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GENERAL MOTORS CORPORATION
FORM 10-K
ANNUAL REPORT
FOR THE YEAR ENDED DECEMBER 31, 1995
FILED PURSUANT TO SECTION 13
OF THE
SECURITIES EXCHANGE ACT OF 1934
THIS DOCUMENT IS A COPY OF THE ANNUAL REPORT FILED BY GENERAL MOTORS
CORPORATION WITH THE SECURITIES AND EXCHANGE COMMISSION AND THE STOCK EXCHANGES
ON WHICH ITS SECURITIES ARE REGISTERED. IT HAS NOT BEEN APPROVED OR DISAPPROVED
BY THE COMMISSION NOR HAS THE COMMISSION PASSED UPON ITS ACCURACY OR ADEQUACY.
IT IS BEING FURNISHED BY THE CORPORATION UPON REQUEST FOR INFORMATIONAL PURPOSES
ONLY.
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549-1004
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT OF
1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-143
GENERAL MOTORS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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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)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (313)-556-5000
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
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<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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*COMMON, $1 2/3 PAR VALUE (755,968,150 SHARES OUTSTANDING AS OF FEBRUARY 29,
1996)........................................................................... NEW YORK STOCK EXCHANGE, INC.
CLASS E COMMON, $0.10 PAR VALUE (483,678,077 SHARES OUTSTANDING AS OF FEBRUARY 29,
1996)........................................................................... NEW YORK STOCK EXCHANGE, INC.
CLASS H COMMON, $0.10 PAR VALUE (97,745,792 SHARES OUTSTANDING AS OF FEBRUARY 29,
1996)........................................................................... NEW YORK STOCK EXCHANGE, INC.
PREFERENCE, $0.10 PAR VALUE, SERIES B 9 1/8% DEPOSITARY SHARES, STATED VALUE $25
PER SHARE, DIVIDENDS CUMULATIVE (20,020,586 DEPOSITARY SHARES OUTSTANDING AS OF
FEBRUARY 29, 1996).............................................................. NEW YORK STOCK EXCHANGE, INC.
PREFERENCE, $0.10 PAR VALUE, SERIES C DEPOSITARY SHARES, CONVERTIBLE INTO CLASS E
COMMON STOCK, LIQUIDATION PREFERENCE $50 PER SHARE, DIVIDENDS CUMULATIVE (33,645
DEPOSITARY SHARES OUTSTANDING AS OF FEBRUARY 29, 1996).......................... NEW YORK STOCK EXCHANGE, INC.
PREFERENCE, $0.10 PAR VALUE, SERIES D 7.92% DEPOSITARY SHARES, STATED VALUE $25
PER SHARE, DIVIDENDS CUMULATIVE (6,069,909 DEPOSITARY SHARES OUTSTANDING AS OF
FEBRUARY 29, 1996).............................................................. NEW YORK STOCK EXCHANGE, INC.
PREFERENCE, $0.10 PAR VALUE, SERIES G 9.12% DEPOSITARY SHARES, STATED VALUE $25
PER SHARE, DIVIDENDS CUMULATIVE (10,079,899 DEPOSITARY SHARES OUTSTANDING AS OF
FEBRUARY 29, 1996).............................................................. NEW YORK STOCK EXCHANGE, INC.
$500,000,000 8 1/8% DEBENTURES DUE APRIL 15, 2016................................. NEW YORK STOCK EXCHANGE, INC.
</TABLE>
*ALSO LISTED ON THE CHICAGO STOCK EXCHANGE, INC., PACIFIC STOCK EXCHANGE, INC.,
AND PHILADELPHIA STOCK EXCHANGE, INC.
NOTE: THE $1 2/3 PAR VALUE COMMON STOCK OF THE REGISTRANT IS ALSO LISTED FOR
TRADING ON:
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MONTREAL STOCK EXCHANGE................................. MONTREAL, QUEBEC, CANADA
TORONTO STOCK EXCHANGE.................................. TORONTO, ONTARIO, CANADA
BORSE FRANKFURT AM MAIN................................. FRANKFORT ON THE MAIN, GERMANY
BORSE DUSSELDORF........................................ DUSSELDORF, GERMANY
BOURSE DE BRUXELLES..................................... BRUSSELS, BELGIUM
COURTIERS EN VALEURS MOBILIERES......................... PARIS, FRANCE
THE LONDON STOCK EXCHANGE............................... LONDON, ENGLAND
</TABLE>
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 .
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM
405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS
FORM 10-K. ( )
THE AGGREGATE MARKET VALUE (BASED UPON THE AVERAGE OF THE HIGHEST AND
LOWEST SALES PRICES ON THE COMPOSITE TAPE ON FEBRUARY 29, 1996) OF GENERAL
MOTORS CORPORATION $1 2/3 PAR VALUE, CLASS E, AND CLASS H COMMON STOCKS HELD BY
NONAFFILIATES ON FEBRUARY 29, 1996 WAS APPROXIMATELY $38,807.7 MILLION,
$27,556.3 MILLION, AND $5,610.4 MILLION, RESPECTIVELY.
DOCUMENTS INCORPORATED BY REFERENCE:
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PART AND ITEM NUMBER OF FORM
10-K
DOCUMENT INTO WHICH INCORPORATED
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GENERAL MOTORS NOTICE OF ANNUAL MEETING OF STOCKHOLDERS AND PROXY STATEMENT FOR
THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 24, 1996.................... PART III, ITEMS 10 THROUGH 13
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PART I
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
THE CORPORATION
General Motors Corporation, incorporated in 1916 under the laws of the
State of Delaware, is hereinafter sometimes referred to as the "Registrant" or
the "Corporation" and, together with its subsidiaries, is hereinafter sometimes
referred to as "General Motors" or "GM."
ITEM 1. BUSINESS
GENERAL
The following information is incorporated herein by reference to the
indicated pages in Part II:
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ITEM PAGE
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Wholesale Sales................................................. II-51 and 53
Employment and Payrolls......................................... II-74
Note 21 of Notes to Consolidated Financial Statements (Segment
Reporting).................................................... II-38
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While the major portion of General Motors' operations is derived from the
automotive products industry segment, GM also has financing and insurance and
information technology segments and produces products and provides services in
other industry segments. The automotive products segment consists of the design,
manufacture, assembly, and sale of automobiles, trucks, and related parts and
accessories. The financing and insurance segment assists in the merchandising of
General Motors' products as well as other products. General Motors Acceptance
Corporation (GMAC) offers financial services and certain types of insurance to
dealers and customers. In addition, GMAC is engaged in mortgage banking and
investment services. The information technology segment relates to the design,
installation, and operation of business information systems. The other products
segment consists of military vehicles, radar and weapon control systems, guided
missile systems, and defense and commercial satellites; the design,
installation, and operation of telecommunication systems; as well as the design,
development, and manufacture of locomotives.
Substantially all of the products in the automotive segment are marketed
through retail dealers and through distributors and jobbers in the United
States, Canada, and Mexico, and through distributors and dealers overseas. At
December 31, 1995, there were approximately 8,800 General Motors vehicle dealers
in the United States, 1,000 in Canada and Mexico, and approximately 5,500
outlets overseas.
BACKLOG OF ORDERS
Shipments of General Motors' automotive products are made as promptly as
possible after receipt of firm sales orders; therefore, no significant backlog
of unfilled orders accumulates. Hughes Electronics Corporation had a $14.9
billion and $13.2 billion backlog of defense and commercial contracts at the end
of 1995 and 1994, respectively.
RAW MATERIALS AND SERVICES
General Motors purchases materials, parts, supplies, freight
transportation, energy, and other services from numerous unaffiliated firms.
Interruptions in production or delivery of these goods or services could
adversely affect General Motors.
COMPETITIVE POSITION
General Motors' principal competitors in passenger cars and trucks in the
United States and Canada include Ford Motor Company, Chrysler Corporation,
Toyota Corporation, Nissan Motor Corporation, Ltd., Honda Motor Company, Ltd.,
Mazda Motor Corporation, Mitsubishi Motors Corporation, Fuji Heavy Industries,
Ltd. (Subaru), Volkswagen A.G., Hyundai Motor Company, Ltd., Daimler-Benz A.G.
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(Mercedes), Bayerische Motoren Werke AG (BMW), and Volvo AB. All but Volkswagen
and Mercedes currently operate vehicle manufacturing facilities in the United
States or Canada. Mercedes has an assembly plant under construction in the
United States. Toyota and GM operate the New United Motor Manufacturing, Inc.
facility in Fremont, California as a joint venture which currently builds
passenger cars and light-duty trucks. Wholesale unit sales of General Motors
passenger cars and trucks during the three years ended December 31, 1995 are
summarized in Management's Discussion and Analysis in Part II.
Total industry new motor vehicle (passenger cars, trucks, and buses)
registrations of domestic and foreign makes and General Motors' competitive
position during the three years ended December 31, 1995 were as follows:
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1995(1) 1994 1993
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(UNITS IN THOUSANDS)
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Total industry registrations
In the United States............................... 15,178 15,257 13,941
In other North America(2).......................... 1,356 1,838 1,778
In other countries................................. 32,169 31,428 30,806
------ ------ ------
Total industry registrations -- all countries........ 48,703 48,523 46,525
====== ====== ======
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1995(1) 1994 1993
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(PERCENT OF TOTAL INDUSTRY)
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General Motors' registrations
In the United States............................... 32 % 33% 33%
In other North America(2).......................... 32 28 27
In other countries................................. 9 9 9
Total General Motors' registrations -- all
countries.......................................... 17 17 18
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(1) Preliminary
(2) Includes Canada and Mexico.
The above information on registrations of new cars, trucks, and buses was
obtained from outside sources and that pertaining to General Motors'
registrations includes units which are manufactured overseas by other companies
and which are imported and sold by General Motors and affiliates.
RESEARCH AND DEVELOPMENT
In 1995, General Motors spent $8,387.9 million for research, manufacturing
engineering, product engineering, and development activities related primarily
to the development of new products or services or the improvement of existing
products or services, including activities related to vehicle emissions control,
improved fuel economy, and the safety of persons using General Motors products.
In addition, $1,394.2 million was spent for customer-sponsored activities, the
majority of which were government related. Comparable data for 1994 were
$7,035.8 million for company-sponsored activities and $1,495.7 million for
customer-sponsored activities and for 1993, $6,029.9 million and $1,340.3
million, respectively.
ENVIRONMENTAL MATTERS
AUTOMOTIVE EMISSIONS CONTROL
Both the Federal and California governments currently impose stringent
emission control requirements on motor vehicles sold in their respective
jurisdictions. These requirements include pre-production testing of vehicles,
testing of vehicles after assembly, the imposition of emission defect and
performance warranties, and the obligation to recall and repair customer-owned
vehicles determined to be non-compliant with emissions requirements.
Both the U.S. Environmental Protection Agency (EPA) and the California Air
Resources Board (CARB) continue to place great emphasis on compliance testing of
customer-owned vehicles. Failure to
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comply with the emission standards or defective emission control hardware
discovered during such testing can lead to substantial cost for General Motors
related to emissions recalls. New CARB and Federal requirements will increase
the time and mileage over which manufacturers are responsible for a vehicle's
emission performance.
Both the EPA and the CARB emission requirements will become even more
stringent in the future. A new tier of exhaust emission standards for cars and
light-duty trucks, the "Tier 1" standards began phasing in for California
vehicles in the 1993 model year and for Federal vehicles in the 1994 model year.
The phase-in of these "Tier 1" standards will be completed by the 1997 model
year.
In addition to the Tier 1 standards is the CARB Low Emission Vehicle (LEV)
Program that began with the 1994 model year and defines requirements through
model year 2003 and beyond. This program sets even more stringent exhaust
emission standards for cars and trucks sold in California. General Motors will
have to meet the LEV Program requirements by marketing a mix of vehicles
complying with the Tier 1 standards, Transitional Low Emission Vehicles (TLEVs),
Low Emission Vehicles (LEVs), Ultra-Low Emission Vehicles (ULEVs), or Zero
Emission Vehicles (ZEVs). From model years 1998 to 2000, 2% of cars and small
light-duty trucks (up to 3,750 lb Loaded Vehicle Weight) sold in California must
be ZEVs. This requirement increases to 5% in 2001 and 10% in 2003 and
thereafter. There is a proposal pending to repeal the 1998 through 2002 model
year ZEV mandates.
The Clean Air Act permits states that have areas with air quality problems
to adopt the California car and truck emission standards in lieu of the Federal
requirements and two states (New York and Massachusetts) have done so. In
addition, the Ozone Transport Commission, representing twelve Northeast states
and the District of Columbia, asked the EPA to impose the California LEV program
requirements throughout the Northeast Ozone Transport Region (OTR). The EPA
granted this request on January 24, 1995. This could mean that vehicles designed
for the California LEV program, including ZEVs, would have to be offered for
sale in that region of the country. As an alternative, the auto industry has
proposed a National LEV program, which would require the phase-in of TLEVs and
LEVs in the northeast starting in 1997, and vehicles in all states outside
California meeting LEV standards starting in 2001. EPA has proposed rulemaking
which would implement the National LEV program as a voluntary alternative
available to automakers.
In addition to the above-mentioned exhaust emission programs, onboard
diagnostic (OBD) devices, far more complex than those currently used to diagnose
problems with emission control systems, will be required both Federally and in
California effective with the 1996 model year. This new system has the potential
of increasing warranty costs and the chance for recall.
New evaporative emission control requirements for cars and trucks begin
phasing in with the 1995 model year in California and the 1996 model year
Federally. Systems will need to be further modified to accommodate Federal
onboard refueling vapor recovery (ORVR) control standards. ORVR phases in on
passenger cars in the 1998 through 2000 model years and on light-duty trucks in
the 2001 through 2006 model years.
INDUSTRIAL ENVIRONMENTAL CONTROL
General Motors is subject to various laws relating to the protection of the
environment, and is in various stages of investigation or remediation for sites
where contamination has been alleged. GM has recorded an accrued liability of
$692 million at December 31, 1995 and $694 million at December 31, 1994 for
worldwide environmental cleanup as summarized below:
- GM has been identified as a potentially responsible party at sites
identified by the EPA and state regulatory agencies for cleanup under the
Comprehensive Environmental Response, Compensation, and Liability Act
(CERCLA) and similar state statutes. GM voluntarily and actively
participates in cleanup activity where such involvement is verified. The
foreseeable total liability for 1996 and beyond for sites involving GM is
estimated to be $227 million, which was recorded at December 31, 1995. This
compares to $223 million at December 31, 1994.
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- For closed or closing plants owned by the Corporation, an estimated
liability for environmental cleanup is typically recognized at the time the
closure decision is made for actions which are not specifically required by
regulations or government action but which serve to minimize future
liability. Such liability, which is based on an environmental assessment of
the plant property, is estimated at $136 million, which was recorded at
December 31, 1995. This compares to $141 million at December 31, 1994.
- GM is involved in investigations and cleanup activities at
additional locations worldwide with a foreseeable liability of
approximately $329 million, which was recorded at December 31, 1995. This
compares to $330 million at December 31, 1994.
The capital cost impact of the Clean Air Act Amendments of 1990 on GM
stationary sources will depend on the specific requirements of new state and
Federal regulations which have been or will be developed and implemented over
the next 10 years. These regulations include operating permit programs, nitrogen
oxide control programs, compliance assurance monitoring programs, and hazardous
air pollutant control programs. The estimated cost of these programs over the
next 10-15 years is approximately $1 billion. Annual operating permit emission
fees will be approximately $9 million.
Expenditures by General Motors in the United States for industrial
environmental control facilities during the three years ended December 31, 1995
were (in millions): 1995-$116; 1994-$118; and 1993-$186. The Corporation
currently estimates that future expenditures for industrial environmental
control facilities through 1999 will be (in millions): 1996-$128; 1997-$124;
1998-$85; and 1999-$56. Specific environmental expenses are difficult to isolate
since expenditures may be made for more than one purpose, making precise
classification difficult.
VEHICULAR NOISE CONTROL
The Federal Truck Regulation preempts all state/local noise regulations for
trucks over 10,000 lb Gross Vehicle Weight Rating (GVWR). All jurisdictions
regulating noise levels of school buses which are built on medium-duty truck
chassis have adopted standards compatible with Federal regulations for
medium-duty trucks. The Federal Truck Regulations contain label and owner's
manual requirements.
Passenger cars and light-duty trucks are subject to state and local motor
vehicle noise regulations. The current standard for vehicles in these classes is
80 dB as measured at 50 feet. Future implementation of more stringent exhaust
emission regulations and more stringent fuel economy regulations will require an
assessment of increased costs of noise control.
SAFETY AFFAIRS AND REGULATIONS
Expenditures to maintain the operational safety, occupant protection, and
vehicle theft deterrence capability of new GM models continue. These
expenditures include amounts for the study of alternative approaches for meeting
the needs of all three areas.
A final rule allowing use of Daytime Running Lamps (DRL) as an option was
issued by the National Highway Traffic Safety Administration (NHTSA). As a
result, GM has announced its intent to provide DRL starting in 1995 on selected
models. DRL will be standard on all GM models, including light trucks and vans,
by the 1997 model year.
GM is meeting the government requirement for passive restraints by
selectively installing automatic lap/shoulder belts or driver supplemental
inflatable restraints (air bags) on all passenger cars. The driver air bag
concept has been approved for all remaining passenger cars and light trucks and
vans during the 1995 through 1997 model years. Current plans call for a phase-in
of front passenger air bags in these same vehicles from the 1995 through 1999
model years. This will meet the requirements of NHTSA's final rule specifying
that air bags be the only means used to meet the automatic restraint
requirements for passenger cars and light trucks and vans on a phased-in basis
beginning September 1, 1996.
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Phase-in of a new government requirement for passenger car dynamic side
impact protection continues through August 31, 1996. The phase-in of the new
requirement began September 1, 1993. New dynamic side impact protection
requirements similar to those for cars will apply to certain light trucks and
vans beginning September 1, 1998. Side structure and interior trim designs of
future models will continue to be affected.
A new government requirement for vehicle interior impact protection was
proposed in 1993. The final rule, similar to the proposal, was promulgated in
August 1995. This rule will significantly affect upper body structure and
interior trim designs of future model passenger cars and light trucks and vans.
The phase-in for this rulemaking begins in the 1999 model year and will apply to
all these vehicles in the 2003 model year.
The NHTSA currently is considering the effects of fuel system crash
integrity requirements of the Federal Motor Vehicle Safety Standard 301. If any
of the considerations ultimately are adopted as final rules, some undetermined
redesign, cost, and weight increase could be expected for most of GM's vehicles.
See Item 3, Legal Proceedings, Other Matters.
With the passage of the Anti-Car Theft Act of 1992, implementation costs
affect approximately 22 passenger car assembly plants and 4 light-duty truck
plants. For the affected truck plants, the major expenditures were for new label
printer installations and additional stamping equipment.
AUTOMOTIVE FUEL ECONOMY
The Energy Policy and Conservation Act passed in 1975 provided for
production-weighted average fuel economy standards for passenger cars for 1978
and thereafter. Based on EPA combined city-highway test data, the General Motors
1995 model year domestic passenger car fleet is projected to attain a Corporate
Average Fuel Economy (CAFE) of 27.2 miles per gallon (mpg) versus the standard
of 27.5 mpg. The CAFE estimate for 1996 model year passenger cars is projected
at 28.4 mpg versus the standard of 27.5 mpg. The projected shortfall for 1995
will be more than offset by credits projected to be earned in the 1996 model
year.
Fuel economy standards for light-duty trucks became effective in 1979.
General Motors' CAFE fleet average for the 1995 model year is projected to be
19.8 mpg versus the standard of 20.6 mpg. For the 1996 model year, GM's truck
CAFE is projected to be 20.7 mpg which is also the standard. The small remaining
shortfall for 1995 is expected to be offset by credits from future model years.
However, the exact amount cannot be determined because standards have not been
set beyond 1997.
GM's ability to meet increased CAFE standards is contingent on various
future economic, consumer, legislative, and regulatory factors that GM cannot
control and cannot predict with certainty. If GM could not comply with any new
CAFE standards, GM could be subject to sizable civil penalties and could have to
close plants or severely restrict product offerings to remain in compliance.
SEASONAL NATURE OF BUSINESS
In the automotive business, there are retail sales fluctuations of a
seasonal nature, so that production varies from month to month. In addition, the
changeover period related to the annual new model introduction has traditionally
occurred in the third quarter of each year. For this reason, third quarter
operating results are, in general, less favorable than those in the other three
quarters of the year, depending on the magnitude of the changeover needed to
commence production of new models incorporating, for example, design
modifications related to more fuel-efficient vehicle packaging, stricter
government standards for safety and emission controls, and consumer-oriented
improvements in performance, comfort, convenience, and style.
SEGMENT REPORTING DATA
Industry segment and geographic segment data for 1995, 1994, and 1993 are
summarized in Note 21 of Notes to Consolidated Financial Statements in Part II.
******
The Registrant makes no attempt herein to predict the future trend of its
business and earnings or the effect thereon of the results of changes in general
economic, industrial, regulatory, and international conditions.
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ITEM 2. PROPERTIES
The Corporation, excluding General Motors Acceptance Corporation, has 316
locations operating in 37 states and 171 cities in the United States. Of these,
25 are engaged in the final assembly of GM cars and trucks; 30 are service parts
operations responsible for distribution or warehousing; 20 are associated with
Electronic Data Systems Corporation as large information processing centers and
offices; 31 major plants, offices, and research facilities relate to the
operations of Hughes Electronics Corporation; and the remainder are offices or
involved primarily in the testing of vehicles or the manufacture of automotive
components and power products. In addition, the Corporation has 20 locations in
Canada and assembly, manufacturing, distribution, or warehousing operations in
51 other countries, including equity interests in associated companies which
conduct assembly, manufacturing, or distribution operations. The major
facilities outside the United States and Canada, which are principally vehicle
manufacturing and assembly operations, are located in Germany, the United
Kingdom, Brazil, Mexico, Austria, Belgium, and Spain.
Most facilities are owned by the Corporation or its subsidiaries. Leased
properties consist primarily of warehouses and administration, engineering, and
sales offices. The leases for warehouses generally provide for an initial period
of five years and contain renewal options. Leases for sales offices are
generally for shorter periods.
Properties of the Registrant and its subsidiaries include facilities which,
in the opinion of management, are suitable and adequate for the manufacture,
assembly, and distribution of their products.
Additional information regarding worldwide expenditures for plants and
equipment is presented under Management's Discussion and Analysis in Part II.
ITEM 3. LEGAL PROCEEDINGS
Material pending legal proceedings, other than ordinary routine litigation
incidental to the business, to which the Corporation is a party as of December
31, 1995 are summarized on the following pages. Reference should also be made to
Note 16 of Notes to Consolidated Financial Statements in Part II.
ENVIRONMENTAL MATTERS
On February 19, 1991, a complaint was filed in the Superior Court of
Connecticut by the Connecticut Commissioner of Environmental Protection alleging
that the plant in Bristol, Connecticut operated by GM's Delco Moraine NDH
Division (now part of the Delphi Chassis Division) had violated Connecticut's
hazardous waste regulations in connection with its inspection, recordkeeping,
and remediation of a spill of chromic acid at the plant site. The complaint
seeks penalties of up to $25,000 per day for a period commencing sometime prior
to April 1989 and running through November 1990. GM contends that its
inspection, recordkeeping, and remediation practices in relation to the spill
complied with applicable rules and regulations.
* *
On March 1, 1993, the U.S. Environmental Protection Agency (EPA) Region V
issued a civil administrative complaint alleging that stormwater from the
Chevrolet-Pontiac-GM of Canada Group's Pontiac Fiero plant in Pontiac, Michigan
exceeded the facility's National Pollutant Discharge System Permit from May 1989
through May 1992. The EPA complaint, as amended, cites the Corporation for 94
exceedances of copper, lead, and zinc and is seeking $125,000 in penalties.
There has been no production at the Fiero Plant since August 1988. The
Corporation believes that the very low concentrations of metals found in the
stormwater during the specified time period occurred as a result of acid rain
dissolving metal from the gutters and roof. General Motors is contesting the
allegations and has requested a hearing.
* *
On March 26, 1993, the Region V office of the EPA issued a Civil
Administration Complaint against the Corporation alleging that 65 petroleum and
hazardous substance underground storage tanks (USTs) which it
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has operated at its Technical Center in Warren, Michigan have been in violation
of certain of the EPA UST regulations. The EPA has proposed a civil penalty of
$267,447. Based upon its current evaluation of this matter, General Motors
believes that the operations cited by the EPA's complaint have been and remain
in substantial compliance with applicable UST regulations.
* *
In March 1993, the Michigan Department of Natural Resources (MDNR) notified
the Corporation's Powertrain Division (PD) that MDNR was making a referral to
the Michigan Attorney General for resolution of allegations by MDNR that a PD
facility in Saginaw, Michigan had failed to conduct a timely environmental
investigation to MDNR's satisfaction of a landfill and certain other areas at
the facility's property, and that PD's on-site water recycling basins were
improperly discharging contaminants to the groundwater and the Saginaw River.
* *
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.
* *
As previously reported, on March 24, 1995 a purported nationwide class
action was filed against General Motors in the Civil District Court for the
Parish of Orleans, State of Louisiana alleging that the paint or paint
application process used by GM on vehicles produced at several GM manufacturing
plants in North America was defective due to the conscious omission of the
surface layer primer, causing the paint to delaminate when exposed to
ultraviolet sunlight and to prematurely deteriorate, peel, and chip. On May 3,
1995, another purported class action, Barney Kizzire v. General Motors
Corporation and Bynun Olds-Pontiac-Cadillac-GMC, Inc., was filed in the Circuit
Court for Fayette County, Alabama on behalf of a class of Alabama residents who
purchased 1989 GMC pickup trucks from authorized Alabama dealers. The complaint
alleges that the paint and/or paint primer used in the manufacture of those
vehicles was defective and resulted in chipping, peeling and discoloration. Both
cases seek compensatory and punitive damages and injunctive relief. No
determination has been made in either case as to whether they may proceed as a
class action.
* *
On November 30, 1995, GM joined the U.S. Environmental Protection Agency
("EPA") and the U.S. Department of Justice ("DOJ") in signing a consent decree
to resolve allegations that GM violated the Clean Air Act and EPA emissions
regulations with regard to approximately 470,000 1991-1995 model Cadillacs
having 4.9 liter engines. The EPA and DOJ alleged that GM had a fueling strategy
that reduced the effectiveness of the vehicles' emission controls, and that GM
had not adequately disclosed to the EPA its use of emissions-related fueling
strategies on those Cadillacs, certain other 1991-1995 passenger cars, and
certain 1989-1992 heavy duty truck gasoline engines. In the consent decree, GM
denies those allegations and any violation of the law, but agrees to voluntarily
recall Cadillacs with the 4.9 liter engines, pay a civil penalty of
I-7
<PAGE> 10
$11 million, and fund certain emission remediation projects currently expected
to have a cost of between $7.05 million and $8.75 million. The total cost
(pre-tax) of the settlement approaches $45 million. The Consent Decree has been
filed with the United States District Court for the District of Columbia, and is
awaiting entry by that court.
* *
On January 26, 1996, GM was notified by the DOJ that the EPA was seeking
civil penalties of $650,000 for alleged violations of the Clean Air Act at GM's
Powertrain Division foundry in Danville, Illinois. Specifically, DOJ alleges
that, based on several stack tests, two cupolas at the facility exceeded air
emission limits for particulate matter and carbon monoxide. GM has entered
settlement negotiations with the DOJ and the EPA in an attempt to resolve the
matter without litigation. It is GM's position that no penalties are
appropriate.
* *
OTHER MATTERS
Three suits, denominated by plaintiffs as class actions, were filed in
Delaware Chancery Court, Stephen A. Solomon v. General Motors Corporation, et
al., on May 13, 1994; TRV Holding Company v. General Motors Corporation, et al.,
on May 18, 1994; and Melvin Ward, et al. v. General Motors Corporation, et al.,
on November 11, 1995. The actions purport to be brought on behalf of holders of
Class E common stock against the Corporation and its directors. Together, the
complaints allege, essentially, that defendants have breached and are continuing
to breach their fiduciary duties to holders of Class E common stock by, among
other things, planning and announcing a contribution of Class E common stock to
the Corporation's U.S. Hourly-Rate Employees Pension Plan, which plan and
announcement were allegedly made for the purpose of -- setting the stage for
GM's disposition of Electronic Data Systems Corporation (EDS) assets in a manner
which will deprive holders of Class E common stock of the full value of their
shares, and -- artificially capping the market price of Class E common stock to
limit the price to be paid to holders of Class E common stock in connection with
what plaintiff alleges is GM's design to either sell EDS assets or tender for
Class E common stock. It is also alleged that the proposed split-off of EDS is
unfair to Class E stockholders because its terms are being arrived at in an
unfair manner and the value of EDS shares is less than the value of GM's $1 2/3
shares to which they claim to be entitled under GM's Certificate of
Incorporation. Together, the complaints seek monetary damages and to enjoin GM
from contributing Class E common stock to its U. S. Hourly-Rate Employees
Pension Plan, to enjoin the split-off of EDS, and to enjoin GM from seeking or
receiving an equalizing dividend from EDS. The contribution of Class E common
stock to GM's U.S. Hourly-Rate Employees Pension Plan is described by GM under
Item 2 of its Quarterly Report on Form 10-Q for the quarterly period ended June
30, 1994. All necessary government clearances were obtained, and the
contribution was made in March of 1995. GM believes the suits are without merit
and intends to defend them vigorously.
* *
U.S. Government contracts held by the Corporation and its subsidiaries are
subject to termination by the U.S. Government either for its convenience or for
default by the contractor. The costs recovered for terminations for convenience
do not always fully reimburse the contractor, and the profit or fee received by
the contractor may be lower than that which it had expected for the portion of
the contract performed. In cases of termination for default, normal contract
remedies generally apply. In addition, the U.S. Government has broad discretion
to suspend or debar a contractor from engaging in new government business,
including discretion as to the period of suspension and activities affected. A
contractor may be debarred based on a conviction or civil judgment involving
certain offenses, including fraud in connection with obtaining or performing a
public contract, or subcontract thereunder, and may be suspended if indicted for
such an offense or if there is other adequate evidence that such an offense has
been committed. Like other government contractors, GM and its subsidiaries are
subject to civil audits and criminal investigations relating to their
contracting activity.
I-8
<PAGE> 11
* *
In September 1973, Hughes Aircraft Company (HAC) filed suit against the
U.S. Government in the U.S. Court of Claims seeking reasonable and entire
compensation for the unauthorized manufacture or use by the United States of the
invention claimed in a HAC patent (the "Williams Patent") covering "Velocity
Control and Orientation of a Spin Stabilized Body," principally satellites. In
late 1983, the United States Court of Appeals for the Federal Circuit (the U.S.
Court with appellate jurisdiction for patent cases) ruled that the Williams
Patent was valid and that the Government had infringed that patent. The
compensation which HAC is entitled to recover as a result of the Government's
infringement is now being determined by the U.S. Court of Claims, as well as
whether additional U.S. Government satellites also infringe.
The trial concluded in December 1988. HAC contended that its recovery
should be calculated in accordance with either of two methods for computing
delay compensation and introduced evidence to support an award of approximately
$4.8 billion or $1.5 billion depending upon the methods used. The Government
sought to demonstrate to the Court that any damages awarded to HAC in this case
should not exceed $20-30 million. In August 1993, the Court determined that
approximately $4 billion in satellite purchases infringed the patent. On June
17, 1994, the Court issued a decision awarding HAC damages of $114 million. HAC
believes that the record supports a higher royalty rate, and, accordingly, on
August 3, 1994 filed a notice of appeal pursuant to which HAC will be seeking a
higher award. Oral argument in the case was heard in June 1995. HAC is unable to
estimate the duration of these appeal efforts. In the opinion of the management
of HAC, there is a reasonable possibility that this matter could be resolved in
the near term. While no amount has been recorded in the financial statements of
Hughes Electronics Corporation pending the outcome of the case, resolution could
result in a gain that would be material to the earnings of GM attributable to
Class H common stock.
* *
On August 21, 1992, EDS filed a breach of contract suit against the State
of Florida (the "State") in the Circuit Court of the Second Judicial Circuit in
Leon County, Florida, seeking recovery under various counts of more than $46
million in payment for unpaid computer equipment and information technology
services. The suit arises out of a 1989 contract entered into between EDS and
the State of Florida under which EDS had agreed to provide an information
management system to the Department of Health and Rehabilitative Services
("DHRS") that would integrate its offices and computer programs statewide. EDS
completed the system and turned it over to the DHRS in May 1992. On September
21, 1993, the State filed an Answer and Counterclaims, alleging principally
breach of contract and breach of warranty. Under various counts, the State is
requesting approximately $90 million in damages and approximately $140 million
in indemnification for potential liability of the State to the Federal
government. EDS and the State agreed to resolve this matter through a final and
binding Alternative Dispute Resolution process (ADR) which commenced in January
1995. On August 14, 1995, the ADR judge recommended that EDS be awarded
approximately $50 million in damages, including interest on unpaid amounts. EDS
is seeking to have this award confirmed by the Circuit Court. The State is
resisting these efforts.
Shortly before the ADR judge issued his opinion, the State filed a motion
to void the agreement under which the parties had agreed to resolve this matter
through the ADR process. The State claimed that it had been fraudulently induced
into signing such agreement, alleged that EDS knew of certain problems with the
system in 1992 and failed to inform the State of such problems and argued that
it would not have signed such agreement had it known of such problems prior to
such signing. EDS denied the State's allegations. On October 17, 1995, the
Circuit Court denied the State's motion to void the ADR agreement. The State
appealed this decision and that appeal was denied on December 14, 1995.
On October 25, 1995, the State filed suit against EDS alleging Inter Alia,
breach of contract and fraud with respect to a guarantee executed by EDS in
conjunction with the transaction which is the subject of the prior litigation
and seeking approximately $46 million in damages. On November 30, 1995, the
Circuit Court granted EDS' motion to dismiss the lawsuit. The judge took
judicial notice of the mediation action and ruled that the State was attempting
improperly to split its causes of action. The State appealed the dismissal on
December 29, 1995. On October 28, 1995, the Attorney General of the State of
Florida also commenced an
I-9
<PAGE> 12
action against EDS for civil theft seeking disgorgement of the Florida computer
system, disgorgement of at least $20 million in payments to EDS, revocation of
EDS' certificate of authority to conduct business in Florida and an injunction
preventing EDS and its affiliates from doing business in Florida, as well as
trebling of actual damages and attorneys' fees. On December 18, 1995, the court
orally ruled that the complaint would be dismissed with prejudice.
EDS management believes that it has strong and meritorious defenses to any
counterclaims which the State may assert and intends to defend itself vigorously
while continuing to pursue recovery against the State under the claims which it
has filed.
* *
Several actions seeking compensatory and punitive damages in unspecified
amounts have been filed against Hughes by plaintiffs alleging that they suffered
injuries as a result of the migration into the Tucson, Arizona water supply of
toxic substances that were disposed of at a facility owned by the United States
Government which Hughes operates under a contract with the U.S. Air Force. These
actions include a class action filed in Arizona State Court, Cordova v. Hughes
Aircraft Company (formerly Bahrs, et al. v. Hughes Aircraft Company, et al.
(Super. Ct. Pima County)), an individual action filed on behalf of approximately
800 plaintiffs in Federal District Court in Arizona, Yslava v. Hughes Aircraft
Company (formerly Acevedo, et al. v. Hughes Aircraft Company), and a class
action filed in Federal District Court in Arizona, Lanier v. Hughes Aircraft
Company. Other governmental and private entities are known to have also been the
source of toxic substances which may have migrated into the Tucson water supply.
Hughes believes that it has strong defenses to the claims asserted against it
and that it may have claims for contribution against the other entities.
The facts alleged in these cases are similar to the facts alleged in the
previously reported action entitled Valenzuela v. Hughes Aircraft Company. As
previously reported, the Valenzuela action was settled pursuant to an agreement
under which Hughes' principal insurers provided $70.7 million and Hughes
provided $13.8 million. At the time of such settlement, Hughes and its insurers
were litigating in the United States District Court in Arizona their respective
ultimate liability to one another for the amounts paid in the Valenzuela
settlement. This litigation, entitled Smith, et al. v. Hughes Aircraft Company
and related cases, was commenced in 1988 by various insurers seeking a
declaratory judgment that the Valenzuela claims are not covered under the terms
of the insurance policies issued to Hughes. These insurers have taken a similar
position with respect to the more recently filed actions and are also litigating
that position against Hughes in the Arizona United States District Court. In
September 1991, the Smith court entered summary judgment in favor of Hughes'
insurers who issued policies from 1971 to 1985, based upon "pollution
exclusions" contained in those policies. In September 1992, the Smith court
entered summary judgment in favor of Hughes' pre-1971 insurers based upon
findings and conclusions that could have been adverse to Hughes with respect to
other claims and proceedings. Hughes appealed these rulings to the Ninth Circuit
Court of Appeals. In November 1993, the Ninth Circuit affirmed in substantial
part the District Court's summary judgment on the "pollution exclusion"
policies, but reversed the District Court's summary judgment on pre-1971
policies. The Ninth Circuit remanded the case for further proceedings in the
District Court.
Contracts under which Hughes has operated the Air Force facility contain
provisions under which indemnification from the Air Force may be provided for
certain liabilities which Hughes may incur in connection with its operation of
the facility to the extent such liabilities are not covered by insurance. Hughes
intends to prosecute all appropriate claims it may have for insurance coverage
and, if necessary, to pursue all appropriate claims for indemnification or
contribution relating to the actions described above.
* *
As previously reported, thirty-eight class actions have been filed in state
and Federal courts against the Corporation, claiming that 1973-1987 model
Chevrolet and GMC full-size pickup trucks are defective because their fuel tanks
are mounted below the cab and outside the frame rails. Twenty-four Federal court
class actions were transferred to the Federal court in Philadelphia,
Pennsylvania by the Judicial Panel on Multidistrict Litigation. In these
actions, plaintiffs claimed that the fuel tank locations make the vehicles
I-10
<PAGE> 13
unreasonably susceptible to fuel-fed fires following side-impact collisions.
Plaintiffs alleged breach of contract and warranty, negligence, fraud, and
negligent misrepresentation, as well as violation of various state consumer
protection laws. The lawsuits seek compensatory and punitive damages and
injunctions requiring notice to owners, repairs, retrofitting, and
"disgorgement" of revenues.
In July 1993, a nationwide class action settlement of the C/K pickup truck
class actions was submitted to the Pennsylvania Federal Court and a state court
in Texas. Following approval by both courts, the U.S. Third Circuit and Texas
appellate courts reversed. The actions will proceed in the Philadelphia Federal
court and Texas trial court.
There are also pending individual product liability claims and lawsuits
involving allegations of defects in the design of such vehicles resulting in
fuel-fed fires following side-impact collisions. GM intends to defend these
cases vigorously.
* *
On October 24, 1994, a jury sitting in two cases consolidated for trial in
the California Superior Court for the County of Los Angeles, both of which cases
had been brought by individual plaintiffs, Jeffrey Lane v. Hughes Aircraft
Company and David Villalpando v. Hughes Aircraft Company, rendered verdicts
resulting in an aggregate award against Hughes in the amount of $89.5 million.
$80 million of the award was for punitive damages and the remainder was for
emotional distress and lost wages and benefits. One plaintiff alleged racial
discrimination by Hughes with respect to pay and promotion, and both plaintiffs
alleged retaliation by Hughes. Hughes vigorously denied plaintiffs' allegations.
On December 15, 1994, Superior Court Judge Malcolm H. Mackey granted Hughes'
motion for judgment in its favor notwithstanding the verdict, overturning the
entire $89.5 million judgment against Hughes. The court also granted Hughes'
alternative motion for an order for a new trial in the event that a court of
appeals reverses Judge Mackey's ruling in favor of Hughes. Plaintiffs filed a
timely appeal which is currently pending.
* *
On April 26 and 27, 1995, two purported class actions, Keith McGill v.
General Motors Corporation and Richard Dolowich v. General Motors Corporation,
were filed against General Motors in the Supreme Court of the State of New York,
Counties of Bronx and Suffolk, alleging defective rear disc brake caliper pins
in the "GM W-Body car". These actions have been consolidated in the Supreme
Court of the State of New York, County of Bronx. The Dolowich suit is brought on
behalf of all persons and entities in the United States who currently own or
lease or previously owned or leased a 1988-1993 Buick Regal, Oldsmobile Cutlass
Supreme, Pontiac Grand Prix or Chevrolet Lumina. The McGill suit includes the
same model year vehicles, but is brought on behalf of persons and entities
residing in the State of New York who purchased or leased such vehicles and
still own them. Three additional purported nationwide class actions, brought on
behalf of current and previous owners of the same vehicles, have been filed in
Federal courts in New Jersey, Garcia v. General Motors, and Pennsylvania, Neff
v. General Motors and Marcel v. General Motors. Two additional purported class
actions involving the same vehicles were filed, one in the Superior Court of New
Jersey for Burlington County, Bishop v. General Motors Corporation and another
in the United States District Court for the Eastern District of Pennsylvania,
Cohen v. General Motors Corporation. Together, the complaints allege violation
of state consumer protection laws, fraud, negligent misrepresentation, and
breach of express and implied warranty, and seek unspecified amounts of economic
damages, punitive damages not less than $20 million, attorneys' fees and costs,
and injunctive relief. The courts have not made a determination as to whether
any of the cases may proceed as class actions.
* *
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable (N/A).
