article Fourth of the For 546,639,001 90.9%
Certificate of Incorporation to Against 49,538,457 8.2%
increase the authorized shares of Abstain 5,487,291 0.9%
Common Stock, $1-2/3 par value.*
Items submitted by stockholders
- -------------------------------
4. Regarding disclosure of information For 19,410,223 3.7%
concerning political contributions. Against 488,105,884 92.3%
Abstain 21,172,102 4.0%
5. To provide for cumulative voting. For 136,897,723 25.9%
Against 382,829,877 72.4%
Abstain 8,960,608 1.7%
* On the basis of percentage of outstanding shares voting (of which a majority
was required for passage), 67.8% of the votes cast by all classes of common
stock voting as a group were for the proposal and 6.2% against, and 68.2%
of the votes cast by $1-2/3 par value stock voting as a single class were
for the proposal and 6.4% against.
- 31 -
<PAGE>32
GENERAL MOTORS CORPORATION
AND SUBSIDIARIES
Percent
Number of Total
of Votes Voting
----------- --------
Items submitted by stockholders (concluded)
- -------------------------------
6. Regarding foreign military sales. For 42,441,600 8.0%
Against 450,944,219 85.3%
Abstain 35,302,389 6.7%
7. Regarding dealings with China For 18,120,789 3.4%
and the former Soviet Union. Against 453,713,028 85.8%
Abstain 56,854,392 10.8%
8. Regarding GM's operations in For 31,226,200 5.9%
Mexico. Against 441,201,545 83.5%
Abstain 56,260,464 10.6%
9. Regarding salary limits for any For 33,247,493 6.3%
officer. Against 484,277,112 91.6%
Abstain 11,163,602 2.1%
10. Regarding the Chief Executive For 39,887,519 7.6%
Officer's compensation. Against 478,060,148 90.4%
Abstain 10,740,542 2.0%
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS.
Exhibit Number Exhibit Name Page No.
- -------------- ------------------------------------------- --------
11 Computation of Earnings Per Share
Attributable to Common Stocks for the
Quarters and Six Months Ended June 30,
1994 and 1993. 34
12 Computation of Ratios of Earnings to Fixed
Charges for the Six Months Ended June 30,
1994 and 1993. 38
99(a) Electronic Data Systems Corporation and
Subsidiaries Consolidated Financial
Statements and Management's Discussion
and Analysis. 39
(b) GM Hughes Electronics Corporation and
Subsidiaries Consolidated Financial
Statements and Management's Discussion
and Analysis. 45
(b) REPORTS ON FORM 8-K.
Three reports on Form 8-K dated May 16, 1994, May 26, 1994, and June 6,
1994 were filed during the quarter ended June 30, 1994 reporting matters under
Item 5, Other Events, Item 7(c), Exhibits, and Item 5, Other Events,
respectively.
* * * * * *
- 32 -
<PAGE>33
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
--------------------------------
Date August 15, 1994 (Leon J. Krain, Vice President
- ---------------------- and Group Executive)
By
s/Wallace W. Creek
--------------------------------
Date August 15, 1994 (Wallace W. Creek, Comptroller)
- ----------------------
- 33 -
l:\secfiles\10-Q\2ndqtr94\exhib11.doc 3
<PAGE>1
GENERAL MOTORS CORPORATION EXHIBIT 11
AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE
ATTRIBUTABLE TO COMMON STOCKS
Quarter Ended
June 30, 1994
-----------------------------
$1-2/3
Par Value Class E Class H
Common Common Common
Stock Stock Stock
-----------------------------
(Dollars in Millions Except
Per Share Amounts)
Net income attributable to stocks $1,755.0 $106.5 $61.3
Dividends on preference stocks 89.7 - -
------- ----- ----
Earnings attributable to common stocks 1,665.3 106.5 61.3
Dividends on common stocks 146.2 31.2 18.3
------- ----- ----
Undistributed earnings 1,519.1 75.3 43.0
Adjustments
Add-back dividends on assumed conversion
of preference stock 17.7 - -
Change in earnings attributable to each
class of common stock related to the
assumed exercise of stock options * (1.3) - 1.3
Dividends on assumed common stock
transactions (4.2) - (0.4)
------- ----- ----
Adjusted earnings attributable to
common stocks $1,531.3 $75.3 $43.9
======= ===== ====
Weighted average shares outstanding
(in millions) 733.1 260.1 91.7
Adjustments
Shares issued on assumed conversion of
preference stock 15.3 - -
Assumed exercise of dilutive stock options * 5.6 - 2.0
----- ----- ----
Adjusted weighted average shares outstanding 754.0 260.1 93.7
===== ===== ====
Per Share Data
Earnings per share attributable to
undistributed earnings on common stocks $2.03 $0.29 $0.47
Dividends 0.20 0.12 0.20
---- ---- ----
Earnings per share attributable
to common stocks $2.23 $0.41 $0.67
==== ==== ====
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.
- 34 -
<PAGE>2
GENERAL MOTORS CORPORATION
AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE
ATTRIBUTABLE TO COMMON STOCKS
Quarter Ended
June 30, 1993
-----------------------------
$1-2/3
Par Value Class E Class H
Common Common Common
Stock Stock Stock
-----------------------------
(Dollars in Millions Except
Per Share Amounts)
Net income attributable to stocks $751.4 $87.7 $50.0
Dividends on preference stocks 89.0 - -
----- ---- ----
Earnings attributable to common stocks 662.4 87.7 50.0
Dividends on common stocks 141.5 23.7 15.5
----- ---- ----
Undistributed earnings 520.9 64.0 34.5
Adjustments
Add-back dividends on assumed conversion
of preference stocks 17.0 - -
Change in earnings attributable to each
class of common stock related to the
assumed share transactions * (6.3) 4.7 1.6
Dividends on assumed common stock
transactions (4.3) (1.3) (0.5)
----- ---- ----
Adjusted earnings attributable to
common stocks $527.3 $67.4 $35.6
===== ==== ====
Weighted average shares outstanding
(in millions) 707.9 236.7 86.0
Adjustments
Shares issued on assumed conversion of
preference stocks * 17.8 12.6 -
Assumed repurchase of common stock subject
to put options - - 0.8
Assumed exercise of dilutive stock options * 3.7 0.1 2.0
----- ----- ----
Adjusted weighted average shares outstanding 729.4 249.4 88.8
===== ===== ====
Per Share Data
Earnings per share attributable to
undistributed earnings on common stocks $0.72 $0.27 $0.40
Dividends 0.20 0.10 0.18
---- ---- ----
Earnings per share attributable to common stocks $0.92 $0.37 $0.58
==== ==== ====
Note: The difference between fully diluted and primary earnings per share is
immaterial.