* * *
I-11
<PAGE> 14
PART II
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
10-K ITEM PAGE (AND CAPTION) IN PART II
- ---------------------------------------------------- ------------------------------------------
<S> <C> <C>
5. Market for Registrant's Common Equity and
Related Stockholder Matters
(a) Market information......................... II-45 -- Selected Quarterly Data
(b) Approximate number of holders of common
stocks..................................... II-45 -- Selected Quarterly Data
(c) Dividends
(1) History.................................... II-45 -- Selected Quarterly Data
(2) Policy..................................... II-36 -- Dividends on Common Stocks
6. Selected Financial Data........................ II-47 -- Selected Financial Data
7. Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... II-50 -- Management's Discussion and
Analysis
8. Financial Statements and Supplementary Data.... II-2 -- Responsibilities for Consolidated
Financial Statements
II-3 -- Independent Auditors' Report
II-4 -- Consolidated Statement of Income
for the Years Ended December 31, 1995,
1994, and 1993
II-5 -- Consolidated Balance Sheet,
December 31, 1995 and 1994
II-6 -- Consolidated Statement of Cash
Flows for the Years Ended December 3l,
1995, 1994, and 1993
II-8 -- Notes to Consolidated Financial
Statements
II-45 -- Selected Quarterly Data
9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure....... None
</TABLE>
II-1
<PAGE> 15
RESPONSIBILITIES FOR CONSOLIDATED FINANCIAL STATEMENTS
The following consolidated financial statements of General Motors
Corporation and subsidiaries were prepared by management which is responsible
for their integrity and objectivity. The statements have been prepared in
conformity with generally accepted accounting principles and, as such, include
amounts based on judgments of management. Financial information elsewhere in
this Annual Report is consistent with that in the consolidated financial
statements.
Management is further responsible for maintaining a system of internal
accounting controls, designed to provide reasonable assurance that the books and
records reflect the transactions of the companies and that its established
policies and procedures are carefully followed. From a stockholder's point of
view, perhaps the most important feature in the system of control is that it is
continually reviewed for its effectiveness and is augmented by written policies
and guidelines, the careful selection and training of qualified personnel, and a
strong program of internal audit.
Deloitte & Touche LLP, an independent auditing firm, is engaged to audit
the consolidated financial statements of General Motors Corporation and its
subsidiaries and issue reports thereon. The audit is conducted in accordance
with generally accepted auditing standards which comprehend the consideration of
internal accounting controls and tests of transactions to the extent necessary
to form an independent opinion on the financial statements prepared by
management. The Independent Auditors' Report appears on the next page.
The Board of Directors, through the Audit Committee (composed entirely of
non-employee Directors), is responsible for assuring that management fulfills
its responsibilities in the preparation of the consolidated financial
statements. The Committee selects the independent auditors annually in advance
of the Annual Meeting of Stockholders and submits the selection for ratification
at the Meeting. In addition, the Committee reviews the scope of the audits and
the accounting principles being applied in financial reporting. The independent
auditors, representatives of management, and the internal auditors meet
regularly (separately and jointly) with the Committee to review the activities
of each, to ensure that each is properly discharging its responsibilities, and
to assess the effectiveness of the system of internal accounting controls. It is
management's conclusion that the system of internal accounting controls at
December 31, 1995 provides reasonable assurance that the books and records
reflect the transactions of the companies and that its established policies and
procedures are complied with. To ensure complete independence, Deloitte & Touche
LLP has full and free access to meet with the Committee, without management
representatives present, to discuss the results of the audit, the adequacy of
internal accounting controls, and the quality of the financial reporting.
/s/ JOHN F. SMITH, JR. /s/ J. MICHAEL LOSH
- --------------------------------- -------------------------
JOHN F. SMITH, JR. J. MICHAEL LOSH
Chairman, Chief Executive Chief Financial Officer
Officer,
and President
II-2
<PAGE> 16
INDEPENDENT AUDITORS' REPORT
General Motors Corporation,
its Directors, and Stockholders:
We have audited the Consolidated Balance Sheets of General Motors
Corporation and subsidiaries as of December 31, 1995 and 1994 and the related
Consolidated Statements of Income and Cash Flows for each of the three years in
the period ended December 31, 1995. These financial statements are the
responsibility of the Corporation's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of General Motors Corporation and subsidiaries
at December 31, 1995 and 1994 and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1995 in
conformity with generally accepted accounting principles.
As discussed in Note 1 to the financial statements, effective January 1,
1995 the Corporation changed its method of accounting for sales to daily rental
car companies. Also, as discussed in Note 1 to the financial statements,
effective January 1, 1994 the Corporation changed its methods of accounting for
postemployment benefits and certain investments in debt and equity securities.
/s/ DELOITTE & TOUCHE LLP
- ------------------------------------------------------
DELOITTE & TOUCHE LLP
Detroit, Michigan
January 29, 1996
II-3
<PAGE> 17
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------
1995 1994 1993
---------- ---------- ----------
(DOLLARS IN MILLIONS
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net Sales and Revenues (Note 1)
Manufactured products.............................................. $143,666.1 $134,759.8 $119,686.3
Financial services................................................. 11,664.0 9,418.8 8,752.0
Computer systems services.......................................... 8,531.0 6,412.9 5,183.6
Other income (Note 3).............................................. 4,967.5 4,359.7 4,597.6
---------- ---------- ----------
Total Net Sales and Revenues................................... 168,828.6 154,951.2 138,219.5
---------- ---------- ----------
Costs and Expenses
Cost of sales and other operating charges, exclusive of items
listed below..................................................... 126,535.3 117,220.5 106,421.9
Selling, general, and administrative expenses...................... 13,514.7 12,233.7 11,531.9
Interest expense (Note 9).......................................... 5,302.2 5,431.9 5,673.7
Depreciation of real estate, plants, and equipment (Note 1)........ 8,554.4 7,124.4 6,576.3
Amortization of special tools (Note 1)............................. 3,212.0 2,900.7 2,535.3
Amortization of intangible assets (Notes 1 and 8).................. 255.3 226.2 330.4
Other deductions (Note 3).......................................... 1,678.4 1,460.5 1,624.7
Special provision for scheduled plant closings (Note 15)........... -- -- 950.0
---------- ---------- ----------
Total Costs and Expenses....................................... 159,052.3 146,597.9 135,644.2
---------- ---------- ----------
Income before Income Taxes......................................... 9,776.3 8,353.3 2,575.3
United States, foreign, and other income taxes (Note 6)............ 2,843.8 2,694.6 109.5
---------- ---------- ----------
Income before cumulative effect of accounting changes.............. 6,932.5 5,658.7 2,465.8
Cumulative effect of accounting changes (Note 1)................... (51.8) (758.1) --
---------- ---------- ----------
Net Income..................................................... 6,880.7 4,900.6 2,465.8
Preference shares tender offer premium (Note 17)................... 153.4 -- --
Dividends on preferred and preference stocks (Note 17)............. 210.2 320.7 356.8
---------- ---------- ----------
Income on Common Stocks........................................ $ 6,517.1 $ 4,579.9 $ 2,109.0
========== ========== ==========
Earnings Attributable to Common Stocks
$1 2/3 par value before cumulative effect of accounting
changes........................................................ $ 5,508.8 $ 4,645.2 $ 1,537.3
Cumulative effect of accounting changes (Note 1)................. (51.8) (751.3) --
---------- ---------- ----------
Net earnings attributable to $1 2/3 par value.................... $ 5,457.0 $ 3,893.9 $ 1,537.3
========== ========== ==========
Net earnings attributable to Class E............................. $ 795.5 $ 444.4 $ 367.2
========== ========== ==========
Class H before cumulative effect of accounting change............ $ 264.6 $ 248.4 $ 204.5
Cumulative effect of accounting change (Note 1).................. -- (6.8) --
---------- ---------- ----------
Net earnings attributable to Class H............................. $ 264.6 $ 241.6 $ 204.5
========== ========== ==========
Average number of shares of common stocks outstanding (in millions)
$1 2/3 par value................................................. 749.7 741.3 710.2
Class E.......................................................... 404.6 260.3 243.0
Class H.......................................................... 95.5 92.1 88.6
Earnings Per Share Attributable to Common Stocks (Note 18)
$1 2/3 par value before cumulative effect of accounting
changes........................................................ $7.28 $6.20 $2.13
Cumulative effect of accounting changes (Note 1)................. (0.07) (1.05) --
----- ----- -----
Net earnings attributable to $1 2/3 par value.................... $7.21 $5.15 $2.13
===== ===== =====
Net earnings attributable to Class E............................. $1.96 $1.71 $1.51
===== ===== =====
Class H before cumulative effect of accounting change............ $2.77 $2.70 $2.30
Cumulative effect of accounting change (Note 1).................. -- (0.08) --
----- ----- -----
Net earnings attributable to Class H............................. $2.77 $2.62 $2.30
===== ===== =====
</TABLE>
Reference should be made to the Notes to Consolidated Financial Statements.
II-4
<PAGE> 18
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1995 1994
---------- ----------
(DOLLARS IN MILLIONS
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
ASSETS
Cash and cash equivalents (Note 1)........................................... $ 11,044.3 $ 10,939.0
Other marketable securities.................................................. 5,598.6 5,136.6
---------- ----------
Total cash and marketable securities................................... 16,642.9 16,075.6
Finance receivables -- net (Note 4).......................................... 58,732.0 54,077.3
Accounts and notes receivable (less allowances).............................. 9,988.4 8,977.8
Inventories (less allowances) (Note 5)....................................... 11,529.5 10,127.8
Contracts in process (less advances and progress payments of $1,327.2 and
$2,311.2) (Note 1)......................................................... 2,469.2 2,265.4
Net equipment on operating leases (less accumulated depreciation of $7,224.5
and $5,374.7) (Note 7)..................................................... 27,702.3 20,061.6
Deferred income taxes (Note 6)............................................... 19,028.3 19,693.3
Property (Note 1)
Real estate, plants, and equipment -- at cost (Note 7)..................... 73,652.3 69,807.9
Less accumulated depreciation.............................................. 44,083.2 42,586.4
---------- ----------
Net real estate, plants, and equipment................................... 29,569.1 27,221.5
Special tools -- at cost (less amortization)............................... 8,170.7 7,559.1
---------- ----------
Total property......................................................... 37,739.8 34,780.6
Intangible assets -- at cost (less amortization) (Notes 1 and 8)............. 11,898.9 11,913.8
Other assets (less allowances)............................................... 21,392.1 20,625.5
---------- ----------
Total Assets........................................................... $217,123.4 $198,598.7
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Accounts payable (principally trade)......................................... $ 11,898.8 $ 11,635.0
Notes and loans payable (Note 9)............................................. 83,323.5 73,730.2
United States, foreign, and other income taxes -- deferred and payable (Note
6)......................................................................... 3,231.6 2,721.0
Postretirement benefits other than pensions (Note 12)........................ 41,595.1 40,018.2
Pensions (Note 13)........................................................... 6,842.3 14,353.2
Other liabilities and deferred credits (Note 14)............................. 46,886.6 42,867.3
---------- ----------
Total Liabilities...................................................... 193,777.9 185,324.9
---------- ----------
Stocks Subject to Repurchase (Note 17)....................................... -- 450.0
---------- ----------
Stockholders' Equity (Notes 17 and 20)
Preference stocks............................................................ 1.2 2.4
Common stocks
$1 2/3 par value (issued, 753,008,273 and 754,345,782 shares).............. 1,255.0 1,257.2
Class E (issued, 442,812,166 and 268,125,255 shares)....................... 44.3 26.8
Class H (issued, 97,152,014 and 78,720,022 shares)......................... 9.7 7.9
Capital surplus (principally additional paid-in capital)..................... 18,870.9 13,149.4
Net income retained for use in the business.................................. 7,185.4 1,785.8
---------- ----------
Subtotal............................................................... 27,366.5 16,229.5
Minimum pension liability adjustment (Note 13)............................... (4,736.3) (3,548.4)
Accumulated foreign currency translation adjustments......................... 222.5 (100.4)
Net unrealized gains on investments in certain debt and equity securities
(Note 1)................................................................... 492.8 243.1
---------- ----------
Total Stockholders' Equity............................................. 23,345.5 12,823.8
---------- ----------
Total Liabilities and Stockholders' Equity............................. $217,123.4 $198,598.7
========== ==========
</TABLE>
Reference should be made to the Notes to Consolidated Financial Statements.
II-5
<PAGE> 19
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------
1995 1994 1993
----------- ----------- -----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Cash Flows from Operating Activities
Income before cumulative effect of accounting
changes.......................................... $ 6,932.5 $ 5,658.7 $ 2,465.8
Adjustments to reconcile income before cumulative
effect of accounting changes to net cash provided
by operating activities
Depreciation of real estate, plants, and
equipment...................................... 4,062.1 3,688.7 3,682.7
Depreciation of equipment on operating leases.... 4,492.3 3,435.7 2,893.6
Amortization of special tools.................... 3,212.0 2,900.7 2,535.3
Amortization of intangible assets................ 255.3 226.2 330.4
Amortization of discount and issuance costs on
debt issues.................................... 77.6 71.3 90.5
Provision for financing losses................... 448.8 177.3 300.8
Special provision for scheduled plant closings... -- -- 950.0
Provision for inventory allowances............... 77.5 53.1 44.1
Pension expense, net of cash contributions....... (2,983.9) (5,096.1) (1,548.2)
Pre-tax (gain) loss on sales of various assets... 116.1 (17.6) 305.6
Provision for ongoing postretirement benefits
other than pensions, net of cash payments...... 1,684.1 2,252.6 2,396.7
Origination and purchase of mortgage loans....... (12,085.6) (10,135.7) (21,583.7)
Proceeds on sale of mortgage loans............... 11,132.7 10,719.2 22,309.5
Change in other investments, miscellaneous
assets, deferred credits, etc. ................ 367.5 (1,628.2) 340.2
Change in other operating assets and liabilities
Accounts receivable............................ (733.1) (2,582.1) (480.9)
Inventories.................................... (1,487.0) (1,750.3) 240.3
Prepaid expenses and other deferred charges.... (661.6) (725.5) 60.2
Deferred taxes and income taxes payable*....... 1,945.2 903.8 (1,512.8)
Other liabilities*............................. 438.8 2,683.5 (189.3)
Other.......................................... (867.8) 1,113.4 1,115.6
----------- ----------- -----------
Net Cash Provided by Operating Activities............. $ 16,423.5 $ 11,948.7 $ 14,746.4
=========== =========== ===========
</TABLE>
- -------------------------
* Excluding effect of accounting changes.
Reference should be made to the Notes to Consolidated Financial Statements.
II-6
<PAGE> 20
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS -- CONCLUDED
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------
1995 1994 1993
------------ ------------ ------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Cash Flows from Investing Activities
Investment in companies, net of cash acquired.... $ (616.3) $ (246.6) $ (232.4)
Expenditures for real estate, plants, and
equipment..................................... (6,351.4) (4,883.7) (3,822.1)
Expenditures for special tools................... (3,725.9) (2,341.4) (2,648.6)
Proceeds from disposals of real estate, plants,
and equipment................................. 540.8 351.0 534.9
Proceeds from the sale of various assets......... 183.2 518.4 231.5
Expenditures related to the sale of NCRS' net
assets........................................ (197.0) -- --
Change in other investing assets
Investments in other marketable securities --
acquisitions................................ (18,410.1) (14,482.3) (13,545.4)
Investments in other marketable securities --
liquidations................................ 17,947.4 13,906.0 13,377.0
Finance receivables -- acquisitions........... (163,033.3) (156,579.8) (103,396.3)
Finance receivables -- liquidations........... 133,766.2 137,598.4 92,808.6
Finance receivables -- other.................. 244.3 610.6 8,528.3
Proceeds from sales of finance receivables.... 25,982.5 18,800.0 13,072.2
Operating leases -- net*...................... (8,856.7) (10,239.8) (4,887.7)
Other......................................... (13.0) (510.6) 346.8
------------ ------------ ------------
Net Cash Provided by (Used in) Investing
Activities....................................... (22,539.3) (17,499.8) 366.8
------------ ------------ ------------
Cash Flows from Financing Activities
Net increase (decrease) in short-term loans
payable....................................... 6,087.6 3,877.7 (4,278.3)
Increase in long-term debt....................... 12,129.8 12,997.4 9,634.7
Decrease in long-term debt....................... (9,636.3) (14,259.9) (17,029.6)
Redemption of HHMI put options................... -- -- (315.0)
Repurchases of common, preferred, and preference
stocks........................................ (1,680.7) -- (265.6)
Proceeds from issuing common stocks.............. 504.8 1,184.9 860.2
Cash dividends paid to stockholders.............. (1,327.7) (1,111.9) (1,083.9)
------------ ------------ ------------
Net Cash Provided by (Used in) Financing
Activities....................................... 6,077.5 2,688.2 (12,477.5)
------------ ------------ ------------
Effect of Exchange Rate Changes on Cash and Cash
Equivalents...................................... 143.6 11.4 76.2
------------ ------------ ------------
Net increase (decrease) in cash and cash
equivalents...................................... 105.3 (2,851.5) 2,711.9
Cash and cash equivalents at beginning of the
year............................................. 10,939.0 13,790.5 11,078.6
------------ ------------ ------------
Cash and cash equivalents at end of the year....... $ 11,044.3 $ 10,939.0 $ 13,790.5
============ ============ ============
</TABLE>
- -------------------------
* Excluding effect of accounting changes.
Reference should be made to the Notes to Consolidated Financial Statements.
II-7
<PAGE> 21
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of General
Motors Corporation (hereinafter referred to as the Corporation) and domestic and
foreign subsidiaries which are more than 50% owned, principally General Motors
Acceptance Corporation and Subsidiaries (GMAC), Electronic Data Systems
Corporation and Subsidiaries (EDS), and Hughes Electronics Corporation and
Subsidiaries (Hughes) (collectively referred to as General Motors). General
Motors' share of earnings or losses of associates in which at least 20% of the
voting securities is owned is included in consolidated operating results under
the equity method of accounting (see Note 3).
Certain amounts for 1994 and 1993 have been reclassified to conform with
the 1995 classifications.
USE OF ESTIMATES IN THE PREPARATION OF THE FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect amounts reported therein. Due to the inherent
uncertainty involved in making estimates, actual results reported in future
periods may be based upon amounts which differ from those estimates.
REVENUE RECOGNITION
Sales are generally recorded when products are shipped to independent
dealers. Provisions for normal dealer sales incentives, returns and allowances,
and GM Card rebates are made at the time of vehicle sale. Costs related to
special sales incentive programs are recognized as reductions to sales when
determinable.
Certain sales under long-term contracts, primarily in the defense business,
are recorded using the percentage-of-completion (cost-to-cost) method of
accounting. Hughes Aircraft Company, a subsidiary of Hughes, recognizes revenues
for certain commercial long-term contracts using the units-of-delivery method.
Profits expected to be realized on contracts are based on estimates of total
sales value and costs at completion. These estimates are reviewed and revised
periodically throughout the lives of the contracts, and adjustments to profits
resulting from such revisions are recorded in the accounting period in which the
revisions are made. Estimated losses on contracts are recorded in the period in
which they are identified.
In the case of finance receivables in which the face amount includes the
finance charge (principally retail financing), earnings are recorded in income
over the terms of the receivables using the interest method. On finance
receivables in which the face amount represents the principal (principally
wholesale, interest-bearing financing, and fleet leasing), the interest is
reported as income when earned. Certain loan origination costs are deferred and
amortized to financing revenue over the life of the related loans using the
interest method. Income from operating lease assets is recognized as scheduled
payments become due.
Insurance premiums are earned on a basis related to coverage provided over
the terms of the policies. Commission costs and premium taxes incurred in
acquiring new business are deferred and amortized over the terms of the related
policies on the same basis as premiums are earned. The liability for losses
includes a provision for unreported losses, based on past experience, net of the
estimated salvage and subrogation recoverable.
PRODUCT-RELATED EXPENSES
Expenditures for advertising and sales promotion and for other
product-related expenses are charged to costs and expenses as incurred;
provisions for estimated costs related to product warranty are made at the time
the products are sold. Expenditures for advertising amounted to $3,139.5 million
in 1995, $2,805.9 million in
II-8
<PAGE> 22
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
1994, and $2,574.4 million in 1993. Expenditures for research and development
are charged to costs and expenses as incurred and amounted to $8,387.9 million
in 1995, $7,035.8 million in 1994, and $6,029.9 million in 1993.
DEPRECIATION AND AMORTIZATION
Depreciation is provided based on estimated useful lives of groups of
property generally using accelerated methods, which accumulate depreciation of
approximately two-thirds of the depreciable cost during the first half of the
estimated useful lives.
The cost of each leasehold improvement is amortized over the period of the
lease or the life of the property, whichever is shorter, with the amortization
applied directly to the asset account and charged to costs and expenses.
Depreciation on capitalized leases with a term of five years or less is provided
using the straight-line method; leases with a term in excess of five years are
depreciated using the foregoing accelerated methods.
Expenditures for special tools are amortized over their estimated useful
lives, primarily using the units of production method. Amortization is applied
directly to the asset account. Replacement of special tools for reasons other
than changes in products is charged directly to cost of sales.
Depreciation of vehicles and other equipment on operating leases or in
General Motors' use is provided generally on a straight-line basis. The
difference between the net book value and the proceeds of sale or salvage on
items disposed of is included in income as a charge against or credit to the
provision for depreciation.
Certain purchased software is being amortized over five to eight years.
FOREIGN CURRENCY TRANSLATION
Exchange and translation gains (losses) on an after-tax basis included in
consolidated operating results in 1995, 1994, and 1993 amounted to ($380.7)
million, $206.9 million, and $189.0 million, respectively.
CASH AND CASH EQUIVALENTS
Cash equivalents are defined as short-term, highly liquid investments with
original maturities of 90 days or less.
Supplemental disclosure of cash flow information is as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1995 1994 1993
-------- -------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Cash paid during the years for
Interest..................................................... $6,056.9 $5,499.3 $5,938.0
Income taxes................................................. $ 930.5 $2,045.8 $1,545.7
</TABLE>
With respect to noncash transactions, 173.2 million shares of Class E
common stock (Note 13) and 18.8 million shares of $1 2/3 par value common stock
were contributed to the U.S. pension plans in 1995 and 1993, respectively. The
1993 contribution of $1 2/3 par value shares consisted of shares sold to the
Corporation from individual employee accounts in various stock savings plans of
General Motors. Also, General Motors entered into capital lease agreements
totaling $22.3 million, $25.0 million, and $13.7 million, in 1995, 1994, and
1993, respectively.
II-9
<PAGE> 23
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
ALLOWANCE FOR FINANCING LOSSES
An allowance for credit losses is generally established during the period
in which receivables are acquired and is maintained in amounts considered by
management to be appropriate in relation to receivables outstanding.
Losses arising from repossession of the collateral supporting doubtful
accounts are recognized upon repossession of the collateral. Repossessed
collateral is recorded at estimated realizable value in other assets and
adjustments to the related valuation allowance are included in operating
expense. Where repossession has not been effected, losses are charged off as
soon as it is determined that the collateral cannot be repossessed, generally
not more than 150 days after default.
Nonretail finance receivables are reduced to the estimated fair value of
collateral when determined to be impaired or uncollectible.
CONTRACTS IN PROCESS
Contracts in process are stated at costs incurred plus estimated profit,
less amounts billed to customers and advances and progress payments applied.
Engineering, tooling, manufacturing, and applicable overhead costs, including
administrative, research and development, and selling expenses, are charged to
costs and expenses when incurred. Contracts in process also include estimates
relating to claims, requests for equitable adjustments, and amounts withheld
pending negotiation or settlement with customers. Under certain contracts with
the U.S. Government, progress payments are received based on costs incurred on
the respective contracts. Title to the inventories related to such contracts
(included in contracts in process) vests with the U.S. Government.
INTANGIBLE ASSETS
General Motors periodically evaluates the recoverability of goodwill and
other intangible assets by assessing whether the unamortized intangible asset
can be recovered over its remaining life through undiscounted cash flows
generated by underlying tangible assets.
DERIVATIVE INSTRUMENTS
General Motors is party to a variety of foreign exchange, interest rate and
commodity forward contracts and options entered into in connection with the
management of its exposure to fluctuations in foreign exchange rates, interest
rates, and certain commodities prices. These financial exposures are monitored
and managed in accordance with Corporate policies and procedures.
Foreign exchange-forward contracts are accounted for as hedges to the
extent they are designated as, and are effective as, hedges of firm foreign
currency commitments. Other such foreign exchange contracts and options are
marked to market on a current basis.
Interest rate forward contracts designated and effective as a hedge of an
underlying debt obligation are not marked to market, but are used to adjust
interest expense recognized over the life of the underlying debt agreement.
Gains and losses from terminated contracts are deferred and amortized over the
remaining period of the original contract. Open interest rate forward contracts
are reviewed regularly to ensure that they remain effective as hedges of
interest rate exposure. Written options (including swaptions and interest rate
caps and collars) are marked to market on a current basis.
General Motors also enters into commodity forward and options contracts.
Since General Motors has the discretion to settle these transactions either in
cash or by taking physical delivery, these contracts are not considered
financial instruments. Commodity forward contracts and options are accounted for
as hedges to the
II-10
<PAGE> 24
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
extent they are designated as, and are effective as, hedges of firm or
anticipated commodity purchase contracts.
ENVIRONMENTAL LIABILITIES
General Motors recognizes environmental liabilities when a loss is probable
and can be reasonably estimated. Such liabilities are generally not subject to
insurance coverage.
The cost of each environmental liability is estimated by engineering,
financial, and legal specialists within General Motors based on current law and
existing technologies. Such estimates are based primarily upon the estimated
cost of investigation and remediation required and the likelihood that other
potentially responsible parties (PRPs) will be able to fulfill their commitments
at the sites where General Motors may be jointly and severally liable. At sites
being addressed under the U.S. Comprehensive Environmental Response,
Compensation, and Liability Act or similar state laws (the "Superfund Sites"),
General Motors typically recognizes a loss once it has been named as a PRP and
has determined that some liability loss is probable. The Superfund Sites are
primarily multi-PRP sites not owned or operated by General Motors. For General
Motors' operating plants, an estimated liability is typically recognized either
upon completion of an environmental assessment or when General Motors proposes
an agreement with the appropriate regulatory agency to take action at a site.
For closed or closing plants owned by General Motors and properties being sold,
an estimated liability is typically recognized at the time the closure decision
is made or sale is recorded and is based on an environmental assessment of the
plant property.
General Motors' estimates for environmental obligations are dependent
primarily on the nature and extent of historical information and physical data
relating to a contaminated site, the complexity of the site, uncertainty as to
what remedy and technology will be required, the outcome of discussions with
regulatory agencies and other PRPs at multi-party sites, the number and
financial viability of other PRPs, and the timing of expenditures; accordingly,
such estimates could change materially as General Motors periodically evaluates
and revises such estimates based on expenditures against established reserves
and the availability of additional information.
ACCOUNTING CHANGES
The Emerging Issues Task Force (EITF) of the Financial Accounting Standards
Board (FASB) reached a consensus in November 1995 on Issue No. 95-1, Revenue
Recognition on Sales with a Guaranteed Minimum Resale Value, and concluded that
a manufacturer must account for the sale of equipment as an operating lease if
it guarantees the resale value of the equipment to the purchaser. Accordingly,
the Corporation has modified its revenue recognition policy on sales to daily
rental car companies to conform to the consensus. Adoption of this consensus,
effective January 1, 1995, resulted in an unfavorable cumulative effect of $51.8
million after-tax ($0.07 per share) attributable to $1 2/3 par value common
stock, and increases at December 31, 1995 in net equipment on operating leases
of $4.4 billion and other liabilities and deferred credits of $4.6 billion. The
effect on future periods is not expected to be material.
Statement of Financial Accounting Standards (SFAS) No. 121, Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,
which becomes effective for General Motors as of January 1, 1996, establishes
accounting standards for determining and calculating the impairment of
long-lived assets, certain identifiable intangible assets, and goodwill related
to those assets. General Motors will adopt SFAS No. 121 and calculate its impact
on General Motors during the first quarter of 1996.
As permitted by SFAS No. 123, Accounting for Stock-Based Compensation,
which becomes effective for General Motors as of January 1, 1996, and which
encourages companies to record expense for stock options and other stock-based
employee compensation awards based on their fair value at date of grant, General
II-11
<PAGE> 25
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Motors will continue to apply its current accounting policy under Accounting
Principles Board Opinion No. 25 and will include the necessary disclosures in
its 1996 financial statements.
Effective January 1, 1994, General Motors adopted SFAS No. 112, Employers'
Accounting for Postemployment Benefits. SFAS No. 112 requires accrual of the
costs of benefits provided to former or inactive employees after employment, but
before retirement. The unfavorable cumulative effect of adopting SFAS No. 112,
determined on a discounted basis, 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 non-cash charge is primarily related to General Motors'
extended-disability benefit program in the U.S. which, under SFAS No. 112, will
be accrued on a service-driven basis.
Also effective January 1, 1994, General Motors 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. SFAS No. 115
requires the recording at fair value of debt securities that are not expected to
be held to maturity and equity securities that have a readily determinable fair
value. The primary effect of SFAS No. 115 on General Motors relates to debt
securities held by a subsidiary of GMAC and certain equity securities.
Marketable securities, other than certain securities held by GMAC and its
subsidiaries (and described in Note 22), are considered available for sale;
$812.6 million mature within one year, $417.2 million mature in two to five
years, and a substantial amount of the remaining $40.6 million matures after 10
years.
LABOR FORCE
General Motors, on a worldwide basis, has a concentration of labor supply
in employees working under union collective bargaining agreements, which
represent approximately 86% of its hourly workforce and 8% of its salaried
workforce. Of these represented employees, 86% of hourly and 37% of salaried
employees are working under agreements that will expire in 1996.
NOTE 2. EDS SPLIT-OFF
The Corporation has previously announced its intention to pursue a
split-off of EDS to the Corporation's Class E stockholders by an exchange of EDS
common stock for Class E stock in a transaction that is tax-free for U.S.
Federal income tax purposes and fair to all classes of the Corporation's common
stockholders. The Corporation also announced in December 1995 that it had
received a ruling from the U.S. Internal Revenue Service to the effect that a
split-off as contemplated by the Corporation would be tax-free to the
Corporation and its common stockholders for U.S. Federal income tax purposes.
The Corporation would not record a gain or loss on the transaction.
The Corporation and EDS management are working to develop specific terms
for such a transaction to present to the Corporation's Board of Directors. Among
other matters being addressed, the managements are in the process of developing
terms for a long-term information technology agreement between the companies to
be effective upon a split-off.
Management of the Corporation and EDS are also addressing the amount of any
special payment that should be made by EDS to the Corporation prior to a
split-off in order to ensure that the split-off is fair to all of the
Corporation's common stockholders. Any such payment will not exceed one billion
dollars and could well be substantially less.
Substantial progress is being made in developing a specific split-off
proposal, although significant matters still remain to be resolved before a
definitive proposal can be presented to the Corporation's Board of Directors for
its consideration. Any such transaction will be subject to approval by the
Corporation's common stockholders. No assurances can be given that a split-off
of EDS will be proposed to the Corporation's
II-12
<PAGE> 26
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
common stockholders or, if proposed, approved by them. However, management of
both the Corporation and EDS and the Corporation's Board of Directors continue
to expect that such a transaction will be accomplished.
If a split-off of EDS is not completed, EDS would continue as a
wholly-owned subsidiary of the Corporation. Under such circumstances, the
existing contractual arrangements between the Corporation and EDS respecting
information technology would continue with any changes that the Corporation's
Board of Directors may consider fair to all classes of the Corporation's common
stockholders and appropriate in light of the evolving competitive market for
information technology services.
NOTE 3. OTHER INCOME AND OTHER DEDUCTIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1995 1994 1993
-------- -------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Other Income
Nonfinancing interest........................................ $1,672.2 $1,507.7 $1,886.2
Insurance premiums........................................... 867.0 873.8 799.3
Claims, commissions, and grants.............................. 603.9 467.4 489.7
Equity in earnings (losses) of associates, net............... 252.9 205.5 (172.5)
Gain on the sale of finance receivables...................... 38.2 30.8 436.4
Other........................................................ 1,533.3 1,274.5 1,158.5
-------- -------- --------
Total other income...................................... $4,967.5 $4,359.7 $4,597.6
======== ======== ========
Other Deductions
Insurance losses and loss adjustment expenses................ $ 620.8 $ 749.7 $ 614.4
Provision for financing losses............................... 448.8 177.3 300.8
Loss on sale of NCRS' net assets*............................ 147.8 -- --
Loss on the sale of Allison Gas Turbine Division (AGT)....... -- -- 305.6
Other........................................................ 461.0 533.5 403.9
-------- -------- --------
Total other deductions.................................. $1,678.4 $1,460.5 $1,624.7
======== ======== ========
</TABLE>
- -------------------------
* The Corporation sold National Car Rental System's (NCRS) net assets, resulting
in $162.6 million of net income, or $0.22 per share of $1 2/3 par value common
stock. The 1995 net income reflects $310.4 million of tax benefits related to
the restructuring for NCRS in 1992. The tax benefits were not previously
recorded due to the uncertainty of ultimate realization.
II-13
<PAGE> 27
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 4. FINANCE RECEIVABLES -- NET
The composition of finance receivables outstanding is summarized as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1995 1994
--------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C>
U.S.
Retail............................................................ $26,979.9 $23,486.8
Wholesale......................................................... 15,187.2 14,560.9
Leasing and lease financing....................................... 1,296.0 1,613.4
Term loans to dealers and others.................................. 3,656.4 3,670.0
--------- ---------
Total U.S...................................................... 47,119.5 43,331.1
--------- ---------
Canada, Mexico, and International
Retail............................................................ 8,651.3 7,747.9
Wholesale......................................................... 5,465.3 4,850.6
Leasing and lease financing....................................... 1,733.0 1,666.7
Term loans to dealers and others.................................. 493.3 484.2
--------- ---------
Total Canada, Mexico, and International........................ 16,342.9 14,749.4
--------- ---------
Total finance receivables................................. 63,462.4 58,080.5
Less -- Unearned income............................................. (3,922.5) (3,309.9)
-- Allowance for financing losses.............................. (807.9) (693.3)
--------- ---------
Total finance receivables -- net.......................... $58,732.0 $54,077.3
========= =========
</TABLE>
Retail, lease financing, and leasing receivable installments past due over
30 days amounted to $90.2 million and $55.5 million at December 31, 1995 and
1994, respectively. Installments on term loans to dealers and others past due
over 30 days aggregated $85.2 million at December 31, 1995 and $70.7 million at
December 31, 1994.
The aggregate amount of total finance receivables maturing in each of the
five years following December 31, 1995 is as follows: 1996 - $36,568.1 million;
1997 - $11,315.2 million; 1998 - $8,168.2 million; 1999 - $4,528.4 million; 2000
- - $2,244.2 million; and 2001 and thereafter - $638.3 million.
The following table presents an analysis of the allowance for financing
losses.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
---------------------
1995 1994
------- -------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Allowance for financing losses at beginning of the year............... $ 693.3 $ 748.0
------- -------
Charge-offs
U.S................................................................. (372.2) (310.7)
Other countries..................................................... (50.2) (50.3)
------- -------
Total charge-offs................................................ (422.4) (361.0)
Recoveries and other.................................................. 104.5 116.0
Transfers (to) from sold receivables allowance........................ (16.3) 13.0
Provisions charged to income.......................................... 448.8 177.3
------- -------
Allowance for financing losses at end of the year................ $ 807.9 $ 693.3
======= =======
</TABLE>
II-14
<PAGE> 28
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
GMAC participates in various sales of receivables programs and has sold
retail finance receivables through special purpose subsidiaries with principal
aggregating $3.6 billion in 1995 and $3.7 billion in 1994. These subsidiaries
generally retain a subordinated investment of no greater than 9% of the total
receivables pool and market the remaining portion. These subordinated
investments absorb losses related to sold receivables to the extent that such
losses are greater than the excess cash flows from those receivables and cash
reserves related to the sale transaction. Pre-tax gains relating to such sales
recorded in other income (excluding limited recourse loss provisions which
generally have been provided at the time the contracts were originally acquired)
amounted to $38.2 million in 1995, $30.8 million in 1994, and $436.4 million in
1993. GMAC continues to service these receivables for a fee and earns other
related ongoing income. GMAC's retail finance receivable servicing portfolio
amounted to $6.6 billion and $9.9 billion at December 31, 1995 and 1994,
respectively.
GMAC has also sold wholesale receivables, resulting in decreases in its
wholesale receivables outstanding of $4.7 billion and $2.6 billion at December
31, 1995 and 1994, respectively. GMAC continues to service these receivables for
a fee, and is committed to sell eligible wholesale receivables arising in
certain dealer accounts.
NOTE 5. INVENTORIES
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1995 1994
--------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Major Classes of Inventories
Productive material, work in process, and supplies..................... $ 6,570.4 $ 5,478.3
Finished product, service parts, etc................................... 4,959.1 4,649.5
--------- ---------
Total............................................................. $11,529.5 $10,127.8
========= =========
Memo: Increase in LIFO inventories if valued at FIFO................... $ 2,424.4 $ 2,535.9
</TABLE>
Inventories are stated generally at cost, which is not in excess of market.
The cost of substantially all U.S. inventories other than the inventories of
Saturn Corporation (Saturn) and Hughes is determined by the last-in, first-out
(LIFO) method. The cost of non-U.S., Saturn, and Hughes inventories is
determined generally by the first-in, first-out (FIFO) or average cost methods.
As a result of decreases in U.S. inventories, certain inventory quantities
carried at lower LIFO costs prevailing in prior years, as compared with current
purchases, were liquidated in 1993. This inventory adjustment improved pre-tax
operating results by approximately $134.4 million in 1993, primarily from the
sale of AGT.
II-15
<PAGE> 29
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 6. UNITED STATES, FOREIGN, AND OTHER INCOME TAXES -- DEFERRED AND PAYABLE
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1995 1994 1993
-------- -------- -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Taxes estimated to be payable (refundable) currently
U.S. Federal.................................................. $ (689.7) $ 544.7 $(230.5)
Foreign....................................................... 1,431.2 1,029.9 783.8
U.S. state and local.......................................... 51.1 69.7 188.9
--------- --------- -------
Total...................................................... 792.6 1,644.3 742.2
--------- --------- -------
Deferred tax (benefits) liabilities -- net
U.S. Federal.................................................. 2,051.6 576.0 (86.2)
Increase in U.S. corporate income tax rate.................... -- -- (444.3)
Foreign....................................................... (67.1) 421.7 (28.3)
U.S. state and local.......................................... 135.6 108.5 (5.3)
--------- --------- -------
Total...................................................... 2,120.1 1,106.2 (564.1)
--------- --------- -------
Investment tax credits amortized -- net
U.S. Federal.................................................. (62.1) (48.1) (58.6)
Foreign....................................................... (6.8) (7.8) (10.0)
--------- --------- -------
Total...................................................... (68.9) (55.9) (68.6)
--------- --------- -------
Total taxes........................................... $2,843.8* $2,694.6* $ 109.5
========= ========= =======
</TABLE>
- -------------------------
* Excluding effect of accounting changes.
Deferred income tax assets and liabilities for 1995 and 1994 reflect the
impact of temporary differences between amounts of assets and liabilities for
financial reporting purposes and the bases of such assets and liabilities as
measured by tax laws. The net deferred tax asset in the U.S. was $17,550.0
million and $18,171.0 million at December 31, 1995 and 1994, respectively.
Realization of the net deferred tax assets is dependent on future reversals
of existing taxable temporary differences and future taxable income exclusive of
reversing temporary differences and carryforwards. Although realization is not
assured, management believes that it is more likely than not that the net
deferred tax assets will be realized. The amount of the net deferred tax assets
considered realizable, however, could be reduced in the near term if actual
future taxable income is lower than estimated, or if there are differences in
the timing or amount of future reversals of existing taxable temporary
differences. The valuation allowance increased by $153.8 million and $46.8
million in 1995 and 1994, respectively. Annual tax provisions include amounts
considered sufficient to pay assessments that may result from examination of
prior year tax returns; however, the amount ultimately paid upon resolution of
issues raised may differ materially from the amount accrued. The alternative
minimum tax credit can be carried forward indefinitely. The U.S. state net
operating loss carryforwards will expire in the years 1997 - 2010 if not
utilized; however, a substantial portion will not expire until after the year
2000. The tax credit carryforwards will expire in the years 2000 - 2010 if not
utilized.
II-16
<PAGE> 30
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Temporary differences and carryforwards which give rise to deferred tax
assets and liabilities are shown as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------------
1995 1994
------------------------- -------------------------
DEFERRED TAX DEFERRED TAX
------------------------- -------------------------
ASSETS LIABILITIES ASSETS LIABILITIES
--------- ----------- --------- -----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Postretirement benefits other than pensions... $15,811.7 $ -- $15,184.7 $ --
Minimum pension liability adjustment.......... 2,926.8 -- 2,213.4 --
Benefit plans................................. 2,056.0 6,621.1 1,606.3 3,757.4
Policy and warranty........................... 2,085.4 -- 2,041.9 --
Sales and product allowances.................. 1,548.5 143.2 1,615.2 241.3
Special provision for scheduled plant
closings.................................... 961.7 -- 1,135.8 --
Miscellaneous foreign......................... 1,140.6 318.1 1,422.2 638.3
Profits on long-term contracts................ 514.4 450.3 387.7 632.4
Alternative minimum tax credit
carryforwards............................... 730.4 -- 741.2 --
Depreciation.................................. 606.7 5,034.0 465.3 4,915.6
Capitalized research and experimentation...... 571.1 -- 780.3 --
U.S. state net operating loss carryforwards... 478.4 -- 314.2 --
Financing losses.............................. 298.5 -- 253.2 --
Tax credit carryforwards...................... 536.5 -- 130.0 --
Lease transactions............................ -- 2,741.5 -- 2,321.3
Tax on unremitted profits..................... -- 467.8 -- 353.1
All other..................................... 6,357.6 3,222.0 5,461.3 2,681.7
--------- --------- --------- ---------
Subtotal.................................... 36,624.3 18,998.0 33,752.7 15,541.1
Valuation allowance........................... (1,228.2) -- (1,074.4) --
--------- --------- --------- ---------
Total deferred taxes..................... $35,396.1 $ 18,998.0 $32,678.3 $ 15,541.1
========= ========= ========= =========
</TABLE>
Provisions are made for estimated U.S. and foreign income taxes, less
available tax credits and deductions, which may be incurred on the remittance of
the Corporation's share of subsidiaries' undistributed earnings not deemed to be
permanently invested. Taxes have not been provided on foreign subsidiaries'
earnings which are deemed essentially permanently reinvested of approximately
$7.3 billion at December 31, 1995 and $5.8 billion at December 31, 1994.
Quantification of the deferred tax liability, if any, associated with
permanently reinvested earnings is not practicable.
Income before income taxes included the following components:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1995 1994 1993
-------- -------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
U.S. income (loss)......................................... $4,712.6 $3,152.1 $ (512.7)
Foreign income............................................. 5,063.7 5,201.2 3,088.0
-------- -------- --------
Total................................................. $9,776.3 $8,353.3 $2,575.3
======== ======== ========
</TABLE>
II-17
<PAGE> 31
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
The consolidated income tax was different than the amount computed using
the 35% U.S. Federal statutory income tax rate for the reasons set forth in the
table below:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1995 1994 1993
-------- -------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Tax at U.S. statutory income tax rate...................... $3,421.7 $2,923.7 $ 901.4
U.S. net operating loss carryback.......................... (190.0) -- --
U.S. state and local income taxes.......................... 135.7 130.8 129.7
Deferred tax impact of Federal rate increase............... -- -- (444.3)
Investment tax credits amortized........................... (68.9) (55.9) (68.6)
U.S. tax effect of foreign earnings and dividends.......... 292.2 126.5 80.9
Foreign rates other than 35%............................... (215.8) (453.6) (433.4)
Taxes on unremitted earnings of subsidiaries............... 139.4 123.5 54.3
Equity effect in pre-tax income............................ (88.5) (71.9) 60.4
Sale of NCRS' net assets................................... (258.7) -- --
Other adjustments.......................................... (323.3) (28.5) (170.9)
-------- -------- -------
Consolidated income tax............................... $2,843.8* $2,694.6* $ 109.5
======== ======== =======
</TABLE>
- -------------------------
* Excluding effect of accounting changes.
NOTE 7. PROPERTY AND NET EQUIPMENT ON OPERATING LEASES
<TABLE>
<CAPTION>
ESTIMATED DECEMBER 31,
USEFUL ----------------------
LIVES (YEARS) 1995 1994
------------- --------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Real estate, plants, and equipment
Land..................................................... -- $ 797.8 $ 799.1
Land improvements........................................ 20-31 1,910.7 1,849.7
Leasehold improvements -- less amortization.............. 8-10 320.7 306.8
Buildings................................................ 29-40 13,921.5 13,651.6
Machinery and equipment.................................. 5-27 45,753.3 43,890.2
Furniture and office equipment........................... 8-20 6,235.3 5,306.7
Capitalized leases....................................... 5-40 1,402.9 1,199.7
Construction in progress................................. -- 3,310.1 2,804.1
--------- ---------
Total................................................. $73,652.3 $69,807.9
========= =========
</TABLE>
The value of General Motors' net equipment on operating leases is based on
estimated residual values of the leased equipment, which are calculated at the
lease inception date. Realization of the residual values is dependent on General
Motors' future ability to market the equipment under then prevailing market
conditions. Although realization is not assured, management believes it is more
likely than not that the estimated residual values will be realized.
The lease payments to be received relate to equipment on operating leases
maturing in each of the five years following December 31, 1995 and are as
follows: 1996-$5,302.4 million; 1997-$3,373.9 million; 1998-$1,361.6 million;
1999-$200.9 million; and 2000-$82.8 million.
II-18
<PAGE> 32
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 8. INTANGIBLE ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1995 1994
--------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Pensions (Note 13)..................................................... $ 6,500.9 $ 7,373.8
Intangible assets relating to acquisition of Hughes.................... 2,845.8 3,005.3
Goodwill relating to all other acquisitions............................ 2,025.4 1,214.1
Mortgage servicing rights.............................................. 470.3 222.3
All other.............................................................. 56.5 98.3
--------- ---------
Total................................................................ $11,898.9 $11,913.8
========= =========
</TABLE>
Intangible assets arising from the acquisition of Hughes relate to patents
and related technology and other intangible assets which were originally
recorded in 1985 and are principally being amortized over 40 years.
Goodwill resulting from other acquisitions is being amortized over periods
of eight to 40 years.
Mortgage servicing rights are being amortized over periods that generally
match future net mortgage servicing revenues.
NOTE 9. NOTES AND LOANS PAYABLE
<TABLE>
<CAPTION>
DECEMBER 31,
WEIGHTED AVERAGE ----------------------
INTEREST RATE(1) 1995 1994
---------------- --------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Notes, loans, and debentures
Payable within one year
Current portion of long-term debt.................. 7.4% $13,117.4 $ 8,381.8
Commercial paper(2)................................ 5.9% 21,913.7 18,644.4
All other(2)....................................... 6.6% 11,617.8 9,213.9
Payable beyond one year
1996............................................... -- -- 11,953.4
1997............................................... 7.0% 11,858.0 10,158.8
1998............................................... 6.9% 6,477.9 2,795.6
1999............................................... 7.1% 4,551.9 4,151.2
2000............................................... 7.5% 4,957.9 2,191.6
2001 and after..................................... 7.7% 9,958.4 7,176.0
Unamortized discount.................................. (1,129.5) (936.5)
--------- ---------
Total............................................ $83,323.5 $73,730.2
========= =========
</TABLE>
- -------------------------
(1) The weighted average interest rate for 1995 includes the impact of interest
rate swap agreements.
(2) The weighted average interest rate for commercial paper and all other
short-term borrowings was 6.1% and 6.5%, respectively, at December 31, 1994.
After consideration of foreign currency swaps, the above 1995 maturities,
payable beyond one year, include $6.1 billion in currencies other than the U.S.
Dollar, primarily the Canadian Dollar ($1.7 billion), German Mark ($1.7
billion), and the British Pound ($1.5 billion).
At December 31, 1995 and 1994, notes and loans payable include $68.8
billion and $62.0 billion of obligations with fixed rates, and $14.5 billion and
$11.7 billion of obligations with variable interest rates
II-19
<PAGE> 33
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(predominantly based on the London Interbank Offering Rate or LIBOR), after
considering the impact of interest rate swap agreements.
To achieve its desired balance, within prescribed limits, between fixed and
variable rate debt, General Motors has entered into interest rate swap, interest
rate cap, interest rate collar, and swaption agreements. The notional amounts of
such agreements as of December 31, 1995 were approximately $7,105 million
($3,568 million pay variable and $3,537 million pay fixed), $340 million, $50
million, and $270 million, respectively. The notional amounts of such agreements
as of December 31, 1994 were approximately $5,482 million ($4,195 million pay
variable and $1,287 million pay fixed), $440 million, $50 million, and $741
million, respectively.
General Motors maintains, or otherwise has available through asset
securitization programs, various syndicated bank credit facilities which in
aggregate provide $30.3 billion of committed bank credit availability. The terms
of the facilities range from one to five years, with a weighted average term of
approximately three years. Facility and commitment fees on the syndicated credit
facilities average 0.11% per annum over the term of the various agreements based
on current credit ratings. The facilities contain certain covenants. The
Corporation and applicable subsidiaries were in compliance with these covenants
at December 31, 1995.
Certain subsidiaries maintain other bank lines of credit, some of which are
supported by bank commitment fees and compensating balances. Compensating
balances, which are not subject to withdrawal restrictions, are maintained at a
level required to provide the same income that a fee would generate. Total
commitment and facilities fees incurred by the Corporation's subsidiaries
amounted to $43.7 million in 1995, $60.0 million in 1994, and $44.5 million in
1993. Total compensating balances maintained by the Corporation's subsidiaries
in lieu of commitment fees averaged $12.4 million in 1995 and $23.5 million in
1994.
At December 31, 1995, unused short-term credit facilities totaled
approximately $22.6 billion and unused long-term credit facilities totaled
approximately $20.1 billion.
Total interest cost incurred in 1995, 1994, and 1993 amounted to $5,352.0
million, $5,465.8 million, and $5,717.8 million, respectively, of which $49.8
million, $33.9 million, and $44.1 million, related to certain real estate,
plants, and equipment acquired in those years, was capitalized.
NOTE 10. DERIVATIVE FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
General Motors is a party to financial instruments with off-balance-sheet
risk which it uses in the normal course of business to manage its exposure to
fluctuations in interest rates and foreign exchange rates, and to meet the
financing needs of its customers.
The primary classes of derivatives used by General Motors are foreign
exchange-forward contracts and options, interest rate forward contracts and
options, and forward contracts to purchase or sell mortgages or mortgage-backed
securities. Those instruments involve, to varying degrees, elements of credit
risk in the event a counter-party should default, and market risk as the
instruments are subject to rate and price fluctuations. Credit risk is managed
through the approval and periodic monitoring of financially sound
counterparties.
Derivative transactions are entered into to hedge underlying business
exposures. Market risk in these instruments is more than offset by opposite
movements in the underlying exposure since General Motors does not hedge 100% of
all such exposures. Cash receipts or payments on these contracts normally occur
at maturity, or for interest rate swap agreements, at periodic contractually
defined intervals.
FOREIGN EXCHANGE-FORWARD CONTRACTS AND OPTIONS
General Motors is an international corporation with operations in over 50
countries. General Motors has foreign currency exposures at these operations
related to buying, selling, and financing in currencies other than
II-20
<PAGE> 34
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
the local currency. General Motors' most significant foreign currency exposures
relate to major North American countries (Canada and Mexico), Western European
countries (primarily Germany, United Kingdom, Spain, Belgium, and France),
Japan, and Brazil. The magnitude of these exposures significantly varies over
time depending upon the strength of local automotive markets and sourcing
decisions.
General Motors enters into agreements by which it seeks to manage certain
of its foreign exchange exposures in accordance with established policy
guidelines. These agreements primarily hedge cash flows such as debt, firm
commitments and anticipated transactions involving vehicles, components and
fixed assets and subsidiary dividends. As a general practice, General Motors has
not hedged the foreign exchange exposure related either to the translation of
overseas earnings into U.S. dollars, or the translation of overseas equity
positions back to U.S. dollars. General Motors uses foreign exchange-forward
contracts as well as purchased and written foreign exchange options. Foreign
exchange-forward contracts are legal agreements between two parties to purchase
and sell a foreign currency, for a price specified at the contract date, with
delivery and settlement in the future. Cross-currency swaps are included in this
category and relate to interest rate swaps in which the underlying notional
principal amounts are in different currencies.
At December 31, 1995 and 1994, General Motors held foreign exchange-forward
contracts of approximately $11,602 million and $9,030 million (including
cross-currency swaps of $1,290 million and $1,161 million), respectively. At
December 31, 1995 and 1994, General Motors had entered into foreign exchange
options of approximately $3,833 million and $2,637 million, respectively.
Deferred hedging gains on outstanding contracts hedging firm commitments to
purchase inventory or fixed assets totaled $1 million and $12 million at
December 31, 1995 and 1994, respectively. Such amounts are deferred and will be
included in the cost of such assets when purchased, to be recognized in
operations as part of the basis of these assets. All other foreign
exchange-forward contracts and options are marked to market, and recognized with
other gains or losses on foreign exchange transactions in the Consolidated
Statement of Income. General Motors' firm commitments typically extend for
periods of up to three years.
INTEREST RATE FORWARD CONTRACTS AND OPTIONS
General Motors' financing and cash management activities subject it to
market risk from exposure to changes in interest rates. To manage these
exposures, General Motors has entered into various financial instrument
transactions. General Motors' objective of entering into these transactions is
to maintain the desired level of exposure to the risk of interest rate
fluctuations and minimize interest expense. To achieve this objective, General
Motors will at times use written options.
In a limited number of cases, GMAC swaps, matched to specific portfolios of
wholesale assets or debt, are executed on a portfolio basis to achieve specific
interest rate management objectives. The differential paid or received on such
swaps is recorded as an adjustment to interest expense or income over the term
of the underlying debt agreement or matched portfolio.
Interest rate forward contracts are contractual agreements between General
Motors and another party to exchange fixed and floating interest rate payments
periodically over the life of the agreements without the exchange of underlying
principal amounts. Interest rate options, including swaptions, and interest rate
caps and floors may result in the future exchange of interest payments if market
interest rates reach certain levels. At December 31, 1995 and 1994, the total
notional amount of such agreements with off-balance-sheet risk was approximately
$15,942 million and $14,080 million, respectively.
II-21
<PAGE> 35
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Interest rate forward contracts used to hedge an underlying debt obligation
are not marked to market, but are used to adjust interest expense recognized
over the life of the underlying debt agreement. Gains and losses on terminated
interest rate forward contracts are deferred and recognized as a yield
adjustment on the underlying debt. Unamortized net losses on interest rate
forward contracts totaled approximately $36 million and $24 million at December
31, 1995 and 1994, respectively. Written options, including those embedded in
interest rate forward agreements, written interest rate caps, written swaptions,
and interest rate forward contracts that do not meet settlement accounting
criteria are marked to market with related gains and losses recognized in income
on a current basis.
MORTGAGE CONTRACTS
GMAC has also entered into contracts to purchase and sell mortgages at
specific future dates and has entered into certain exchange traded futures and
option contracts to reduce exposure to interest rate risk. At December 31, 1995
and 1994, commitments to sell mortgage loans totaled $2,154 million and $694
million, respectively, and commitments to purchase or originate mortgage loans
totaled $2,896 million and $690 million, respectively. GMAC's exchange traded
futures and option contracts, which are used to hedge mortgage loans held for
sale, have notional values of $100 million and $4,954 million at December 31,
1995 and 1994, respectively. Gains and losses on derivatives, including exchange
traded futures and option contracts, used to hedge interest rate risk associated
with rate locked funding commitments and mortgage loans held for sale are
deferred, and considered in the reporting of the underlying mortgages on a lower
of cost or market basis.
The notional values of derivatives used to hedge price and interest rate
risk associated with mortgage related securities totaled $66 million and $667
million at December 31, 1995 and 1994, respectively. Gains and losses associated
with these instruments are recognized in the current period on a mark to market
basis. Derivatives used to hedge purchased mortgage servicing rights have
notional values of $5,022 million and $482 million at December 31, 1995 and
1994, respectively; gains and losses on such contracts are recorded as an
adjustment to amortization expense.
GMAC has also entered into interest rate swap contracts in an effort to
stabilize short-term borrowing costs and to maintain a minimum return on certain
mortgage loans held for investment. Amounts received or paid under such interest
rate swap contracts are recorded as an adjustment to interest expense. At
December 31, 1995 and 1994, the notional values of such instruments totaled $133
million and $461 million, respectively.
CREDIT RISK
The forward contracts, options, and lines of credit previously discussed
contain an element of risk that the counterparties may be unable to meet the
terms of the agreements. However, General Motors minimizes such risk exposure
for forward contracts and options by limiting the counterparties to major
international banks and financial institutions. Management also reduces its
credit risk for unused lines of credit by applying the same credit policies in
making commitments as it does for extending loans. Management does not expect to
record any losses as a result of counterparty default. General Motors does not
require or place collateral for these financial instruments, except for the
lines of credit.
General Motors has business activities with customers, dealers, and
associates around the world, and its receivables from and guarantees to such
parties are well diversified and, in many cases, secured by collateral.
Consequently, in management's opinion, no significant concentration of credit
risk exists for General Motors.
II-22
<PAGE> 36
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 11. FAIR VALUE OF FINANCIAL INSTRUMENTS
In accordance with the requirements of SFAS No. 107, Disclosures about Fair
Value of Financial Instruments, and SFAS No. 119, Disclosures about Derivative
Financial Instruments and Fair Value of Financial Instruments, General Motors
has provided the following fair value estimates and information about valuation
methodologies. The estimated fair value amounts have been determined using
available market information or other appropriate valuation methodologies.
However, considerable judgment is required in interpreting market data to
develop estimates of fair value; therefore, the estimates are not necessarily
indicative of the amounts that could be realized or would be paid in a current
market exchange. The effect of using different market assumptions and/or
estimation methodologies may be material to the estimated fair value amounts.
Fair value information presented herein is based on information available
at December 31, 1995 and 1994. Although management is not aware of any factors
that would significantly affect the estimated fair value amounts, such amounts
have not been updated since those dates and, therefore, the current estimates of
fair value at dates subsequent to December 31, 1995 and 1994 may differ
significantly from these amounts. The estimated fair value of financial
instruments held by General Motors, for which it is practicable to estimate that
value, are set forth below:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------
1995 1994
------------------------ ------------------------
BOOK FAIR BOOK FAIR
VALUE VALUE VALUE VALUE
---------- ---------- ---------- ----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Assets
Cash and Marketable Securities.............. $ 16,642.9 $ 16,642.9 $ 16,075.6 $ 16,075.6
Finance Receivables -- net.................. 58,714.8 59,095.9 54,048.4 53,869.8
Accounts and Notes Receivable -- net........ 9,946.2 9,946.2 8,742.5 8,742.5
Other Assets................................ 6,349.8 6,474.2 7,591.6 7,801.4
Liabilities
Accounts Payable............................ (11,898.8) (11,898.8) (11,635.0) (11,635.0)
Notes and Loans Payable
Payable within one year.................. (46,305.1) (46,381.6) (36,108.5) (36,097.4)
Payable beyond one year.................. (37,018.4) (41,016.0) (37,621.7) (38,138.9)
Other Liabilities........................... (623.0) (639.5) (632.9) (622.8)
Stocks Subject to Repurchase.................. -- -- (450.0) (445.4)
</TABLE>
II-23
<PAGE> 37
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
The prior table excludes the book value and fair value of financial
instrument derivatives which are as follows:
<TABLE>
<CAPTION>
FAIR VALUE OF OPEN CONTRACTS(1) AT:
DECEMBER 31,
-----------------------------------------------
1995 1994
--------------------- ---------------------
ASSET LIABILITY ASSET LIABILITY
POSITION POSITION POSITION POSITION
-------- -------- -------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Foreign Exchange-Forward Contracts(2)................... $290 $ (174) $241 $ (63)
Foreign Exchange Options................................ 28 (29) 2 (1)
Interest Rate Forward Contracts......................... 181 (133) 48 (296)
Interest Rate Options................................... -- (42) -- (126)
Mortgage Contracts...................................... 46 (43) 9 (7)
</TABLE>
- -------------------------
(1) The related asset (liability) recorded on the balance sheet for foreign
exchange-forward contracts, foreign exchange options, interest rate forward
contracts, and interest rate options totaled $64 million, ($1) million,
($21) million, and ($46) million, respectively, at December 31, 1995, and
$42 million, $1 million, ($78) million, and ($137) million, respectively, at
December 31, 1994. The related asset recorded on the balance sheet for
mortgage contracts was $5 million and $1 million at December 31, 1995 and
1994, respectively.
(2) Foreign exchange contracts include certain derivatives with both foreign
exchange and interest rate exposures which had a fair value of $75 million
at December 31, 1995 and $77 million at December 31, 1994.
The following methods and assumptions were used to estimate the fair value
of each class of financial instrument:
CASH AND MARKETABLE SECURITIES
The fair value of cash equivalents and marketable securities is determined
principally based on quoted market prices.
FINANCE RECEIVABLES
The fair value is estimated by discounting the future cash flows using
applicable spreads to approximate current rates applicable to each category of
finance receivables. The carrying value of wholesale receivables and other
receivables whose interest rates adjust on a short-term basis with applicable
market indices (generally the prime rate) are assumed to approximate fair value
either due to their short maturities or due to the interest rate adjustment
feature.
ACCOUNTS AND NOTES RECEIVABLE AND ACCOUNTS PAYABLE
For receivables and payables with short maturities, the book values
approximate market value.
OTHER ASSETS AND OTHER LIABILITIES
Other assets reported at December 31, 1995 and 1994 include various
financial instruments (e.g., long-term receivables and certain investments)
having a fair value based on discounted cash flows, market quotations, and other
appropriate valuation techniques. The fair values of retained subordinated
interests in trusts and excess servicing assets (net of deferred costs) are
derived by discounting expected cash flows using
II-24
<PAGE> 38
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
current market rates. Estimated values of Industrial Development Bonds, included
in other liabilities and deferred credits, are based on quoted market prices for
the same or similar issues.
NOTES AND LOANS PAYABLE
The fair value of the debt payable within one year is determined by using
quoted market prices, if available, or calculating the estimated value of each
bank loan, note, or debenture in the portfolio at the applicable rate in effect.
Commercial paper, master notes, and demand notes have an original term of less
than 90 days and, therefore, the carrying amount of these liabilities is
considered fair value. Debt payable beyond one year has an estimated fair value
based on quoted market prices for the same or similar issues or based on the
current rates offered to General Motors for debt of similar remaining
maturities.
STOCKS SUBJECT TO REPURCHASE
At December 31, 1994, the fair value of the Corporation's repurchase
obligation was based on discounted cash flows assuming redemption by the Howard
Hughes Medical Institute (HHMI) at the specified exercise date. At the closing
Class H common stock price on December 31, 1994, the shares subject to
repurchase would have been valued at $523 million.
FOREIGN EXCHANGE-FORWARD CONTRACTS AND OPTIONS
The fair value of foreign exchange-forward contracts is estimated by
obtaining quotes for futures contracts with similar terms, adjusted where
necessary for maturity differences. The fair value of foreign exchange options
is estimated using active exchange quotations for most options, and pricing
models for illiquid options.
INTEREST RATE FORWARD CONTRACTS AND OPTIONS
The fair value of interest rate forward contracts, including contracts with
optionality, is estimated using pricing models based upon current market
interest rates. Exchange traded futures are valued at quoted market prices.
MORTGAGE CONTRACTS
The fair value of such contracts is estimated based upon the amount that
would be received or paid to terminate the contracts based on market prices of
similar financial instruments and current rates for mortgage loans.
UNUSED LINES OF CREDIT
Because loans extended under these commitments are at market interest
rates, there is no significant fair value position related to the outstanding
commitments.
NOTE 12. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
General Motors maintains hourly and salaried benefit plans that provide
postretirement medical, dental, vision, and life insurance to most U.S. retirees
and eligible dependents. These benefits are funded as incurred from the general
assets of General Motors. SFAS No. 106, Employers' Accounting for Postretirement
Benefits Other Than Pensions, requires that the cost of such benefits be
recognized in the consolidated financial statements during the period employees
provide service to General Motors.
The medical, dental, vision, and life insurance costs for active employees
during active service are not covered by SFAS No. 106 and are charged directly
to expense on a pay-as-you-go basis.
Certain of the Corporation's subsidiaries outside of the U.S. have
postretirement plans, although most participants are covered by government
sponsored or administered programs, and the postretirement cost of such programs
generally is not significant to General Motors.
II-25
<PAGE> 39
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
The components of non-pension postretirement benefit cost are set forth
below:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1995 1994 1993
-------- -------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Benefits earned during the year............................ $ 617.2 $ 955.4 $ 811.5
Interest accrued on benefits earned in prior years......... 3,120.0 3,114.2 3,177.5
Termination, curtailment, and settlement benefits.......... 26.4 (233.0) 174.4
Amortization of net actuarial (gains) losses............... (7.4) 407.4 --
Amortization of prior service costs due to plan changes.... (115.9) (121.7) --
-------- -------- --------
Total non-pension postretirement benefit cost............ $3,640.3 $4,122.3 $4,163.4
======== ======== ========
</TABLE>
The table below displays the components of General Motors' net
postretirement benefit obligation, as recognized in the Consolidated Balance
Sheet:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1995 1994
--------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Accumulated postretirement benefit obligation (APBO)
Current retirees.................................................. $23,155.1 $21,562.3
Fully eligible active plan participants........................... 5,295.6 3,984.7
Other active plan participants.................................... 12,411.1 11,196.1
--------- ---------
APBO................................................................ 40,861.8 36,743.1
Unamortized prior service costs due to plan changes................. 795.4 958.3
Unamortized net amount resulting from changes in plan experience and
actuarial assumptions............................................. (62.1) 2,316.8
--------- ---------
Net obligation recognized in the Consolidated Balance Sheet....... $41,595.1 $40,018.2
========= =========
</TABLE>
The following table summarizes the principal assumptions used in
determining the actuarial value of the APBO:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Weighted average discount rate.............................................. 7.5 % 8.8 %
Weighted average rate of increase in future compensation levels related to
pay-related life insurance................................................ 4.3 % 4.2 %
Base weighted average health-care cost trend rate (a)
1995...................................................................... 8.7 %
1996...................................................................... 6.5 %
Ultimate sustained weighted average health-care cost trend rate in 2002..... 5.0 %(b) 5.5 %
</TABLE>
- -------------------------
(a) Current year trend rate assumed at beginning of year is adjusted to actual
in determining year-end obligations.
(b) Rate remains at 6.5% through 1999, and then decreases on a linear basis
through 2002, to the ultimate weighted average trend rate of 5.0%.
The following decreases would result from a one percentage point increase
in the weighted average discount rates:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1995 1994
------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C>
APBO................................................................... $4,500 $3,800
</TABLE>
II-26
<PAGE> 40
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
The following increases would result from a one percentage point increase
in the weighted average health-care cost trend rates:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
------------------
1995 1994
------ ------
(DOLLARS IN
MILLIONS)
<S> <C> <C>
APBO..................................................................... $5,000 $3,950
Service and interest components of postretirement expense................ $ 470 $ 600
</TABLE>
General Motors has disclosed in the consolidated financial statements
certain amounts associated with estimated future postretirement benefits other
than pensions and characterized such amounts as "accumulated postretirement
benefit obligations", "liabilities", or "obligations". Notwithstanding the
recording of such amounts and the use of these terms, General Motors does not
admit or otherwise acknowledge that such amounts or existing postretirement
benefit plans of General Motors (other than pensions) represent legally
enforceable liabilities of General Motors.
NOTE 13. PENSIONS
General Motors has a number of defined benefit pension plans covering
substantially all employees. Plans covering U.S. and Canadian represented
employees generally provide benefits of negotiated stated amounts for each year
of service as well as significant supplemental benefits for employees who retire
with 30 years of service before normal retirement age. The benefits provided by
the plans covering U.S. and Canadian salaried employees, and employees in
certain foreign locations, are generally based on years of service and the
employee's salary history. General Motors also has certain nonqualified pension
plans covering executives which are based on targeted wage replacement
percentages and are unfunded.
In March 1995, the Corporation contributed to the General Motors
Hourly-Rate Employees Pension Plan (Hourly Plan) 173,163,187 shares of Class E
common stock, having an aggregate fair market value of approximately $6.3
billion (determined by an independent valuation expert retained by the Trustee)
at the time of contribution. The contribution was made under the terms of an
agreement between the Corporation and the Pension Benefit Guaranty Corporation
(the PBGC). Subject to the terms of the agreement, the Corporation will defer
the use of the funding credits that would otherwise result from such cash and
stock contributions. Consequently, the Corporation will continue to make regular
cash contributions to the Hourly Plan over the next several years. The agreement
with the PBGC also provides flexibility to the Corporation by granting a release
of EDS from liability, if any, under Title IV of the Employee Retirement Income
Security Act (ERISA) for the Corporation's U.S. pension plans, in the event EDS
were to leave the Corporation's control group under certain circumstances (Note
2). In addition, in connection with the contribution of the shares of Class E
common stock, the U.S. Department of Labor granted an exemption with respect to,
among other things, limits otherwise applicable under ERISA on the amount of
Class E common stock that could legally be held by the Hourly Plan.
The measurement date used for the Corporation's principal U.S. plans was
changed in 1994 from October 1 to December 31, primarily to align the
measurement date with the year-end consolidated financial statement date. The
measurement dates for the EDS and Hughes U.S. plans are October 1 and December
1, respectively. For non-U.S. plans, the measurement dates used are October 1
for certain foreign plans and December 1 for Canadian plans.
Plan assets are primarily invested in U.S. Government obligations, equity
and fixed income securities, commingled pension trust funds, insurance
contracts, and the Corporation's $1 2/3 par value and Class E common stocks
(valued as of the 1995 measurement date at $1,414.4 million and $7,464.5
million, respectively). General Motors' funding policy with respect to its
qualified plans is to contribute annually not
II-27
<PAGE> 41
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
less than the minimum required by applicable law and regulation. General Motors
made pension contributions to the U.S. plans of $10,364.6 million in 1995,
$7,655.6 million in 1994, and $4,387.9 million in 1993.
Total pension expense for General Motors amounted to $2,103.0 million in
1995, $3,677.4 million in 1994, and $2,684.9 million in 1993. Programs for early
retirement were offered to certain employees during 1995, 1994, and 1993. The
pension related cost of these programs was $67.0 million, $88.9 million, and
$659.3 million, respectively, of which $67.0 million, $88.9 million, and $229.4
million was expensed during 1995, 1994, and 1993, respectively. In 1993, the
remaining cost of $429.9 million was offset against certain training fund
accruals, based upon an agreement with represented hourly employees.
Net periodic pension cost and total pension expense of U.S. plans and plans
of subsidiaries outside the United States included the following components:
<TABLE>
<CAPTION>
NON-
U.S. PLANS U.S. PLANS
---------- ----------
(DOLLARS IN MILLIONS)
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1995
Benefits earned during the year..................................... $ 989.2 $ 187.0
Interest accrued on benefits earned in prior years.................. 4,916.4 684.0
Return on assets
Actual gain....................................................... (12,156.3) (675.8)
Less deferred gain................................................ 6,624.7 213.4
Net amortization.................................................... 1,054.0 117.7
---------- ----------
Net periodic pension cost........................................... 1,428.0 526.3
Termination, curtailment, and settlement benefits................... 50.5 25.1
Other-primarily minor pension plans................................. 9.3 63.8
---------- ----------
Total pension expense........................................ $ 1,487.8 $ 615.2
========= ========
YEAR ENDED DECEMBER 31, 1994
Benefits earned during the year..................................... $ 1,207.0 $ 223.7
Interest accrued on benefits earned in prior years.................. 4,466.6 617.7
Return on assets
Actual gain....................................................... (1,161.3) (105.0)
Plus deferred loss................................................ (3,312.0) (285.2)
Net amortization.................................................... 1,323.5 174.0
---------- ----------
Net periodic pension cost........................................... 2,523.8 625.2
Termination, curtailment, and settlement benefits................... 399.6 61.4
Other-primarily minor pension plans................................. 12.9 54.5
---------- ----------
Total pension expense........................................ $ 2,936.3 $ 741.1
========= ========
YEAR ENDED DECEMBER 31, 1993
Benefits earned during the year..................................... $ 939.9 $ 133.1
Interest accrued on benefits earned in prior years.................. 4,258.9 473.9
Return on assets
Actual gain....................................................... (7,159.0) (775.6)
Less deferred gain................................................ 3,329.1 453.1
Net amortization.................................................... 647.7 67.7
---------- ----------
Net periodic pension cost........................................... 2,016.6 352.2
Termination, curtailment, and settlement benefits................... 202.8 26.6
Other-primarily minor pension plans................................. 12.1 74.6
---------- ----------
Total pension expense........................................ $ 2,231.5 $ 453.4
========= ========
</TABLE>
II-28
<PAGE> 42
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
The tables below reconcile the funded status of General Motors' U.S. and
non-U.S. plans for which SFAS No. 87, Employers' Accounting for Pensions, has
been adopted with amounts recognized in the Consolidated Balance Sheet.
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------
1995 1994
----------------------- -----------------------
ASSETS ACCUM. ASSETS ACCUM.
EXCEED BENEFITS EXCEED BENEFITS
ACCUM. EXCEED ACCUM. EXCEED
BENEFITS ASSETS BENEFITS ASSETS
--------- ---------- --------- ----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
U.S. PLANS
Actuarial present value of benefits based on
service to date and present pay levels
Vested........................................ $24,557.6 $ 34,327.4 $20,631.9 $ 28,799.4
Nonvested..................................... 1,826.1 7,600.4 1,654.7 6,488.0
--------- ---------- --------- ----------
Accumulated benefit obligation.................. 26,383.7 41,927.8 22,286.6 35,287.4
Additional amounts related to projected pay
increases..................................... 2,734.3 238.3 1,985.5 192.4
--------- ---------- --------- ----------
Total projected benefit obligation (PBO) based
on service to date............................ 29,118.0 42,166.1 24,272.1 35,479.8
Plan assets at fair value....................... 29,699.8 38,581.5 25,827.9 24,579.7
--------- ---------- --------- ----------
PBO (in excess of) less than plan assets........ 581.8 (3,584.6) 1,555.8 (10,900.1)
Unamortized net amount resulting from changes in
plan experience and actuarial assumptions..... 5,891.0 7,269.1 4,180.1 5,567.4
Unamortized prior service cost.................. 1,276.2 5,166.4 1,357.5 5,887.2
Unamortized net obligation (asset) at date of
adoption...................................... (844.0) 519.6 (1,035.7) 624.3
Adjustment for unfunded pension liabilities..... -- (12,716.8) -- (11,886.5)
--------- ---------- --------- ----------
Net prepaid pension cost (accrued
liability) recognized in the
Consolidated Balance Sheet............ $ 6,905.0 $ (3,346.3) $ 6,057.7 $(10,707.7)
========= ========== ========= ==========
NON-U.S. PLANS
Actuarial present value of benefits based on
service to date and present pay levels
Vested........................................ $ 2,278.2 $ 5,546.2 $ 1,945.8 $ 4,535.9
Nonvested..................................... 78.6 167.9 68.8 148.0
--------- ---------- --------- ----------
Accumulated benefit obligation.................. 2,356.8 5,714.1 2,014.6 4,683.9
Additional amounts related to projected pay
increases..................................... 361.1 574.5 316.6 425.4
--------- ---------- --------- ----------
Total PBO based on service to date.............. 2,717.9 6,288.6 2,331.2 5,109.3
Plan assets at fair value....................... 3,023.7 2,415.3 2,673.3 1,543.1
--------- ---------- --------- ----------
PBO (in excess of) less than plan assets........ 305.8 (3,873.3) 342.1 (3,566.2)
Unamortized net amount resulting from changes in
plan experience and actuarial assumptions..... 550.6 786.8 455.4 394.7
Unamortized prior service cost.................. 175.8 911.4 192.1 962.1
Unamortized net obligation (asset) at date of
adoption...................................... (167.1) 226.1 (218.6) 229.9
Adjustment for unfunded pension liabilities..... -- (1,411.0) -- (1,206.7)
--------- ---------- --------- ----------
Net prepaid pension cost (accrued
liability) recognized in the
Consolidated Balance Sheet............ $ 865.1 $ (3,360.0) $ 771.0 $ (3,186.2)
========= ========== ========= ==========
</TABLE>
II-29
<PAGE> 43
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
The assumptions for non-U.S. plans were developed on a basis consistent
with that for U.S. plans, adjusted to reflect prevailing economic conditions and
interest rate environments. Assumptions used to determine the pension expense
and the actuarial value of the PBO were as shown below:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-------------
1995 1994
---- ----
<S> <C> <C>
Weighted average discount rate
U.S. plans.................................................................. 7.0% 8.5%
Non-U.S. plans.............................................................. 8.0 9.0
Rate of increase in future compensation levels*
U.S. plans.................................................................. 5.1 5.2
Non-U.S. plans.............................................................. 4.5 4.8
Expected long-term rate of return on plan assets
U.S. plans.................................................................. 10.0 10.0
Non-U.S. plans.............................................................. 9.9 9.8
</TABLE>
- -------------------------
* Benefits under the hourly plans are generally not based on wages and therefore
no benefit escalation beyond existing negotiated or anticipated increases was
included.
NOTE 14. OTHER LIABILITIES AND DEFERRED CREDITS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1995 1994
--------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Warranties, dealer and customer allowances, claims, discounts, etc. ... $10,508.8 $11,598.1
Customer deposits...................................................... 7,325.1 2,022.2
Unpaid insurance losses, loss adjustment expenses, and unearned
insurance premiums................................................... 2,921.6 2,985.6
Plant closings (excludes environmental)................................ 2,612.3 3,103.6
Environmental cleanup.................................................. 691.9 693.7
Employee benefits (excludes postemployment)............................ 2,376.8 2,437.0
Postemployment benefits................................................ 2,219.4 2,193.8
Governmental and other contract related................................ 970.3 777.8
Payrolls............................................................... 2,034.7 1,844.4
Taxes, other than income taxes......................................... 1,498.1 1,569.8
Deferred credits....................................................... 1,496.2 1,666.3
Insurance.............................................................. 1,199.7 1,022.9
Interest............................................................... 2,277.3 3,023.2
Industrial Development Bonds........................................... 623.0 632.9
Other.................................................................. 8,131.4 7,296.0
--------- ---------
Total............................................................. $46,886.6 $42,867.3
========= =========
</TABLE>
NOTE 15. SPECIAL PROVISION FOR SCHEDULED PLANT CLOSINGS
General Motors previously established a plant closing reserve to provide
for estimates of costs related to plant closures, including employee job
security and supplemental unemployment compensation benefits. The 1993 operating
results reflect a pre-tax increase of $950 million to the plant closing reserve
($589 million after taxes, or $0.83 per share of $1 2/3 par value common stock).
The 1993 increase to the reserve resulted from
II-30
<PAGE> 44
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
changes in assumptions, primarily regarding the amount and duration of job
security and supplemental unemployment benefits expected to be paid to
employees, given the terms of the Corporation's 1993 collective bargaining
agreements.
Hughes maintains a restructuring reserve that was established in 1992 to
provide for a reduction of Hughes' worldwide employment, a major facilities
consolidation, and a reevaluation of certain non-strategic businesses. In 1994
and 1993, the Hughes restructuring reserve was increased by $35 million and $78
million, respectively, primarily due to changes in the estimated loss on
disposition of two subsidiaries.
During 1995, 1994, and 1993, a total of $712.6 million, $727.1 million, and
$1,127.2 million, respectively, was charged against the reserves, primarily
related to employee job security costs. Included in the charges to the reserves
were $5.9 million, $4.5 million, and $12.6 million of environmental costs in
1995, 1994, and 1993, respectively. In 1994, the plant closing reserve was
decreased to reflect a $401.9 million discount for only the postemployment
benefits portion of the reserve due to the Corporation's use of discounting in
its method of adoption of SFAS No. 112. In 1995, the plant closing reserve was
increased by $215.4 million for the effects of accretion and a change in the
interest rate used to discount the postemployment benefits. The plant closing
reserve includes estimates of costs related to plant disposals and for employee
job security and supplemental unemployment benefits which are subject to change
in the near term (although not currently anticipated) due to changes in
assumptions and the period over which such costs are expected to be incurred.
NOTE 16. COMMITMENTS AND CONTINGENT LIABILITIES
Minimum future commitments under operating leases having noncancellable
lease terms in excess of one year, primarily for real property, aggregating
$6,475.5 million, are payable $1,002.4 million in 1996, $799.1 million in 1997,
$677.8 million in 1998, $638.4 million in 1999, $599.1 million in 2000, and
$2,758.7 million in 2001 and thereafter. Certain of the leases contain
escalation clauses and renewal or purchase options. Rental expenses under
operating leases were $1,751.9 million in 1995, $1,560.9 million in 1994, and
$1,472.4 million in 1993.
In 1973, Hughes Aircraft Company filed a lawsuit against the U.S.
Government in the U.S. Court of Claims for infringement of a patent utilized in
the design of satellites ("the Williams Patent"). In late 1983, the U.S. Court
of Appeals ruled that the patent was valid and that the Government had infringed
the patent. In June 1994, the U.S. Court of Claims issued a decision awarding
Hughes damages of $114 million. Both parties to the lawsuit have appealed the
judgment, with Hughes asserting that the award did not adequately compensate it
for damages suffered. In the opinion of the management of Hughes, there is a
reasonable possibility that this matter could be resolved in the near term.
While no amount has been recorded in Hughes' financial statements pending the
outcome of the case, resolution could result in a gain that would be material to
the earnings of General Motors attributable to Class H common stock.
General Motors is subject to potential liability under government
regulations and various claims and legal actions which are pending or may be
asserted against them. Some of the pending actions purport to be class actions.
The aggregate ultimate liability of General Motors under these government
regulations, and under these claims and actions, was not determinable at
December 31, 1995. In the opinion of management, such liability is not expected
to have a material adverse effect on the Corporation's consolidated operations
or financial position.
NOTE 17. STOCKHOLDERS' EQUITY
Holders of $1 2/3 par value, Class E, and Class H common stocks are
entitled to one, one-eighth, and one-half vote per share, respectively, on all
matters submitted to the stockholders for a vote. The liquidation rights of
common stockholders are based on per-share liquidation units of the various
classes and are subject to
II-31
<PAGE> 45
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
certain adjustments if outstanding common stock is subdivided, by stock split or
otherwise, or if shares of one class of common stock are issued as a dividend to
holders of another class of common stock.
At December 31, 1995, each share of $1 2/3 par value, Class E, and Class H
common stocks was entitled to a liquidation unit of the same as the vote per
share. Holders of Class E and Class H common stocks have no direct rights in the
equity or assets of EDS or Hughes, but rather have rights in the equity and
assets of General Motors (which includes 100% of the stock of EDS and Hughes).
The Corporation's Certificate of Incorporation provides, generally, that if
at any time the Corporation should sell, liquidate, or otherwise dispose of
substantially all of EDS, Hughes Aircraft Company, or the other businesses of
Hughes, shares of the Corporation's $1 2/3 par value common stock will
automatically be exchanged for Class E or Class H common stock, respectively.
After December 31, 1995, the Board may exchange $1 2/3 par value common
stock for Class E or Class H common stock, respectively, if the Board has
declared and paid certain minimum cash dividends during each of the last five
years preceding the exchange. Based on the dividends paid on the Class E and
Class H common stock in 1991 through 1995, the dividend condition described
above would be satisfied in 1996.
In the event any of the aforementioned exchanges were to occur, the
Corporation's Certificate of Incorporation provides that the Class E or Class H
common stockholders would receive $1 2/3 par value common stock having a market
value at the time of the exchange equal to 120% of the market value of the Class
E or Class H common stock exchanged (see Note 2).