* The assumed conversion of preference stocks and exercise of stock options
reflected by these adjustments has no effect on Class E or Class H common
stock earnings per share, because to the extent that shares of Class E or
Class H common stock deemed to be outstanding would increase, such increased
shares would also increase the numerator of the fraction used to determine
Available Separate Consolidated Net Income.
- 35 -
<PAGE>3
GENERAL MOTORS CORPORATION
AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE
ATTRIBUTABLE TO COMMON STOCKS
Six Months Ended
June 30, 1994
----------------------------
$1-2/3
Par Value Class E Class H
Common Common Common
Stock Stock Stock
----------------------------
(Dollars in Millions Except
Per Share Amounts)
Net income attributable to stocks (before
cumulative effect of accounting change) $3,203.9 $198.6 $132.1
Dividends on preference stocks 176.5 - -
------- ----- -----
Earnings attributable to common stocks 3,027.4 198.6 132.1
Dividends on common stocks 291.4 62.1 36.5
------- ----- -----
Undistributed earnings 2,736.0 136.5 95.6
Adjustments
Add-back dividends on assumed conversion
of preference stock 32.4 - -
Change in earnings attributable to each
class of common stock related to the
assumed exercise of stock options * (2.9) - 2.9
Dividends on assumed common stock transactions (9.2) - (0.8)
------- ----- -----
Adjusted earnings attributable to
common stocks $2,756.3 $136.5 $97.7
======= ===== =====
Weighted average shares outstanding
(in millions) 729.2 259.0 91.2
Adjustments
Shares issued on assumed conversion
of preference stock 16.5 - -
Assumed exercise of dilutive stock options * 6.4 - 2.0
----- ----- ----
Adjusted weighted average shares outstanding 752.1 259.0 93.2
===== ===== ====
Per Share Data
Earnings per share attributable to
undistributed earnings on common
stocks (before cumulative effect of
accounting change) 3.67 0.53 1.05
Cumulative effect of accounting change at
January 1, 1994 (1.05) - (0.08)
Dividends 0.40 0.24 0.40
----- ---- -----
Earnings per share attributable
to common stocks $3.02 $0.77 $1.37
===== ==== =====
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.
- 36 -
<PAGE>4
GENERAL MOTORS CORPORATION
AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE
ATTRIBUTABLE TO COMMON STOCKS
Six Months Ended
June 30, 1993
-----------------------------
$1-2/3
Par Value Class E Class H
Common Common Common
Stock Stock Stock
-----------------------------
(Dollars in Millions Except
Per Share Amounts)
Net income attributable to stocks $1,146.1 $161.8 $94.4
Dividends on preferred and preference stocks 183.2 - -
------- ----- ----
Earnings attributable to common stocks 962.9 161.8 94.4
Dividends on common stocks 283.1 47.1 32.7
------- ----- ----
Undistributed earnings 679.8 114.7 61.7
Adjustments
Add-back dividends on assumed conversion
of preference stocks 4.6 - -
Change in earnings attributable to each
class of common stock related to the
assumed share transactions * (13.1) 8.8 4.3
Dividends on assumed common stock transactions (1.5) (2.6) (1.5)
------- ----- ----
Adjusted earnings attributable to
common stocks $669.8 $120.9 $64.5
======= ===== ====
Weighted average shares outstanding
(in millions) 707.7 235.7 89.1
Adjustments
Shares issued on assumed conversion of
preference stocks * - 12.8 -
Assumed repurchase of common stock subject
to put options - - 2.1
Assumed exercise of dilutive stock options * 3.7 0.1 2.0
----- ----- ----
Adjusted weighted average shares outstanding 711.4 248.6 93.2
===== ===== ====
Per Share Data
Earnings per share attributable to
undistributed earnings on common stocks $0.94 $0.49 $0.69
Dividends 0.40 0.20 0.36
---- ---- ----
Earnings per share attributable to common stocks $1.34 $0.69 $1.05
==== ==== ====
Note: The difference between fully diluted and primary earnings per share is
immaterial.
* The assumed conversion of preference stocks and exercise of stock options
reflected by these adjustments has no effect on Class E or Class H common
stock earnings per share, because to the extent that shares of Class E or
Class H common stock deemed to be outstanding would increase, such increased
shares would also increase the numerator of the fraction used to determine
Available Separate Consolidated Net Income.
- 37 -
l:\secfiles\10-Q\2ndqtr94\exhib12.doc 1
<PAGE>1
GENERAL MOTORS CORPORATION EXHIBIT 12
AND SUBSIDIARIES COMPUTATION OF RATIOS OF EARNINGS
TO FIXED CHARGES
Six Months Ended
June 30,
---------------------
1994 1993
---------------------
(Dollars in Millions)
Income before cumulative effect of
accounting change $3,534.6 $1,402.3
United States, foreign, and other income taxes 2,003.7 1,060.6
Equity in losses of associates 5.3 33.6
Cash dividends received from associates 3.2 1.1
Amortization of capitalized interest 25.3 27.3
------- -------
Income before income taxes, undistributed
losses of associates, and amortization of
capitalized interest 5,572.1 2,524.9
------- -------
Fixed charges included in net income
Interest and related charges on debt 2,427.2 2,928.4
Portion of rentals deemed to be interest 218.5 229.2
------- -------
Total fixed charges included in net income 2,645.7 3,157.6
------- -------
Earnings available for fixed charges $8,217.8 $5,682.5
======= =======
Fixed charges
Fixed charges included in net income $2,645.7 $3,157.6
Interest capitalized in the period 16.7 14.4
-------- -------
Total fixed charges $2,662.4 $3,172.0
======= =======
Ratios of earnings to fixed charges 3.09 1.79
==== ====
Certain amounts for 1993 have been reclassified to conform with 1994
classifications.
- 38 -
l:\secfiles\10-Q\2ndqtr94\exhib99a.doc 6
<PAGE>1
EXHIBIT 99(a)
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS AND
MANAGEMENT'S DISCUSSION AND ANALYSIS
- ----------------------------------------------------------------------------
Consolidated Statements of Income
Six Months Ended
Second Quarter June 30,
----------------- ------------------
1994 1993 1994 1993
----------------- ------------------
(in millions except per share amounts)
Revenues
Systems and other contracts
GM and affiliates $856.2 $834.8 $1,697.9 $1,680.7
Outside customers 1,453.3 1,240.6 2,828.8 2,454.5
Interest and other income 24.5 15.1 46.6 28.5
------- ------- ------- -------
Total revenues 2,334.0 2,090.5 4,573.3 4,163.7
------- ------- ------- -------
Costs and expenses
Cost of revenues 1,725.4 1,574.1 3,436.0 3,143.8
Selling, general, and administrative 289.5 230.1 540.3 487.7
Interest 10.9 8.1 20.5 17.4
------- ------- ------- -------
Total costs and expenses 2,025.8 1,812.3 3,996.8 3,648.9
------- ------- ------- -------
Income before income taxes 308.2 278.2 576.5 514.8
Provision for income taxes 110.9 100.1 207.5 185.3
------- ------- ------- -------
Separate Consolidated Net Income $197.3 $178.1 $369.0 $329.5
======= ======= ======= =======
Available Separate Consolidated Net
Income (Note 1)
Average number of shares of GM
Class E common stock outstanding
(in millions) (Numerator) 260.1 236.7 259.0 235.7
Class E dividend base (in millions)
(Denominator) 481.7 480.5 481.5 480.1
Available Separate Consolidated
Net Income $106.5 $87.7 $198.6 $161.8
===== ===== ===== =====
Earnings Attributable to GM Class E
Common Stock on a Per Share Basis
(Note 1) $0.41 $0.37 $0.77 $0.69
==== ==== ==== ====
See accompanying notes to consolidated financial statements.
- 39 -
<PAGE>2
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
June 30, December 31,
1994 1993
-------------------------
(in millions)
Assets
Current assets
Cash and cash equivalents $574.4 $383.4
Marketable securities 235.3 224.1
Accounts receivable 1,487.5 1,412.5
Accounts receivable from GM and affiliates 24.0 112.6
Inventories 172.5 130.7
Prepaids and other 307.2 243.5
------- -------
Total current assets 2,800.9 2,506.8
------- -------
Property and equipment, at cost less accumulated
depreciation of $2,596.8 at June 30, 1994
and $2,405.7 at December 31, 1993
Land 122.6 121.6
Buildings and facilities 517.8 532.0
Computer equipment 1,484.3 1,275.5
Other equipment and furniture 182.6 185.6
------- -------
Total property and equipment, net 2,307.3 2,114.7
------- -------
Operating and other assets
Land held for development, at cost 95.8 94.4
Investment in leases and other 1,323.6 1,159.9
Software, goodwill, and other intangibles, net 1,096.4 1,066.3
------- -------
Total operating and other assets 2,515.8 2,320.6
------- -------
Total Assets $7,624.0 $6,942.1
======= =======
Liabilities and Stockholder's Equity
Current liabilities
Accounts payable $385.0 $359.8
Accrued liabilities 1,039.2 996.0
Deferred revenue 438.2 429.7
Income taxes 87.6 202.2
Notes payable 108.6 172.7
------- -------
Total current liabilities 2,058.6 2,160.4
------- -------
Deferred income taxes 715.9 641.5
------- -------
Notes payable 935.4 522.8
------- -------
Stockholder's equity
Common stock, without par value; authorized
1,000.0 shares. Issued and outstanding 481.7
shares at June 30, 1994 and 480.9 shares
at December 31, 1993 454.2 421.2
Retained earnings 3,459.9 3,196.2
------- -------
Total stockholder's equity 3,914.1 3,617.4
------- -------
Total Liabilities and Stockholder's Equity $7,624.0 $6,942.1
======= =======
See accompanying notes to consolidated financial statements.
- 40 -
<PAGE>3
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Six Months Ended
Second Quarter June 30,
--------------- ----------------
1994 1993 1994 1993
--------------- ---------------
(in millions)
Cash Flows from Operating Activities
Net income $197.3 $178.1 $369.0 $329.5
----- ----- ----- -----
Adjustments to reconcile net income
to net cash provided by operating
activities (net of effects of
acquired companies)
Depreciation and amortization 182.4 159.0 343.1 302.6
(Increase) decrease in
accounts receivable (84.9) 14.2 (63.0) (21.8)
Decrease in accounts receivable
from GM and affiliates 65.2 61.4 90.7 27.8
(Increase) decrease in inventories (21.8) 1.7 (40.3) (26.8)
Increase in prepaids and other (25.5) (16.1) (58.7) (14.5)
Increase (decrease) in accounts
payable and accrued liabilities 11.4 14.7 17.0 (115.0)
Increase (decrease) in
deferred revenue 13.9 (7.8) 2.4 (19.4)
Increase in income taxes (125.7) (41.2) (115.2) (32.8)
Increase in deferred income taxes 44.0 41.9 79.6 75.7
----- ----- ----- -----
Total adjustments 59.0 227.8 255.6 175.8
----- ----- ----- -----
Net cash provided by operating activities 256.3 405.9 624.6 505.3
----- ----- ----- -----
Cash Flows from Investing Activities
Payments for purchase of marketable
securities (83.4) (60.5) (122.0) (104.7)
Proceeds from sale of marketable
securities 44.1 48.9 114.4 82.7
Payments related to land held for
development - (2.0) (1.4) (4.8)
Payments for investment in leases
and other (52.9) (68.5) (310.1) (145.5)
Proceeds from investment in leases
and other 49.5 65.5 146.3 156.6
Payments for purchase of software,
goodwill, and other intangibles (35.1) (10.1) (39.9) (26.2)
Payments for purchase of property and
equipment (271.0) (221.7) (427.3) (352.3)
Payments related to acquisition of
outside companies, net of cash acquired (47.9) (72.9) (48.6) (102.9)
----- ----- ----- -----
Net cash used in investing activities ($396.7) ($321.3) ($688.6) ($497.1)
----- ----- ----- -----
See accompanying notes to consolidated financial statements.
- 41 -
<PAGE>4
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
Six Months Ended
Second Quarter June 30,
--------------- ----------------
1994 1993 1994 1993
--------------- ---------------
(in millions)
Cash Flows from Financing Activities
Net increase (decrease) in current
notes payable with maturities less
than 90 days ($57.4) ($54.1) ($101.0) $90.8
Payments on notes payable (22.0) (15.7) (54.1) (164.7)
Proceeds from notes payable 274.5 2.6 480.2 51.5
Proceeds from issuance of common stock 7.9 12.3 33.0 42.0
Cash dividends paid to GM (57.8) (48.1) (115.5) (96.0)
----- ----- ----- -----
Net cash provided by (used in)
financing activities 145.2 (103.0) 242.6 (76.4)
----- ----- ----- -----
Effect of Exchange Rate Changes on Cash and
Cash Equivalents 9.9 2.2 12.4 (3.3)
----- ----- ----- -----
Net Increase (Decrease) in Cash and Cash
Equivalents 14.7 (16.2) 191.0 (71.5)
Cash and Cash Equivalents at Beginning
of Period 559.7 366.6 383.4 421.9
----- ----- ----- -----
Cash and Cash Equivalents at End of Period $574.4 $350.4 $574.4 $350.4
===== ===== ===== =====
See accompanying notes to consolidated financial statements.