The Corporation held an option to call 15 million shares of Class H common
stock subject to put options issued to the HHMI. In March 1995, the put and call
rights expired unexercised. As a result, $1.5 million was reclassified to Class
H common stock and $448.5 million was reclassified to capital surplus.
Holders of Series C Depositary Shares are entitled to receive cumulative
preferential dividends from the date of issue at the quarterly rate of $0.8125
per share. The Series C Depositary Shares are convertible at any time at the
option of the holder into shares of Class E common stock. On February 5, 1996,
the Corporation announced that the Board had authorized the redemption on
February 22, 1996 of all of the Corporation's outstanding Series C Preference
Shares, which are represented by Series C Depositary Shares. The redemption
price will be $51.95 per Series C Depositary Share, plus accrued and unpaid
dividends of $0.47, for a total redemption price of $52.42 per Series C
Depositary Share.
In May 1995, the Corporation concluded a tender offer, which began in April
1995, under which it purchased for $1.3 billion of cash (i) 24.3 million
depositary shares, each representing one-fourth of a share of its Series B
9 1/8% Preference Stock, at a purchase price of $27.50 per depositary share,
(ii) 9.6 million depositary shares, each representing one-fourth of a share of
its Series D 7.92% Preference Stock, at a purchase price of $26.375 per
depositary share, and (iii) 12.9 million depositary shares, each representing
one-fourth of a share of its Series G 9.12% Preference Stock, at a purchase
price of $28.25 per depositary share. The repurchase had an unfavorable impact
of $0.22 per share of $1 2/3 par value common stock. This was comprised of
tender offer expenses of $13.5 million after-tax, or $0.02 per share, that were
charged against income and the purchase price in excess of the carrying amount
of the preference shares amounting to $153.4 million, or $0.20 per share, that
was not charged against income but reduced earnings attributable to $1 2/3 par
value common stock.
In June 1994, the Corporation converted all 17,825,000 outstanding shares
of its Series A Conversion Preference Stock (Preference Equity Redemption
Cumulative Stock or PERCS) into shares of $1 2/3 par value common stock. The
Corporation 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 $1 2/3 par
value common stock for each share of Preference Stock called for conversion,
plus $0.1655 in cash as consideration for the accrued and unpaid
II-32
<PAGE> 46
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
dividend. Fractional shares of $1 2/3 par value common stock were paid in cash.
A total of 17.7 million shares of $1 2/3 par value common stock were issued in
this conversion.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------
1995 1994 1993
--------- --------- ---------
(DOLLARS IN MILLIONS
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Capital Stock
Preferred Stock, without par value, cumulative dividends (authorized,
6,000,000 shares) $5.00 series, stated value $100 per share,
redeemable at Corporation option at $120 per share
Outstanding at beginning of the year............................ $ -- $ -- $ 153.0
Redeemed by the Corporation during the year..................... -- -- (153.0)
--------- --------- ---------
Outstanding at end of the year.................................. -- -- --
--------- --------- ---------
$3.75 series, stated value $100 per share, redeemable at
Corporation option at $100 per share
Outstanding at beginning of the year............................ -- -- 81.4
Redeemed by the Corporation during the year..................... -- -- (81.4)
--------- --------- ---------
Outstanding at end of the year.................................. -- -- --
--------- --------- ---------
Preference Stock, $0.10 par value (authorized, 100,000,000 shares)
E series, convertible one-for-four at fixed dates into Class E
common stock
Issued at beginning of the year................................. -- -- 0.3
Converted into shares of Class E common stock................... -- -- (0.3)
--------- --------- ---------
Issued at end of the year....................................... -- -- --
--------- --------- ---------
Series A Conversion, mandatorily convertible one-for-one on July
1, 1994 into $1 2/3 par value common stock
Issued at beginning of the year (17,825,000 shares)............. -- 1.8 1.8
Converted into shares of $1 2/3 par value common stock
(17,825,000 shares).......................................... -- (1.8) --
--------- --------- ---------
Issued at end of the year (17,825,000 shares in 1993)........... -- -- 1.8
--------- --------- ---------
Series B 9 1/8% Depositary Shares, stated value $25 per share,
redeemable at Corporation option on or after January 1, 1999
Issued at beginning of the year (44,300,000 shares)............. 1.1 1.1 1.1
Reacquired under tender offer (24,279,414 shares)............... (0.6) -- --
--------- --------- ---------
Issued at end of the year (20,020,586 shares, equivalent to
5,005,147 shares of nonconvertible Series B 9 1/8% Preference
Stock, stated value $100 per share).......................... 0.5 1.1 1.1
--------- --------- ---------
Series C Depositary Shares, liquidation preference $50 per share,
convertible one for 1.4078 into Class E common stock, callable at
Corporation option on or after February 19, 1996
Issued at beginning of the year (31,880,600 shares)............. 0.3 0.3 0.3
Converted into shares of Class E common stock (91,497 shares)... -- -- --
--------- --------- ---------
Issued at end of the year (31,789,103 shares, equivalent to
3,178,910 shares of Series C Convertible Preference Stock)... 0.3 0.3 0.3
--------- --------- ---------
Series D 7.92% Depositary Shares, stated value $25 per share,
redeemable at Corporation option on or after August 1, 1999
Issued at beginning of the year (15,700,000 shares)............. 0.4 0.4 0.4
Reacquired under tender offer (9,630,091 shares)................ (0.3) -- --
--------- --------- ---------
Issued at end of the year (6,069,909 shares, equivalent to
1,517,477 shares of Series D 7.92% Preference Stock)......... 0.1 0.4 0.4
--------- --------- ---------
Series G 9.12% Depositary Shares, stated value $25 per share,
redeemable at Corporation option on or after January 1, 2001
Issued at beginning of the year (23,000,000 shares)............. 0.6 0.6 0.6
Reacquired under tender offer (12,920,101 shares)............... (0.3) -- --
--------- --------- ---------
Issued at end of the year (10,079,899 shares, equivalent to
2,519,975 shares of Series G 9.12% Preference Stock)......... 0.3 0.6 0.6
--------- --------- ---------
Total Preference Stocks.................................... $ 1.2 $ 2.4 $ 4.2
--------- --------- ---------
</TABLE>
II-33
<PAGE> 47
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------
1995 1994 1993
--------- --------- ---------
(DOLLARS IN MILLIONS
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Common Stock, $1 2/3 par value (authorized, 2,000,000,000 shares)
Issued at beginning of the year (754,345,782 shares in 1995)...... $ 1,257.2 $ 1,200.2 $ 1,178.1
Reacquired on the open market (9,510,687 shares in 1995).......... (15.8) -- --
Issued during the year (8,163,237 shares in 1995)................. 13.6 27.6 22.1
Series A conversion (9,941 shares in 1995)........................ -- 29.4 --
--------- --------- ---------
Issued at end of the year (753,008,273 shares in 1995, 754,345,782
in 1994, and 720,105,471 in 1993)............................... 1,255.0 1,257.2 1,200.2
--------- --------- ---------
Class E Common Stock, $0.10 par value (authorized, 1,000,000,000
shares)
Issued at beginning of the year (268,125,255 shares in 1995)...... 26.8 26.3 24.2
Reacquired on the open market (25,950 shares in 1995)............. -- -- --
Issued during the year (1,420,872 shares in 1995)................. 0.2 0.5 2.1
Issued in conjunction with U.S. Hourly-Rate Employees Pension Plan
contribution (173,163,187 shares in 1995)....................... 17.3 -- --
Series C conversion (128,802 shares in 1995)...................... -- -- --
--------- --------- ---------
Issued at end of the year (442,812,166 shares in 1995, 268,125,255
in 1994, and 263,089,320 in 1993)............................... 44.3 26.8 26.3
--------- --------- ---------
Class H Common Stock, $0.10 par value (authorized, 600,000,000 shares)
Issued at beginning of the year (78,720,022 shares in 1995)....... 7.9 7.6 7.0
Issued during the year (3,431,992 shares in 1995)................. 0.3 0.3 0.6
Reclassification of shares formerly subject to repurchase from
HHMI (15,000,000 shares in 1995)................................ 1.5 -- --
--------- --------- ---------
Issued at end of the year (97,152,014 shares in 1995, 78,720,022
in 1994, and 75,705,433 in 1993)................................ 9.7 7.9 7.6
--------- --------- ---------
Total capital stock at end of the year..................... $ 1,310.2 $ 1,294.3 $ 1,238.3
========= ========= =========
Capital Surplus (principally additional paid-in capital)
Balance at beginning of the year.................................. $13,149.4 $12,003.4 $10,971.2
Preference stock
Amounts in excess of par value of
Depositary shares reacquired under tender offer.............. (1,132.2) -- --
Series E shares converted.................................... -- -- (171.2)
Series A shares converted.................................... -- (720.5) --
Series C shares converted.................................... (4.5) -- --
$1 2/3 par value common stock
Amounts in excess of par value of
Shares issued................................................ 342.9 870.2 612.6
Shares reacquired on the open market......................... (378.1) -- --
Series A shares converted.................................... -- 692.8 --
Class E common stock
Amounts in excess of par value of
Series C shares converted.................................... 4.5 -- --
Series E shares converted.................................... -- -- 170.2
Shares issued during the year................................ 85.1 188.7 257.2
Shares reacquired on the open market......................... (1.3) -- --
Shares contributed to the U.S. Hourly-Rate Employees Pension
Plan....................................................... 6,241.5 -- --
Class H common stock
Amounts in excess of par value of
Shares issued................................................ 115.1 114.8 164.0
Reclassification of shares formerly subject to repurchase
from HHMI.................................................. 448.5 -- --
Shares reacquired on the open market......................... -- -- (0.6)
--------- --------- ---------
Balance at end of the year................................... $18,870.9 $13,149.4 $12,003.4
========= ========= =========
</TABLE>
II-34
<PAGE> 48
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------
1995 1994 1993
--------- --------- ---------
(DOLLARS IN MILLIONS
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net Income Retained for Use in the Business
(Accumulated Deficit)
Balance at beginning of the year.................................... $ 1,785.8 $(2,002.9) $(3,354.2)
--------- --------- ---------
Income before cumulative effect of accounting changes............... 6,932.5 5,658.7 2,465.8
Cumulative effect of accounting changes............................. (51.8) (758.1) --
--------- --------- ---------
Net income.......................................................... 6,880.7 4,900.6 2,465.8
--------- --------- ---------
Total........................................................ 8,666.5 2,897.7 (888.4)
--------- --------- ---------
Cash dividends
Preferred stock, $5.00 series, $1.68 per share in 1993............ -- -- 2.6
Preferred stock, $3.75 series, $1.26 per share in 1993............ -- -- 1.0
Preference stock, E-I series, $1.42 per share in 1993............. -- -- 4.6
Preference stock, Series A Conversion, $1.66 per share in 1994 and
$3.31 in 1993................................................... -- 32.5 59.0
Depositary Shares, Series B, $2.28 per share in 1995, 1994, and
1993............................................................ 59.5 101.1 101.1
Depositary Shares, Series C, $3.25 per share in 1995, 1994, and
1993............................................................ 103.5 103.6 103.6
Depositary Shares, Series D, $1.98 per share in 1995, 1994, and
1993............................................................ 16.8 31.1 31.1
Depositary Shares, Series G, $2.28 per share in 1995 and 1994 and
$2.34 in 1993................................................... 30.4 52.4 53.8
$1 2/3 par value common stock, $1.10 per share in 1995 and $0.80
in 1994 and 1993................................................ 824.2 592.6 565.8
Class E common stock, $0.52 per share in 1995, $0.48 in 1994, and
$0.40 in 1993................................................... 205.4 124.8 97.2
Class H common stock, $0.92 per share in 1995, $0.80 in 1994, and
$0.72 in 1993................................................... 87.9 73.8 64.1
--------- --------- ---------
Total cash dividends......................................... 1,327.7 1,111.9 1,083.9
--------- --------- ---------
Less redemption price of preference and preferred stock in excess of
stated value...................................................... 153.4 -- 30.6
--------- --------- ---------
Balance at end of the year................................. 7,185.4 1,785.8 (2,002.9)
========= ========= =========
Minimum Pension Liability Adjustment (Note 13)
Balance at beginning of the year.................................... (3,548.4) (5,311.2) (2,925.3)
Change during the year.............................................. (1,187.9) 1,762.8 (2,385.9)
--------- --------- ---------
Balance at end of the year................................. (4,736.3) (3,548.4) (5,311.2)
========= ========= =========
Accumulated Foreign Currency Translation Adjustments
Balance at beginning of the year.................................... (100.4) (494.4) (155.9)
Changes during the year -- net of tax (benefit) of $215.9, $263.8,
and $(210.0), respectively........................................ 322.9 394.0 (338.5)
--------- --------- ---------
Balance at end of the year................................. 222.5 (100.4) (494.4)
========= ========= =========
Net Unrealized Gains (Losses) on Investments in Certain Debt and
Equity Securities
Balance at beginning of the year.................................... 243.1 164.3 241.6
Cumulative effect of adopting SFAS No. 115.......................... -- 241.0 --
Changes during the year............................................. 249.7 (162.2) (77.3)
--------- --------- ---------
Balance at end of the year................................. 492.8 243.1 164.3
========= ========= =========
Total Stockholders' Equity............................................ $23,345.5 $12,823.8 $ 5,597.5
========= ========= =========
Memo: Retained earnings (accumulated deficit) attributable to:
$1 2/3 par value common stock..................................... $ 3,854.0 $ (778.8) $(4,080.1)
Class E common stock.............................................. 2,254.1 1,663.9 1,344.3
Class H common stock.............................................. 1,077.3 900.7 732.9
--------- --------- ---------
Total........................................................ $ 7,185.4 $ 1,785.8 $(2,002.9)
========= ========= =========
</TABLE>
II-35
<PAGE> 49
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 18. EARNINGS PER SHARE ATTRIBUTABLE TO AND DIVIDENDS ON COMMON STOCKS
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 General Motors, excluding the Available Separate Consolidated Net
Income of EDS and Hughes. Dividends on the Class E and Class H common stocks are
declared out of the Available Separate Consolidated Net Income of EDS and
Hughes, respectively, earned since the acquisition by the Corporation.
The Available Separate Consolidated Net Income of EDS and Hughes is
determined quarterly and is equal to the separate consolidated net income of EDS
and Hughes, respectively, excluding the effects of purchase accounting
adjustments arising at the time of the respective acquisition, multiplied by a
fraction, the numerator of which is a number equal to the weighted average
number of shares of Class E (438.9 million during the fourth quarter of 1995) or
Class H (96.5 million during the fourth quarter of 1995) common stock
outstanding during the period and the denominator of which is 483.7 million for
Class E stock and 399.9 million for Class H stock during the fourth quarter of
1995. Comparable numerators for the fourth quarters of 1994 and 1993 were 261.9
million and 253.5 million for Class E stock and 93.3 million and 88.7 million
for Class H stock. Comparable denominators for the fourth quarters of 1994 and
1993 were 481.7 million and 480.6 million, respectively, for Class E stock and
399.9 million for Class H stock in the fourth quarters of both years.
The denominators used in determining the Available Separate Consolidated
Net Income of EDS and Hughes are adjusted as deemed appropriate by the Board to
reflect subdivisions or combinations of the Class E and Class H common stocks
and to reflect certain transfers of capital to or from EDS and Hughes. The
Board's discretion to make such adjustments is limited by criteria set forth in
the Corporation's Certificate of Incorporation. In this regard, the Board has
generally caused the denominators to decrease as shares are purchased by EDS or
Hughes, and to increase as such shares are used, at EDS or Hughes expense, for
EDS or Hughes employee benefit plans or acquisitions.
Dividends may be paid on common stocks only when, as, and if declared by
the Board 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 Hughes, respectively, for the prior year. Notwithstanding the
current dividend policy, the Board declared a dividend on the Class H common
stock for each of the quarters of 1995, 1994, and 1993, which was based on an
annual rate higher than 35% of the Available Separate Consolidated Net Income of
Hughes for the preceding year.
NOTE 19. PROFIT SHARING PLANS
The profit sharing formula for most U.S. employees provides a range of
percentage payouts when the Corporation's manufacturing, wholesale marketing,
defense, electronics, and computer service operations U.S. income before income
taxes with the financing and insurance operations reflected on an equity basis
exceeds various minimum annual returns on U.S. sales and revenues. Both the
percentage payout and the minimum returns are as agreed to by General Motors and
eligible U.S. employees. General Motors' pre-tax income from U.S. operations in
1995 and 1994 resulted in a profit sharing payout of approximately $250 million
and $185
II-36
<PAGE> 50
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
million, respectively. General Motors' pre-tax loss from U.S. operations in 1993
precluded a payment under the profit sharing formula.
NOTE 20. STOCK INCENTIVE PLANS
General Motors' stock incentive plans consist of the General Motors Amended
1987 Stock Incentive Plan (the "GMSIP"), the 1984 Electronic Data Systems
Corporation Stock Incentive Plan (the "EDS Plan"), and the Hughes Electronics
Corporation Incentive Plan (the "Hughes Plan"). The GMSIP is administered by the
Executive Compensation Committee of the Board.
Under the GMSIP, 39.8 million shares of $1 2/3 par value, 12.2 million
shares of Class E, and 5.9 million shares of Class H common stock may be granted
from June 1, 1992 through May 31, 1997, of which 17.0 million, 10.7 million, and
3.6 million shares, respectively, were available for grants at December 31,
1995. Option prices are 100% of fair market value on the dates of grant, and the
options generally expire 10 years from the dates of grant, subject to earlier
termination under certain conditions.
Under the EDS Plan, EDS may grant shares and rights or options to acquire
up to 160 million shares of Class E common stock through October 17, 2004, of
which 93.3 million shares were available for grants at December 31, 1995. No
options were outstanding as of December 31, 1995, 1994, or 1993. Under the EDS
Plan, approximately 55.3 million shares of Class E common stock have also been
granted to key employees at stock prices up to $0.025 per share. Such shares
generally vest over a 10-year period from the date of grant. Approximately 19.8
million shares were not yet vested at December 31, 1995.
Under the Hughes Plan, Hughes may grant shares, rights, or options to
acquire up to 20 million shares of Class H common stock through May 31, 1997, of
which 3.9 million shares were available for grant at December 31, 1995. Option
prices are 100% of fair market value on the dates of grant, and the options
generally expire 10 years from the dates of grant, subject to earlier
termination under certain conditions.
Changes in the status of outstanding options under the GMSIP and the Hughes
Plan were as follows:
<TABLE>
<CAPTION>
GMSIP OPTION SHARES UNDER
$1 2/3 PAR VALUE COMMON PRICES OPTION
- ------------------------------------------------------------------ ------------- ------------
<S> <C> <C>
Outstanding at January 1, 1993.................................... $33.97-$48.07 22,068,746
Granted........................................................... 33.88- 44.00 5,526,855
Exercised......................................................... 33.97- 48.07 (4,303,326)
Terminated........................................................ 33.88- 48.07 (531,218)
----------
Outstanding at December 31, 1993................................ 33.88- 48.07 22,761,057
Granted........................................................... 37.32- 59.07 6,159,395
Exercised......................................................... 33.88- 48.07 (3,305,513)
Terminated........................................................ 33.88- 59.07 (340,161)
----------
Outstanding at December 31, 1994................................ 33.88- 59.07 25,274,778
Granted........................................................... 39.25- 47.50 6,600,115
Exercised......................................................... 33.88- 48.07 (2,248,627)
Terminated........................................................ 33.88- 59.07 (346,140)
----------
Outstanding at December 31, 1995................................ $33.88-$59.07 29,280,126
==========
Memo:
Options exercisable at December 31, 1995.......................... 19,963,479
==========
</TABLE>
II-37
<PAGE> 51
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
<TABLE>
<CAPTION>
HUGHES PLAN OPTION SHARES UNDER
CLASS H COMMON PRICES OPTION
- ------------------------------------------------------------------ ------------- ------------
<S> <C> <C>
Outstanding at January 1, 1993.................................... $17.07-$30.25 6,516,755
Granted........................................................... 28.00- 28.56 2,027,260
Exercised......................................................... 17.07- 30.25 (1,960,162)
Terminated........................................................ 17.07- 30.25 (217,845)
------------
Outstanding at December 31, 1993................................ 17.07- 30.25 6,366,008
Granted........................................................... 36.75 1,612,640
Exercised......................................................... 17.07- 30.25 (712,107)
Terminated........................................................ 17.07- 36.75 (202,220)
------------
Outstanding at December 31, 1994................................ 17.07- 36.75 7,064,321
Granted........................................................... 39.94 1,537,350
Exercised......................................................... 17.07- 36.75 (1,929,393)
Terminated........................................................ 28.00- 36.75 (14,425)
------------
Outstanding at December 31, 1995................................ $17.07-$39.94 6,657,853
==========
Memo:
Options exercisable at December 31, 1995.......................... 4,422,618
==========
</TABLE>
NOTE 21. SEGMENT REPORTING
INDUSTRY SEGMENTS
While the major portion of General Motors' operations is derived from the
automotive products industry segment, General Motors also has financing and
insurance and information technology industry segments, and produces products
and provides services in other industry segments. The automotive products
segment consists of the design, manufacture, assembly, and sale of automobiles,
trucks, and related parts and accessories. The financing and insurance
operations assist in the merchandising of General Motors' products as well as
other products. GMAC offers financial services and certain types of insurance to
dealers and customers. In addition, GMAC is engaged in mortgage banking and
investment services. The information technology operations relate to the design,
installation, and operation of business information systems. The other products
segment consists of military vehicles, radar and weapon control systems, guided
missile systems, and defense and commercial satellites; the design,
installation, and operation of telecommunication systems; as well as the design,
development, and manufacture of locomotives. Because of the high degree of
integration, substantial interdivisional and intersegment transfers of materials
and services are made. Intersegment sales and revenues are made at negotiated
selling prices.
Substantially all of the products in the automotive segment are marketed
through retail dealers and through distributors and jobbers in the United
States, Canada, and Mexico, and through distributors and dealers overseas.
II-38
<PAGE> 52
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Information concerning operations by industry segment as of and for each of
the three years ended December 31, follows:
<TABLE>
<CAPTION>
FINANCING &
AUTOMOTIVE INSURANCE INFORMATION OTHER
PRODUCTS OPERATIONS TECHNOLOGY PRODUCTS TOTAL
---------- ----------- ---------- --------- ----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
1995
Net Sales and Revenues
Outside........................... $132,159.0 $11,664.0 $ 8,531.0 $11,507.1 $163,861.1
Intersegment...................... 102.8 -- 3,891.1 -- --
---------- --------- --------- --------- ----------
Total(1)....................... $132,261.8 $11,664.0 $ 12,422.1 $11,507.1 $163,861.1
Operating Profit.................... $ 6,101.4 N/A(2) $ 1,529.0 $ 538.0 $ 8,168.4
---------- --------- --------- --------- ----------
Identifiable Assets at Year-End..... $ 91,162.0 $94,469.4 $ 10,908.9 $17,371.8 $213,912.1
---------- --------- --------- --------- ----------
Depreciation and Amortization....... $ 5,990.0 $ 4,426.9 $ 1,107.8 $ 497.0 $ 12,021.7
---------- --------- --------- --------- ----------
Capital Expenditures................ $ 8,215.8 $ 133.0 $ 1,261.5 $ 467.0 $ 10,077.3
========== ========= ========= ========= ==========
1994
Net Sales and Revenues
Outside........................... $123,253.4 $ 9,418.8 $ 6,412.9 $11,506.4 $150,591.5
Intersegment...................... 416.9 -- 3,547.2 -- --
---------- --------- --------- --------- ----------
Total(1)....................... $123,670.3 $ 9,418.8 $ 9,960.1 $11,506.4 $150,591.5
---------- --------- --------- --------- ----------
Operating Profit.................... $ 6,116.0 N/A(2) $ 1,214.5 $ 890.8 $ 8,221.3
---------- --------- --------- --------- ----------
Identifiable Assets at Year-End..... $ 88,064.5 $84,554.6 $ 8,901.7 $13,879.1 $195,399.9
---------- --------- --------- --------- ----------
Depreciation and Amortization....... $ 5,655.2 $ 3,301.5 $ 800.2 $ 494.4 $ 10,251.3
---------- --------- --------- --------- ----------
Capital Expenditures................ $ 5,545.4 $ 132.8 $ 1,186.0 $ 360.9 $ 7,225.1
========== ========= ========= ========= ==========
1993
Net Sales and Revenues
Outside........................... $107,908.5 $ 8,752.0 $ 5,183.6 $11,777.8 $133,621.9
Intersegment...................... 118.7 -- 3,323.7 0.2 --
---------- --------- --------- --------- ----------
Total(1)....................... $108,027.2 $ 8,752.0 $ 8,507.3 $11,778.0 $133,621.9
---------- --------- --------- --------- ----------
Operating Profit.................... $ 1,625.7 N/A(2) $ 1,076.4 $ (171.7) $ 2,530.4
---------- --------- --------- --------- ----------
Identifiable Assets at Year-End..... $ 81,009.0 $79,352.3 $ 7,086.4 $16,454.7 $183,902.4
---------- --------- --------- --------- ----------
Depreciation and Amortization....... $ 5,281.9 $ 2,892.6 $ 661.7 $ 605.8 $ 9,442.0
---------- --------- --------- --------- ----------
Capital Expenditures................ $ 5,164.8 $ 118.5 $ 816.4 $ 371.0 $ 6,470.7
========== ========= ========= ========= ==========
</TABLE>
- -------------------------
(1) After elimination of intersegment transactions.
(2) Financing and Insurance Operations do not report Operating Profit.
II-39
<PAGE> 53
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
A reconciliation of Outside Net Sales and Revenues to Total Net Sales and
Revenues, and of Operating Profit to Income before Income Taxes detailed in the
Consolidated Statement of Income and a reconciliation of Identifiable Assets to
Total Assets displayed in the Consolidated Balance Sheet follow:
<TABLE>
<CAPTION>
AS OF AND FOR THE YEARS ENDED DECEMBER 31,
------------------------------------------
1995 1994 1993
---------- ---------- ----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Outside Net Sales and Revenues reported on the
previous page...................................... $163,861.1 $150,591.5 $133,621.9
Other Income......................................... 4,967.5 4,359.7 4,597.6
---------- ---------- ----------
Total Net Sales and Revenues.................... $168,828.6 $154,951.2 $138,219.5
========== ========== ==========
Total Operating Profit reported on the previous
page............................................... $ 8,168.4 $ 8,221.3 $ 2,530.4
Financing and Insurance Operations................... 1,783.2 1,439.8 1,572.8
Other Corporate Income and Expenses Less Intersegment
Transactions....................................... (175.3) (1,307.8) (1,527.9)
---------- ---------- ----------
Income before Income Taxes...................... $ 9,776.3 $ 8,353.3 $ 2,575.3
========== ========== ==========
Identifiable Assets reported on the previous page.... $213,912.1 $195,399.9 $183,902.4
Corporate Assets..................................... 5,687.9 5,648.2 7,207.9
Eliminations......................................... (2,476.6) (2,449.4) (2,909.4)
---------- ---------- ----------
Total Assets.................................... $217,123.4 $198,598.7 $188,200.9
========== ========== ==========
</TABLE>
GEOGRAPHIC SEGMENTS
Net sales and revenues, income before cumulative effect of accounting
change, net income, total and net assets, and average number of employees in the
U.S., Other North America (Canada and Mexico), and in locations outside North
America are summarized below and on the next page. Income before cumulative
effect of accounting change and net income are after provisions for deferred
income taxes applicable to that portion of the undistributed earnings deemed to
be not permanently invested, less available tax credits and deductions, and
appropriate consolidating adjustments. Interarea sales and revenues are made at
negotiated selling prices. Average number of employees for 1995 includes NCRS
employees through May.
<TABLE>
<CAPTION>
AS OF AND FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------------------------------------
OTHER
UNITED NORTH LATIN ALL
STATES AMERICA EUROPE AMERICA OTHER TOTAL*
---------- --------- --------- -------- -------- ----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
1995
Net Sales and Revenues
Outside (excluding GMAC)....... $107,999.8 $ 7,214.6 $29,205.9 $6,014.6 $1,762.2 $152,197.1
GMAC and related operations.... 8,124.8 985.8 2,191.5 118.9 243.0 11,664.0
Other income................... 3,688.8 120.5 638.8 330.6 188.8 4,967.5
---------- --------- --------- -------- -------- ----------
Subtotal outside............ 119,813.4 8,320.9 32,036.2 6,464.1 2,194.0 168,828.6
Interarea...................... 12,781.0 17,997.6 1,054.7 621.2 59.0 --
---------- --------- --------- -------- -------- ----------
Total....................... $132,594.4 $26,318.5 $33,090.9 $7,085.3 $2,253.0 $168,828.6
========== ========= ========= ======== ======== ==========
</TABLE>
- -------------------------
* After elimination of interarea transactions.
II-40
<PAGE> 54
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
<TABLE>
<CAPTION>
AS OF AND FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------------------------------------
OTHER
UNITED NORTH LATIN ALL
STATES AMERICA EUROPE AMERICA OTHER TOTAL*
---------- --------- --------- -------- -------- ----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
1995 (CONCLUDED)
Income Before Cumulative Effect
of Accounting Change........... $ 3,134.7 $ 1,148.2 $ 1,579.0 $ 713.5 $ 297.5 $ 6,932.5
---------- --------- --------- -------- -------- ----------
Net Income....................... $ 3,082.9 $ 1,148.2 $ 1,579.0 $ 713.5 $ 297.5 $ 6,880.7
---------- --------- --------- -------- -------- ----------
Total Assets..................... $163,065.0 $14,151.9 $34,792.1 $4,883.2 $4,479.9 $217,123.4
---------- --------- --------- -------- -------- ----------
Net Assets....................... $ 6,450.1 $ 4,638.4 $ 8,540.1 $3,028.5 $1,550.1 $ 23,345.5
---------- --------- --------- -------- -------- ----------
Average Number of Employees (in
thousands)..................... 437 108 129 29 6 709
========== ========= ========= ======== ======== ==========
1994
Net Sales and Revenues
Outside (excluding GMAC)....... $101,185.6 $ 8,376.7 $24,849.5 $5,304.6 $1,456.4 $141,172.8
GMAC and related operations.... 6,531.2 781.0 1,894.2 57.2 155.2 9,418.8
Other income................... 3,193.5 177.7 483.5 354.8 150.1 4,359.6
---------- --------- --------- -------- -------- ----------
Subtotal outside............ 110,910.3 9,335.4 27,227.2 5,716.6 1,761.7 154,951.2
Interarea...................... 11,476.9 13,607.4 753.7 90.2 59.2 --
---------- --------- --------- -------- -------- ----------
Total....................... $122,387.2 $22,942.8 $27,980.9 $5,806.8 $1,820.9 $154,951.2
========== ========= ========= ======== ======== ==========
Income Before Cumulative Effect
of Accounting Change........... $ 2,075.5 $ 1,177.3 $ 1,337.1 $ 828.5 $ 256.9 $ 5,658.7
---------- --------- --------- -------- -------- ----------
Net Income....................... $ 1,361.9 $ 1,132.8 $ 1,337.1 $ 828.5 $ 256.9 $ 4,900.6
---------- --------- --------- -------- -------- ----------
Total Assets..................... $154,175.7 $13,765.9 $29,523.6 $4,023.6 $3,463.4 $198,598.7
---------- --------- --------- -------- -------- ----------
Net Assets....................... $ (1,178.2) $ 4,724.0 $ 6,719.3 $2,178.2 $1,065.3 $ 12,823.8
---------- --------- --------- -------- -------- ----------
Average Number of Employees (in
thousands)..................... 437 101 126 27 6 697
========== ========= ========= ======== ======== ==========
1993
Net Sales and Revenues
Outside (excluding GMAC)....... $ 89,868.0 $ 7,311.5 $21,847.3 $4,595.0 $1,248.1 $124,869.9
GMAC and related operations.... 5,921.7 682.0 1,947.6 52.5 148.2 8,752.0
Other income................... 3,783.5 210.0 345.2 191.3 67.6 4,597.6
---------- --------- --------- -------- -------- ----------
Subtotal outside............ 99,573.2 8,203.5 24,140.1 4,838.8 1,463.9 138,219.5
Interarea...................... 10,094.7 13,416.4 433.9 166.9 30.8 --
---------- --------- --------- -------- -------- ----------
Total....................... $109,667.9 $21,619.9 $24,574.0 $5,005.7 $1,494.7 $138,219.5
========== ========= ========= ======== ======== ==========
Net Income....................... $ 190.1 680.8 $ 604.7 $ 798.0 $ 160.4 $ 2,465.8
---------- --------- --------- -------- -------- ----------
Total Assets..................... $151,343.5 $10,963.7 $23,395.0 $3,113.4 $2,672.8 $188,200.9
---------- --------- --------- -------- -------- ----------
Net Assets....................... $ (7,315.6) $ 4,516.3 $ 5,967.3 $2,054.9 $1,001.2 $ 5,597.5
---------- --------- --------- -------- -------- ----------
Average Number of Employees (in
thousands)..................... 448 99 131 27 6 711
========== ========= ========= ======== ======== ==========
</TABLE>
- -------------------------
* After elimination of interarea transactions.
II-41
<PAGE> 55
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 22. GENERAL MOTORS ACCEPTANCE CORPORATION AND SUBSIDIARIES
CONDENSED GMAC CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------
1995 1994 1993
--------- -------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Financing Revenue
Retail and lease financing................................. $ 3,291.6 $2,955.0 $3,673.4
Operating leases........................................... 6,285.0 4,855.7 3,870.9
Wholesale and term loans................................... 2,087.4 1,608.1 1,207.7
---------- -------- --------
Total financing revenue................................. 11,664.0 9,418.8 8,752.0
Interest and discount........................................ 4,936.3 4,230.9 4,721.2
Depreciation on operating leases............................. 4,304.8 3,233.8 2,702.0
---------- -------- --------
Net financing revenue................................... 2,422.9 1,954.1 1,328.8
Insurance premiums earned.................................... 1,082.4 1,127.6 1,107.2
Other income................................................. 2,116.8 1,598.6 2,624.3
---------- -------- --------
Net Financing Revenue and Other......................... 5,622.1 4,680.3 5,060.3
Expenses..................................................... 3,838.9 3,240.5 3,487.5
---------- -------- --------
Income before income taxes.............................. 1,783.2 1,439.8 1,572.8
Income taxes................................................. 752.2 512.7 591.7
---------- -------- --------
Income before cumulative effect of accounting change.... 1,031.0 927.1 981.1
Cumulative effect of accounting change....................... -- (7.4)* --
---------- -------- --------
Net Income............................................ $ 1,031.0 $ 919.7 $ 981.1
========== ======== ========
Cash dividends paid to General Motors........................ $ 950.0 $ 875.0 $1,250.0
========== ======== ========
</TABLE>
- -------------------------
* GMAC adopted SFAS No. 112 effective January 1, 1994.
CONDENSED GMAC CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1995 1994
--------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Cash and cash equivalents............................................. $ 1,448.6 $ 1,339.5
Investments in securities............................................. 4,328.2 3,891.7
Finance receivables -- net............................................ 59,330.4 54,625.1
Net investment in operating leases.................................... 22,134.9 17,809.2
Notes receivable from General Motors.................................. -- 1,080.5
Other assets.......................................................... 7,330.9 6,791.4
--------- ---------
Total Assets..................................................... $94,573.0 $85,537.4
========= =========
Short-term debt....................................................... $43,871.8 $35,114.8
Accounts payable and other liabilities (including General Motors --
$1,787.6 and $1,867.3).............................................. 11,381.3 10,989.3
Long-term debt........................................................ 31,050.6 31,539.6
Stockholder's equity.................................................. 8,269.3 7,893.7
--------- ---------
Total Liabilities and Stockholder's Equity....................... $94,573.0 $85,537.4
========= =========
</TABLE>
II-42
<PAGE> 56
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
CONDENSED GMAC CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------
1995 1994 1993
----------- ----------- -----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Net Cash Provided by Operating Activities.............. $ 4,998.7 $ 4,735.8 $ 4,901.8
----------- ----------- -----------
Cash Flows from Investing Activities
Finance receivables -- acquisitions.................... (163,033.3) (156,579.8) (103,396.3)
Finance receivables -- liquidations.................... 132,242.6 137,598.4 92,808.6
Notes receivable from General Motors................... 1,080.5 275.0 10,207.7
Operating leases -- acquisitions....................... (14,034.6) (13,086.8) (6,971.3)
Operating leases -- liquidations....................... 5,642.5 3,569.5 2,572.7
Investments in securities -- acquisitions.............. (12,723.0) (11,715.3) (10,976.1)
Investments in securities -- liquidations.............. 12,397.3 11,495.2 10,676.7
Proceeds from sales of receivables -- wholesale........ 20,718.2 13,098.9 --
Proceeds from sales of receivables -- retail........... 5,264.3 5,701.1 13,072.2
Due and deferred from receivable sales................. 231.9 322.9 (618.4)
Other.................................................. 579.4 (612.5) 449.1
----------- ----------- -----------
Net Cash Provided by (Used in) Investing
Activities...................................... (11,634.2) (9,933.4) 7,824.9
----------- ----------- -----------
Cash Flows from Financing Activities
Debt with original maturities 90 days and
over -- proceeds....... 47,807.0 46,348.0 38,577.4
-- liquidations... (44,138.7) (46,541.3) (45,148.0)
Debt with original maturities less than 90 days -- net
change............................................... 4,026.5 3,540.8 (4,744.0)
Cash dividends paid to General Motors.................. (950.0) (875.0) (1,250.0)
Proceeds from issuance of stock to General Motors...... -- 35.0 --
----------- ----------- -----------
Net Cash Provided by (Used in) Financing
Activities...................................... 6,744.8 2,507.5 (12,564.6)
----------- ----------- -----------
Effect of exchange rate changes on cash and cash
equivalents.......................................... (0.2) 1.5 (5.1)
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents... 109.1 (2,688.6) 157.0
Cash and cash equivalents at beginning of the year..... 1,339.5 4,028.1 3,871.1
----------- ----------- -----------
Cash and cash equivalents at end of the year...... $ 1,448.6 $ 1,339.5 $ 4,028.1
=========== =========== ===========
Supplementary cash flow information
Interest paid........................................ $ 4,783.3 $ 4,223.7 $ 4,819.1
Income taxes paid (refundable)....................... $ 210.9 $ (16.0) $ 430.5
</TABLE>
INVESTMENTS IN SECURITIES
GMAC's bonds, equity securities, notes, certificates of deposit, other
investments, and preferred stocks with mandatory redemption terms are carried at
fair value.