Notes to Consolidated Financial Statements
In the opinion of management, the interim consolidated financial statements
reflect all adjustments, consisting of only normal recurring items (with the
exception of the accounting change in 1994 to adopt Statement of Financial
Accounting Standards (SFAS) No. 115, Accounting for Certain Investments in
Debt and Equity Securities, as described in Note 2), which are necessary for a
fair presentation of the results for the interim periods presented. The
results for interim periods are not necessarily indicative of results which
may be expected for any other interim period or for the full year. These
consolidated financial statements should be read in conjunction with the
consolidated financial statements, the summary of significant accounting
policies, and the other notes to the consolidated financial statements
included in General Motors' 1993 Annual Report to the SEC on Form 10-K.
Note 1.
The consolidated financial statements of EDS do not reflect the purchase
accounting adjustments arising as a result of the acquisition of EDS by GM.
Earnings Attributable to GM Class E Common Stock on a Per Share Basis have
been determined based on the relative amounts available for the payment of
dividends to holders of GM Class E common stock. Holders of GM Class E common
stock have no direct rights in the equity or assets of EDS, but rather have
rights in the equity and assets of GM (which includes 100% of the stock of
EDS). Dividends on the GM Class E common stock are declared out of the
Available Separate Consolidated Net Income of EDS earned since the acquisition
of EDS by GM. The Available Separate Consolidated Net Income of EDS is
determined quarterly and is equal to the separate consolidated net
- 42 -
<PAGE>5
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
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 the weighted average number of shares of GM Class E common stock
outstanding during the period and the denominator of which was 481.7 million
shares during the second quarter of 1994. The comparable denominator for the
second quarter of 1993 was 480.5 million shares.
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. 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 the Company's employee benefit plans.
The GM Board has generally caused the denominator used in calculating the
Available Separate Consolidated Net Income of EDS to decrease as shares are
purchased and to increase as shares are used for the employee benefit plans.
The current GM Board policy is that the cash dividends on the GM Class E
common stock, when, as, and if declared by the GM Board in its sole
discretion, will equal approximately 30% of the Available Separate
Consolidated Net Income of EDS for the prior year.
Consistent with Delaware law, which governs the amount legally available for
the payment of dividends on GM's common stock, the GM Board of Directors has
determined that such amount is materially higher than GM's capital surplus
plus net income retained for use in the business (less accumulated deficit).
Note 2.
EDS adopted SFAS No. 115, Accounting for Certain Investments in Debt and
Equity Securities, on January 1, 1994. This statement requires that certain
investments in debt and equity securities be classified into one of three
categories: held-to-maturity, available-for-sale, or trading. The
implementation of this Standard had an immaterial effect on the consolidated
financial statements.
* * * * *
Management's Discussion and Analysis
Result of Operations
- ---------------------
EDS signed $3.8 billion in new business during the quarter ended June 30,
1994, bringing the total of new business signed for the year to $6.0 billion.
This compares to $3.0 billion signed during the first half of 1993.
Total revenues for the quarter and six months ended June 30, 1994 rose
$243.5 million and $409.6 million, respectively, over the comparable quarter
and six-month period in the prior year to $2,334.0 million and $4,573.3
million, respectively. Revenues related to GM and affiliates amounted to
$856.2 and $834.8 million for the second quarter ended June 30, 1994 and 1993,
respectively, and $1,697.9 and $1,680.7 million for the six months ended June
30, 1994 and 1993, respectively.
The growth of non-GM revenue during the second quarter and six-month period
ending June 30, 1994, when compared to the corresponding periods in 1993, was
17.7% and 15.8%, respectively. This growth results from several new contracts
and improved performance of existing contracts.
GM revenue increased 2.6% and 1.0% during the second quarter and six-month
period ending June 30, 1994, respectively, when compared with the same periods
in 1993. While it is anticipated that GM will continue to contribute a
significant portion of systems revenue, the percentage of revenue from GM and
affiliates will continue to decline as non-GM revenues continue to increase.
- 43 -
<PAGE>6
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
Total costs and expenses as a percentage of systems and other contracts
revenue remained relatively flat at 87.7% and 88.3%, respectively, for the
quarter and six months ended June 30, 1994, when compared to the corresponding
periods in 1993.
For the quarter and six-month periods ended June 30, 1994, EDS' separate
consolidated net income increased 10.8% to $197.3 million and 12.0% to $369.0
million, respectively, when compared to net income of $178.1 million and
$329.5 million for the respective periods of last year. Earnings per share of
GM Class E common stock rose from $0.37 to $0.41, or 10.8%, for the second
quarter of 1994 when compared to the second quarter of 1993. Year-to-date
earnings per share increased from $0.69 to $0.77, or 11.6%, over 1993. EDS'
effective tax rate remained at 36% for the quarter.
Liquidity and Capital Resources
- -------------------------------
EDS maintained a strong liquidity and capital structure during the second
quarter. The current ratio improved to 1.36-to-1 at June 30, 1994 from
1.16-to-1 at December 31, 1993. Return on assets was 10.1% for the first six
months of 1994 compared to 10.7% for the same period of 1993. Return on
equity was 19.6% for the first six months of 1994 compared to 20.7% for the
same period of 1993. The noncurrent debt-to-capital ratio was 19% at June 30,
1994 and 13% at December 31, 1993. At June 30, 1994, EDS' capital consisted
of $935.4 million in noncurrent notes payable and $3,914.1 million in
stockholder's equity.
Total debt was $1,044.0 million at June 30, 1994 and represented a 50%
increase from total debt of $695.5 million at December 31, 1993. Debt, which
consists largely of commercial paper, increased primarily to support specific
working capital needs related to new business during 1994. The total debt-to-
capital ratio (includes current debt as a component of capital) was 21.1% at
June 30, 1994 and 16.1% at December 31, 1993.
EDS' strong cash position reflects additional borrowings during the quarter.
Overall cash and cash equivalents increased $191.0 million to $574.4 million
from the end of 1993 to the end of the second quarter. Cash flows from
operations increased from $505.3 million during the first six months of 1993
to $624.6 million during the same period of 1994. Cash flows from operations
decreased $149.6 million during the second quarter of 1994 when compared to
the second quarter of 1993. The changes in cash flows from operations
principally reflect the timing of receipts and disbursements. Cash used in
investing activities was $396.7 million and $688.6 million for the quarter and
first six months of 1994, respectively, compared with $321.3 million and
$497.1 million, respectively, for the corresponding periods in 1993. The
increased use of cash during the first six months of 1994 is due to
expenditures supporting the growth of business. Net cash provided by (used
in) financing activities was $145.2 million and $242.6 million for the quarter
and first six months of 1994, respectively, compared to ($103.0) million and
($76.4) million, respectively, for the same periods last year. The changes in
cash flows from financing activities is principally due to the issuance of
long-term debt.
During the quarter, EDS made net additions to property and equipment of
$282.8 million and net additions to software, goodwill, and other intangibles
of $75.8 million. EDS paid cash dividends to GM totaling $57.8 million in the
second quarter and has consistently paid cash dividends since 1974.
* * * * *
- 44 -
l:\secfiles\10-Q\2ndqtr94\exhib99b.doc 6
<PAGE>1
EXHIBIT 99(b)
GM HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS AND
MANAGEMENT'S DISCUSSION AND ANALYSIS
- ------------------------------------------------------------------------------
Statement of Consolidated Operations and
Available Separate Consolidated Net Income
Six Months Ended
Second Quarter June 30,
------------------ ------------------
1994 1993 1994 1993
------------------ ------------------
(Dollars in Millions
Except per Share Amounts)
Revenues
Net sales
Outside customers $2,195.5 $2,188.1 $4,496.4 $4,298.0
General Motors and affiliates 1,322.3 1,121.3 2,582.2 2,181.0
Other income - net 18.1 6.0 44.6 17.6
------- ------- ------- -------
Total Revenues 3,535.9 3,315.4 7,123.2 6,496.6
------- ------- ------- -------
Costs and Expenses
Cost of sales and other operating charges,
exclusive of items listed below 2,735.9 2,622.2 5,504.5 5,112.3
Selling, general, and administrative
expenses 246.9 214.4 440.5 444.3
Depreciation and amortization 116.1 95.0 228.9 231.3
Amortization of GM purchase accounting
adjustments related to Hughes 30.9 30.9 61.9 61.9
Interest expense - net 5.5 4.5 9.5 19.0
------- ------- ------- -------
Total Costs and Expenses 3,135.3 2,967.0 6,245.3 5,868.8
------- ------- ------- -------
Income before Income Taxes 400.6 348.4 877.9 627.8
United States, foreign, and other
income taxes 164.2 147.3 360.0 268.4
------- ------- ------- -------
Income before cumulative effect
of accounting change 236.4 201.1 517.9 359.4
Cumulative effect of accounting
change (Note 1) - - (30.4) -
------- ------- ------- -------
Net Income 236.4 201.1 487.5 359.4
Adjustments to exclude the effect of
GM purchase accounting adjustments
related to Hughes (Note 2) 30.9 30.9 61.9 61.9
------- ------- ------- -------
Earnings Used for Computation of Available
Separate Consolidated Net Income $267.3 $232.0 $549.4 $421.3
======= ======= ======= ========
Available Separate Consolidated Net Income (Note 2)
Average number of shares of GM
Class H Common Stock outstanding
(in millions) (Numerator) 91.7 86.0 91.2 89.1
Class H dividend base (in millions)
(Denominator) 399.9 399.9 399.9 399.9
Available Separate Consolidated
Net Income $61.3 $50.0 $125.3 $94.4
======= ======= ======= =======
Earnings Attributable to GM
Class H Common Stock on a
Per Share Basis (Note 2)
Before cumulative effect of
accounting change $0.67 $0.58 $1.45 $1.05
Cumulative effect of accounting
change (Note 1) - - (0.08) -
---- ---- ---- ----
Net earnings attributable to
GM Class H Common Stock $0.67 $0.58 $1.37 $1.05
==== ==== ==== ====
Reference should be made to the Notes to Consolidated Financial Statements.
- 45 -
<PAGE>2
GM HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheet
June 30, December 31,
ASSETS 1994 1993
-------------------------
(Dollars in Millions
Except Per Share Amount)
Current Assets
Cash and cash equivalents $1,242.5 $1,008.7
Accounts and notes receivable
Trade receivables (less allowances) 652.6 736.7
General Motors and affiliates 177.5 404.1
Contracts in process, less advances and
progress payments 2,693.7 2,376.8
Inventories (less allowances)
Productive material, work in process,
and supplies 1,123.8 957.1
Finished product 119.8 103.3
Prepaid expenses, including deferred income taxes 129.0 127.6
-------- --------
Total Current Assets 6,138.9 5,714.3
Property-Net 2,591.1 2,634.4
Telecommunications and Other Equipment - Net 860.1 767.6
Intangible Assets, net of amortization 3,338.9 3,374.4
Investments and Other Assets, Including Deferred
Income Taxes - principally at cost
(less allowances) 1,577.7 1,626.4
-------- --------
Total Assets $14,506.7 $14,117.1
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities
Accounts payable
Outside $879.1 $717.1
General Motors and affiliates 67.0 117.5
Advances on contracts 552.8 660.6
Notes and loans payable 71.9 77.8
United States, foreign, and other
income taxes payable 162.3 102.1
Accrued liabilities 1,789.7 1,874.0
-------- --------
Total Current Liabilities 3,522.8 3,549.1
-------- --------
Long-Term Debt and Capitalized Leases 424.6 416.8
-------- --------
Postretirement Benefits Other Than Pensions (Note 3) 1,501.1 1,446.3
-------- --------
Other Liabilities, Deferred Income Taxes,
and Deferred Credits 1,411.3 1,376.8
-------- --------
Stockholder's Equity
Capital stock (outstanding, 1,000 shares, $0.10
par value) and additional paid-in capital 6,325.1 6,323.1
Net income retained for use in the business 1,465.7 1,138.2
-------- --------
Subtotal 7,790.8 7,461.3
Minimum pension liability adjustment (120.4) (120.4)
Accumulated foreign currency translation
adjustments (23.5) (12.8)
-------- --------
Total Stockholder's Equity 7,646.9 7,328.1
-------- --------
Total Liabilities and Stockholder's Equity $14,506.7 $14,117.1
======== ========
Reference should be made to the Notes to Consolidated Financial Statements.