<TABLE>
<CAPTION>
DECEMBER 31, 1995
------------------------------------------------
FAIR UNREALIZED UNREALIZED
Type of Security COST VALUE GAINS LOSSES
-------- -------- ---------- ----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Bonds, notes, and other securities
United States Government and governmental agencies
and authorities................................. $ 268.0 $ 279.4 $ 11.5 $ (0.1)
States, municipalities, and political
subdivisions.................................... 1,720.8 1,825.0 112.7 (8.5)
Other.............................................. 1,621.3 1,674.1 54.5 (1.7)
-------- -------- ------ ------
Total debt securities................................ 3,610.1 3,778.5 178.7 (10.3)
Equity securities.................................... 280.0 549.7 284.6 (14.9)
-------- -------- ------ ------
Total investments in securities................. $3,890.1 $4,328.2 $463.3 $(25.2)
======== ======== ====== ======
</TABLE>
II-43
<PAGE> 57
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONCLUDED
<TABLE>
<CAPTION>
DECEMBER 31, 1994
------------------------------------------------
FAIR UNREALIZED UNREALIZED
Type of Security COST VALUE GAINS LOSSES
-------- -------- ---------- ----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Bonds, notes, and other securities
United States Government and governmental agencies
and authorities................................. $ 298.5 $ 285.0 $ 0.3 $ (13.8)
States, municipalities, and political
subdivisions.................................... 1,813.3 1,747.4 38.0 (103.9)
Other.............................................. 1,417.0 1,387.3 4.2 (33.9)
-------- -------- ------ -------
Total debt securities................................ 3,528.8 3,419.7 42.5 (151.6)
Equity securities.................................... 280.9 472.0 203.2 (12.1)
-------- -------- ------ -------
Total investments in securities............... $3,809.7 $3,891.7 $245.7 $ (163.7)
======== ======== ====== =======
</TABLE>
The distribution of maturities of GMAC's debt securities is summarized
below:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------
1995 1994
-------------------- --------------------
FAIR
Maturity COST VALUE COST
-------- -------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Due in one year or less............................... $ 265.5 $ 269.6 $ 177.6 $ 179.0
Due after one year through five years................. 900.8 935.2 637.9 631.5
Due after five years through 10 years................. 1,020.4 1,084.5 997.9 968.8
Due after 10 years.................................... 861.9 925.7 1,094.3 1,027.4
Mortgage-backed securities............................ 561.5 563.5 621.1 613.0
-------- -------- -------- --------
Total debt securities.......................... $3,610.1 $3,778.5 $3,528.8 $3,419.7
======== ======== ======== ========
</TABLE>
The following table summarizes proceeds, gains, and losses realized from
the sale of investment securities:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1995 1994 1993
-------- -------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Debt Securities
Sale Proceeds................................................ $1,370.9 $1,036.4 $2,093.4
Gross Realized Gains......................................... 21.4 15.0 58.6
Gross Realized Losses........................................ 15.5 18.9 13.3
Equity Securities
Sale Proceeds................................................ $ 202.7 $ 185.1 $ 258.6
Gross Realized Gains......................................... 87.4 80.5 160.5
Gross Realized Losses........................................ 6.9 11.9 2.3
</TABLE>
* * *
II-44
<PAGE> 58
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
SUPPLEMENTARY INFORMATION
SELECTED QUARTERLY DATA (UNAUDITED)
<TABLE>
<CAPTION>
1995 QUARTERS
-----------------------------------------------------
1ST 2ND 3RD 4TH
--------- --------- --------- ---------
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Net sales and revenues................................. $43,285.0 $44,146.2 $37,462.9 $43,934.5
========= ========= ========= =========
Income before income taxes............................. $ 3,479.7 $ 3,217.2 $ 803.4 $ 2,276.0(1)
U.S., foreign, and other income taxes.................. 1,325.7 947.1 161.0(2) 410.0(1)
--------- --------- --------- ---------
Income before cumulative effect of accounting
change............................................. 2,154.0 2,270.1 642.4 1,866.0
Cumulative effect of accounting change................. (51.8)(3) -- -- --
--------- --------- --------- ---------
Net income........................................... 2,102.2 2,270.1 642.4 1,866.0
Dividends on preference stocks......................... 72.0 199.5(4) 41.4 50.7
--------- --------- --------- ---------
Income on common stocks.............................. $ 2,030.2 $ 2,070.6 $ 601.0 $ 1,815.3
========= ========= ========= =========
Earnings attributable to common stocks
$1 2/3 par value before cumulative effect of
accounting change.................................. $ 1,896.3 $ 1,796.0 $ 316.7 $ 1,499.8
Cumulative effect of accounting change............... (51.8)(3) -- -- --
--------- --------- --------- ---------
Net earnings attributable to $1 2/3 par value........ $ 1,844.5 $ 1,796.0 $ 316.7 $ 1,499.8
========= ========= ========= =========
Net earnings attributable to Class E................. $ 122.4 $ 205.8 $ 222.9 $ 244.4
========= ========= ========= =========
Net earnings attributable to Class H................. $ 63.3 $ 68.8 $ 61.4 $ 71.1
========= ========= ========= =========
Average number of shares of common stocks outstanding
(in millions)
$1 2/3 par value..................................... 752.6 746.3 748.2 751.5
Class E.............................................. 300.0 438.7(5) 438.8 438.9
Class H.............................................. 94.2 95.4 95.9 96.5
Earnings per share attributable to common stocks
$1 2/3 par value before cumulative effect of
accounting change.................................. $ 2.51 $2.39 $0.42 $1.98
Cumulative effect of accounting change............... (0.07)(3) -- -- --
------ ----- ----- -----
Net earnings attributable to $1 2/3 par value........ $ 2.44 $2.39 $0.42 $1.98
====== ===== ===== =====
Net earnings attributable to Class E................. $ 0.42 $0.47 $0.51 $0.56
====== ===== ===== =====
Net earnings attributable to Class H................. $ 0.67 $0.72 $0.64 $0.74
====== ===== ===== =====
Cash dividends per share of common stocks
$1 2/3 par value..................................... $0.20 $0.30 $0.30 $0.30
Class E.............................................. 0.13 0.13 0.13 0.13
Class H.............................................. 0.23 0.23 0.23 0.23
Price range of common stocks
$1 2/3 par value(6): High............................ $45.63 $49.00 $51.88 $53.13
Low............................. 37.25 42.38 45.38 43.38
Class E(6): High............................ 41.38 45.25 47.50 52.63
Low............................. 36.88 38.38 41.50 43.88
Class H(6): High............................ 41.75 41.63 42.75 50.00
Low............................. 33.25 37.75 39.13 39.50
</TABLE>
- -------------------------
(1) Income taxes and interest expense in the fourth quarter reflect benefits
related to the resolution of worldwide prior year income tax issues. Income
taxes also reflects the benefit of a U.S. net operating loss carryback --
for tax purposes only -- to years with higher tax rates.
(2) The effective income tax rate in the third quarter reflects tax benefits
from the mix of foreign income and foreign income taxes.
(3) In November 1995, the Corporation adopted, retroactive to January 1, 1995,
the provisions of the EITF consensus on Issue No. 95-1. The unfavorable
cumulative effect of this accounting change was $51.8 million, or $0.07 per
share of $1 2/3 par value common stock. Previously reported first quarter
results have been restated to reflect the effects of adoption. The effect on
other 1995 quarters was not material.
(4) Includes a $153.4 million tender offer premium associated with the
repurchase of a portion of the Series B, D, and G preference stock.
(5) Reflects Class E common stock contribution to the U.S. Hourly Pension Plan.
(6) The principal market is the New York Stock Exchange and prices are based on
the Composite Tape. $1 2/3 par value common stock is also listed on the
Chicago, Pacific, and Philadelphia stock exchanges. As of December 31, 1995,
there were 625,652 holders of record of $1 2/3 par value common stock,
272,096 holders of record of Class E common stock, and 267,052 holders of
record of Class H common stock.
II-45
<PAGE> 59
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
SUPPLEMENTARY INFORMATION -- CONTINUED
SELECTED QUARTERLY DATA (UNAUDITED) -- CONCLUDED
<TABLE>
<CAPTION>
1994 QUARTERS
-------------------------------------------------------
1ST 2ND 3RD 4TH
--------- --------- --------- ---------
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Net sales and revenues.............................. $37,495.4 $40,392.2 $34,510.3 $42,553.3
========= ========= ========= =========
Income before income taxes.......................... $ 2,452.1 $ 3,086.2 $ 453.6 $ 2,361.4
U.S., foreign, and other income taxes (credit)...... 840.3 1,163.4 (98.4)(1) 789.3
--------- --------- --------- ---------
Income before cumulative effect of accounting
change.......................................... 1,611.8 1,922.8 552.0 1,572.1
Cumulative effect of accounting change.............. (758.1)(2) -- -- --
--------- --------- --------- ---------
Net income...................................... 853.7 1,922.8 552.0 1,572.1
Dividends on preference stocks...................... 86.8 89.7 72.1 72.1
--------- --------- --------- ---------
Income on common stocks......................... $ 766.9 $ 1,833.1 $ 479.9 $ 1,500.0
========= ========= ========= =========
Earnings attributable to common stocks
$1 2/3 par value before cumulative effect of
accounting change............................. $ 1,362.1 $ 1,665.3 $ 306.0 $ 1,311.8
Cumulative effect of accounting change.......... (751.3)(2) -- -- --
--------- --------- --------- ---------
Net earnings attributable to $1 2/3 par value... $ 610.8 $ 1,665.3 $ 306.0 $ 1,311.8
========= ========= ========= =========
Net earnings attributable to Class E............ $ 92.1 $ 106.5 $ 117.3 $ 128.5
========= ========= ========= =========
Class H before cumulative effect of accounting
change........................................ $ 70.8 $ 61.3 $ 56.6 $ 59.7
Cumulative effect of accounting change.......... (6.8)(2) -- -- --
--------- --------- --------- ---------
Net earnings attributable to Class H............ $ 64.0 $ 61.3 $ 56.6 $ 59.7
========= ========= ========= =========
Average number of shares of common stocks
outstanding
(in millions)
$1 2/3 par value................................ 725.3 733.1 752.7 753.7
Class E......................................... 257.9 260.1 261.2 261.9
Class H......................................... 90.6 91.7 92.7 93.3
Earnings per share attributable to common stocks
$1 2/3 par value before cumulative effect of
accounting change............................. $ 1.86 $2.23 $0.40 $1.74
Cumulative effect of accounting change.......... (1.05)(2) -- -- --
------ ----- ----- -----
Net earnings attributable to $1 2/3 par value... $ 0.81 $2.23 $0.40 $1.74
====== ===== ===== =====
Net earnings attributable to Class E............ $ 0.36 $0.41 $0.45 $0.49
====== ===== ===== =====
Class H before cumulative effect of accounting
change........................................ $ 0.78 $0.67 $0.61 $0.64
Cumulative effect of accounting change.......... (0.08)(2) -- -- --
------ ----- ----- -----
Net earnings attributable to Class H............ $ 0.70 $0.67 $0.61 $0.64
====== ===== ===== =====
Cash dividends per share of common stocks
$1 2/3 par value................................ $0.20 $0.20 $0.20 $0.20
Class E......................................... 0.12 0.12 0.12 0.12
Class H......................................... 0.20 0.20 0.20 0.20
Price range of common stocks
$1 2/3 par value: High............................ $65.38 $60.13 $53.38 $48.38
Low............................. 52.00 49.75 46.25 36.13
Class E: High............................ 36.88 38.00 38.50 39.50
Low............................. 27.50 32.88 33.00 34.75
Class H: High............................ 40.38 38.75 38.00 37.75
Low............................. 32.63 31.75 34.63 31.00
</TABLE>
- -------------------------
(1) The income tax credit in the third quarter is primarily a function of the
low level of pre-tax income, a low effect tax rate for foreign operations,
and a favorable adjustment related to book tax accruals which had been
established in prior years.
(2) Effective January 1, 1994, General Motors adopted SFAS No. 112. The
unfavorable cumulative effect of adopting SFAS No. 112 was $758.1 million,
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 Class H common
stock.
II-46
<PAGE> 60
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
SUPPLEMENTARY INFORMATION -- CONTINUED
SELECTED FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
AS OF AND FOR THE YEARS ENDED DECEMBER 31,
--------------------------------------------
1995 1994 1993
---------- ---------- ----------
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net sales and revenues............................ $168,828.6 $154,951.2 $138,219.5
Income before income taxes........................ $ 9,776.3 $ 8,353.3 $ 2,575.3
Percentage of sales and revenues.................. 5.8% 5.4% 1.9%
========== ========== ==========
Net income........................................ $ 6,880.7(1) $ 4,900.6 $ 2,465.8
Income on common stocks........................... $ 6,517.1 $ 4,579.9 $ 2,109.0
Rate of return on average common stockholders'
equity.......................................... 54.2%(2) 79.9%(2) 104.2%(2)
========== ========== ==========
$1 2/3 par value common stock
Earnings attributable to........................ $ 5,457.0(1) $ 3,893.9(3) $ 1,537.3
Cash dividends.................................. 824.2 592.6 565.8
---------- ---------- ----------
Net income retained............................. $ 4,632.8 $ 3,301.3 $ 971.5
========== ========== ==========
Earnings per share.............................. $7.21(1) $5.15(3) $2.13
Cash dividends per share........................ 1.10 0.80 0.80
---------- ---------- ----------
Net income retained per share................... $6.11 $4.35 $1.33
========== ========== ==========
Class E common stock
Earnings attributable to........................ $ 795.5 $ 444.4 $ 367.2
Cash dividends.................................. 205.4 124.8 97.2
---------- ---------- ----------
Net income retained............................. $ 590.1 $ 319.6 $ 270.0
========== ========== ==========
Earnings per share.............................. $1.96 $1.71 $1.51
Cash dividends per share........................ 0.52 0.48 0.40
---------- ---------- ----------
Net income retained per share................... $1.44 $1.23 $1.11
========== ========== ==========
Class H common stock
Earnings attributable to........................ $ 264.6 $ 241.6(3) $ 204.5
Cash dividends.................................. 87.9 73.8 64.1
---------- ---------- ----------
Net income retained............................. $ 176.7 $ 167.8 $ 140.4
========== ========== ==========
Earnings per share.............................. $2.77 $2.62(3) $2.30
Cash dividends per share........................ 0.92 0.80 0.72
---------- ---------- ----------
Net income retained per share................... $1.85 $1.82 $1.58
========== ========== ==========
Average number of shares of common stocks
outstanding (in millions)
$1 2/3 par value................................ 749.7 741.3 710.2
Class E......................................... 404.6 260.3 243.0
Class H......................................... 95.5 92.1 88.6
Cash dividends on capital stocks as a % of net
income.......................................... 19.3% 22.7% 44.0%
Expenditures for real estate, plants, and
equipment....................................... $ 6,351.4 $ 4,883.7 $ 3,822.1
Expenditures for special tools.................... $ 3,725.9 $ 2,341.4 $ 2,648.6
Cash and marketable securities.................... $ 16,642.9 $ 16,075.6 $ 17,962.7
Working capital (with GMAC on an equity basis).... $ 2,390.5 $ 700.9 $ 2,822.2
Current ratio (with GMAC on an equity basis)...... 1.06 1.02 1.08
Total assets...................................... $217,123.4 $198,598.7 $188,200.9
Long-term debt and capitalized leases (with GMAC
on an equity basis)............................. $ 6,134.0 $ 6,218.7 $ 6,383.6
</TABLE>
- -------------------------
See notes on page II-49.
II-47
<PAGE> 61
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
SUPPLEMENTARY INFORMATION -- CONTINUED
SELECTED FINANCIAL DATA (UNAUDITED) -- CONTINUED
<TABLE>
<CAPTION>
AS OF AND FOR THE
YEARS ENDED DECEMBER 31,
-----------------------------
1992 1991
---------- ----------
(DOLLARS IN MILLIONS EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C>
Net sales and revenues........................................ $132,242.2 $123,108.8
Loss before income taxes...................................... $ (3,333.1) $ (5,892.3)
Percentage of sales and revenues.............................. (2.5)% (4.8)%
========== ==========
Net loss...................................................... $(23,498.3) $ (4,452.8)
Loss on common stocks......................................... $(23,804.6) $ (4,523.2)
Rate of return on average common stockholders' equity......... (169.3)%(2) (15.9)%
========== ==========
$1 2/3 par value common stock
Loss attributable to........................................ $(23,940.7) (4) $ (4,851.4) (5)
Cash dividends.............................................. 945.4 983.4
---------- ----------
Net loss accumulated........................................ $(24,886.1) $ (5,834.8)
========== ==========
Loss per share.............................................. $(38.28) (4) $(7.97) (5)
Cash dividends per share.................................... 1.40 1.60
---------- ----------
Net loss accumulated per share.............................. $(39.68) $(9.57)
========== ==========
Class E common stock
Earnings attributable to.................................... $ 278.4 $ 223.6(5)
Cash dividends.............................................. 76.1 62.5
---------- ----------
Net income retained......................................... $ 202.3 $ 161.1
========== ==========
Earnings per share.......................................... $1.33 $1.14(5)
Cash dividends per share.................................... 0.36 0.32
---------- ----------
Net income retained per share............................... $0.97 $0.82
========== ==========
Class H common stock
Earnings (Loss) attributable to............................. $ (142.3) (4) $ 104.6(5)
Cash dividends.............................................. 53.3 54.3
---------- ----------
Net income retained (loss accumulated)...................... $ (195.6) $ 50.3
========== ==========
Earnings (Loss) per share................................... $(2.29) (4) $1.39(5)
Cash dividends per share.................................... 0.72 0.72
---------- ----------
Net income retained (loss accumulated) per share............ $(3.01) $0.67
========== ==========
Average number of shares of common stocks outstanding (in
millions)
$1 2/3 par value............................................ 670.5 614.6
Class E..................................................... 209.1 195.3
Class H..................................................... 75.3 73.7
Cash dividends on capital stocks as a % of net income......... N/A N/A
Expenditures for real estate, plants, and equipment........... $ 4,336.7 $ 4,255.1
Expenditures for special tools................................ $ 2,252.9 $ 2,956.8
Cash and marketable securities................................ $ 15,107.7 $ 10,192.4
Working capital (with GMAC on an equity basis)................ $ 10,938.6 $ 10,807.1
Current ratio (with GMAC on an equity basis).................. 1.32 1.36
Total assets.................................................. $190,196.0 $184,074.6
Long-term debt and capitalized leases (with GMAC on an equity
basis)...................................................... $ 7,055.4 $ 6,699.1
</TABLE>
- -------------------------
See notes on page II-49.
II-48
<PAGE> 62
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
SUPPLEMENTARY INFORMATION -- CONCLUDED
SELECTED FINANCIAL DATA (UNAUDITED) -- CONCLUDED
- -------------------------
(1) In November 1995, the Corporation adopted, retroactive to January 1, 1995,
the provisions of the EITF consensus on Issue No. 95-1. The unfavorable
effect of this accounting change was $51.8 million, or $0.07 per share of
$1 2/3 par value common stock.
(2) The high returns in 1995, 1994, and 1993 compared to the large negative
return in 1992 reflect the adoption of SFAS No. 106 and its impact on
lowering average common stockholders' equity.
(3) General Motors adopted SFAS No. 112, Employers' Accounting for
Postemployment Benefits, effective January 1, 1994. The unfavorable
cumulative effect of adopting SFAS No. 112 was $751.3 million or $1.05 per
share of $1 2/3 par value and $6.8 million or $0.08 per share of Class H
common stock.
(4) General Motors adopted SFAS No. 106, Employers' Accounting for
Postretirement Benefits Other Than Pensions, effective January 1, 1992. The
unfavorable cumulative effect of adopting SFAS No. 106 was $20,687.3 million
or $33.38 per share of $1 2/3 par value and $150.4 million or $2.08 per
share of Class H common stock. Also effective January 1, 1992, Hughes
changed its revenue recognition policy for certain commercial businesses.
The unfavorable effect of this change on 1992 earnings was $32.8 million or
$0.05 per share of $1 2/3 par value and $7.2 million or $0.10 per share of
Class H common stock.
(5) Effective January 1, 1991, accounting procedures were changed to include in
inventory general purpose spare parts previously charged directly to
expense. The effect of this change on 1991 earnings was a favorable
adjustment of $302.7 million or $0.50 per share of $1 2/3 par value and $3.8
million or $0.04 per share of Class H common stock. Also, General Motors
adopted SFAS No. 109, Accounting for Income Taxes, effective January 1,
1991. The favorable (unfavorable) cumulative effect of adopting SFAS No. 109
was $230.5 million or $0.38 per share of $1 2/3 par value, ($6.1) million or
($0.03) per share of Class E, and $8.3 million or $0.09 per share of Class H
common stock.
II-49
<PAGE> 63
MANAGEMENT'S DISCUSSION AND ANALYSIS
GM-NAO/DELPHI FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------
1995 1994 1993
---------- ---------- ----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Net Sales
Vehicles and service parts................... $ 95,936.0 $ 91,767.6 $ 80,553.1
Components................................... 26,425.5 26,096.7 25,090.1
Intrasector eliminations..................... (19,108.6) (19,731.8) (19,678.7)
---------- ---------- ----------
Total Net Sales......................... 103,252.9 98,132.5 85,964.5
---------- ---------- ----------
Pre-tax Income (Loss).......................... 3,346.4 1,589.3 (2,387.7)
Income Taxes (Benefit)......................... 962.7 268.4 (1,336.2)
Earnings of Nonconsolidated Affiliates......... 63.6 61.0 39.8
Cumulative effect of accounting changes........ (51.8)(1) (704.6)(2) --
---------- ---------- ----------
Net Income (Loss)....................... $ 2,395.5 $ 677.3 $ (1,011.7)
========== ========== ==========
Profit (Loss) Margin(3)................. 2.3% 0.7% (1.2)%
Depreciation and Amortization.................. $4,663.6 $4,324.2 $4,224.7
Capital Expenditures........................... $6,012.8 $3,976.0 $3,560.7
Worldwide Employment at December 31, (in
thousands)................................... 434 431 436
</TABLE>
- -------------------------
(1) In November 1995, the provisions of Issue No. 95-1 of the Emerging Issues
Task Force of the Financial Accounting Standards Board (EITF) were
retroactively adopted to January 1, 1995, which had an unfavorable impact of
$51.8 million.
(2) Statement of Financial Accounting Standards (SFAS) No. 112, Employers'
Accounting for Postemployment Benefits, was adopted effective January 1,
1994, which had an unfavorable impact of $704.6 million.
(3) Profit (loss) margin represents net income (loss) as a percent of net sales.
GM-NAO/DELPHI FINANCIAL REVIEW
The net income of GM-NAO/Delphi, which represents the combined results for
GM-NAO and Delphi Automotive Systems, totaled $2.4 billion, or 2.3% of net
sales, an increase of $1.7 billion from 1994. Excluding accounting changes, 1995
net income was $2.4 billion, up $1.0 billion from the 1994 net income of $1.4
billion. The improved profitability reflected revenue growth and savings from
continued global sourcing and lean manufacturing strategies.
Net sales were $103.3 billion for 1995, an increase of $5.2 billion over
1994. The net sales increase resulted from a 23,000 unit increase in wholesale
sales to nearly 5.6 million units as well as favorable price retention and an
increase of approximately 9% in Delphi's non-GM-NAO vehicle sales. These
increases were partially offset by a year-over-year shift in vehicle sales from
the large/luxury segments to the small/compact segments.
GM's North American vehicle deliveries were 5.3 million units in 1995,
which resulted in a market share of 32.3%, unchanged from 1994. GM has
maintained its position as the #1 vehicle producer in North America for over 60
years. During 1995, GM-NAO increased its market share in both Canada and Mexico
reflecting the favorable customer reaction to new products. However, in the
U.S., market share was adversely affected by continuing capacity constraints for
the most popular truck models.
II-50
<PAGE> 64
VEHICLE UNIT DELIVERIES OF CARS AND TRUCKS -- GM-NAO
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------------------------------------
1995 1994 1993
--------------------------- --------------------------- ---------------------------
GM AS GM AS GM AS
A % OF A % OF A % OF
INDUSTRY GM INDUSTRY INDUSTRY GM INDUSTRY INDUSTRY GM INDUSTRY
-------- ----- -------- -------- ----- -------- -------- ----- --------
(UNITS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
United States
Cars............................... 8,636 2,956 34.2% 8,991 3,079 34.3% 8,519 2,927 34.4%
Trucks............................. 6,483 1,939 29.9% 6,422 1,984 30.9% 5,682 1,786 31.4%
------ ----- ------ ----- ------ -----
Total United States(1)........... 15,119 4,895 32.4% 15,413 5,063 32.8% 14,201 4,713 33.2%
Other North America
Canada............................. 1,165 385 33.0% 1,258 410 32.6% 1,190 378 31.8%
Mexico............................. 225 48 21.4% 620 113 18.2% 607 107 17.6%
------ ----- ------ ----- ------ -----
Total North America.............. 16,509 5,328 32.3% 17,291 5,586 32.3% 15,998 5,198 32.5%
====== ===== ====== ===== ====== =====
WHOLESALE SALES -- GM-NAO
Cars............................... 3,352 3,353 3,238
Trucks............................. 2,208 2,184 1,968
----- ----- -----
Total............................ 5,560 5,537 5,206
===== ===== =====
</TABLE>
- -------------------------
(1) Industry deliveries include foreign brands of 4,052,000 units or 26.8% in
1995, 4,136,000 units or 26.8% in 1994, and 3,723,000 units or 26.2% in
1993.
During 1994, net sales increased $12.1 billion or 14.1% compared to net
sales of $86.0 billion for 1993. The increased net sales in 1994 primarily
resulted from higher wholesale sales in line with vehicle deliveries. GM-NAO
vehicle deliveries increased 7.5% during 1994, slightly below the full-year
industry delivery increase of 8.1%.
Significant cost savings were achieved in the two primary drivers of
costs -- material and manufacturing. Material cost reductions in 1995 and 1994
resulted from on-going efforts led by our worldwide purchasing team, while our
lean manufacturing initiatives increased efficiency and quality. Manufacturing
cost savings in 1995 also reflected lower pension costs from improved funding of
U.S. pension plans. The manufacturing cost savings in 1995 and 1994 were
partially offset by increased safety and emissions costs and spending to support
new product development. Increased truck production, in response to market
demand, and trimming of unneeded capacity resulted in capacity utilization
increasing from 77% in 1993 to 87% in 1995.
Pre-tax income for 1995 increased by $1.76 billion to $3.35 billion,
compared to $1.59 billion for 1994 and a pre-tax loss of $2.39 billion for 1993.
The 1995 increase in the pre-tax income reflected the material and manufacturing
efficiencies and lower interest expense, partially offset by increased
depreciation and amortization associated with new equipment and special tools.
The 1994 improvement is principally attributable to increased volume and
material and manufacturing efficiencies, partially offset by increased new
product development expenditures.
The effective income (benefit) tax rate for 1995 was 28.8% compared to
16.9% for 1994 and (56.0%) for 1993. The 1995 effective income tax rate
reflected a U.S. net operating loss -- for tax purposes only -- that will be
carried back to prior years that were subject to higher income tax rates. The
1994 effective income tax rate reflected favorable tax positions in Canada and
Mexico, while the higher than normal 1993 income tax benefits resulted from the
favorable impact of the increase in the U.S. corporate income tax rate. The
higher rate resulted in benefits because of GM-NAO/Delphi's net deferred tax
asset position.
On March 22, 1996, General Motors reached an agreement with the United Auto
Workers Local 696 in Dayton, Ohio that ended a work stoppage that had ceased
production at 26 of its 29 North American assembly plants and at certain of its
automotive component plants. General Motors estimates that the work stoppage
will have an unfavorable effect of approximately $900 million after tax, or
$1.20 per share of $1 2/3 par value common stock, on its operating results for
the first quarter of 1996.
Statements regarding the effect of the work stoppage and the estimated
unfavorable impact on GM's operating results are forward-looking statements
which by their nature are subject to numerous uncertainties that could cause
actual results to vary.
II-51
<PAGE> 65
GMIO FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------
1995 1994 1993
--------- --------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Net Sales............................................... $32,111.6 $28,086.5 $24,942.4
--------- --------- ---------
Pre-tax Income.......................................... 1,600.6 2,231.5 1,393.7
Income Taxes............................................ 161.5 817.6 228.3
Earnings (Loss) of Nonconsolidated Affiliates........... 204.5 161.3 (179.4)
--------- --------- ---------
Net Income
GM Europe............................................. 796.4 694.9 243.7
Other International................................... 847.2 880.3 742.3
--------- --------- ---------
Total Net Income................................. $ 1,643.6 $ 1,575.2 $ 986.0
========= ========= =========
Profit Margin.................................... 5.1% 5.6% 4.0%
Depreciation and Amortization........................... $1,364.3 $1,202.0 $ 985.3
Capital Expenditures.................................... $2,086.1 $1,387.5 $1,509.2
Worldwide Employment at December 31, (in thousands)..... 103 102 107
</TABLE>
GMIO FINANCIAL REVIEW
GMIO further improved profitability in 1995 with net income of $1,643.6
million compared with $1,575.2 million in 1994 and $986.0 million in 1993. The
increased net income in 1995 and 1994 resulted from significant improvements in
GM Europe's (GME) earnings and continued strong financial results from our Latin
American Operations.
Total net sales for GMIO increased by $4.0 billion, or 14.2%, to $32.1
billion in 1995 compared with $28.1 billion in 1994. Net sales for 1994 were
$3.2 billion, or 12.9% higher than 1993. At the pre-tax level, GMIO recorded
income of $1,600.6 million which was down significantly from the 1994 pre-tax
income of $2,231.5 million. During 1994, pre-tax income increased $837.8 million
compared to 1993. The reduction in pre-tax income in 1995 was largely the result
of adverse foreign exchange rate movements of approximately $600 million,
material and labor cost pressures in Latin America, and start-up and launch
costs associated with the introduction in Europe of the new Opel/Vauxhall
Vectra. These higher 1995 costs were partially offset by increased volume
worldwide. The 1994 results reflected increased volume worldwide, partially
offset by substantial business development costs of expanding GMIO's operations
in the fast growing Latin American and Asian and Pacific regions. With a
favorable income tax position compared to 1994 and growth in the earnings of
nonconsolidated affiliates, GMIO was able to attain a 5.1% profit margin in 1995
compared to 5.6% in 1994 and 4.0% in 1993.
Looking at the regional split of net income, GMIO's net income improvement
in 1995 and 1994 resulted from gains from GME, although the balance of GMIO's
operations generated $847.2 million and $880.3 million of net income in 1995 and
1994, respectively. GME's net income improved from $694.9 million in 1994 to
$796.4 million in 1995, a $101.5 million, or 14.6%, increase. During 1994, GME's
net income more than doubled, compared to net income of $243.7 million in 1993.
The improvement in 1995 reflected volume gains, material and manufacturing cost
reductions, and a favorable income tax rate, partially offset by negative
exchange rate movements and costs associated with the new Vectra model
introduction in the second half of the year. The increase in net income for GME
from 1993 to 1994 resulted from strong volume gains, lower employment --
separation costs, and manufacturing -- and material-cost reductions.
II-52
<PAGE> 66
VEHICLE UNIT DELIVERIES OF CARS AND TRUCKS -- GMIO
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------------------------------------
1995 1994 1993
-------------------------- -------------------------- --------------------------
GM AS A GM AS A GM AS A
% OF % OF % OF
INDUSTRY GM INDUSTRY INDUSTRY GM INDUSTRY INDUSTRY GM INDUSTRY
-------- ----- ------- -------- ----- ------- -------- ----- -------
(UNITS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INTERNATIONAL
Europe
Germany....................... 3,586 581 16.2% 3,470 553 15.9% 3,455 547 15.8%
United Kingdom................ 2,179 335 15.4% 2,139 347 16.2% 1,975 340 17.2%
Other West Europe............. 7,680 751 9.8% 7,815 751 9.6% 7,196 671 9.3%
------ ----- ------ ----- ------ -----
Total West Europe........ 13,445 1,667 12.4% 13,424 1,651 12.3% 12,626 1,558 12.3%
Central/East Europe........... 1,816 58 3.2% 1,764 53 3.0% 2,949 64 2.2%
------ ----- ------ ----- ------ -----
Total Europe............. 15,261 1,725 11.3% 15,188 1,704 11.2% 15,575 1,622 10.4%
------ ----- ------ ----- ------ -----
Latin America, Africa and the
Middle East (LAAMO)
Brazil........................ 1,728 348 20.2% 1,398 269 19.3% 1,135 255 22.5%
Venezuela..................... 89 28 31.6% 75 22 30.0% 125 31 24.8%
Other Latin American.......... 993 127 12.8% 1,189 125 10.5% 1,015 121 11.9%
------ ----- ------ ----- ------ -----
Total Latin America...... 2,810 503 17.9% 2,662 416 15.6% 2,275 407 17.9%
Africa........................ 615 80 13.0% 501 63 12.5% 518 57 11.0%
Middle East................... 534 64 11.9% 607 63 10.4% 730 72 9.9%
------ ----- ------ ----- ------ -----
Total LAAMO.............. 3,959 647 16.3% 3,770 542 14.4% 3,523 536 15.2%
------ ----- ------ ----- ------ -----
Asian and Pacific
Australia..................... 643 129 20.2% 616 122 19.8% 556 102 18.3%
Other Asian and Pacific....... 12,306 495 4.0% 11,854 425 3.6% 11,152 393 3.5%
------ ----- ------ ----- ------ -----
Total Asian and
Pacific............... 12,949 624 4.8% 12,470 547 4.4% 11,708 495 4.2%
------ ----- ------ ----- ------ -----
Total International...... 32,169 2,996 9.3% 31,428 2,793 8.9% 30,806 2,653 8.6%
====== ===== ====== ===== ====== =====
WHOLESALE SALES -- GMIO
Cars.......................... 2,233 2,127 1,931
Trucks........................ 774 664 648
----- ----- -----
Total.................... 3,007 2,791 2,579
===== ===== =====
</TABLE>
In the remainder of GMIO's operations, 1995 net income declined marginally
from the $880.3 million reported in 1994 -- a $33.1 million, or 3.8%, reduction
- -- and net income for 1994 increased 18.6% compared to 1993. The primary causes
of the decline in 1995 were the impact of the government initiated "Popular Car"
program in Brazil which negatively impacted sales mix; adverse exchange rate
movements; material and labor costs pressures in Latin America; and continued
growth-related expenditures in the Asian and Pacific region. These negative
factors were partially offset by a favorable income tax rate, improved volumes,
and income gains from nonconsolidated affiliates -- particularly Isuzu. The
improvement in 1994 compared to 1993 resulted from industry expansions in Latin
America and the Asian and Pacific region and improved results from
nonconsolidated affiliates, partially offset by capacity constraints in Brazil,
the timing of start-up operations in Argentina, and substantial business
development costs.
Finally, as an indication of its continued commitment to leadership in the
international automotive business, GMIO's capital expenditures in 1995 totaled
approximately $2.1 billion, nearly 50% more than the $1.4 billion spent in 1994,
which was down slightly compared to 1993.
II-53
<PAGE> 67
GMAC FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------
1995 1994 1993
--------- --------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Financing Revenue
Retail and lease financing.............................. $3,291.6 $2,955.0 $3,673.4
Operating leases........................................ 6,285.0 4,855.7 3,870.9
Wholesale and term loans................................ 2,087.4 1,608.1 1,207.7
--------- --------- ---------
Total Financing Revenue.............................. 11,664.0 9,418.8 8,752.0
Interest and discount..................................... 4,936.3 4,230.9 4,721.2
Depreciation on operating leases.......................... 4,304.8 3,233.8 2,702.0
--------- --------- ---------
Net Financing Revenue................................ 2,422.9 1,954.1 1,328.8
Other income and insurance premiums earned................ 3,199.2 2,726.2 3,731.5
Expenses.................................................. 3,838.9 3,240.5 3,487.5
--------- --------- ---------
Pre-tax Income............................................ 1,783.2 1,439.8 1,572.8
Income Taxes.............................................. 752.2 512.7 591.7
Cumulative effect of accounting change(1)................. -- (7.4) --
--------- --------- ---------
$1,031.0 $ 919.7 $ 981.1
Net Income........................................... ========= ========= =========
Average Earning Assets.................................... $83,301.9 $74,451.2 $75,659.8
Return on Average Equity.................................. 12.5% 11.6% 11.9%
Worldwide Employment at December 31, (in thousands)....... 17 17 18
</TABLE>
- -------------------------
(1) GMAC adopted SFAS No. 112, Employers' Accounting for Postemployment
Benefits, effective January 1, 1994. The unfavorable cumulative effect of
adopting SFAS No. 112 was $7.4 million.
II-54
<PAGE> 68
GMAC FINANCIAL REVIEW
Consolidated net income for GMAC totaled $1,031.0 million in 1995,
including net income from financing operations of $868.4 million, which
increased $66.2 million over 1994. The improvement resulted primarily from more
favorable financing margins and higher average earning asset levels, principally
finance receivables and operating leases. Net income from financing operations
in 1994 totaled $802.2 million, an increase of $11.6 million over 1993,
reflecting continued positive credit loss experience and a more favorable U.S.
funding mix than in 1993. Insurance operations contributed $162.6 million to
1995 consolidated net income, with improved underwriting results and higher
realized capital gains factoring significantly in the $45.1 million improvement
over 1994 performance, to bring results closer to 1993 earnings of $190.5
million.
Consolidated financing revenue totaled $11,664.0 million in 1995. The
improvement from 1994 to 1995 was attributable to increased revenues in all
areas of the business, while the 1994 increase over 1993 was primarily
attributable to increased operating lease and wholesale revenues. Retail and
lease financing revenue, at $3,291.6 million for 1995, increased primarily from
a higher average amount financed per new unit, partially offset by a decline in
GMAC penetration of retail delivery financing. The decrease in 1994 retail and
lease financing revenues compared to 1993 primarily reflected a lower asset
level due to net asset liquidations through the sale of retail finance
receivables over the 1990 through 1993 period. Operating lease revenue, net of
depreciation, reached $1,980.2 million in 1995, compared to $1,621.9 million in
1994 and $1,168.9 million in 1993, as leasing continued to gain popularity among
consumers. During 1995, 1994, and 1993, GMAC financed 26.4%, 26.2%, and 27.8%,
respectively, of GM's retail vehicle deliveries, amid continued competitive
pressures from other providers of vehicle financing. In 1995, wholesale and term
loan financing revenue amounted to $2,087.4 million. The growth over 1994
revenue was primarily due to increased dealer inventories and higher floor plan
financing rates, while the 1994 improvement over 1993 reflected the December
1993 resumption of wholesale financing activities formerly transacted by GM.
Interest and discount expense increased to $4,936.3 million during 1995,
$705.4 million above 1994, due to increased funding levels and higher interest
rates. The 1994 interest and discount expense was $490.3 million below 1993
because of a more favorable year-to-year funding mix. Consolidated net financing
revenue increased to $2,422.9 million in 1995, $468.8 million and $1,094.1
million higher than the respective 1994 and 1993 results. Other income and
insurance premiums totaled $3,199.2 million in 1995, compared to $2,726.2
million and $3,731.5 million in 1994 and 1993, respectively. Higher fee and
investment income at GMAC Mortgage Group accounted for a majority of the
increase during 1995 compared to 1994. The decrease between 1994 and 1993 was
largely due to lower interest and service fees from GM.
Revenue growth in 1995 was partially offset by an increase in total
expenses to $3,838.9 million. The largest single component of the increase was
the $448.8 million provision for financing losses, which increased from $177.3
million in 1994, due to increased vehicle charge-off experience in the U.S. In
addition, other expenses in 1995 were $3,390.1 million, up from $3,063.2 million
in 1994, reflecting higher salaries and benefits and operating costs. In
comparison, total expenses in 1994 decreased slightly from 1993, primarily due
to a $123.5 million reduction in the loss provision and lower intangible asset
amortization.
GMAC's effective income tax rate for 1995 was 42.2%, compared to 35.6% in
1994 and 37.6% in 1993, with the 1995 increase over 1994 reflecting higher U.S.
and foreign taxes assessed on foreign-sourced income. The 1994 decrease from
1993 was attributable to reductions in tax accruals for prior years based upon
periodic assessments of the adequacy of such reserves.
II-55
<PAGE> 69
EDS FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------
1995 1994 1993
--------- -------- --------
(DOLLARS IN MILLIONS
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Systems and Other Contracts Revenues
Outside customers........................................... $ 8,531.0 $6,412.9 $5,183.6
GM and affiliates........................................... 3,891.1 3,547.2 3,323.7
--------- -------- --------
Total Systems and Other Contracts Revenues............... 12,422.1 9,960.1 8,507.3
--------- -------- --------
Pre-tax Income................................................ 1,467.0 1,284.2 1,131.3
Income Taxes.................................................. 528.1 462.3 407.3
--------- -------- --------
Separate Consolidated Net Income............................ $ 938.9 $ 821.9 $ 724.0
========= ======== ========
Net Earnings Attributable to Class E Common Stock on a Per
Share Basis................................................. $1.96 $1.71 $1.51
Cash Dividends Per Share of Class E Common Stock.............. $0.52 $0.48 $0.40
Depreciation and Amortization................................. $1,107.8 $771.1 $626.8
Capital Expenditures.......................................... $1,261.5 $1,186.0 $816.4
Worldwide Employment at December 31, (in thousands)........... 96 81 70
</TABLE>
II-56
<PAGE> 70
EDS FINANCIAL REVIEW
EDS' separate consolidated net income for 1995 increased 14% to $938.9
million, compared with $821.9 million in 1994 and $724.0 million in 1993.
Earnings per share attributable to Class E common stock were $1.96, $1.71, and
$1.51 per share for 1995, 1994, and 1993, respectively, based on EDS' Available
Separate Consolidated Net Income as described in Note 18 to the Consolidated
Financial Statements.
Total revenues for EDS rose to $12,422.1 million for the year ended
December 31, 1995, representing an increase of 25%. The comparative percentage
increases for 1994 and 1993 were 17% and 4%, respectively. The increase in 1995
was attributable to full-year revenues on contracts which began in late 1994 and
to revenues related to acquisitions, primarily the A.T. Kearney acquisition in
1995. Revenues from customers other than GM increased 33% to $8,531.0 million
compared with a 24% increase in 1994 and an 8% increase in 1993. Revenues
related to GM were $3,891.1 million, $3,547.2 million and $3,323.7 million in
1995, 1994, and 1993, respectively.
Total revenues from outside the U.S. were $3,701.1 million, or 30% of total
revenues in 1995 compared with $2,584.5 million, or 26%, in 1994 and $1,928.3
million, or 23%, in 1993. Total domestic revenues from customers other than GM
were $5,794.9 million, $4,611.2 million, and $4,004.5 million in 1995, 1994, and
1993, respectively.
Cost of revenues as a percentage of systems and other contracts revenues
was 77% in 1995, compared with 76% in 1994 and 75% in 1993. Selling, general,
and administrative expenses increased 9% in 1995 to $1,291.5 million from
$1,187.1 million in 1994, which increased 18% from 1993. Selling, general, and
administrative expenses were 10% of systems and other contracts revenues in
1995, down from 12% in 1994 and 1993 due to the fixed nature of certain of these
costs.
Interest expense increased to $120.8 million in 1995, compared with $51.7
million in 1994 and $34.5 million in 1993. The increase in 1995 resulted from
the issuance of $350 million of 6.85% notes due May 15, 2000, and $300 million
of 7.125% notes due May 15, 2005, as well as from other increased borrowings,
which were used to purchase property and equipment, participate in business
combinations, and make other contract-related investments to support business
growth.
EDS' separate consolidated net income excludes expenses of $38.8 million,
$29.1 million, and $34.9 million in 1995, 1994, and 1993, respectively, relating
to purchase accounting adjustments associated with GM's acquisition of EDS in
1984.
II-57
<PAGE> 71
HUGHES FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------
1995 1994 1993
--------- --------- ---------
(DOLLARS IN MILLIONS
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net Sales
Outside customers..................................... $ 9,528.8 $ 9,108.7 $ 9,062.8
GM and affiliates..................................... 5,185.5 4,953.6 4,387.4
--------- --------- ---------
Total Net Sales.................................... 14,714.3 14,062.3 13,450.2
Other income -- net..................................... 57.5 37.1 67.3
--------- --------- ---------
Total Revenues..................................... 14,771.8 14,099.4 13,517.5
--------- --------- ---------
Pre-tax Income.......................................... 1,593.9 1,528.6 1,370.4
Income Taxes............................................ 645.6 572.8 572.6
Cumulative effect of accounting change.................. -- (30.4) --
--------- --------- ---------
Net Income......................................... $ 948.3 $ 925.4(1) $ 797.8
========= ========= =========
Earnings Used for Computation of Available Separate
Consolidated Net Income(2)....................... $ 1,107.8 $ 1,049.2(1) $ 921.6
========= ========= =========
Net Earnings Attributable to Class H Common Stock on a
Per Share Basis....................................... $2.77 $2.62(1) $2.30
Cash Dividends Per Share of Class H Common Stock........ $0.92 $0.80 $0.72
Depreciation and Amortization(2)........................ $487.7 $470.2 $503.5
Capital Expenditures(3)................................. $820.3 $746.3 $580.0
Worldwide Employment at December 31, (in thousands)..... 84 79 78
</TABLE>
- -------------------------
(1) Includes unfavorable cumulative effect of the SFAS No. 112 accounting change
of $30.4 million, or $0.08 per Class H share.