- 46 -
<PAGE>3
GM HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES
Condensed Statement of Consolidated Cash Flows
Six Months Ended
June 30,
------------------
1994 1993
------------------
(Dollars in Millions)
Net Cash Provided by Operating Activities $485.9 $835.6
------- -----
Cash Flows from Investing Activities
Investment in companies, net of cash acquired - (45.8)
Expenditures for property and special tools (175.8) (130.8)
Expenditures for telecommunications
and other equipment (134.7) (51.5)
Proceeds from disposals of property 15.1 87.1
Net collections on notes receivable 201.4 17.9
Other - 1.9
------- -----
Net Cash Used in Investing Activities (94.0) (121.2)
------- -----
Cash Flows from Financing Activities
Net decrease in notes and
loans payable (5.9) (75.6)
Increase in long-term debt 14.4 52.6
Decrease in long-term debt (6.6) (32.5)
Cash dividends paid to General Motors (160.0) (144.0)
------- -----
Net Cash Used in Financing Activities (158.1) (199.5)
------- -----
Net increase in cash and cash equivalents 233.8 514.9
Cash and cash equivalents at beginning
of the period 1,008.7 702.7
------- -----
Cash and cash equivalents at end of the period $1,242.5 $1,217.6
======= =======
Certain amounts for 1993 have been reclassified to conform with 1994
classifications.
Reference should be made to the Notes to Consolidated Financial Statements.
Notes To Consolidated Financial Statements
In the opinion of management, the interim consolidated financial statements
reflect all adjustments, consisting of only normal recurring items (with the
exception of the accounting change in 1994 to adopt Statement of Financial
Accounting Standards (SFAS) No. 112, Employers' Accounting for Postemployment
Benefits, as described in Note 1), which are necessary for a fair presentation
of the results for the interim periods presented. The results for interim
periods are not necessarily indicative of results which may be expected for
any other interim period or for the full year. These consolidated financial
statements should be read in conjunction with the consolidated financial
statements, the summary of significant accounting policies, and the other
notes to the consolidated financial statements included in General Motors'
1993 Annual Report to the SEC on Form 10-K.
Note 1.
Effective January 1, 1994, GMHE adopted SFAS No. 112. The Standard requires
accrual of the costs of benefits provided to former or inactive employees
after employment, but before retirement. The unfavorable cumulative effect of
adopting this Standard was $30.4 million, net of income taxes of $19.2
million, or $0.08 per share of GM Class H common stock. The noncash charge is
primarily related to Delco Electronics Corporation's extended-disability
benefit program in the U.S. which, under the new accounting Standard, will be
accrued on a service-driven basis. The ongoing effect was not material.
- 47 -
<PAGE>4
GM HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES
Note 2.
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 GMHE,
but rather have rights in the equity and assets of GM (which includes 100% of
the stock of GMHE). 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 GMHE since the acquisition of Hughes Aircraft Company (Hughes) by GM. The
Available Separate Consolidated Net Income of GMHE is determined quarterly and
is equal to the separate consolidated net income of GMHE, excluding the
effects of GM purchase accounting adjustments arising from the acquisition of
Hughes (Earnings Used for Computation of Available Separate Consolidated Net
Income), multiplied by a fraction, the numerator of which is 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 shares during the second
quarters of 1994 and 1993.
The denominator used in determining the Available Separate Consolidated Net
Income of GMHE 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 GMHE. In this regard, the GM
Board has generally caused the denominator to decrease as shares are purchased
by GMHE and to increase as such shares are used, at GMHE expense, for GMHE
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 cash
dividends approximately equal to 35% of the Available Separate Consolidated
Net Income of GMHE for the prior year. In February 1994, the GM Board
increased the quarterly dividends on Class H common stock from $0.18 per share
to $0.20 per share. Notwithstanding the current dividend policy, the GM Board
declared dividends on the GM Class H Common Stock of $0.18 per share for each
of the quarters of 1993, which was more than 35% of the Available Separate
Consolidated Net Loss of GMHE for 1992. The GM Board determined that 1992
Available Separate Consolidated Net Income of GMHE used as a basis for 1993
dividends was calculated without giving effect to the special restructuring
charge at Hughes.
Consistent with Delaware law, which governs the amount legally available for
the payment of dividends on GM's common stock, the GM Board of Directors has
determined that such amount is materially higher than GM's capital surplus
plus net income retained for use in the business (less accumulated deficit).
Note 3.
GMHE 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, GMHE does not admit or otherwise
acknowledge that such amounts or existing postretirement benefit plans of GMHE
(other than pensions) represent legally enforceable liabilities of GMHE.
Management's Discussion and Analysis*
Results of Operations
- ---------------------
GMHE reported second quarter earnings, before the effects of purchase
accounting adjustments related to General Motors' acquisition of Hughes, of
$267.3 million, a 15.2% increase from the $232.0 million reported in the
second quarter of 1993. Earnings per share of GM Class H common stock, on the
same basis, increased 15.5% to $0.67 per share from $0.58 per share in the
comparable period of 1993.
* The following discussion excludes the purchase accounting adjustments
related to General Motors' acquisition of Hughes (see Supplemental Data on
page 50).
- 48 -
<PAGE>5
GM HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES
Revenues for the period were $3,535.9 million, a 6.7% increase over the
$3,315.4 million recorded in the second quarter of 1993. Costs and expenses
as a percentage of revenues decreased to 87.8% from 88.6% in the second
quarter of 1993. Income taxes were $164.2 million, or 38.1% of income before
income taxes, for the quarter compared with $147.3 million, or 38.8% of income
before income taxes, in the comparable quarter of 1993.
Operating profit was $418.9 million for the second quarter, a 10.9% increase
from operating profit of $377.8 million reported in the comparable quarter of
1993. The operating profit margin improved to 11.9% for the quarter, compared
with 11.4% for the same quarter of 1993. Effective with the first quarter of
1994, calculation of the operating profit margin is based on net sales rather
than revenues. Second quarter and six month 1993 amounts have been restated
on this basis.
Second quarter results reflected growth in the non-defense portion of the
company and continued success at improving operating performance. Revenue
growth is attributable to the Automotive Electronics and Telecommunications
and Space business segments with earnings increases coming from both the
Automotive Electronics and Defense Electronics businesses. Continued strength
in the domestic automotive market and demand for telecommunications products
and services provided by GMHE continue to expand the revenue base while
efforts to improve competitiveness in the defense businesses are increasing
the operating profit margins.
The Automotive Electronics segment reported revenues for the quarter of
$1,435.3 million, an increase of 24.3% from revenues of $1,154.7 million for
the same period in 1993. The increase reflects a 12.5% increase in GM
vehicles produced in North America, a 13.6% increase in GMHE-supplied
electronic content in these vehicles, from $708 to $804 per vehicle, and an
18.7% increase in international and non-GM sales, from $171 million to $203
million. Operating profit for the quarter increased 33.5% to $220.6 million
from $165.3 million for the comparable period last year reflecting increased
production volumes and continued cost reductions. These factors resulted in
an increase in the operating profit margin to 15.5% from 14.4% in the second
quarter of 1993.
The Telecommunications and Space segment reported revenues for the quarter
of $548.9 million, an increase of 24.6% from revenues of $440.4 million in the
second quarter of 1993, due primarily to increased efforts on government-
related satellite manufacturing programs and the BellSouth Cellular
Corporation contract to supply cellular communications equipment. Operating
profit in the second quarter decreased to $23.0 million from $60.1 million in
the same period in 1993 and the operating profit margin decreased to 4.2% from
13.7%. The decrease was due to fewer sales as compared to leases of satellite
transponders, a charge recorded on the Mobile Satellite program due to
subcontractor antenna problems and increased operating costs for DIRECTV
resulting from the initiation of service in June.
The Defense Electronics segment reported revenues of $1,388.6 million, a
decrease of 10.5% from revenues of $1,552.3 million for the same period of
1993. Operating profit increased 13.9% to $181.2 million from $159.1 million
in the comparable quarter of 1993 and the operating profit margin improved to
13.1% from 10.2%. The decrease in revenues was primarily due to reduced
production rates on the Stinger, Tomahawk, and Advanced Medium-Range
Air-to-Air Missile (AMRAAM) programs as well as the Advanced Capability
(ADCAP) torpedo program. In addition, the anticipated termination of the
Advanced Cruise Missile program at the end of 1993 and the termination of the
Follow-On Early-Warning System earlier this year contributed to the decline.
The increase in operating profit and the improvement in the operating profit
margin was a result of ongoing efforts to reduce costs across GMHE's defense
businesses and continuing benefits from the consolidation of the missile
business.
- 49 -
<PAGE>6
GM HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES
Commercial Technologies segment revenues were $163.1 million, slightly less
than the $168.0 million in the second quarter of 1993 due primarily to the
sale of Hughes Rediffusion Simulation Limited and related entities in December
1993 and the Interconnect Systems Division in April 1993, offset by increased
effort on air traffic control programs and the Earth Observing System Data and
Information System (EOSDIS) contract awarded in the first quarter of 1993.
The operating loss for the quarter was $3.3 million compared to a loss of $2.2
million in the second quarter of 1993. The operating loss reflects losses at
Hughes-Avicom International, Inc. relating to product development and initial
system service of in-flight entertainment systems as well as increased
development costs for new products.
Liquidity and Capital Resources
- -------------------------------
Cash and cash equivalents at June 30, 1994 amounted to $1,242.5 million, an
increase of $233.8 million over December 31, 1993. The increase primarily
reflects net cash provided by operating activities of $485.9 million and
payments received on a note receivable from GM of $200.0 million offset by
cash dividends paid to General Motors of $160.0 million, expenditures for
property and special tools of $175.8 million and expenditures for telecom-
munications and other equipment of $134.7 million.
As a measure of liquidity, GMHE's current ratio (ratio of current assets to
current liabilities) increased to 1.74 at June 30, 1994 from 1.61 at
December 31, 1993.
Capital expenditures, including expenditures for telecommunications and
other equipment, increased to $310.5 million from $182.3 million in the
comparable period in 1993.
Long-term debt and capitalized leases increased slightly from $416.8 million
at December 31, 1993 to $424.6 million at June 30, 1994. The ratio of long-
term debt to the total of such debt and proforma stockholder's equity improved
to 8.5% at June 30, 1994 from 9.0% at December 31, 1993.
Supplemental Data
The Consolidated Financial Statements reflect the application of purchase
accounting adjustments as described in Note 2 to the Consolidated Financial
Statements. However, as provided in GM's Certificate of Incorporation, the
earnings attributable to GM Class H common stock for purposes of determining
the amount available for the payment of dividends on GM Class H common stock
specifically excludes such adjustments. More specifically, amortization of
purchase accounting adjustments associated with GM's purchase of Hughes was
$30.9 million for the second quarters of 1994 and 1993. 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 were $3,067.2 million at
June 30, 1994 and $3,129.1 million at December 31, 1993.
In order to provide additional analytical data to the users of GMHE's
financial information, supplemental data in the form of unaudited summary pro
forma financial data are provided. Consistent with the basis on which
earnings of GMHE available for the payment of dividends on GM Class H common
stock is determined, the pro forma data exclude the General Motors' purchase
accounting adjustments related to the acquisition of Hughes. 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 GMHE.
- 50 -
<PAGE>7
GM HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES
Summary Pro Forma Financial Data*
Pro Forma Condensed Statement of Consolidated Operations
Six Months Ended
Second Quarter June 30,
------------------ ------------------
1994 1993 1994 1993
------------------ ------------------
(Dollars in Millions
Except per Share Amounts)
Total Revenues $3,535.9 $3,315.4 $7,123.2 $6,496.6
Total Costs and Expenses 3,104.4 2,936.1 6,183.4 5,806.9
------- ------- ------- -------
Income before Income Taxes 431.5 379.3 939.8 689.7
United States, foreign, and other
income taxes 164.2 147.3 360.0 268.4
------- ------- ------- -------
Income before cumulative
effect of accounting change 267.3 232.0 579.8 421.3
Cumulative effect of accounting change - - (30.4) -
------- ------- ------- -------
Earnings Used for Computation of
Available Separate Consolidated
Net Income $267.3 $232.0 $549.4 $421.3
======= ======= ======= =======
Earnings Attributable to General
Motors Class H Common Stock on a
Per Share Basis
Before cumulative effect of
accounting change $0.67 $0.58 $1.45 $1.05
Cumulative effect of accounting change - - (0.08) -
---- ---- ---- ----
Net earnings attributable to
General Motors Class H Common Stock $0.67 $0.58 $1.37 $1.05
==== ==== ==== ====
Pro Forma Condensed Consolidated Balance Sheet
June 30, December 31,
ASSETS 1994 1993
-------------------------
(Dollars in Millions)
Total Current Assets $6,138.9 $5,714.3
Property - Net 2,591.1 2,634.4
Telecommunication and Other Equipment - Net 860.1 767.6
Intangible Assets, Investments, and Other Assets 1,849.4 1,871.7
-------- --------
Total Assets $11,439.5 $10,988.0
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Total Current Liabilities $3,522.8 $3,549.1
Long-Term Debt and Capitalized Leases 424.6 416.8
Postretirement Benefits Other Than Pensions,
Other Liabilities, Deferred Income Taxes,
and Deferred Credits 2,912.4 2,823.1
Total Stockholder's Equity** 4,579.7 4,199.0
-------- --------
Total Liabilities and Stockholder's Equity** $11,439.5 $10,988.0
======== ========
* The summary is unaudited and excludes GM purchase accounting adjustments
related to the acquisition of Hughes.