(2) Excludes amortization and adjustment of GM purchase accounting adjustments
of $159.5 million, $123.8 million, and $123.8 million for 1995, 1994, and
1993, respectively, related to GM's acquisition of Hughes Aircraft Company.
(3) Includes expenditures related to telecommunications and other equipment
amounting to $274.6 million, $255.8 million, and $131.1 million, in 1995,
1994, and 1993, respectively.
SEGMENT HIGHLIGHTS
<TABLE>
<S> <C> <C> <C>
Automotive Electronics
Revenues................................................. $5,561.3 $5,221.7 $4,453.4
Net Sales................................................ $5,479.7 $5,170.6 $4,451.0
Operating Profit(1)...................................... $ 869.0 $ 794.8 $ 624.3
Operating Profit Margin(2)............................... 15.9% 15.4% 14.0%
Telecommunications and Space
Revenues................................................. $3,092.7 $2,596.2 $2,238.3
Net Sales................................................ $3,075.8 $2,633.8 $2,135.8
Operating Profit(1)...................................... $ 189.2 $ 271.0 $ 209.6
Operating Profit Margin(2)............................... 6.2% 10.3% 9.8%
Aerospace and Defense Systems
Revenues................................................. $5,945.4 $6,023.6 $6,472.2
Net Sales................................................ $5,899.7 $6,007.3 $6,442.9
Operating Profit(1)...................................... $ 688.0 $ 663.6 $ 664.2
Operating Profit Margin(2)............................... 11.7% 11.0% 10.3%
</TABLE>
- -------------------------
(1) Net sales less total costs and expenses other than interest expense and
amortization of purchase accounting adjustments related to GM's purchase of
Hughes Aircraft Company.
(2) Operating profit as a percentage of net sales.
II-58
<PAGE> 72
HUGHES FINANCIAL REVIEW
Hughes Electronics reported net income of $948.3 million in 1995, compared
to $925.4 million and $797.8 million in 1994 and 1993, respectively. The 1994
net income includes the unfavorable cumulative effect of adopting SFAS No. 112
of $30.4 million. Excluding amortization and adjustment of purchase accounting
adjustments related to GM's acquisition of Hughes Aircraft Company, Hughes'
Earnings Used for Computation of Available Separate Consolidated Net Income was
$1,107.8 million in 1995 compared to $1,049.2 million in 1994 and $921.6 million
in 1993. The improved earnings for 1995 and 1994 were due primarily to increased
revenues and on-going cost-reduction efforts, partially offset by the planned
increase in expenses associated with the commencement of operations and
continued expansion of DIRECTV(R).
Total revenues increased to $14,771.8 million in 1995, compared to
$14,099.4 million in 1994 and $13,517.5 million in 1993. Revenues in the
Automotive Electronics segment increased in 1995 to $5,561.3 million compared to
$5,221.7 million and $4,453.4 million in 1994 and 1993, respectively. The
increase in Automotive Electronics revenues in 1995 and 1994 resulted from an
increase in Hughes-supplied electronic content in GM vehicles produced in North
America, and continued growth of sales to international and non-GM customers. In
addition, the 1994 increase reflected an increase in GM-NAO vehicle production
during 1994.
Revenues from the Telecommunications and Space segment increased to
$3,092.7 million in 1995 compared to $2,596.2 million and $2,238.3 million in
1994 and 1993, respectively. The increase in both years reflected increased
sales of satellites, Galaxy transponders, cellular communications equipment, and
private business networks. The commencement of DIRECTV service in 1994 and
DIRECTV subscriber growth in 1995 also contributed to the revenue gains.
Revenues from the Aerospace and Defense Systems segment decreased to
$5,945.4 million compared to $6,023.6 million in 1994 and $6,472.2 million in
1993. The decreases in 1995 and 1994 revenues resulted from lower production
rates and planned terminations on several defense programs. The decrease in 1995
revenues was partially offset by additional revenues resulting from the
acquisition of the CAE-Link training and simulation business.
The operating profit margin as a percentage of net sales, excluding
amortization of purchase accounting adjustments related to GM's purchase of
Hughes Aircraft Company, was 11.3% in 1995 compared to 11.6% for 1994 and 10.9%
in 1993. The decrease in 1995 compared to 1994 was primarily a result of
increased operating expenses associated with the continued expansion of DIRECTV
in 1995, partially offset by higher margins in the Automotive Electronics and
Aerospace and Defense Systems segments resulting from cost-reduction programs.
The improvement in 1994 compared to 1993 also relates primarily to higher
margins resulting from such cost-reduction efforts.
Hughes recorded pre-tax charges of $76.1 million, $35.0 million, and $55.0
million in 1995, 1994, and 1993, respectively, relating to the disposition of
certain non-strategic businesses. Pre-tax income for 1993 also included a gain
of $89.7 million related to the sale of a 30% ownership interest in Japan
Communications Satellite Company, Inc.
Hughes' effective income tax rate was 40.5% in 1995 compared to 37.5% in
1994 and 41.8% in 1993. The lower effective income tax rate in 1994 resulted
from the recognition of capital loss carryforward benefits.
II-59
<PAGE> 73
RESULTS OF OPERATIONS WITH GMAC ON AN EQUITY BASIS
To facilitate analysis, the following financial statements present
financial data for the Corporation's manufacturing, wholesale marketing,
defense, electronics, and computer service operations with the financing and
insurance operations reflected on an equity basis. This is the same basis and
format used in years prior to the Corporation's adoption of SFAS No. 94,
Consolidation of All Majority-owned Subsidiaries.
CONSOLIDATED STATEMENT OF INCOME
WITH GMAC ON AN EQUITY BASIS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------
1995 1994 1993
---------- ---------- ----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Net Sales and Revenues(1)................................ $152,614.5 $141,576.0 $125,252.7
---------- ---------- ----------
Costs and Expenses
Cost of sales and other operating charges, exclusive of
items listed below.................................. 126,545.8 117,290.8 106,497.1
Selling, general, and administrative expenses.......... 11,489.8 10,574.7 9,765.7
Depreciation of real estate, plants, and equipment..... 4,211.8 3,868.4 3,824.7
Amortization of special tools.......................... 3,212.0 2,900.7 2,535.3
Amortization of intangible assets...................... 171.1 180.7 189.3
Special provision for scheduled plant closings......... -- -- 950.0
---------- ---------- ----------
Total Costs and Expenses.......................... 145,630.5 134,815.3 123,762.1
---------- ---------- ----------
Operating Income......................................... 6,984.0 6,760.7 1,490.6
Other income less income deductions -- net(2)............ 1,220.8 1,251.8 1,195.3
Interest expense......................................... (464.6) (1,304.5) (1,510.9)
---------- ---------- ----------
Income before Income Taxes............................... 7,740.2 6,708.0 1,175.0
Income taxes (benefit)................................... 2,091.6 2,181.9 (482.1)
---------- ---------- ----------
Income after Income Taxes................................ 5,648.6 4,526.1 1,657.1
Earnings of nonconsolidated affiliates................... 1,283.9 1,125.2 808.7
---------- ---------- ----------
Income before cumulative effect of accounting changes.... 6,932.5 5,651.3 2,465.8
Cumulative effect of accounting changes(3)............... (51.8) (750.7) --
---------- ---------- ----------
Net Income........................................ $ 6,880.7 $ 4,900.6 $ 2,465.8
========== ========== ==========
Profit Margin..................................... 4.5% 3.5% 2.0%
</TABLE>
- -------------------------
(1) Includes sales to nonconsolidated affiliates of $1,214.6 million in 1995,
$1,134.1 million in 1994, and $1,059.2 million in 1993.
(2) Includes a loss on the sale of NCRS' net assets of $147.8 million in 1995
and a loss on the sale of AGT of $305.6 million in 1993.
(3) Effective January 1, 1995 the Corporation adopted EITF Issue No. 95-1 and
effective January 1, 1994 the Corporation adopted SFAS No. 112. Not included
in 1994 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.
II-60
<PAGE> 74
Net income in 1995 was $6,880.7 million, or $7.21 per share of $1 2/3 par
value common stock, compared with net income of $4,900.6 million in 1994, or
$5.15 per share of $1 2/3 par value common stock, and net income of $2,465.8
million in 1993, or $2.13 per share of $1 2/3 par value common stock.
The increased net income for 1995 was achieved as a result of earnings
improvement by the five major business sectors.
<TABLE>
<CAPTION>
1995
O/(U)
1995 1994* 1994
-------- -------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
GM-NAO/Delphi............................... $2,395.5 $ 677.3 $1,718.2
GMIO........................................ 1,643.6 1,575.2 68.4
GMAC........................................ 1,031.0 919.7 111.3
EDS......................................... 938.9 821.9 117.0
Hughes...................................... 1,107.8 1,049.2 58.6
Other....................................... (236.1) (142.7) (93.4)
-------- -------- --------
Total.................................. $6,880.7 $4,900.6 $1,980.1
======== ======== ========
</TABLE>
- -------------------------
* Reflects 1995 reclassifications
Reference should be made to the Financial Reviews for GM-NAO/Delphi, GMIO,
GMAC, EDS, and Hughes, that are presented on pages II-50 through II-59 and are
incorporated herein by reference to supplement the information presented below.
Net sales and revenues increased $11.0 billion to $152.6 billion in 1995,
compared to $141.6 billion and $125.3 billion in 1994 and 1993, respectively.
The year-over-year increase was primarily due to increased wholesale vehicle
sales, lower sales incentives, and an improved mix of retail and fleet sales in
North America; increased wholesale vehicle sales outside of North America; and
the continued expansion of EDS and Hughes.
The gross margin percentage was 17.1% for 1995, compared to 17.2% and 15.0%
in 1994 and 1993, respectively. The slight decrease in the gross margin
percentage for 1995 compared to 1994 primarily resulted from labor cost
pressures in Latin America; foreign exchange rate movements in Europe, Brazil,
and Venezuela; vehicle launch costs in Europe; and increased corporate-wide
engineering expenses to support new product development. These higher 1995 costs
were partially offset by material and manufacturing cost savings for GM-NAO,
Delphi, and GMIO in connection with ongoing global sourcing initiatives and
efforts to increase efficiency and quality. The improvement from 1993 to 1994
resulted from lower material cost, improved manufacturing performance, and a
reduction in hourly employment despite increased vehicle production.
Other operating expenses totaled $19.1 billion in 1995 compared to $17.5
billion in 1994 and $17.3 billion in 1993. The increases in other operating
expenses in 1995 and 1994 reflect increased depreciation and amortization in
connection with production and quality improvements worldwide. Other operating
expenses for 1993 included a $950 million increase to the plant closing reserve.
Other income less income deductions approximated $1.2 billion in 1995,
1994, and 1993. The amount reported for 1995 includes a $147.8 million loss
associated with the Corporation's sale of the net assets of National Car Rental
System (NCRS), and the 1993 total includes a $305.6 million loss on the sale of
Allison Gas Turbine Division.
The effective income (benefit) tax rate for 1995 was 27.0% compared to
32.5% in 1994 and (41.0%) in 1993. The 1995 effective income tax rate resulted
from the resolution of numerous prior year tax issues worldwide, efficient
utilization of a net operating loss carryback, tax benefits associated with the
mix of foreign earnings and foreign income taxes, and tax benefits relating to
the sale of the net assets of NCRS. The $10.4 billion of pension contributions
helped generate a net operating loss -- for income tax purposes -- in 1995 which
will be carried back to prior years during which General Motors was subject to
higher tax rates. The lower 1995 interest expense compared to 1994 resulted from
the reversal of interest related to income tax
II-61
<PAGE> 75
issues resolved in 1995 and the revaluation of the remaining reserve. The
interest had been accrued for more than 10 years on numerous items. There also
was a reduction in the current year interest accrued on outstanding tax issues.
General Motors realized an overall tax benefit in 1993, primarily relating to a
$444.3 million favorable impact of the increase in the U.S. corporate income tax
rate. The higher tax rate resulted in a benefit because of General Motors' net
deferred tax asset position.
The Corporation used $1.3 billion of cash during 1995 to purchase certain
of its outstanding preference shares pursuant to an issuer tender offer. The
repurchase had an unfavorable impact of $0.22 per share of $1 2/3 par value
common stock, including tender offer expenses of $13.5 million after-tax, or
$0.02 per share, that were charged against income and the purchase price in
excess of the carrying amount of the preference shares amounting to $153.4
million, or $0.20 per share, that was not charged against income but reduced
earnings attributable to $1 2/3 par value common stock.
In November 1995, the Emerging Issues Task Force of the Financial
Accounting Standards Board (EITF) reached a consensus on its Issue No. 95-1,
Revenue Recognition on Sales with a Guaranteed Minimum Resale Value. The EITF
determined that manufacturers should account for such transactions as leases.
Accordingly, the Corporation's revenue recognition policy on sales to daily
rental car companies was modified to conform to the consensus. Adoption of this
consensus, effective January 1, 1995, resulted in an unfavorable cumulative
effect of $51.8 million after-tax ($0.07 per share of $1 2/3 par value common
stock), and increases at December 31, 1995 in net equipment on operating leases
of $4.4 billion and other liabilities and deferred credits of $4.6 billion. The
effect on future periods is not expected to be material.
Results for 1994 included a $758.1 million after-tax charge reflecting the
unfavorable effect of adopting SFAS No. 112 effective January 1, 1994. Of this
amount, $7.4 million relates to GMAC and is included in earnings of
nonconsolidated affiliates.
The profit margin has improved 2.5 percentage points since 1993, and was
4.5%, 3.5%, and 2.0% in 1995, 1994, and 1993, respectively. However, the results
are short of General Motors' goal of an average annual profit margin of at least
5% over the automotive industry business cycle.
LIQUIDITY AND CAPITAL RESOURCES WITH GMAC ON AN EQUITY BASIS
Total cash and marketable securities at December 31, 1995 were $10.9
billion, down from $11.0 billion a year earlier as a result of cash used for
pension funding, increased capital expenditures, and the preference stock tender
offer, each of which is discussed in further detail in later sections of this
analysis. General Motors is still on track to accumulate its targeted $13.0
billion of cash and marketable securities in order to continue to fund product
development programs throughout the next downturn in the business cycle.
The Corporation continued to improve its financial condition in 1995 and
has sufficient resources to meet anticipated future cash flow requirements. In
addition to cash flow from operations, the Corporation and certain of its
subsidiaries (including GMAC) maintain, or otherwise have available through
asset securitization programs, various syndicated bank credit facilities which
in the aggregate provide $30.3 billion of committed bank credit availability. Of
this amount, $3.0 billion is directly available to the Corporation.
At year-end 1995, unused short-term credit facilities, including those
relating to GMAC, totaled approximately $22.9 billion and unused long-term
credit facilities (including GMAC) totaled approximately $20.1 billion, compared
with $18.5 billion and $19.2 billion, respectively, at the end of 1994.
Long-term debt was $5,967.8 million at the end of 1995, a decrease of
$114.5 million compared to 1994. The ratio of long-term debt to the total of
long-term debt and stockholders' equity was 20.4% at December 31, 1995 and 32.2%
at December 31, 1994. The ratio of long-term debt and short-term loans payable
to the total of this debt and stockholders' equity was 26.5% at the end of 1995
and 35.6% at the end of 1994.
Net liquidity, calculated as cash and marketable securities less the total
of loans payable, long-term debt and capitalized leases, declined $1.5 billion
to $2.3 billion, primarily due to increased notes payable of EDS, significant
cash contributions to the worldwide pension funds, and the preference stock
repurchase. EDS' increased debt balances reflected EDS' capital requirements to
expand its business. Excluding EDS, net liquidity was $3.8 billion.
II-62
<PAGE> 76
CONSOLIDATED BALANCE SHEET WITH GMAC ON AN EQUITY BASIS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1995 1994
---------- ----------
(DOLLARS IN MILLIONS)
<S> <C> <C>
ASSETS
Cash and cash equivalents........................................... $ 9,595.7 $ 9,731.4
Other marketable securities......................................... 1,270.4 1,245.0
---------- ----------
Total cash and marketable securities........................... 10,866.1 10,976.4
Accounts and notes receivable -- net
Trade............................................................. 8,513.7 7,873.1
Nonconsolidated affiliates........................................ 2,256.8 2,080.4
Inventories -- net.................................................. 11,529.5 10,127.8
Contracts in process -- net......................................... 2,469.2 2,265.4
Net equipment on operating leases................................... 4,392.6 --
Deferred income taxes and other..................................... 5,820.3 6,455.6
---------- ----------
Total Current Assets........................................... 45,848.2 39,778.7
Equity in Net Assets of Nonconsolidated Affiliates.................. 9,983.0 9,204.3
Deferred Income Taxes............................................... 16,783.2 16,318.6
Other Investments and Miscellaneous Assets.......................... 13,757.5 14,835.5
Property -- Net..................................................... 37,609.6 34,661.4
Intangible Assets -- Net............................................ 11,261.8 11,536.4
---------- ----------
Total Assets................................................... $135,243.3 $126,334.9
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable.................................................... $ 10,975.7 $ 10,905.0
Loans payable....................................................... 2,434.7 993.7
Income taxes payable................................................ 126.9 144.7
Accrued liabilities and customer deposits........................... 29,920.4 26,584.4
Stocks subject to repurchase........................................ -- 450.0
---------- ----------
Total Current Liabilities...................................... 43,457.7 39,077.8
Long-Term Debt...................................................... 5,967.8 6,082.3
Payable to GMAC..................................................... -- 1,212.5
Capitalized Leases.................................................. 166.2 136.4
Postretirement Benefits Other Than Pensions......................... 39,001.0 37,348.0
Pensions............................................................ 5,744.9 11,223.1
Other Liabilities and Deferred Income Taxes......................... 16,058.9 16,752.2
Deferred Credits.................................................... 1,501.3 1,678.8
Stockholders' Equity................................................ 23,345.5 12,823.8
---------- ----------
Total Liabilities and Stockholders' Equity..................... $135,243.3 $126,334.9
========= =========
</TABLE>
Stocks subject to repurchase at December 31, 1994 consisted of 15 million
shares of Class H common stock subject to put options issued to the Howard
Hughes Medical Institute (HHMI) and exercisable at $30 per share on March 1,
1995. The Corporation held an option to call HHMI's shares until February 28,
1995 at $37.50 per share. The put and call rights expired unexercised. As a
result, $1.5 million was transferred to Class H common stock and $448.5 million
was transferred to capital surplus.
In 1994, the Corporation converted all 17,285,000 outstanding shares of its
Series A Conversion Preference Stock (Preference Equity Redemption Cumulative
Stock or PERCS) into shares of $1 2/3 par value common stock. A total of 17.7
million shares of $1 2/3 par value common stock was issued in this conversion.
Book value per share of $1 2/3 par value common stock was $24.37 at the end
of 1995, versus $11.18 a year earlier and $1.65 at the end of 1993. Book value
per share of Class E common stock increased to $3.11 from $1.43 and $0.21 at the
end of 1994 and 1993, respectively. Book value per share of Class H common stock
increased to $12.20 from $5.59 and $0.83 at the end of 1994 and 1993,
respectively. Book value per share was determined based on the liquidation
rights of the various classes of common stock.
II-63
<PAGE> 77
CONSOLIDATED STATEMENT OF CASH FLOWS WITH GMAC ON AN EQUITY BASIS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------
1995 1994 1993
---------- --------- ----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Cash Flows from Operating Activities
Income before cumulative effect of accounting changes........... $ 6,932.5 $ 5,651.3(1) $ 2,465.8
Adjustments to reconcile income before cumulative effect of
accounting changes to net cash provided by operating activities
Depreciation and amortization................................. 7,594.9 6,949.8 6,549.3
Special provision for scheduled plant closings................ -- -- 950.0
Provision for inventory allowances............................ 77.5 53.1 44.1
Pension expense, net of cash contributions.................... (2,983.9) (5,096.1) (1,548.2)
Pre-tax (gain) loss on sales of various assets................ 116.1 (17.6) 305.6
Provision for ongoing postretirement benefits other than
pensions, net of cash payments.............................. 1,659.0 2,204.6 2,355.7
Change in deferred income taxes(2)............................ 1,139.9 584.5 (1,345.8)
Undistributed (earnings) loss of non-consolidated
affiliates.................................................. (309.4) (204.4) 448.1
Change in other operating assets and liabilities
Accounts receivable......................................... (539.4) (1,428.7) (106.0)
Inventories................................................. (1,487.0) (1,750.3) 240.3
Accounts payable............................................ (328.7) 1,224.0 552.2
Income taxes payable........................................ (9.9) (243.3) (353.1)
Other liabilities(2)........................................ (731.0) 990.0 (455.9)
Other....................................................... 756.6 (480.1) 1,304.2
---------- --------- ----------
Net Cash Provided by Operating Activities......................... 11,887.2 8,436.8 11,406.3
---------- --------- ----------
Cash Flows from Investing Activities
Investment in companies, net of cash acquired................... (616.3) (246.6) (232.4)
Expenditures for real estate, plants, and equipment............. (6,218.4) (4,750.9) (3,703.6)
Expenditures for special tools.................................. (3,725.9) (2,341.4) (2,648.6)
Proceeds from disposals of real estate, plants, and equipment... 450.9 240.9 447.1
Proceeds from the sale of various assets........................ 183.2 518.4 231.5
Expenditures related to the sale of NCRS' net assets............ (197.0) -- --
Change in other investing assets
Investments in other marketable securities -- acquisitions.... (5,682.1) (2,757.0) (2,554.9)
Investments in other marketable securities -- liquidations.... 5,656.7 2,237.0 2,585.6
Notes receivable.............................................. (54.3) 101.9 8,811.0
Operating leases -- net(2).................................... (583.9) (723.1) (470.7)
---------- --------- ----------
Net Cash Provided by (Used In) Investing Activities............... (10,787.1) (7,720.8) 2,465.0
---------- --------- ----------
Cash Flows from Financing Activities
Net increase (decrease) in loans payable........................ 931.8 (550.9) 252.5
Increase in long-term debt...................................... 1,533.9 798.7 989.6
Decrease in long-term debt...................................... (1,652.8) (934.8) (1,627.7)
Net increase (decrease) in payable to GMAC...................... 311.1 (143.0) (10,207.7)
Redemption of HHMI put options.................................. -- -- (315.0)
Repurchases of common, preferred, and preference stocks......... (1,680.7) -- (265.6)
Proceeds from issuing common stocks............................. 504.8 1,184.9 860.2
Cash dividends paid to stockholders............................. (1,327.7) (1,111.9) (1,083.9)
---------- --------- ----------
Net Cash Used in Financing Activities............................. (1,379.6) (757.0) (11,397.6)
---------- --------- ----------
Effect of Exchange Rate Changes on Cash and Cash Equivalents...... 143.8 9.9 81.2
---------- --------- ----------
Net increase (decrease) in cash and cash equivalents.............. (135.7) (31.1) 2,554.9
Cash and cash equivalents at beginning of the year................ 9,731.4 9,762.5 7,207.6
---------- --------- ----------
Cash and cash equivalents at end of the year...................... $ 9,595.7 $ 9,731.4 $ 9,762.5
========== ========= ==========
</TABLE>
- -------------------------
(1) Includes the unfavorable cumulative effect on GMAC earnings of $7.4 million
from adopting SFAS No. 112.
(2) Excluding effect of accounting changes.
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<PAGE> 78
CASH FLOWS WITH GMAC ON AN EQUITY BASIS
Net cash provided by operating activities was $11,887.2 million in 1995,
$8,436.8 million in 1994, and $11,406.3 million in 1993. The increase in 1995
was primarily attributable to higher net income and depreciation, the sale of
$600 million of accounts receivable during 1995, and a decrease in cash pension
contributions in excess of pension expense. Depreciation expense increased as a
result of higher capital expenditures in each of the last three years. Cash
pension contributions for 1995 decreased compared to 1994; however, the
Corporation made a non-cash pension contribution of Class E common shares,
valued at approximately $6.3 billion, during 1995. Cash pension contributions
exceeded pension expense by $2,983.9 million, $5,096.1 million, and $1,548.2
million in 1995, 1994, and 1993, respectively, as the Corporation continued its
efforts to reduce the unfunded pension position. The decrease in cash provided
from operating activities in 1994 compared to 1993 reflected cash pension
contributions in excess of pension expense and an increase in net operating
assets, partially offset by higher net income before the accounting change and
an increase in depreciation expense.
The Hughes restructuring reserve was increased by $35 million in 1994 and
$78 million in 1993 primarily reflecting changes in the estimated loss on
disposition of Hughes LAN Systems and Hughes Rediffusion Simulation Limited and
related entities, respectively. In 1993, the Corporation increased its existing
reserve for scheduled plant closings by $950 million as a result of changes in
assumptions, primarily regarding the amount and duration of job security and
supplemental unemployment benefits expected to be paid to employees, given the
terms of the Corporation's collective bargaining agreements.
During 1995, 1994, and 1993, $503.8 million, $498.8 million, and $599.6
million, respectively, was charged against the Corporation's plant closing
reserve, primarily related to employee job security costs. Charges against the
Hughes restructuring reserve amounted to $208.8 million in 1995, $228.3 million
in 1994, and $527.6 million in 1993. The charges in 1995 and 1994 were
predominantly facilities costs, while the 1993 charges were comprised of
facilities costs, severance, business disposition costs, and other.
At December 31, 1995, the combined total of the plant closing and
restructuring reserves (excluding environmental) was $2,612.3 million, which
included $2,477.9 million for GM-NAO plant closings and $134.4 million for the
Hughes restructuring. The reserve balance primarily includes people related
costs, on a discounted basis, and certain other noncash items such as asset
write-downs. Total future cash expenditures for GM-NAO plant closings will be
approximately $2,650 million. The future employee job security costs
(approximately three-quarters of the future cash expenditures) will be expended
during the period between the closing of the plants and the time the affected
employees are redeployed, retire, or otherwise terminate their employment. The
majority of such spending will occur over the next five years. Most of the
facility costs will be expended in varying amounts over the next four years.
Cash outflows are influenced by, among other items, efficient and effective
management of the work force and the timing of plant closings. Approximately
$119.3 million of the Hughes restructuring reserve balance, primarily relating
to facilities consolidation, will require future cash outflows, the predominant
portion of which will occur over the next two years. The balance of the Hughes
reserve represents non-cash items.
The Corporation has made substantial progress toward achieving its plan of
realigning GM-NAO's plant capacity and the improved operating results and cash
flow are partly a result of these actions. Further incremental benefits are
anticipated as execution of the plan is completed. Hughes' operating results and
cash flow were favorably affected by cost reductions resulting from the
restructuring.
Net cash used in investing activities amounted to $10,787.1 million in 1995
and $7,720.8 million in 1994, compared to net cash provided by investing
activities of $2,465.0 million in 1993. Net cash used in investing activities in
1995 and 1994 consisted primarily of capital expenditures, including special
tools. Worldwide capital expenditures for real estate, plants, and equipment and
special tools were $9.9 billion in 1995, $7.1 billion in 1994, and $6.4 billion
in 1993. Expenditures in 1995 were devoted primarily to improve efficiency and
quality, to increase truck assembly capacity, and to increase the Corporation's
global presence.
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<PAGE> 79
Of the 1995 worldwide expenditures for real estate, plants, and equipment,
and special tools, approximately 68% were in the U.S. (70% in 1994 and 71% in
1993), 8% in Canada and Mexico (10% in 1994 and 5% in 1993), and 24% overseas
(20% in 1994 and 24% in 1993).
Commitments for capital spending, including special tools, were $4.9
billion at December 31, 1995. Capital expenditures for 1996 are estimated to be
approximately $10.5 billion.
Net cash used in financing activities was $1,379.6 million in 1995 compared
to $757.0 million in 1994 and $11,397.6 million in 1993. Net cash used in
financing activities in 1995 primarily reflected $1,286.7 million used to
repurchase preference stock and $1,327.7 million in cash dividends paid to
stockholders, partially offset by an increase in total loans payable of $931.8
million. Cash used in financing activities in 1994 reflected a net decrease in
long-term debt and loans payable, and cash dividends paid to stockholders,
partially offset by proceeds from issuing common stocks, primarily for employee
benefit plans. Cash flows from investing and financing activities in 1993 were
affected by the discontinuation of the Corporation's financing of certain dealer
wholesale receivables and the use of the related proceeds to retire certain
intercompany financing arrangements with GMAC. In 1993, the Corporation redeemed
all of the $5.00 Series and $3.75 Series of Preferred Stock for $265.0 million.
In May 1995, the Corporation concluded a tender offer, under which it
purchased for $1.3 billion of cash (i) 24.3 million depositary shares each
representing one-fourth of a share of its Series B 9 1/8% Preference Stock, at a
purchase price of $27.50 per share, (ii) 9.6 million depositary shares, each
representing one-fourth of a share of its Series D 7.92% Preference Stock at a
purchase price of $26.375 per depositary share, and (iii) 12.9 million
depositary shares, each representing one-fourth of a share of its Series G 9.12%
Preference Stock, at a purchase price of $28.25 per depositary share.
LIQUIDITY AND CAPITAL RESOURCES FOR GMAC
At the end of 1995, GMAC owned assets and serviced automotive receivables
for others which totaled $105.5 billion, an increase of $8.0 billion over
year-end 1994. Earning assets, which accounted for $90.5 billion of total
assets, increased by $8.4 billion from 1994. The increase in earning assets was
primarily attributable to increases in finance receivables and operating leases.
Consolidated finance receivables, net of unearned income, totaled $59.3
billion at December 31, 1995, an increase of $4.7 billion over 1994 year-end.
The increase was primarily attributable to a higher average amount financed per
new vehicle retail contract in the U.S.
GMAC's operating lease assets, net of depreciation, totaled $22.1 billion
at year-end 1995, $4.3 billion over year-end 1994. The increase primarily
reflected a continued trend of new lease volume exceeding maturities and
terminations.
GMAC's liquidity, as well as its ability to profit from ongoing acquisition
activity, is in a large part dependent upon its timely access to capital and the
costs associated with raising funds in different segments of the capital
markets. In this regard, GMAC regularly accesses the short-, medium-, and
long-term debt markets, principally through commercial paper, medium-term notes,
and underwritten transactions. Also, GMAC continues to use an asset
securitization program as an alternative funding source with net proceeds
totaling $5.5 billion and $6.1 billion during 1995 and 1994, respectively.
As of December 31, 1995, GMAC's total borrowings were $74.9 billion, an
increase of $8.2 billion over the $66.7 billion outstanding at the end of 1994.
The higher amount of outstanding borrowings was attributable to increased
funding requirements for higher earning asset levels. Consequently, GMAC's ratio
of debt to total stockholder's equity at December 31, 1995 was 9.1:1, up from
8.4:1 at the end of 1994. GMAC maintains substantial bank lines of credit. At
December 31, 1995, GMAC maintained or had access to approximately $30.4 billion
of unused credit lines with banks worldwide, an increase of $4.7 billion
compared to 1994.
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<PAGE> 80
CASH FLOW FOR GMAC
Cash provided by operating and financing activities in 1995 totaled $5.0
billion and $6.7 billion, respectively. Such cash was used in investing
activities, principally for expansion of the finance receivables and operating
lease portfolios, totaling $11.6 billion.
In 1994, cash provided by operating and financing activities totaled $4.7
billion and $2.5 billion, respectively. Such cash was used for investing
activities totaling $9.9 billion, primarily for acquiring operating lease
assets, with a resultant decrease in cash and cash equivalents amounting to $2.7
billion. The 1994 decrease in cash and cash equivalents resulted from a planned
reduction in liquidity reserve requirements due to improved access to capital
markets.
In 1993, cash provided by operating activities totaled $4.9 billion. A net
reduction in finance receivables (resulting from sales of finance receivables)
factored significantly in the $7.8 billion provided by investing activities.
Such cash was used in financing activities totaling $12.6 billion, principally
to reduce debt.
Reference should be made to the condensed GMAC financial statements
included in Note 22 to the Consolidated Financial Statements.
EDS SPLIT-OFF
The GM Board of Directors (the "GM Board") has approved a split-off (the
"Split-Off") of EDS to the holders of General Motors' Class E Common Stock in a
transaction that is tax-free for U.S. Federal income tax purposes. GM's Board
has determined that the Split-Off and related transactions are in the best
interests of, and fair to, General Motors and each class of GM common
stockholders. The Split-Off will be submitted for approval by the common
stockholders of General Motors and, if approved, is expected to be consummated
in the second quarter of 1996. No assurances can be given that the Split-Off
will occur.
The principal terms of the Split-Off include a revised Master Services
Agreement and other agreements between GM and EDS relating to information
technology ("IT") services to be provided after the Split-Off (collectively, the
"IT Services Agreements") and a special payment of $500 million to be made by
EDS to GM in connection with the Split-Off (the "Special Inter-Company
Payment"). If the Split-Off is not completed, EDS would continue as an indirect
wholly-owned subsidiary of GM and no Special Inter-Company Payment would be
made. Under such circumstances, the existing contractual arrangements between GM
and EDS with respect to IT services would continue with such changes as General
Motors and EDS may from time to time agree upon or as the GM Board upon
recommendation of its Capital Stock Committee may from time to time determine to
be fair to all classes of GM common stockholders.
The IT Services Agreements contemplate that EDS would continue to serve as
GM's principal supplier of IT services for an initial term of ten years, which
may be extended by agreement of the parties, and that the IT services to be
provided by EDS after the Split-Off will generally be similar to those provided
to General Motors under the existing Master Agreement that serves as a framework
for individual services agreements between GM and EDS (collectively, together
with the existing Master Agreement, the "Existing IT Services Agreements"). IT
services that will be considered to be "in-scope" for purposes of the IT
Services Agreements accounted for approximately $3.4 billion of approximately
$3.9 billion in the aggregate of revenues received by EDS from GM in 1995. The
balance of EDS' 1995 revenues from GM was attributable to services that, to the
extent sourced from EDS, will continue to be contracted for outside the
framework of the Master Services Agreement.
Under the terms of the IT Services Agreements, certain of the Existing IT
Services Agreements applicable to particular units, sectors or other
organizations within General Motors will be extended for additional terms of
between approximately one and three years beyond their current expiration dates.
In addition, EDS will provide to General Motors certain plant floor automation
services in North America that it has not previously provided. The IT Services
Agreements provide that certain significant changes will be made to the pricing
and terms of services provided by EDS. Among other things, the parties have
agreed that the rates charged by EDS to General Motors for certain information
processing activities and communications services will be reduced and that the
parties will work together to achieve increased targets for structural cost
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<PAGE> 81
reductions. General Motors will also be given the right to competitively bid
and, subject to certain restrictions, outsource a limited portion of its IT
service requirements to third party providers. In addition, commencing in 1997,
the payment terms relating to IT services provided by EDS will be revised over a
two-year period to extend the due dates for payments from General Motors. The
Master Services Agreement provides for termination in the event of material
default by either party, non-payment by GM, the insolvency of either party and
certain changes in control of EDS. The GM Board believes that the changes
reflected in the Master Services Agreement are necessary (i) in light of the
fact that, after the Split-Off, EDS will no longer be a subsidiary of General
Motors and the Capital Stock committee of the GM Board of Directors will no
longer be able to monitor the IT service arrangements between the parties; (ii)
to reflect the evolutionary nature of the General Motors-EDS customer
relationship and the IT services industry; and (iii) to provide additional
assurance to General Motors, as EDS' largest customer, that the IT services
performed by EDS will remain competitive.
The Special Inter-Company Payment has been included as one of the terms of
the Split-Off in order to enable the GM Board of Directors to determine that the
Split-Off is fair to all classes of GM common stockholders. The Special
Inter-Company Payment will be paid by EDS to GM at such time as the Split-Off
occurs. In determining the amount of the Special Inter-Company Payment, the GM
Board gave consideration to, among other things, a $50.0 million allowance to
EDS relating to the resolution of various uncertain, contingent or other matters
arising out of the separation of GM and EDS.
Statements about the effect of the proposed Split-Off and the impact of the
agreement relating to IT services after the proposed Split-Off are
forward-looking statements which by their nature are subject to numerous
uncertainties that could cause actual results to vary. Further information about
the terms of the proposed Split-Off is included in EDS' Management's Discussion
and Analysis set forth in Exhibit 99(a) to this Annual Report on Form 10-K and
additional information will be set forth in a joint consent solicitation
statement and prospectus of GM and EDS to be filed with the Securities and
Exchange Commission and distributed to GM common stockholders in connection with
the submission of the Split-Off for approval by such stockholders. No offering
of securities of EDS in connection with the proposed Split-Off will be made
other than by means of such prospectus.
HEALTH CARE EXPENSE AND OTHER POSTRETIREMENT BENEFITS
As described in Note 12 to the Consolidated Financial Statements, SFAS No.
106 requires the cost of postretirement medical, dental, vision, and life
insurance to retirees and eligible dependents to be recognized in the financial
statements during the period employees provide services to General Motors. Costs
for medical, dental, vision, and life insurance claims provided to employees
during active service are expensed as incurred (pay-as-you-go) and are not
covered by SFAS No. 106. The components of the 1995 SFAS No. 106 expense and the
1995 U.S. health care cost and cash expenditures are set forth below (excluding
cash expenditures for EDS and Hughes' non-automotive employees, but including
GMAC). In determining 1996 expense the favorable impact on the accumulated
postretirement benefit obligation of the reduction in the health care trend rate
assumption will be substantially offset by the unfavorable impact of the decline
in the health care discount rate.
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<PAGE> 82
SFAS No. 106 has no effect on cash flow since General Motors continues its
practice of paying postretirement benefits (other than pensions) when incurred.
Nonetheless, General Motors is committed to reducing the burden of continuing
health care cost increases.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
--------------------------------------------
SFAS NO. 106 HEALTH CARE PAY-AS-YOU-GO
EXPENSE COST COST*
------------ ----------- -------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
GM U.S. Operations Health Care --
SFAS No. 106 Expense................................. $3,166 $3,166 $ --
Retired Employees
Pay-As-You-Go..................................... -- -- 1,699
Active Employees
Pay-As-You-Go..................................... -- 1,871 1,871
------ ------ ------
Total Health Care................................. 3,166 $5,037 $3,570
====== ======
SFAS No. 106 Ongoing Expense
Life Insurance....................................... 344
Other Subsidiaries -- Health Care and Life
Insurance......................................... 130
------
Total SFAS No. 106................................ $3,640
======
</TABLE>
- -------------------------
* Pay-as-you-go amounts for 1994 were $1,616 million for retirees, $1,845
million for active employees and $3,461 million in total.
General Motors has disclosed in the Consolidated Financial Statements
certain amounts associated with estimated future postretirement benefits other
than pensions and characterized such amounts as "accumulated postretirement
benefit obligations", "liabilities", or "obligations". Notwithstanding the
recording of such amounts and the use of these terms, General Motors does not
admit or otherwise acknowledge that such amounts or existing postretirement
benefit plans of General Motors (other than pensions) represent legally
enforceable liabilities of General Motors.
GM CARD
The Corporation and certain of its subsidiaries sponsor a credit card
program, entitled the GM Card program, introduced in the U.S. in September 1992
and subsequently in Canada, Australia, Brazil, and the United Kingdom. A
cardholder's use of the card generates entitlements to rebates which can be used
solely in connection with the cardholder's purchase or lease of a new General
Motors vehicle.
As the sponsor of the GM Card program, General Motors does not provide
consumer credit. The program is used as a marketing tool to strengthen brand
loyalty and to ultimately increase product sales. Independent banks issue the GM
Card and are responsible for evaluating, extending, and funding credit to the
cardholders, and are fully responsible for any credit card losses with no
recourse against General Motors.
In the U.S., GM Card rebates accumulate at a rate equal to 5% of all
spending for goods or services charged to the GM Card up to a maximum rebate
amount of $500 per year on the Blue Card and $1,000 per year on the Gold Card.
Additional rebates may be earned when the GM Card is used to make purchases from
non-bank marketing partners. The rebates, which expire in 7 years, may be
applied over and above all sales allowances in the market at the time of vehicle
purchase or lease. General Motors is solely responsible to cardholders for
rebates. Provisions for GM Card rebates are recorded as reductions in revenue at
the time of vehicle sale. General Motors has the right to prospectively modify
the plan.
Rebates redeemed worldwide during 1995, 1994, and 1993 were $299.4 million,
$149.8 million, and $33.6 million, respectively. Cardholder rebates available
worldwide for future redemption when the cardholder purchases or leases a new
General Motors vehicle amounted (net of deferred program income) to $2.5 billion
and $1.6 billion at December 31, 1995 and 1994, respectively. The Corporation
anticipates that profits from
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<PAGE> 83
incremental sales resulting from the GM Card program along with deferred program
income will more than offset future rebate costs associated with the GM Card.
DERIVATIVE INSTRUMENTS
General Motors is an international corporation with operations in over 50
countries in the world, which naturally exposes it to a variety of financial
risks. These financial risks are principally the effects of movements in foreign
exchange rates on transactions not denominated in U.S. dollars, and, to a lesser
extent, changes in interest rates on its net cost of borrowings. In addition,
General Motors is hedging its use of metals in the physical and financial
commodities markets. The impact of such financial exposures on General Motors'
annual income is relatively small compared with the impact of changes in vehicle
sales volumes and operating margins. These financial exposures are monitored and
managed in accordance with General Motors' policies and procedures.
With respect to foreign exchange, General Motors has foreign exchange
exposures at many of its domestic and foreign operations related to buying,
selling, and financing in currencies other than the local currency. General
Motors' most significant foreign currency exposures relate to major North
American countries (Canada and Mexico), Western European countries (primarily
Germany, United Kingdom, Spain, Belgium, and France), Japan, and Brazil. The
magnitude of these exposures varies significantly over time depending upon the
strength of local automotive markets and sourcing decisions. The Corporation and
its subsidiaries enter into agreements related to the management of certain
foreign exchange exposures, primarily to hedge transaction risks. As a general
practice, General Motors has not hedged the foreign exchange exposure related to
either the translation of overseas earnings into U.S. dollars or the translation
of overseas equity positions back to U.S. dollars.