** General Motors' equity in its wholly-owned subsidiary, GMHE. Holders of
GM Class H common stock have no direct rights in the equity or assets of
GMHE, but rather have rights in the equity and assets of General Motors
(which includes 100% of the stock of GMHE).
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<PAGE>8
GM HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES
Summary Pro Forma Financial Data*
Pro Forma Selected Segment Data
Six Months Ended
Second Quarter June 30,
------------------ -------------------
1994 1993 1994 1993
------------------ -------------------
(Dollars in Millions)
AUTOMOTIVE ELECTRONICS
Revenues
Amount $1,435.3 $1,154.7 $2,723.2 $2,278.9
As a percentage of GMHE Revenues 40.6% 34.8% 38.2% 35.1%
Net Sales $1,421.3 $1,146.5 $2,702.1 $2,266.9
Operating Profit (1) $220.6 $165.3 $444.3 $318.8
Operating Profit Margin(2) 15.5% 14.4% 16.4% 14.1%
Depreciation and Amortization $40.2 $27.8 $78.8 $65.4
Capital Expenditures $13.6 $19.2 $52.1 $36.4
TELECOMMUNICATIONS AND SPACE
Revenues
Amount $548.9 $440.4 $1,148.4 $902.5
As a percentage of GMHE Revenues 15.5% 13.3% 16.1% 13.9%
Net Sales $546.9 $440.0 $1,150.6 $899.4
Operating Profit (1) $23.0 $60.1 $136.5 $85.3
Operating Profit Margin(2) 4.2% 13.7% 11.9% 9.5%
Depreciation and Amortization(3) $26.9 $21.2 $54.6 $52.7
Capital Expenditures(4) $60.8 $72.6 $180.6 $95.3
DEFENSE ELECTRONICS
Revenues
Amount $1,388.6 $1,552.3 $2,946.9 $2,979.0
As a percentage of GMHE Revenues 39.3% 46.8% 41.4% 45.8%
Net Sales $1,383.3 $1,552.8 $2,918.5 $2,974.0
Operating Profit (1) $181.2 $159.1 $332.6 $289.8
Operating Profit Margin(2) 13.1% 10.2% 11.4% 9.7%
Depreciation and Amortization(3) $39.7 $37.2 $80.4 $91.9
Capital Expenditures $31.8 $26.2 $66.2 $45.6
COMMERCIAL TECHNOLOGIES
Revenues
Amount $163.1 $168.0 $304.7 $336.2
As a percentage of GMHE Revenues 4.6% 5.1% 4.3% 5.2%
Net Sales $166.3 $170.1 $307.4 $338.7
Operating Profit (Loss)(1) ($3.3) ($2.2) ($4.1) $6.4
Operating Profit (Loss) Margin(2) (2.0%) (1.3%) (1.3%) 1.9%
Depreciation and Amortization(3) $9.3 $8.8 $15.1 $21.3
Capital Expenditures $7.7 $0.6 $11.6 $5.0
CORPORATE
Operating Loss (1) ($2.6) ($4.5) ($4.6) ($9.2)
Certain amounts for 1993 have been reclassified to conform with 1994
classifications.
* The summary is unaudited and excludes GM purchase accounting adjustments
related to the acquisition of Hughes.
(1) Net Sales less Total Costs and Expenses other than Interest Expense.
(2) Operating Profit (Loss) as a percentage of Net Sales.
(3) Excludes amortization arising from purchase accounting adjustments related
to GM's acquisition of Hughes amounting to $2.7 million, $2.7 million,
$5.4 million, and $5.4 million, respectively, for the Telecommunications
and Space segment; $25.7 million, $25.7 million, $51.4 million, and $51.4
million, respectively, for the Defense Electronics segment; and $2.5
million, $2.5 million, $5.1 million, and $5.1 million, respectively, for
the Commercial Technologies segment.
(4) Includes expenditures related to telecommunications and other equipment
amounting to $42.2 million, $49.6 million, $134.7 million, and $51.5
million, respectively.
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<PAGE>9
GM HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES
Summary Pro Forma Financial Data*
Pro Forma Selected Financial Data
Six Months Ended
Second Quarter June 30,
------------------ ------------------
1994 1993 1994 1993
------------------ ------------------
(Dollars in Millions
Except per Share Amounts)
Operating profit $418.9 $377.8 $904.7 $691.1
Income before income
taxes and cumulative effect
of accounting change $431.5 $379.3 $939.8 $689.7
Earnings used for
computation of available
separate consolidated
net income $267.3 $232.0 $549.4(1) $421.3
Average number of GM Class H
dividend base shares (2) 399.9 399.9 399.9 399.9
Stockholder's Equity $4,579.7 $3,856.8 $4,579.7 $3,856.8
Dividends per share of
GM Class H common stock $0.20 $0.18 $0.40 $0.36
Working capital $2,616.1 $2,052.7 $2,616.1 $2,052.7
Operating profit as a
percent of net sales 11.9% 11.4% 12.8% 10.7%
Pre-tax income as a
percent of revenues 12.2% 11.4% 13.2% 10.6%
Net income as a
percent of revenues 7.6% 7.0% 7.7% 6.5%
* The summary is unaudited and excludes GM purchase accounting adjustments
related to the acquisition of Hughes.
(1) Includes unfavorable cumulative effect of accounting change of
$30.4 million.
(2) Class H dividend base shares is used in calculating earnings attributable
to GM Class H common stock on a per share basis. This is not the same as
the average number of GM Class H shares outstanding, which was 91.7
million for the second quarter of 1994 and 86.0 million for the second
quarter of 1993.
* * * * * * *
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