General Motors manages its market risk from exposure to changes in interest
rates through various interest rate forward contracts and options both on debt
and on GMAC's assets. At December 31, 1995 and 1994, the total notional amount
of such financial instruments was approximately $16 billion and $14 billion,
respectively. The $2 billion increase in the notional amount relates to GMAC,
and its use of such instruments in the normal course of business to offset a
companion asset or funding position as well as to adjust the fixed/floating
nature of its funding position.
Additional information regarding General Motors' accounting policies for
and use of derivative financial instruments is contained in Notes 1, 9, 10, and
11 to the Consolidated Financial Statements.
SECURITY RATINGS
<TABLE>
<CAPTION>
CURRENT SECURITY RATINGS
--------------------------------
S&P MOODY'S D&P FITCH
---- ------- ---- -----
<S> <C> <C> <C> <C>
GM/GMAC Long-Term Debt....................... A- A.3 A- A-
GM Preference Stock.......................... BBB+ Baa1 BBB+ BBB+
GMAC Commercial Paper........................ A.2 P-1 D-1 F-1
Hughes Long-Term Debt........................ A- A.3 -- --
Hughes Commercial Paper...................... A.2 P-2 -- --
EDS Long-Term Debt........................... A* A.1 A+ A+**
EDS Commercial Paper......................... A.1* P-1 D-1 F-1**
</TABLE>
- -------------------------
* On CreditWatch with positive implications.
** On Fitch Alert with positive implications.
Debt ratings by the various rating agencies reflect each agency's opinion
of the ability of issuers to repay debt obligations punctually. Lower ratings
generally result in higher borrowing costs. 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.
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<PAGE> 84
In May 1995, Moody's Investors Service (Moody's) raised the long-term
credit ratings of General Motors Corporation, GMAC, Hughes and certain related
affiliates to A.3 from Baa1, seventh highest within the 10 investment grade
ratings available from Moody's for long-term debt. Moody's defines A.3 bonds as
having "upper-medium grade" quality, whereas the Baa1 rating signifies "medium
grade" quality. In this action, the credit rating of GMAC's commercial paper was
also raised from P-2 to P-1. Moody's employs its P-1 rating to indicate that an
issuer's ability to repay is superior relative to other issuers, while the P-2
rating indicates that the issuer has a strong ability for repayment relative to
other issuers. The ratings for commercial paper and term debt of EDS and the
rating for commercial paper of Hughes were not affected by the action announced
by Moody's. The rating for GM preference stock was upgraded two levels, to Baa1
from Baa3 (Baa3 is the lowest investment grade category).
During 1995, Standard & Poor's Corporation (S&P) raised the long-term debt
ratings of GM, GMAC, and Hughes from BBB+ to A-. The S&P A- credit rating is the
seventh highest within the 10 investment grade ratings available from S&P for
long-term debt, based on a strong capability to pay interest and repay
principal, although somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than debt in higher rated categories.
Additionally, S&P raised its rating on GM's preference stock from BBB to BBB+,
eighth highest within the 10 S&P investment grade ratings, affirmed its A.2
rating on GMAC's and Hughes' commercial paper, and raised its commercial paper
rating of EDS to A.1 from A.2. The A.1 credit rating is the second highest
within the four investment grade ratings available from S&P for commercial
paper, indicating a strong degree of safety regarding timely payments. The
senior debt (A) and commercial paper (A.1) rating on EDS remain on CreditWatch
with positive implications.
In addition, substantially all of the short-, medium-, and long-term debt
issued by GMAC and the senior debt of GM and EDS is rated by Fitch Investors
Service, Inc. (Fitch) and Duff & Phelps Credit Rating Co. (D&P). The senior debt
of GM and GMAC is rated A- by both agencies, seventh highest within the 10
investment grade ratings available. Fitch's A- rating is assigned to bonds
considered to be of high credit quality, with the obligor's ability to pay
interest and repay principal considered to be strong. D&P's A- rating indicates
adequate likelihood of timely payment of principal and interest. The senior debt
of EDS is rated A+ by both agencies, fifth highest within the 10 investment
grade ratings available. In January 1996, EDS senior debt was put on Fitch Alert
with positive implications.
GMAC's and EDS' commercial paper has received ratings of F-1 by Fitch, the
second highest of four investment grade ratings available, which is assigned to
short-term issues which possess a very strong credit quality based primarily on
the existence of liquidity necessary to meet the obligation in a timely manner.
In January 1996, EDS' commercial paper was put on Fitch Alert with positive
implications. GMAC's and EDS' commercial paper is rated D-1 by D&P, the second
highest of five investment grade ratings available which signifies a very high
certainty of timely payment based on excellent liquidity factors and good
fundamental protection factors.
GM's preference shares are rated BBB+ by Fitch and D&P, the eighth highest
of 10 investment grade ratings available. Preference issues assigned this rating
by Fitch are considered reasonably safe but lack the projections of the "A" to
"AAA" categories. This rating signifies that current results should be watched
for possible signs of deterioration. Preference stock assigned this rating by
D&P has below average projection factors but is still considered sufficient for
prudent investment.
DIVIDEND POLICY
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.
At the February 1996 meeting of the General Motors Board of Directors, the
quarterly dividend on the $1 2/3 par value common stock was raised from $0.30
per share to $0.40 per share, a level that the Corporation believes will be
sustainable throughout the automotive business cycle.
With respect to Class E and Class H common stocks, the Corporation's
current policy is to pay cash dividends approximately equal to 30% and 35% of
the Available Separate Consolidated Net Income of EDS and Hughes, respectively,
for the prior year. In February 1996, the Board of Directors increased the
quarterly
II-71
<PAGE> 85
dividends on Class E common stock from $0.13 per share to $0.15 per share and on
Class H common stock from $0.23 per share to $0.24 per share.
Notwithstanding the current dividend policy, the dividends declared on the
Class H common stock for each of the quarters of 1995, 1994, and 1993 were based
on an annual rate higher than 35% of the Available Separate Consolidated Net
Income of Hughes for the preceding year.
DEFERRED INCOME TAXES
General Motors' Consolidated Balance Sheet at December 31, 1995 included a
net deferred tax asset of approximately $17.6 billion related to net future
deductible temporary differences (see Note 6 to the Consolidated Financial
Statements) in the U.S. of which approximately $15.5 billion relates to the
obligation for postretirement benefits other than pensions. Realization of the
net deferred tax asset is dependent upon profitable operations in the U.S. and
future reversals of existing taxable temporary differences. Although realization
is not assured, General Motors believes that it is more likely than not that
such benefits will be realized through the reduction of future taxable income.
Management has carefully considered various factors in assessing the probability
of realizing these deferred tax benefits including:
- Operating results of GMAC, EDS, and Hughes, which collectively
generated U.S. pre-tax income of approximately $3.9 billion, $3.3
billion, and $3.4 billion in 1995, 1994, and 1993, respectively.
- The operating results of GM-NAO/Delphi over the most recent three
year period and overall financial forecasts of book and taxable
income for the 1996-2000 period. Further improvements are expected
by continuing to balance plant capacity pursuant to the plant
closing plan, reduce material costs through global sourcing,
increase efficiency through lean manufacturing, and reduce low
profit fleet sales.
- The ability to utilize tax planning, such as capitalization of
research and experimentation costs for tax purposes, so that General
Motors does not have, and does not expect to generate in the near
future, any significant U.S. Federal tax net operating loss
carryforwards.
- The extended period of time over which the tax benefits can be
utilized. Postretirement benefits become tax deductions over periods
up to 50 years.
- The fact that General Motors has never lost deferred Federal tax
benefits due to the expiration of a U.S. net operating loss
carryforward.
Dividends received from foreign operations for U.S. Federal income tax
purposes totaled approximately $0.2 billion, $1.1 billion, and $6.2 billion in
1995, 1994, and 1993, respectively. The significant level of dividends in 1993
was effected as part of GM's tax planning and global cash management
initiatives, with the resulting U.S. Federal income tax effect being
substantially offset by foreign tax credits. The reduced level of dividends in
1995 resulted from tax planning strategies related to the U.S. net operating
loss carryback position -- for tax purposes only. It is anticipated that the
dividends from foreign operations in 1996 will be substantially higher than
those in 1995.
PENSIONS
At year-end 1995, General Motors' total worldwide net unfunded pension
position decreased to $6.6 billion ($3.0 billion U.S. and $3.6 billion non-U.S.)
from $12.6 billion a year ago ($9.3 billion U.S. and $3.3 billion non-U.S.). The
improvement in the U.S. plans resulted from $10.4 billion in 1995 cash and non-
cash pension contributions to U.S. hourly and salaried pension plans and asset
returns in excess of the assumed 10% asset earnings rate, partially offset by
the effect of a year-to-year 150 basis point decrease in the discount rate used
to measure the pension obligation at the end of 1995 compared to 1994. Total
worldwide pension contributions for the 1995 calendar year totaled $11.4
billion.
On an economic basis, General Motors achieved a fully-funded status for its
U.S. hourly and salaried pension plans at December 31, 1995, one year ahead of
its stated goal. The economic measure of the U.S. hourly and salaried pension
liability differs from the SFAS No. 87 basis required by generally accepted
II-72
<PAGE> 86
accounting principles, but General Motors believes it to be a better measure of
General Motors' ongoing economic exposure for pension obligations and as such
uses this measure to determine its funding. As a result of this fully funded
status on an economic basis, it is anticipated that funding to the U.S. hourly
and salaried plans will decline substantially in 1996 compared to 1995 levels.
The economic basis discounts pension liabilities at the long-term asset earnings
rate assumption (currently 10%) rather than at a year-end market rate as
required by SFAS No. 87 (currently 7%). In periods of low interest rates, as in
the current market environment, the SFAS No. 87 liability will generally exceed
the liability calculated on an economic basis, whereas in periods of high
interest rates the economic basis liability will generally exceed the SFAS No.
87 liability.
During 1995, General Motors contributed $4.1 billion in cash to its U.S.
hourly and salaried pension plans. In addition, during March 1995, the
Corporation contributed to the General Motors Hourly-Rate Employees Pension Plan
173,163,187 shares of Class E common stock, having an aggregate fair market
value on such date of approximately $6.3 billion (determined by an independent
valuation expert retained by the Trustee). See Note 13 to the Consolidated
Financial Statements for additional information on this contribution.
The Class E common stock contribution to the U.S. hourly pension plan in
1995 increased the weighted average number of Class E shares outstanding which
increased the allocation of EDS earnings to Class E common stock and decreased
the allocation of EDS earnings to $1 2/3 par value common stock. The reduction
in EDS earnings allocated to $1 2/3 par value common stock was more than offset
by reduced pension expense as a result of the stock contribution. The
relationship between the reduction in EDS earnings allocated to $1 2/3 par value
common stock and reduced pension expense will vary from period to period. The
stock contribution had no impact on Class E earnings per share since the
increased allocation of EDS earnings to Class E common stock is offset by the
higher weighted average number of Class E shares outstanding.
ENVIRONMENTAL MATTERS
General Motors is subject to various laws relating to the protection of the
environment, and is in various stages of investigation or remediation for sites
where contamination has been alleged.
As disclosed in Note 14 to the Consolidated Financial Statements, other
liabilities and deferred credits, the accrued liability for worldwide
environmental cleanup was $691.9 million at December 31, 1995 and $693.7 million
at December 31, 1994. In future periods, new laws or regulations, advances in
technologies, and additional information about the ultimate remedy selected at
new and existing sites, and General Motors' share of the cost of such remedies,
could significantly change General Motors' estimates.
Note 1 to the Consolidated Financial Statements, Significant Accounting
Policies, describes the Corporation's methodology for estimating environmental
liabilities. The process of estimating such liabilities is complex and is
dependent primarily on the nature and extent of historical information and
physical data relating to a contaminated site, the complexity of the site,
uncertainty as to what remedy and technology will be required, the outcome of
discussions with regulatory agencies and other potentially responsible parties
(PRPs) at multi-party sites, the number and financial viability of other PRPs,
and the timing of expenditures.
In 1995, 1994, and 1993, General Motors expensed $133.5 million, $105.7
million, and $104.7 million, respectively, for environmental cleanup. In
addition, worldwide capital expenditures, as discussed previously, include
$132.6 million, $130.5 million, and $211.5 million in 1995, 1994, and 1993,
respectively, for various environmental matters.
II-73
<PAGE> 87
EMPLOYMENT AND PAYROLLS
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
WORLDWIDE EMPLOYMENT AT DECEMBER 31, (in thousands)
GM-NAO/Delphi......................................... 434 431 436
GMIO.................................................. 103 102 107
GMAC.................................................. 17 17 18
EDS................................................... 96 81 70
Hughes................................................ 84 79 78
NCRS(1)............................................... -- 6 6
Other................................................. 11 12 11
--- --- ---
745 728 726
Total number of employees.......................... === === ===
WORLDWIDE PAYROLLS (in millions)........................ $33,633.8 $31,737.3 $29,805.8
U.S. hourly payrolls (in millions)(2)(3)................ $13,708.2 $13,582.3 $12,438.9
Average labor cost per active hour worked-U.S.
hourly(2)............................................. $43.13 $44.23 $42.72
</TABLE>
- -------------------------
(1) Net assets sold as of May 1995.
(2) Excludes EDS, Hughes' non-automotive employees, Saturn, and NCRS.
(3) Includes employees "at work" (excludes laid-off employees receiving
benefits).
* * * * *
II-74
<PAGE> 88
PART III
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
ITEMS 10 THROUGH 13
Certain information required by Part III (Items 10 through 13) of this
form, other than the information set forth below, has been omitted because the
Registrant intends to file a definitive proxy statement pursuant to Regulation
14A not later than 120 days after the end of its fiscal year.
EXECUTIVE OFFICERS OF THE REGISTRANT
The names and ages of all executive officers of the Registrant at February
29, 1996 and their positions and offices with the Registrant on that date are as
follows:
<TABLE>
<CAPTION>
NAME AND (AGE) POSITIONS AND OFFICES
- --------------------------------------------- ----------------------------------------------
<S> <C>
John F. Smith, Jr. (57)...................... Chairman of the Board; Chief Executive
Officer; President; Member, Finance Committee
and Chairman, The President's Council
Harry J. Pearce (53)......................... Vice Chairman of the Board; Member, The
President's Council
J. Michael Losh (49)......................... Executive Vice President; Chief Financial
Officer; Member, The President's Council
G. Richard Wagoner, Jr. (43)................. Executive Vice President; Member, The
President's Council
Louis R. Hughes (47)......................... Executive Vice President; Member, The
President's Council
</TABLE>
There are no family relationships, as defined, between any of the above
executive officers, and there is no arrangement or understanding between any of
the above executive officers and any other person pursuant to which he was
selected as an officer. Each of the above executive officers was elected by the
Board of Directors to hold office until the next annual election of officers and
until his successor is elected and qualified or until his earlier resignation or
removal. The Board of Directors elects the officers in conjunction with each
annual meeting of the stockholders.
Mr. John F. Smith, Jr. has been associated with General Motors since 1961.
He was elected Executive Vice President in charge of International Operations in
1988. Effective August 1990, he was elected Vice Chairman of the Board of
Directors. On April 6, 1992, Mr. Smith was elected President and Chief Operating
Officer. Effective November 1992, he was elected Chief Executive Officer and
President. On January 1, 1996, Mr. Smith became Chairman of the Board of
Directors.
Mr. Pearce has been associated with General Motors since 1985. In May 1987,
he was elected Vice President and General Counsel of General Motors. Effective
November 1992, he was elected Executive Vice President of General Motors with
responsibility for the Industry-Government Relations Staff, Environmental
Activities Staff (now Environmental and Energy Staff), Worldwide Economics,
Electronic Data Systems Corporation and GM Hughes Electronics Corporation (now
Hughes Electronics Corporation). In July 1994, he assumed responsibility for
GM's Strategic Decision Center, Corporate Communications, Allison Transmission
Division, Electro-Motive Division (now GM Locomotive Group), Urban and Community
Affairs, Executive Compensation and Corporate Governance, and the Corporate
Services Staff. He remained General Counsel through August 1, 1994. Effective
January 1, 1996, Mr. Pearce was elected a director and became Vice Chairman of
the Board of Directors.
Mr. Losh has been associated with General Motors since 1964. In July 1984,
he was elected Vice President of General Motors and General Manager of Pontiac
Division. He was named General Manager of Oldsmobile Division in June 1989.
Effective May 1992, he was elected Group Executive in charge of North
III-1
<PAGE> 89
American Vehicle Sales, Service, and Marketing. In July 1994, he was elected
Executive Vice President and Chief Financial Officer of General Motors.
Mr. Wagoner has been associated with General Motors since 1977. He was
elected Vice President in charge of finance for General Motors Europe in June
1989. In July 1991, he was elected President and Managing Director of General
Motors do Brasil. Effective November 1992, he was elected Executive Vice
President and Chief Financial Officer of General Motors. In July 1994, he was
named President of North American Operations.
Mr. Hughes has been associated with General Motors since 1966. In March
1989, he was elected Chairman and Managing Director of Adam Opel AG. He was
elected President of General Motors Europe and Vice President and Group
Executive of General Motors in April 1992. Effective November 1992, he was
elected Executive Vice President, International Operations of General Motors. In
September 1994, he was named President of International Operations.
III-2
<PAGE> 90
PART IV
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
PAGE NO.
---------------
<S> <C> <C>
(a) 1. All Financial Statements
See Part II
2. Financial Statement Schedule II-Allowances for the Years Ended
December 31, 1995, 1994, and 1993......................................... IV-3
3. Exhibits (Including Those Incorporated by Reference)
</TABLE>
<TABLE>
<CAPTION>
EXHIBIT
NO.
- ---------
<S> <C> <C>
(3)(a) Restated Certificate of Incorporation as amended to May 26, 1994,
incorporated by reference to Exhibit 3(i) to the Current Report on
Form 8-K of General Motors Corporation dated May 26, 1994, and
Amendment to Article Fourth of the Certificate of Incorporation --
Division III -- Preference Stock, by reason of the Certificates of
Designations filed with the Secretary of State of the State of
Delaware on September 14, 1987 and the Certificate of Decrease filed
with the Secretary of State of the State of Delaware on September 29,
1987 (pertaining to the six series of Preference Stock contributed to
the General Motors pension trusts), incorporated by reference to
Exhibit 19 to the Quarterly Report on Form 10-Q of General Motors
Corporation for the quarter ended June 30, 1990 in the Form SE of
General Motors Corporation dated August 6, 1990; as further amended
by the Certificate of Designations filed with the Secretary of State
of the State of Delaware on June 28, 1991 (pertaining to Series A
Conversion Preference Stock), incorporated by reference to Exhibit
4(a) to Form S-8 Registration Statement No. 33-43744 in the Form SE
of General Motors Corporation dated November 1, 1991; as further
amended by the Certificate of Designations filed with the Secretary
of State of the State of Delaware on December 9, 1991 (pertaining to
Series B 9 1/8% Preference Stock), incorporated by reference to
Exhibit 4(a) to Form S-3 Registration Statement No. 33-45216 in the
Form SE of General Motors Corporation dated January 27, 1992; as
further amended by the Certificate of Designations filed with the
Secretary of State of the State of Delaware on February 14, 1992
(pertaining to Series C Convertible Preference Stock), incorporated
by reference to Exhibit (3)(a) to the Annual Report on Form 10-K of
General Motors Corporation for the year ended December 31, 1991 in
the Form SE of General Motors Corporation dated March 20, 1992; as
further amended by the Certificate of Designations filed with the
Secretary of State of the State of Delaware on July 15, 1992
(pertaining to Series D 7.92% Preference Stock), incorporated by
reference to Exhibit 3(a)(2) to the Quarterly Report on Form 10-Q of
General Motors Corporation for the quarter ended June 30, 1992 in the
Form SE of General Motors Corporation dated August 10, 1992; and as
further amended by the Certificate of Designations filed with the
Secretary of State of the State of Delaware on December 15, 1992
(pertaining to Series G 9.12% Preference Stock), incorporated by
reference to Exhibit 4(a) to Form S-3 Registration Statement No.
33-49309 in the Form SE of General Motors Corporation dated January
25, 1993............................................................. N/A
(b) By-Laws as amended to December 4, 1995, incorporated by reference to
Exhibit 3(ii) to the Current Report on Form 8-K of General Motors
Corporation dated December 4, 1995................................... N/A
(4)(a) Form of Indenture relating to the $500,000,000 8 1/8% Debentures Due
April 15, 2016 dated as of April 1, 1986 between General Motors
Corporation and Citibank, N.A., Trustee, incorporated by reference to
Exhibit 4 to Amendment No. 1 to Form S-3 Registration Statement No.
33-4452 and resolutions adopted by the Special Committee on April 15,
1986, incorporated by reference to Exhibit 4(a) to the Current Report
on Form 8-K of General Motors Corporation dated April 24, 1986....... N/A
</TABLE>
IV-1
<PAGE> 91
<TABLE>
<CAPTION>
EXHIBIT
NO. PAGE NO.
- --------- ---------------
<S> <C> <C>
(4)(b) Form of Indenture relating to the $700,000,000 9 5/8% Notes Due
December 1, 2000 and the $1,400,000,000 Medium-Term Note Program
dated as of November 15, 1990 between General Motors Corporation and
Citibank, N.A., Trustee, incorporated by reference to Exhibit 4(a) to
Form S-3 Registration Statement No. 33-37737......................... N/A
(c) Instruments defining the rights of holders of nonregistered debt of
the Registrant have been omitted from this exhibit index because the
amount of debt authorized under any such instrument does not exceed
10% of the total assets of the Registrant and its subsidiaries. The
Registrant agrees to furnish a copy of any such instrument to the
Commission upon request.............................................. N/A
(d) Rights agreement dated as of March 12, 1996 between Electronic Data
Systems Holding Corporation and The Bank of New York, Rights Agent,
incorporated by reference to Exhibit 4(d) to the Current Report on
Form 8-K of General Motors Corporation dated March 12, 1996.......... N/A
(10)(a) The General Motors Hourly-Rate Employees Pension Plan, incorporated
by reference to Exhibit (10)(a) to the Annual Report on Form 10-K for
the year ended December 31, 1994..................................... N/A
(b) General Motors Retirement Program for Salaried Employees,
incorporated by reference to Exhibit (10)(b) to the Annual Report on
Form 10-K for the year ended December 31, 1994....................... N/A
(c)* General Motors Amended 1987 Stock Incentive Plan, incorporated by
reference to Exhibit A to the Proxy Statement of General Motors
Corporation dated April 13, 1992..................................... N/A
(d)* General Motors Performance Achievement Plan, incorporated by
reference to Exhibit A to the Proxy Statement of General Motors
Corporation dated April 16, 1982..................................... N/A
(e)* General Motors 1987 Performance Achievement Plan, incorporated by
reference to Exhibit A to the Proxy Statement of General Motors
Corporation dated April 17, 1987..................................... N/A
(f)* General Motors 1992 Performance Achievement Plan, incorporated by
reference to Exhibit A to the Proxy Statement of General Motors
Corporation dated April 13, 1992..................................... N/A
(11) Computation of Earnings Per Share Attributable to Common Stocks for
the Three Years Ended December 31, 1995.............................. IV-6
(12) Computation of Ratios of Earnings to Fixed Charges for the Three
Years Ended December 31, 1995........................................ IV-9
(21) Subsidiaries of the Registrant as of December 31, 1995............... IV-10
(23) Consents of Independent Auditors..................................... IV-19 and IV-21
(99)(a) Electronic Data Systems Corporation and Subsidiaries
Consolidated Financial Statements and Management's Discussion and
Analysis............................................................. IV-20
(b) Hughes Electronics Corporation and Subsidiaries
Consolidated Financial Statements and Management's Discussion and
Analysis............................................................. IV-53
(27) Financial Data Schedule (for SEC information only)................... N/A
(b) Reports on Form 8-K
</TABLE>
Two reports on Form 8-K, dated October 2 and December 4, 1995, were filed
during the quarter ended December 31, 1995 reporting amendments to the By-Laws.
* Required to be filed as an exhibit pursuant to Item 14(c) of Form 10-K.
IV-2
<PAGE> 92
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
SCHEDULE II -- ALLOWANCES
<TABLE>
<CAPTION>
ADDITIONS ADDITIONS
BALANCE AT CHARGED TO CHARGED TO
BEGINNING COSTS AND OTHER BALANCE AT
DESCRIPTION OF YEAR EXPENSES ACCOUNTS DEDUCTIONS END OF YEAR
- ---------------------------------------------- ------------ ----------- ----------- ---------- ------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31, 1995
Allowances Deducted from Assets(a)
Finance receivables (unearned income)....... $3,309.9 $ -- $ 3,617.0 $3,004.4 $3,922.5
Accounts and notes receivable (for doubtful
receivables).............................. 244.6 138.8 0.7 146.9(b) 237.2
Inventories (principally for obsolescence of
service parts)............................ 177.8 77.5 -- 26.5(c) 228.8
Other investments and miscellaneous assets
(receivables and other)................... 32.4 -- 0.4 -- 32.8
Miscellaneous allowances (insurance and
mortgage)................................. 35.7 36.4 -- 13.0 59.1
-------- ------ -------- -------- --------
Total Allowances Deducted from Assets... $3,800.4 $ 252.7 $ 3,618.1 $3,190.8 $4,480.4
======== ====== ======== ======== ========
FOR THE YEAR ENDED DECEMBER 31, 1994
Allowances Deducted from Assets(a)
Finance receivables (unearned income)....... $3,195.1 $ -- $ 2,324.6 $2,209.8 $3,309.9
Accounts and notes receivable (for doubtful
receivables).............................. 222.0 98.8 0.8 77.0(b) 244.6
Inventories (principally for obsolescence of
service parts)............................ 149.3 53.1 -- 24.6(c) 177.8
Other investments and miscellaneous assets
(receivables and other)................... 34.1 -- -- 1.7 32.4
Miscellaneous allowances (insurance and
mortgage)................................. 24.4 28.0 -- 16.7 35.7
-------- ------ -------- -------- --------
Total Allowances Deducted from Assets... $3,624.9 $ 179.9 $ 2,325.4 $2,329.8 $3,800.4
======== ====== ======== ======== ========
FOR THE YEAR ENDED DECEMBER 31, 1993
Allowances Deducted from Assets(a)
Finance receivables (unearned income)....... $4,215.5 $ -- $ 3,260.4 $4,280.8 $3,195.1
Accounts and notes receivable (for doubtful
receivables).............................. 215.6 106.2 3.1 102.9(b) 222.0
Inventories (principally for obsolescence of
service parts)............................ 141.7 44.1 0.3 36.8(c) 149.3
Other investments and miscellaneous assets
(receivables and other)................... 31.6 4.3 -- 1.8 34.1
Miscellaneous allowances (insurance and
mortgage)................................. 17.8 9.5 -- 2.9 24.4
-------- ------ -------- -------- --------
Total Allowances Deducted from Assets... $4,622.2 $ 164.1 $ 3,263.8 $4,425.2 $3,624.9
======== ====== ======== ======== ========
</TABLE>
- -------------------------
Notes: (a) See analysis of allowance for financing losses in Note 4 to the
Financial Statements.
(b) Accounts written off.
(c) Obsolete parts written off, etc.
Reference should be made to the Notes to Consolidated Financial Statements.
IV-3
<PAGE> 93
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, hereunto duly authorized.
GENERAL MOTORS CORPORATION
-----------------------------------
(Registrant)
Date: March 4, 1996 By /s/ JOHN F. SMITH, JR.
------------------------------------
(John F. Smith, Jr.
Chairman of the Board of Directors,
Chief Executive Officer, and
President)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on this 4th day of March 1996 by the following
persons on behalf of the Registrant and in the capacities indicated.
SIGNATURE TITLE
- ----------------------------------- -----------------------------------
/s/ JOHN F. SMITH, JR. Chairman of the Board of Directors,
- ----------------------------------- Chief Executive Officer, and
(John F. Smith, Jr.) President
/s/ HARRY J. PEARCE Vice Chairman of the Board of
- ----------------------------------- Directors
(Harry J. Pearce)
/s/ J. MICHAEL LOSH Executive Vice President and Chief
- ----------------------------------- Financial Officer
(J. Michael Losh)
/s/ LEON J. KRAIN Vice President and Group Executive
- -----------------------------------
(Leon J. Krain)
/s/ JOHN D. FINNEGAN Vice President and Treasurer
- -----------------------------------
(John D. Finnegan)
/s/ WALLACE W. CREEK Comptroller
- -----------------------------------
(Wallace W. Creek)
/s/ JAMES H. HUMPHREY Chief Accounting Officer
- -----------------------------------
(James H. Humphrey)
IV-4
<PAGE> 94
SIGNATURES -- CONCLUDED
SIGNATURE TITLE
- ----------------------------------- -----------------------------------
/s/ ANNE L. ARMSTRONG Director
- -----------------------------------
(Anne L. Armstrong)
/s/ JOHN H. BRYAN Director
- -----------------------------------
(John H. Bryan)
/s/ THOMAS E. EVERHART Director
- -----------------------------------
(Thomas E. Everhart)
/s/ CHARLES T. FISHER, III Director
- -----------------------------------
(Charles T. Fisher, III)
/s/ J. WILLARD MARRIOTT, JR. Director
- -----------------------------------
(J. Willard Marriott, Jr.)
/s/ ANN D. MCLAUGHLIN Director
- -----------------------------------
(Ann D. McLaughlin)
/s/ EDMUND T. PRATT, JR. Director
- -----------------------------------
(Edmund T. Pratt, Jr.)
/s/ JOHN G. SMALE Director
- -----------------------------------
(John G. Smale)
/s/ LOUIS W. SULLIVAN Director
- -----------------------------------
(Louis W. Sullivan)
/s/ DENNIS WEATHERSTONE Director
- -----------------------------------
(Dennis Weatherstone)
/s/ THOMAS H. WYMAN Director
- -----------------------------------
(Thomas H. Wyman)
IV-5
<PAGE> 1
EXHIBIT 11
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
ATTRIBUTABLE TO COMMON STOCKS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
-----------------------------------
$1 2/3
PAR VALUE CLASS E CLASS H
COMMON COMMON COMMON
STOCK STOCK STOCK
--------- ------- -------
(DOLLARS IN MILLIONS EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net income before cumulative effect of accounting change
attributable to stocks..................................... $ 5,872.4 $ 795.5 $264.6
Premium on repurchase of preference stocks................... 153.4 -- --
Dividends on preference stocks............................... 210.2 -- --
-------- ------ ------
Earnings attributable to common stocks....................... 5,508.8 795.5 264.6
Dividends on common stocks................................... 824.2 205.4 87.9
-------- ------ ------
Undistributed earnings....................................... 4,684.6 590.1 176.7
Adjustments
Change in earnings attributable to each class of common
stock related to the assumed exercise of stock
options(1).............................................. (8.9) 0.1 8.8
Dividends on assumed common stock transactions............. (6.5) -- (2.9)
-------- ------ ------
Adjusted earnings attributable to common stocks.............. $ 4,669.2 $ 590.2 $182.6
======== ====== ======
Weighted average shares outstanding (in millions)............ 749.7 404.6 95.5
Adjustment
Assumed exercise of dilutive stock options(1).............. 6.0 -- 3.2
------ ------ -----
Adjusted weighted average shares outstanding................. 755.7 404.6 98.7
====== ====== =====
Per Share Data
Earnings per share attributable to undistributed earnings on
common stocks before cumulative effect of accounting
change..................................................... $ 6.18 $ 1.46 $1.85
Cumulative effect of accounting change at January 1, 1995.... (0.07) -- --
Dividends.................................................... 1.10 0.52 0.92
Adjustment................................................... -- (0.02)(2) --
------ ------ -----
Earnings per share attributable to common stocks............. $ 7.21 $ 1.96 $2.77
====== ====== =====
</TABLE>
- -------------------------
Note: The difference between fully diluted and primary earnings per share is
immaterial.
(1) 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.
(2) The per-share reported earnings attributable to Class E common stock of
$1.96 equals the sum of the separate computations of each of the four
quarters, consistent with the requirements for calculating earnings per
share based on EDS earnings and the Class E denominator. The calendar year
calculation shown above (based on 1995 weighted average outstanding Class E
shares for the year) requires an adjustment of $0.02 due to the significant
differences in the weighted average number of shares outstanding in each
quarter resulting from the Class E stock contribution to the U.S. Hourly
Pension Plan.
IV-6
<PAGE> 2
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
ATTRIBUTABLE TO COMMON STOCKS -- CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
-----------------------------------
$1 2/3
PAR VALUE CLASS E CLASS H
COMMON COMMON COMMON
STOCK STOCK STOCK
--------- ------- -------
(DOLLARS IN MILLIONS EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net income attributable to stocks (before cumulative effect
of accounting change)...................................... $ 4,965.9 $ 444.4 $248.4
Dividends on preference stocks............................... 320.7 -- --
-------- ------ ------
Earnings attributable to common stocks....................... 4,645.2 444.4 248.4
Dividends on common stocks................................... 592.6 124.8 73.8
-------- ------ ------
Undistributed earnings....................................... 4,052.6 319.6 174.6
Adjustments
Add-back dividends on assumed conversion of preference
stock................................................... 32.5 -- --
Change in earnings attributable to each class of common
stock related to the assumed exercise of stock
options*................................................ (5.3) -- 5.3
Dividends on assumed common stock transactions............. (10.4) -- (1.6)
-------- ------ ------
Adjusted earnings attributable to common stocks.............. $ 4,069.4 $ 319.6 $178.3
======== ====== ======
Weighted average shares outstanding (in millions)............ 741.3 260.3 92.1
Adjustments
Shares issued on assumed conversion of preference stock*... 8.2 -- --
Assumed exercise of dilutive stock options*................ 4.8 -- 2.0
----- ----- ----
Adjusted weighted average shares outstanding................. 754.3 260.3 94.1
===== ===== ====
Per Share Data
Earnings per share attributable to undistributed earnings on
common stocks (before cumulative effect of accounting
change).................................................... $ 5.40 $1.23 $ 1.90
Cumulative effect of accounting change at January 1, 1994.... (1.05) -- (0.08)
Dividends.................................................... 0.80 0.48 0.80
------ ----- ------
Earnings per share attributable to common stocks............. $ 5.15 $1.71 $ 2.62
====== ===== ======
</TABLE>
- -------------------------
Note: The difference between fully diluted and primary earnings per share is
immaterial.
* The assumed conversion of preference stock 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.
IV-7
<PAGE> 3
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
ATTRIBUTABLE TO COMMON STOCKS -- CONCLUDED
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1993
-----------------------------------
$1 2/3
PAR VALUE CLASS E CLASS H
COMMON COMMON COMMON
STOCK STOCK STOCK
--------- ------- -------
(DOLLARS IN MILLIONS EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net income attributable to stocks............................ $ 1,894.1 $ 367.2 $204.5
Dividends on preferred and preference stocks................. 356.8 -- --
-------- ------ ------
Earnings attributable to common stocks....................... 1,537.3 367.2 204.5
Dividends on common stocks................................... 565.8 97.2 64.1
-------- ------ ------
Undistributed earnings....................................... 971.5 270.0 140.4
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*........ (10.5) 10.5 --
Attributable to conversion of options*..................... (6.6) 0.1 6.5
Dividends on assumed common stock transactions............. (6.1) (2.8) (2.0)
-------- ------ ------
Adjusted earnings attributable to common stocks.............. $ 952.9 $ 277.8 $144.9
======== ====== ======
Weighted average shares outstanding (in millions)............ 710.2 243.0 88.6
Adjustments
Shares issued on assumed conversion of preference
stocks*................................................. -- 7.0 --
Assumed exercise of dilutive stock options*................ 7.5 -- 2.8
----- ----- ----
Adjusted weighted average shares outstanding................. 717.7 250.0 91.4
===== ===== ====
Per Share Data
Earnings per share attributable to undistributed earnings on
common stocks.............................................. $1.33 $1.11 $1.58
Dividends.................................................... 0.80 0.40 0.72
----- ----- -----
Earnings per share attributable to common stocks............. $2.13 $1.51 $2.30
===== ===== =====
</TABLE>
- -------------------------
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.
IV-8
<PAGE> 1
EXHIBIT 12
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1995 1994 1993
--------- --------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Income before cumulative effect of accounting change....... $ 6,932.5 $ 5,658.7 $2,465.8
United States, foreign, and other income taxes............. 2,843.8 2,694.6 109.5
Equity in (income) losses of associates.................... (187.5) (21.7) 18.1
Cash dividends received from associates.................... 16.2 10.0 5.0
Amortization of capitalized interest....................... 50.9 50.0 54.7
--------- --------- --------
Income before income taxes, undistributed (income) losses
of associates, and amortization of capitalized
interest................................................. 9,655.9 8,391.6 2,653.1
--------- --------- --------
Fixed charges included in net income
Interest and related charges on debt..................... 5,678.3 5,035.7 5,552.0
Portion of rentals deemed to be interest................. 586.2 465.1 459.4
--------- --------- --------
Total fixed charges included in net income............ 6,264.5 5,500.8 6,011.4
--------- --------- --------
Earnings available for fixed charges....................... $15,920.4 $13,892.4 $8,664.5
========= ========= ========
Fixed charges
Fixed charges included in net income..................... $ 6,264.5 $ 5,500.8 $6,011.4
Interest capitalized in the period....................... 49.8 33.9 44.1
--------- --------- --------
Total fixed charges................................... $ 6,314.3 $ 5,534.7 $6,055.5
========= ========= ========
Ratios of earnings to fixed charges........................ 2.52 2.51 1.43
==== ==== ====
</TABLE>
IV-9
<PAGE> 1
EXHIBIT 21
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
SUBSIDIARIES OF THE REGISTRANT
AS OF DECEMBER 31, 1995
Subsidiary companies of the Registrant are listed below. With respect to
the companies named, all voting securities are owned directly or indirectly by
the Registrant, except where otherwise indicated.
<TABLE>
<CAPTION>
STATE OR
SOVEREIGN POWER
NAME OF SUBSIDIARY OF INCORPORATION
- ----------------------------------------------------------------------- ---------------------
<S> <C>
Subsidiaries included in the Registrant's consolidated financial
statements
AC Battery Corporation............................................... Michigan
Adam Opel Aktiengesellschaft......................................... Germany
ACG Deutschland GmbH (99% owned by subsidiary and 1% owned by
Delphi France Automotive Systems)................................ Germany
Asset Leasing GmbH (95% owned by subsidiary)...................... Germany
Autohaus am Nordring GmbH, Berlin................................. Germany
Carus Grundstucks-Vermietungsgesellschaft mbH & Co.
Object Kuno 65 KG (94% owned by subsidiary)..................... Germany
Carus Grundstucks-Vermietungsgesellschaft mbH & Co.
Object Leo 40 KG (94% owned by subsidiary)...................... Germany
GM Europe GmbH (99% owned by subsidiary and 1% owned by GM Service
GmbH)............................................................ Germany
GM Service GmbH................................................... Germany
General Motors GmbH & Co. OHG (99% owned by subsidiary)........... Germany
Opel-Automobilwerk Eisenach-PKW GmbH (80% owned by subsidiary).... Germany
Opel Eisenach GmbH................................................ Germany
Opel Hungary Automobile Production Ltd. .......................... Hungary
Opel Turkiye Limited Sirketi (99.5% owned by subsidiary and 0.5%
owned by General Motors Overseas Corporation).................... Turkey
Saginaw Deutschland GmbH.......................................... Germany
Arabian Battery Holding Company...................................... Delaware
Arabian Financing Company............................................ Delaware
Autocable Industries (Pty) Limited (51% owned by General Motors
Corporation)...................................................... South Africa
Automotive Battery Manufacturing, Inc. .............................. Delaware
Battery Technology Services, Inc. ................................... Delaware
Controladora General Motors, S.A. de C.V. ........................... Mexico
Centro Tecnico Herramental, S.A. de C.V. (80% owned by
subsidiary)...................................................... Mexico
Componentes Para Automotores, S.A. de C.V. ....................... Mexico
Alambrados Automotrices, S.A. de C.V. .......................... Mexico
Cableados, S.A. de C.V. ........................................ Mexico
Componentes Mecanicos de Matamoros, S.A. de C.V. ............... Mexico
Ensamble de Cables y Componentes, S.A. de C.V. ................. Mexico
Productos Delco de Chihuahua, S.A. de C.V. ..................... Mexico
Sistemas Electricos y Conmutadores, S.A. de C.V. ............... Mexico
General Motors de Mexico, S.A. de C.V. ........................... Mexico
Sistemas Para Automotores de Mexico, S.A. de C.V. ................ Mexico
Conductores y Componentes Electricos de Juarez, S.A. de C.V. ... Mexico
Delphi Automotive Systems do Brasil Ltda. ........................... Brazil
Sielin do Brasil S.A. ............................................ Brazil
Delphi Automotive Systems, Inc. ..................................... Delaware
Delphi Automotive Systems China, Inc. ............................... Delaware
</TABLE>
IV-10
<PAGE> 2
<TABLE>
<CAPTION>
STATE OR
SOVEREIGN POWER
NAME OF SUBSIDIARY OF INCORPORATION
- ----------------------------------------------------------------------- ---------------------
<S> <C>
Delphi Automotive Systems Deutschland GmbH........................... Germany
F&G Megamos Sicherheitselektronik GmbH............................ Germany
Reinshagen GmbH................................................... Germany
Delphi Automotive Systems Singapore PTE LTD.......................... Singapore
Delphi Energy and Engine Management Systems (M) Sdn Bhd ............. Malaysia
Delphi France Automotive Systems (50.4% owned by General Motors
Corporation and 49.6% owned by Adam Opel Aktiengesellschaft)...... France
ACG Italia S.r.1. (99% owned by subsidiary and 1% owned by
Opel France S.A.)............................................ Italy
ACGI S.p.A. (98% owned by subsidiary and 2% owned by
Opel France S.A.)............................................ Italy
Aura Srl (100% owned by subsidiary)............................. Italy
DRB s.a./n.v. (51% owned by subsidiary)......................... France
Diavia Aire, S.A. (100% owned by subsidiary).................... Italy
Diavia S.r.1. (100% owned by subsidiary)........................ Italy
Opel France S.A.(99% owned by subsidiary)....................... France
Texton S.A. .................................................... France
ENCI S.A.R.L. (99.8% owned by subsidiary).................... France
Texton P.L.C. (97.5% owned by subsidiary).................... United Kingdom
Delphi Steering (Malaysia) Sdn Bhd................................... Malaysia
Electro-Motive Maintenance Operations Pty Ltd. ...................... Australia
Electronic Data Systems Holding Corporation.......................... Delaware
Electronic Data Systems Intermediate Corporation.................. Delaware
Electronic Data Systems Corporation............................... Texas
Alpha Joshua, Inc. ............................................. California
Alpha Mariah, Inc. ............................................. California
American Network Leasing Corporation............................ Nevada
Appex, Inc. .................................................... Delaware
Beta Mariah, Inc. .............................................. California
Beta Willow, Inc. .............................................. California
Deep Star, Inc. ................................................ California
EDS Acquisition Corporation #4.................................. Delaware
EDS Antares, Inc. .............................................. Nevada
E.D.S. of Canada, Ltd. ......................................... Canada
EDS Crisis Response Foundation.................................. Texas
E.D.S. De Mexico, S.A. De C.V. ................................. Mexico
EDS Electronic Financial Services, Inc. ........................ Delaware
EDS Export Corporation.......................................... U.S. Virgin Islands
EDS Fleet Services, Inc. ....................................... Texas
EDS Global Services, Inc. ...................................... Delaware
E.D.S. International Corporation................................ Texas
EDS North America Holdings, Inc. ............................... Nevada
EDS Personal Communications Corporation (87% owned by subsidiary
and 13% by Appex, Inc.)........................................ Delaware
EDS-Scicon, US Software Products Group Incorporated............. Delaware
E.D.S. Spectrum Corporation..................................... Nevada
EDS Technical Products Corporation.............................. Delaware
EDS VLT Holdings, Inc. ......................................... Nevada
E.D.S. World Corporation (Far East)............................. Nevada
E.D.S. World Corporation (Netherlands).......................... Texas
FACS Reorganizations, Inc. ..................................... New York
Federal Computer Services Corporation (66.7% owned by
subsidiary).................................................... Delaware
</TABLE>
IV-11
<PAGE> 3
<TABLE>
<CAPTION>
STATE OR
SOVEREIGN POWER
NAME OF SUBSIDIARY OF INCORPORATION
- ----------------------------------------------------------------------- ---------------------
<S> <C>
Japan Systems Company Limited (51% owned by subsidiary)......... Japan
A.T. Kearney, Inc. ............................................. Delaware
A.T. Kearney International, Inc. ............................... Delaware
Keisai Associados, C.A. ........................................ Venezuela
Keisai Panama, S.A. ............................................ Panama
M&SD Network Services, Inc. .................................... Delaware
OAN Services, Inc. ............................................. Texas
Oy EDS Electronic Data Systems Ab............................... Finland
Power Investment Corporation.................................... Nevada
PremiTech Corporation........................................... Texas
Scicon Energy, Inc. ............................................ Delaware
Scicon International Systems Company Incorporated............... Delaware
Subarban Limited Liability Company (74.2% owned by subsidiary
and 1.1% owned by EDS Technical Products Corporation).......... Nevada
Telecommunications International, Inc. ......................... California
Varitel, Inc. .................................................. California
Ward FSC, Ltd. ................................................. Bermuda
Exhaust Systems Corporation.......................................... Delaware
GM Allison Japan Limited............................................. Japan
GM Auto Receivables Co. ............................................. Delaware
GMC Truck Motors Development Corporation............................. Delaware
GM-DI Leasing Corporation............................................ Delaware
GMLG Ltd. ........................................................... Delaware
MLS USA, Inc. .................................................... Delaware
GM Ovonic L.L.C. (60% owned by General Motors Corporation)........... Michigan
General Motors Acceptance Corporation................................ New York
Banque Opel (98% owned by subsidiary)............................. France
Capital Auto Receivables, Inc. ................................... Delaware
GM Finance HB (91% owned by subsidiary)........................... Sweden
GMAC, Australia (Finance) Limited................................. Australia
GMAC Auto Receivables Corporation................................. Delaware
GMAC Comercial Automotriz Chile S.A. ............................. Chile
GMAC Commercial Corporation....................................... Delaware
GMAC del Ecuador S.A. ............................................ Ecuador
GMAC Holding S.A. de C.V. (99.95% owned by subsidiary and .05%
owned by various GMAC subsidiaries).............................. Mexico
GMAC Arrendadora S.A. de C. V. .............................. Mexico
General Motors Acceptance Corporation, S.A. de C.V. ......... Mexico
Servicios GMAC S.A. de C.V. ................................. Mexico
GMAC International Finance, B.V. ................................. Netherlands
GMAC Italia Leasing S.p.A. ....................................... Italy
GMAC Leasing Corporation.......................................... Delaware
Patlan Corporation.............................................. Delaware
Patlan Marina, Inc. ............................................ Michigan
Patlan Restaurants, Inc. ....................................... Michigan
GMAC Mortgage Corporation......................................... Michigan
GMAC Commercial Mortgage Corporation............................ California
GMAC Mortgage Corporation of PA................................. Pennsylvania
GMAC Mortgage Holdings, Inc. ................................... Delaware
GMAC Mortgage Securities II, Inc. .............................. Michigan
GMAC RF, INC. .................................................. Michigan
GMAC Overseas Finance Corporation N.V. ........................... Netherlands Antilles
</TABLE>
IV-12
<PAGE> 4
<TABLE>
<CAPTION>
STATE OR
SOVEREIGN POWER
NAME OF SUBSIDIARY OF INCORPORATION
- ----------------------------------------------------------------------- ---------------------
<S> <C>
GMAC Sverige AB................................................... Sweden
General Motors Acceptance Corporation, Australia.................. Delaware
Holden National Leasing Limited (74.9% owned by subsidiary)..... Australia
General Motors Acceptance Corporation of Canada, Limited.......... Canada
Canadian Securitized Auto Receivables Corporation............... Canada
GMAC Leaseco Limited............................................ Canada
General Motors Acceptance Corporation, Colombia S.A. ............. Delaware
General Motors Acceptance Corporation, Continental................ Delaware
General Motors Acceptance Corporation Hungary Financial
Services Limited Liability Company.............................. Hungary
General Motors Acceptance Corporation International............... Delaware
General Motors Acceptance Corporation Italia S.p.A. .............. Italy
General Motors Acceptance Corporation Nederland N.V. ............. Netherlands
GMAC Espana, S.A. de Financiacion............................... Spain
General Motors Acceptance Corporation, North America.............. Delaware
General Motors Acceptance Corporation (N.Z.) Limited.............. New Zealand
General Motors Acceptance Corporation del Ecuador S.A.
GMAC-Management (Holding)....................................... Ecuador
General Motors Acceptance Corporation de Portugal --
Servicos Financeiros, S.A. (99% owned by subsidiary and 1% owned
by General Motors Acceptance Corporation International).......... Portugal
General Motors Acceptance Corporation, South America.............. Delaware
General Motors Acceptance Corporation de Venezuela, C.A. ....... Venezuela
General Motors Acceptance Corporation Suisse S.A. ................ Switzerland
General Motors Austria Beteiligungsgesellschaft m.b.H. ........... Austria
OPEL Leasinggesellschaft mbH (74% owned by subsidiary).......... Austria
Motors Insurance Corporation...................................... New York
Cadmic Agency Corporation....................................... Delaware
Car Care Plan (Holdings) Limited (99.9% owned by subsidiary and
0.1% owned by GMOC Administrative Services Corporation)........ England
Car Care Plan (Securities Division) Limited (99.9% owned by Car
Care Plan (Holdings) Limited and 0.1% owned by GMOC
Administrative Services Corporation)........................... England
CIM Insurance Corporation....................................... New York
MIC General Insurance Corporation............................... Indiana
MIC Life Insurance Corporation.................................. Delaware
MIC Property and Casualty Insurance Corporation................. Michigan
MIC Re Corp. ................................................... Delaware
MIC Services Corporation........................................ Delaware
Motors Insurance Company Limited................................ England
Motors Insurance Purchasing Group, Inc. ........................ Michigan
Motors Mechanical Reinsurance Company, Limited.................. Barbados
NAVCO Corp. .................................................... Missouri
New Motor Club, Inc. ........................................... North Carolina
Trinity General Agency, Inc. ................................... Texas
Opel Bank GmbH.................................................... Germany
Opel Leasing GmbH & Co. OHG* (partnership between Opel Bank GmbH
and Opel Leasing Verwaltungs GmbH)............................. Germany
</TABLE>
- ---------------
*Joint Venture Partnership
IV-13
<PAGE> 5
<TABLE>
<CAPTION>
STATE OR
SOVEREIGN POWER
NAME OF SUBSIDIARY OF INCORPORATION
- ----------------------------------------------------------------------- ---------------------
<S> <C>
Opel Leasing Verwaltungs GmbH (60% owned by Opel Bank GmbH, 20%
owned by General Motors Acceptance Corporation, and 20% owned
by Adam Opel Aktiengesellschaft)............................... Germany
P.T. GMAC Lippo Finance* (80% owned by General Motors Acceptance
Corporation)..................................................... Indonesia
Wholesale Auto Receivables Corporation............................ Delaware
General Motors de Argentina S.A. (80% owned by General Motors
Corporation)...................................................... Argentina
General Motors Asia, Inc. ........................................... Delaware
General Motors (Thailand) Ltd. ................................... Thailand
General Motors Asian and Pacific Operations.......................... Singapore
General Motors do Brasil Ltda. ...................................... Brazil
Brazauto Trading (Cayman) Limited................................. Cayman Island
GM Factoring Sociedade de Fomento Comercial Ltda. ................ Brazil
General Motors of Canada Limited..................................... Canada
General Motors Chile S.A., Industria Automotriz...................... Chile
General Motors China (Components), Inc. ............................. Delaware
Beijing WY-GM Automotive Electronic Control Co., Limited (51%
owned by subsidiary)............................................. People's Republic
of China
Zhejiang Delphi Asia-Pacific Brake Co. Ltd. (60% owned by
subsidiary)...................................................... China
General Motors China, Inc. .......................................... Delaware
General Motors Colmotores, S.A. (82.6% owned by
General Motors Corporation)....................................... Colombia
General Motors Commercial Corporation................................ Delaware
General Motors Development Corporation............................... Delaware
General Motors del Ecuador S.A. (98% owned by
General Motors Corporation)....................................... Ecuador
General Motors (Europe) AG........................................... Switzerland
General Motors Export Corporation.................................... Delaware
General Motors Foreign Sales Corporation............................. U.S. Virgin Islands
General Motors Holding Espana, S.A. (73.5% owned by General Motors
Corporation and 26.5% owned by Adam Opel Aktiengesellschaft)...... Spain
ACG Componentes, S.A. .......................................... Spain
General Motors ACG, S.A. ....................................... Spain
General Motors Holdings (U.K.)....................................... England
General International (UK) Limited (50% owned by subsidiary and
50% owned by GMOC Administrative Services Corporation)........... England
General Motors Acceptance Corporation (U.K.) Public Limited
Company.......................................................... England
General Motors Acceptance Corporation (U.K.) Finance plc........ England
GMAC Leasing (U.K.) Limited..................................... England
GMAC Leasing (U.K.) (No. 1) Limited............................. England
GMAC Leasing (U.K.) (No. 2) Limited............................. England
GMAC Leasing (U.K.) (No. 3) Limited............................. England
Group Lotus, plc (84.6% owned by subsidiary and 15.4% owned by
GMLG Ltd.)...................................................... United Kingdom
MLS UK Ltd. ................................................. England
IBC Vehicles Limited (75.1% owned by subsidiary).................. United Kingdom
Millbrook Land and Co. Ltd. ...................................... England
Millbrook Pension Management Ltd. (99% owned by subsidiary)....... England
Millbrook Proving Ground Ltd. .................................... England
</TABLE>
- ---------------
*Joint Venture Partnership
IV-14
<PAGE> 6
<TABLE>
<CAPTION>
STATE OR
SOVEREIGN POWER
NAME OF SUBSIDIARY OF INCORPORATION
- ----------------------------------------------------------------------- ---------------------
<S> <C>
VHC Sub-Holdings (UK) Ltd. ....................................... England
Vauxhall Motors (Finance) Plc. ................................. England
Vauxhall Motors Limited......................................... England
General Motors Indonesia, Inc. ...................................... Delaware
General Motors Interamerica Corporation.............................. Delaware
General Motors International Operations, Inc. ....................... Delaware
General Motors Investment Management Corporation..................... Delaware
General Motors Japan Ltd. ........................................... Japan
General Motors Korea, Inc. .......................................... Delaware
General Motors Market Development of Canada Limited.................. Canada
General Motors Nederland B.V. ....................................... Netherlands
Allison Transmission Europe B.V. ................................. Netherlands
General Motors Poland Spolka, zo.o. .............................. Poland
General Motors Yugoslavia, d.o.o. ................................ Yugoslavia
Opel C&S spol. s.r.o. ............................................ Czechoslovakia
Opel Nederland B.V. .............................................. Netherlands
General Motors Nordiska AB........................................... Sweden
General Motors Overseas Corporation.................................. Delaware
AC Delco Systems Overseas Corporation............................. Delaware
Delco Chassis Overseas Corporation................................ Delaware
Automotive Components Group Espana, S.A. ....................... Spain
Delco Chassis Limited........................................... England/Wales
Delco Limited................................................... England
Saginaw Limited................................................. England
Delphi Automotive Systems Australia Ltd. ......................... Australia
G.M. Holding (Portugal) SGPS, Lda. (50% owned by subsidiary and
50% owned by General Motors Corporation)......................... Portugal
CABLESA-Industria de Componentes Electricos Sociedade
Anonima.................................................... Portugal
INLAN -- Industria de Componentes Mecanicos, S.A. ........... Portugal
Opel Portugal, Lda. ......................................... Portugal
GMOC Administrative Services Corporation.......................... Delaware
Fisher Body Limited (50% owned by subsidiary and 50% owned by GM
(UK) Pension Trustees Limited)................................. Ireland
GM (UK) Pension Trustees Limited (50% owned by subsidiary and
50% owned by Vauxhall Motors Limited).......................... United Kingdom
GMOC Australia Pty. Ltd. ......................................... Australia
General Motors-Holden's Automotive Limited (49% owned by
subsidiary and 51% owned by United Australian Automotive
Industries Limited).............................................. Australia
General Motors Overseas Commercial Vehicle Corporation............ Delaware
General Motors Venezolana, C.A. .................................. Venezuela
Holden's Motor Overseas Corporation Limited....................... Delaware
Lidlington Engineering Company, Ltd. ............................. Delaware
Truck and Bus Engineering U.K., Limited........................... Delaware
Venezolana de Industrias Automotrices, C.A. ...................... Venezuela
General Motors de Venezuela, C.A. .............................. Venezuela
General Motors Overseas Distribution Corporation..................... Delaware
Delphi Automotive Systems Luxembourg S.A. ........................ Luxembourg
GMODC Finance N.V. ............................................... Netherlands Antilles
General Motors Import & Distribution GmbH......................... Germany
General Motors Investment Services Company N.V. .................. Belgium
Packard Elektrik Sistemleri Limited Sirketi (97.6% owned by
subsidiary and 2.4% owned by General Motors Overseas
Corporation)..................................................... Turkey
</TABLE>
IV-15
<PAGE> 7
<TABLE>
<CAPTION>
STATE OR
SOVEREIGN POWER
NAME OF SUBSIDIARY OF INCORPORATION
- ----------------------------------------------------------------------- ---------------------
<S> <C>
General Motors Peru S.A. ............................................ Peru
General Motors Receivables Corporation............................... Delaware
General Motors Uruguay, S.A. ........................................ Uruguay
Grand Pointe Holdings, Inc. ......................................... Michigan
Holden New Zealand Limited........................................... New Zealand
Hughes Electronics Corporation....................................... Delaware
Delco Electronics Corporation..................................... Delaware
Delco Electronics Asia/Pacific Pte. Ltd. ....................... Singapore
Delco Electronics Europe GmbH................................... Germany
Delco Electronics Overseas Corporation.......................... Delaware
Delco Electronics Singapore Pte. Ltd. .......................... Singapore
Delnosa, S.A. de C.V. .......................................... Mexico
Deltronicos de Matamoros, S.A. de C.V. ......................... Mexico
Mecel AB........................................................ Sweden
DIRECTV Global, Inc. ............................................. Delaware
DIRECTV International, Inc. .................................... Delaware
H E Microwave Corporation......................................... Delaware
Hughes Aircraft Company........................................... Delaware
Advanced Electronics Systems International...................... California
AMI Instruments, Inc. .......................................... Oklahoma
DIRECTV Enterprises, Inc. ...................................... Delaware
Hughes Aircraft of Canada Limited............................... Canada
Hughes Aircraft Holdings Canada Ltd. ........................... Canada
Hughes Aircraft Mississippi, Inc. .............................. California
Hughes Aircraft -- South Carolina............................... California
Hughes Aircraft Systems International........................... California
Hughes Asia Pacific Hong Kong Limited........................... Hong Kong
Hughes Australia International PTY Ltd. ........................ Australia
Hughes-Avicom International, Inc. .............................. California
Hughes Communications, Inc. .................................... California
Hughes Danbury Optical Systems, Inc. ........................... Delaware
Hughes Data Systems............................................. California
Hughes Document Production Services, Inc. ...................... Delaware
Hughes Electronic Technologies, Inc. ........................... Delaware
Hughes Electronics Manufacturing Service Company................ Delaware
Hughes Environmental Systems, Inc. ............................. California
Hughes Espana S.A. ............................................. Spain
Hughes ESSM, Co. ............................................... California
Hughes Europe N.V. ............................................. Belgium
Hughes Foreign Sales Corporation................................ U.S. Virgin Islands
Hughes Georgia, Inc. ........................................... Delaware
Hughes Information Systems Company.............................. Delaware
Hughes International Corporation................................ Delaware
Hughes International de Mexico, S.A. de C.V. ................... Mexico
Hughes International Sales Corporation.......................... California
Hughes International Sales Corporation No. 2.................... California
Hughes Investment Management Company............................ California
Hughes Lexington, Inc. ......................................... Delaware
Hughes Microelectronics Limited................................. United Kingdom
Hughes Missile Systems Company.................................. Delaware
Hughes Nadge Corporation........................................ Delaware
Hughes Network Systems, Inc. ................................... Delaware
</TABLE>
IV-16
<PAGE> 8
<TABLE>
<CAPTION>
STATE OR
SOVEREIGN POWER
NAME OF SUBSIDIARY OF INCORPORATION
- ----------------------------------------------------------------------- ---------------------
<S> <C>
Hughes Newco, Inc. ............................................. Delaware
Hughes Power Products, Inc. (60% owned by subsidiary and 40%
owned by General Motors Corporation)........................... Delaware
Hughes Power Supplies Corporation............................... Delaware
Hughes Research Analytics, Inc. ................................ Delaware
Hughes STX Corporation.......................................... Delaware
Hughes Saudi Arabia Limited..................................... Delaware
Hughes Space and Communications International, Inc. ............ Delaware
Hughes Systems Management International......................... California
Hughes Technical Services Company............................... California
Hughes Training, Inc. .......................................... Delaware
Hughes Transportation Control Systems, Inc. .................... Delaware
Hughes (U.K.) Limited........................................... England
International Electronics Systems, Inc. ........................ California
L-T Ranches, Inc. .............................................. California
MESC Holdings, Inc. ............................................ Delaware
MDP, Ltd. ...................................................... California
Santa Barbara Research Center................................... California
Spectrolab, Inc. ............................................... California
Systems Building Corp. ......................................... Arizona
Hughes Electronics International, Inc. ........................... Delaware
Hughes International GmbH....................................... Germany
Hughes Research Laboratories, Inc. ............................... Delaware
Hughes Telecommunications & Space Company......................... Delaware
IBC Vehicles (Distribution) Limited (60% owned by General Motors
Corporation)...................................................... United Kingdom
Kabelwerke Reinshagen Werk Berlin GmbH (75.5% owned by
subsidiary and 18.5% by General Motors Corporation)............ West Berlin
Kabelwerke Reinshagen Werk Neumarkt GmbH (75.5% owned by
subsidiary and 18.5% by General Motors Corporation)............ Germany
Opel Austria GmbH.................................................... Austria
AC Delco Systems Austria GmbH..................................... Austria
Opel Hungary Automotive Distribution Ltd. ........................ Hungary
Opel Hungary Automotive Manufacturing Ltd. ....................... Hungary
Opel Belgium N.V. ................................................... Belgium
Opel Ireland Limited................................................. Ireland
Opel Italia S.p.A. (99.9% owned by General Motors Corporation and
0.1% owned by General Motors Overseas Distribution Corporation)... Italy
Opel Norge AS........................................................ Norway
Opel Oy.............................................................. Finland
Opel Suisse S.A. .................................................... Switzerland
GM-Saab Communication GmbH (55% owned by subsidiary).............. Switzerland
Packard CTA Pty. Ltd. (60% owned by General Motors Corporation)...... Australia
Packard Electric Europa Ges.m.b.H. .................................. Austria
Packard Electric Burgenland GmbH.................................. Austria
Packard Electric Vas kft (60% owned by subsidiary)................ Hungary
Reinshagen Tournai S.A. (99% owned by subsidiary and 1% owned by
Packard Electric Burgenland GmbH)................................ Belgium
Packard Electric Ireland Limited..................................... Ireland
Packard Electric Poland Sp. zo.o. ................................... Poland
Packard Hughes Interconnect Company.................................. Delaware
Packard Hughes Interconnect Connection Systems.................... California
</TABLE>
IV-17
<PAGE> 9
<TABLE>
<CAPTION>
STATE OR
SOVEREIGN POWER
NAME OF SUBSIDIARY OF INCORPORATION
- ----------------------------------------------------------------------- ---------------------
<S> <C>
Packard Hughes Interconnect Engineering Services.................. Delaware
Packard Hughes Interconnect Wiring Systems........................ California
PT General Motors Buana Indonesia (60% owned by General Motors
Corporation)...................................................... Indonesia
Rimir, S.A. de C.V. ................................................. Mexico
Saab Opel Sverige AB................................................. Sweden
Saturn Corporation................................................... Delaware
Saturn Distribution Corporation................................... Delaware
Saturn County Bond Corporation....................................... Delaware
Sistemas Electronicos Integrados, S.A. .............................. Argentina
Unicables, S.A. ..................................................... Spain
Asientos IFG, S.A. ............................................... Spain
Cableados Integrados S.A. ........................................ Spain
Conexionados Electricos Tarazona S.A. ............................ Spain
</TABLE>
298 directly or indirectly owned subsidiaries
Companies not included in the Registrant's consolidated financial statements,
for which no financial statements are submitted:
18 other directly or indirectly owned domestic and foreign subsidiaries
12 active subsidiaries
6 inactive subsidiaries
37 fifty-percent owned companies and 107 less than fifty-percent owned
companies the investments in which are accounted for by the equity
method.
In addition, the Registrant owns 100% of the voting control of the following
companies:
373 dealerships operating under dealership assistance plans and engaged in
retail distribution of General Motors products
245 dealerships operating in the United States
128 dealerships operating in foreign countries
Companies not shown by name, if considered in the aggregate as a single
subsidiary, would not constitute a significant subsidiary.
During 1995, there were changes in the number of subsidiaries and companies of
the Registrant, as follows:
2 directly and 36 indirectly owned domestic subsidiaries, and 5 directly
and 63 indirectly owned foreign subsidiaries were organized or acquired. 4
directly and 9 indirectly owned domestic subsidiaries, and 10 indirectly
owned foreign subsidiaries were dissolved or sold. A fifty-percent interest
and less than fifty-percent interests were acquired in 6 companies and 25
companies, while interests in 3 fifty-percent owned and 4 less than
fifty-percent owned companies were terminated. 1 directly owned less than
fifty-percent domestic subsidiary was reclassified to active
nonconsolidated subsidiary. 1 indirectly owned foreign subsidiary was
reclassified to inactive nonconsolidated subsidiary. 1 directly owned
foreign associate changed ownership from fifty-percent owned to less than
fifty-percent owned. 1 indirectly owned domestic subsidiary changed
ownership from sixty-percent owned to twenty-percent owned. 6 indirectly
owned foreign subsidiaries were reclassified to less than fifty-percent
owned associates.
The number of dealerships operating under dealership assistance plans
decreased by a net of 24.
******
IV-18
<PAGE> 1
EXHIBIT 23
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
CONSENT OF INDEPENDENT AUDITORS
General Motors Corporation:
We consent to the incorporation by reference of our reports dated January
29, 1996 appearing in this Annual Report on Form 10-K of General Motors
Corporation for the year ended December 31, 1995 in the following Registration
Statements:
<TABLE>
<CAPTION>
REGISTRATION
FORM STATEMENT NO. DESCRIPTION
- ----- ------------------ ---------------------------------------------------------------------
<S> <C> <C>
S-3 33-41557 General Motors Corporation Debt Securities
S-3 33-64229 General Motors Corporation Debt Securities
S-3 33-47343 General Motors Corporation $1 2/3 Par Value Common Stock
(Post-Effective
Amendment No. 1)
S-3 33-49035 General Motors Corporation $1 2/3 Par Value Common Stock
(Amendment No. 1)
S-3 33-56671 General Motors Corporation $1 2/3 Par Value Common Stock
(Amendment No. 1)
S-3 33-49309 General Motors Corporation Dividend Reinvestment Plan
S-8 33-56753 The General Motors Personal Savings Plan for Hourly-Rate Employees in
the United States
S-8 33-54841 General Motors Amended 1987 Stock Incentive Plan
S-8 33-64197 General Motors Savings-Stock Purchase Program for Salaried Employees
in the United States
S-8 2-94690 1984 Electronic Data Systems Corporation Stock Purchase Plan
(Post-Effective
Amendment No. 1)
S-8 2-94691 1984 Electronic Data Systems Corporation Stock Incentive Plan
(Post-Effective
Amendment No. 1)
S-8 33-64681 EDS Deferred Compensation Plan
S-8 33-54833 EDS Puerto Rico Savings Plan
S-8 33-32322 Hughes Aircraft Company Salaried Employees' Thrift and Savings Plan
Hughes Aircraft Company Tucson Bargaining Employees' Thrift and
Savings Plan
Hughes Aircraft Company California Hourly Employees' Thrift and
Savings Plan
Hughes Thrift and Savings Plan
S-8 33-54835 The GMAC Mortgage Corporation Savings Incentive Plan
S-8 33-64199 Hughes Electronics Corporation Incentive Plan
S-8 33-64691 Saturn Individual Savings Plan for Represented Members
S-8 33-64693 Saturn Personal Choices Savings Plan for Non-Represented Members
S-8 33-28714 Marketing & Systems Development Corporation 1985 Incentive Stock
Option Plan
</TABLE>
/s/ DELOITTE & TOUCHE LLP
- ------------------------------------
DELOITTE & TOUCHE LLP
Detroit, Michigan
March 29, 1996
IV-19
<PAGE> 1
EXHIBIT 99(A)
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
RESPONSIBILITIES FOR CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements of EDS were prepared by management,
which is responsible for their integrity and objectivity. The statements have
been prepared in conformity with generally accepted accounting principles and,
as such, include amounts based on judgments of management. Financial information
elsewhere in this Exhibit 99(a) is consistent with that in the consolidated
financial statements.
Management is further responsible for maintaining a system of internal
accounting controls designed to provide reasonable assurance that the books and
records reflect the transactions of the Company and that its established
policies and procedures are carefully followed. Perhaps the most important
feature in the system of control is that it is continually reviewed for its
effectiveness and is augmented by written policies and guidelines, the careful
selection and training of qualified personnel, and a strong program of internal
audit.
The Company's independent auditors, KPMG Peat Marwick LLP, have audited the
consolidated financial statements. Their audits were conducted in accordance
with generally accepted auditing standards, which include the consideration of
the Company's internal controls to the extent necessary to form an independent
opinion on the consolidated financial statements prepared by management.
The Board of Directors, through the EDS Audit Committee, is responsible for
assuring that management fulfills its responsibilities in the preparation of the
consolidated financial statements and for engaging the independent auditors. The
Committee reviews the scope of the audits and the accounting principles being
applied in financial reporting. The independent auditors, representatives of
management, and the internal auditors meet regularly (separately and jointly)
with the Committee to review the activities of each, to ensure that each is
properly discharging its responsibilities and to discuss the effectiveness of
the system of internal accounting controls. It is management's conclusion that
the system of internal accounting controls as of and for the period ended
December 31, 1995 provides reasonable assurance that the books and records
reflect the transactions of the Company and that the Company complies with
established policies and procedures. To ensure complete independence, KPMG Peat
Marwick LLP have full and free access to meet with the Committee, without
management representatives present, to discuss the results of their audits and
the quality of the financial reporting.
<TABLE>
<S> <C>
/s/ LESTER M. ALBERTHAL, JR. /s/ JOSEPH M. GRANT
- ---------------------------------------- -------------------------
Lester M. Alberthal, Jr. Joseph M. Grant
Chairman of the Board Senior Vice President
President and Chief Executive Officer Chief Financial Officer
</TABLE>
IV-20
<PAGE> 2
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
INDEPENDENT AUDITORS' REPORT AND CONSENT
The Board of Directors
Electronic Data Systems Corporation:
We have audited the accompanying consolidated balance sheets of Electronic
Data Systems Corporation and subsidiaries as of December 31, 1995 and 1994, and
the related consolidated statements of income and cash flows for each of the
years in the three-year period ended December 31, 1995. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Electronic
Data Systems Corporation and subsidiaries as of December 31, 1995 and 1994, and
the results of their operations and their cash flows for each of the years in
the three-year period ended December 31, 1995, in conformity with generally
accepted accounting principles.
We hereby consent to the incorporation by reference of our report stated
above in the following Registration Statements:
<TABLE>
<CAPTION>
REGISTRATION
FORM STATEMENT NO. DESCRIPTION
- ---- -------------------- -----------------------------------------------------------------
<S> <C> <C>
S-3 33-41557 General Motors Corporation Debt Securities
S-3 33-64229 General Motors Corporation Debt Securities
S-3 33-47343 General Motors Corporation $1 2/3 Par Value Common Stock
(Post Effective
Amendment No. 1)
S-3 33-49035 General Motors Corporation $1 2/3 Par Value Common Stock
Amendment No. 1
S-3 33-56671 General Motors Corporation $1 2/3 Par Value Common Stock
(Amendment No. 1)
S-3 33-49309 General Motors Corporation Dividend Reinvestment Plan
S-8 33-56753 The General Motors Personal Savings Plan for Hourly-Rate
Employees in the United States
S-8 33-54841 General Motors Amended 1987 Stock Incentive Plan
S-8 33-64197 General Motors Savings-Stock Purchase Program for Salaried
Employees in the United States
S-8 2-94690 1984 Electronic Data Systems Corporation Stock Purchase Plan
(Post-Effective
Amendment No. 1)
S-8 2-94691 1984 Electronic Data Systems Corporation Stock Incentive Plan
(Post-Effective
Amendment No. 1)
S-8 33-64681 EDS Deferred Compensation Plan
S-8 33-54833 EDS Puerto Rico Savings Plan
</TABLE>
IV-21
<PAGE> 3
<TABLE>
<CAPTION>
REGISTRATION
FORM STATEMENT NO. DESCRIPTION
- ---- -------------------- -----------------------------------------------------------------
<S> <C> <C>
S-8 33-32322 Hughes Aircraft Company Salaried Employees' Thrift and Savings
Plan
Hughes Aircraft Company Tucson Bargaining Employees' Thrift and
Savings Plan
Hughes Aircraft Company California Hourly Employees' Thrift and
Savings Plan
Hughes Thrift and Savings Plan
S-8 33-54835 The GMAC Mortgage Corporation Savings Incentive Plan
S-8 33-64199 Hughes Electronics Corporation Incentive Plan
S-8 33-64691 Saturn Individual Savings Plan for Represented Members
S-8 33-64693 Saturn Personal Choices Savings Plan for Non-Represented Members
S-8 33-28714 Marketing & Systems Development Corporation 1985 Incentive Stock
Option Plan
</TABLE>
/s/ KPMG PEAT MARWICK LLP
- ----------------------------------------
KPMG PEAT MARWICK LLP
Dallas, Texas
January 24, 1996 (March 29, 1996 as
to the consent in the last
paragraph on the preceding page)
IV-22
<PAGE> 4
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------
1995 1994 1993
--------- -------- --------
(IN MILLIONS EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C>
Systems and other contracts revenues
GM and affiliates......................................... $ 3,891.1 $3,547.2 $3,323.7
Outside customers......................................... 8,531.0 6,412.9 5,183.6
--------- -------- --------
Total.................................................. 12,422.1 9,960.1 8,507.3
--------- -------- --------
Costs and expenses
Cost of revenues.......................................... 9,601.6 7,529.4 6,390.6
Selling, general, and administrative...................... 1,291.5 1,187.1 1,005.4
--------- -------- --------
Total costs and expenses............................... 10,893.1 8,716.5 7,396.0
--------- -------- --------
Operating income............................................ 1,529.0 1,243.6 1,111.3
Interest and other income, net (Note 20).................... (62.0) 40.6 20.0
--------- -------- --------
Income before income taxes.................................. 1,467.0 1,284.2 1,131.3
Provision for income taxes (Note 11)........................ 528.1 462.3 407.3
--------- -------- --------
Separate Consolidated Net Income............................ $ 938.9 $ 821.9 $ 724.0
========= ======== ========
Available Separate Consolidated Net Income
Average number of shares of GM Class E common stock
outstanding (in millions) (Note 1) (Numerator)............ 404.6 260.3 243.0
Class E dividend base (in millions) (Denominator)........... 483.7 481.7 480.6
Available Separate Consolidated Net Income.................. $795.5 $444.4 $367.2
====== ====== ======
Earnings Attributable to GM Class E Common Stock on a Per
Share Basis (Note 1)...................................... $1.96 $1.71 $1.51
===== ===== =====
</TABLE>
See accompanying notes to consolidated financial statements.
IV-23
<PAGE> 5
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1995 1994
--------- --------
(IN MILLIONS)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents.................................................... $ 548.9 $ 608.2
Marketable securities (Note 3)............................................... 89.7 149.6
Accounts receivable, net..................................................... 2,872.0 2,082.1
Accounts receivable from GM and affiliates................................... 297.0 65.4
Inventories.................................................................. 181.2 137.8
Prepaids and other........................................................... 392.7 311.0
--------- --------
Total current assets..................................................... 4,381.5 3,354.1
--------- --------
Property and equipment, at cost less accumulated depreciation (Note 4)......... 3,242.4 2,756.6
--------- --------
Operating and other assets
Land held for development, at cost (Note 5).................................. 105.1 97.4
Investment in leases and other (Note 6)...................................... 1,573.5 1,308.8
Software, goodwill, and other intangibles, net (Notes 7 and 19).............. 1,529.9 1,269.6
--------- --------
Total operating and other assets......................................... 3,208.5 2,675.8
--------- --------
Total Assets................................................................... $10,832.4 $8,786.5
========= ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities
Accounts payable............................................................. $ 603.9 $ 571.1
Accrued liabilities (Note 8)................................................. 1,704.5 1,451.0
Deferred revenue............................................................. 629.3 536.7
Income taxes (Note 11)....................................................... 75.9 111.0
Notes payable (Note 9)....................................................... 247.8 203.4
--------- --------
Total current liabilities................................................ 3,261.4 2,873.2
--------- --------
Deferred income taxes (Note 11)................................................ 739.7 659.8
--------- --------
Notes payable (Note 9)......................................................... 1,852.8 1,021.0
--------- --------
Commitments and contingent liabilities (Notes 17 and 18)
Stockholder's equity (Notes 10 and 12)
Common stock, without par value; authorized 1,000.0 shares. Issued and
outstanding 483.7 and 481.7 shares at December 31, 1995 and 1994,
respectively............................................................... 517.7 455.1
Retained earnings............................................................ 4,460.8 3,777.4
--------- --------
Total stockholder's equity............................................... 4,978.5 4,232.5
--------- --------
Total Liabilities and Stockholder's Equity..................................... $10,832.4 $8,786.5
========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
IV-24
<PAGE> 6
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------
1995 1994 1993
--------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net income.......................................................... $ 938.9 $ 821.9 $ 724.0
--------- --------- ---------
Adjustments to reconcile net income to net cash provided by
operating activities
Depreciation and amortization..................................... 1,107.8 771.1 626.8
Deferred compensation............................................. 58.8 62.0 33.8
Other............................................................. 33.0 30.9 (17.7)
Changes in assets and liabilities, net of effects of acquired
companies:
Increase in accounts receivable................................. (611.5) (605.4) (200.8)
(Increase) decrease in accounts receivable from GM and
affiliates................................................... (227.8) 51.1 (56.0)
Increase in inventories......................................... (41.9) (1.9) (15.5)
Increase in prepaids and other.................................. (59.7) (57.0) (26.8)
Increase (decrease) in accounts payable and accrued
liabilities.................................................. (76.0) 453.2 27.4
Increase in deferred revenue.................................... 81.0 79.1 137.1
Increase (decrease) in taxes payable............................ 56.4 (72.5) 188.7
--------- --------- ---------
Total adjustments................................................. 320.1 710.6 697.0
--------- --------- ---------
Net cash provided by operating activities............................. 1,259.0 1,532.5 1,421.0
--------- --------- ---------
Cash Flows from Investing Activities
Proceeds from sales of marketable securities........................ 163.6 370.0 234.2
Proceeds from investments in leases and other assets................ 87.8 134.6 217.3
Payments for purchases of property and equipment.................... (1,261.5) (1,186.0) (816.4)
Payments for investments in leases and other assets................. (356.3) (395.7) (170.6)
Payments related to acquisitions, net of cash acquired.............. (234.9) (186.6) (122.1)
Payments for purchases of software and other intangibles............ (92.0) (77.0) (119.0)
Payments for purchases of marketable securities..................... (100.9) (248.9) (292.5)
Other............................................................... 12.7 49.9 1.4
--------- --------- ---------
Net cash used in investing activities............................... (1,781.5) (1,539.7) (1,067.7)
--------- --------- ---------
Cash Flows from Financing Activities
Proceeds from notes payable......................................... 7,466.7 10,821.0 2,527.7
Payments on notes payable........................................... (6,776.3) (10,300.7) (2,648.7)
Net decrease in current notes payable with maturities less than 90
days.............................................................. -- (102.9) (99.0)
Employee stock transactions and related tax benefit................. 26.0 20.2 33.9
Cash dividends paid to GM........................................... (251.3) (231.1) (192.1)
--------- --------- ---------
Net cash provided by (used in) financing activities................. 465.1 206.5 (378.2)
--------- --------- ---------
Effect of Exchange Rate Changes on Cash and Cash Equivalents.......... (1.9) 25.5 (13.6)
--------- --------- ---------
Net Increase (Decrease) in Cash and Cash Equivalents.................. (59.3) 224.8 (38.5)
Cash and Cash Equivalents at Beginning of Year........................ 608.2 383.4 421.9
--------- --------- ---------
Cash and Cash Equivalents at End of Year.............................. $ 548.9 $ 608.2 $ 383.4
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
IV-25
<PAGE> 7
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Electronic Data Systems Corporation is a provider of information technology
using advanced computer and communications technologies to meet the business
needs of its clients. As used herein, the terms "EDS" and "the Company" refer to
Electronic Data Systems Corporation and its consolidated subsidiaries. EDS
offers its clients a continuum of services in over 40 countries worldwide. This
continuum includes the management of computers, networks, information systems,
information processing facilities, business operations, and related personnel,
as well as management consulting services. (See Note 14 for geographic segment
information.)
General Motors Corporation (GM) acquired all of the capital stock of EDS in
October 1984. Prior to that time, EDS had been an independent, publicly held
corporation. Electronic Data Systems Holding Corporation was incorporated in
Delaware in 1994 for the purpose of holding the capital stock of EDS, which was
incorporated in Texas in 1962. Accordingly, EDS is an indirect wholly owned
subsidiary of GM.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of EDS and all
majority-owned subsidiaries. The Company's investments in companies in which it
has the ability to exercise significant influence over operating and financial
policies are accounted for under the equity method, with the remaining
investments carried at cost.
Earnings Attributable to GM Class E Common Stock on a Per Share Basis have
been determined based on the relative amounts available for the payment of
dividends to holders of GM Class E common stock. Holders of GM Class E common
stock have no direct rights in the equity or assets of EDS, but rather have
rights in the equity and assets of GM (which includes 100% of the stock of EDS).
Dividends on the GM Class E common stock are declared out of the Available
Separate Consolidated Net Income of EDS earned since the acquisition of EDS by
GM. The Available Separate Consolidated Net Income of EDS is determined
quarterly and is equal to the separate consolidated net income of EDS, excluding
the effects of purchase accounting adjustments arising from the acquisition of
EDS, multiplied by a fraction, the numerator of which is a number equal to the
weighted average number of shares of GM Class E common stock outstanding during
the quarter, and the denominator of which was 483.7 million during the fourth
quarter of 1995. Comparable denominators for the fourth quarters of 1994 and
1993 were 481.7 million and 480.6 million, respectively.
GM Series C depositary shares represent ownership of one-tenth of a share
of GM Series C convertible preference stock. GM Series C depositary shares and
GM Series C preference stocks are convertible into GM Class E common stock and
are common stock equivalents for purposes of computing Earnings Attributable to
GM Class E Common Stock on a Per Share Basis. On November 2, 1992, GM Series
E-II and E-III preference stocks, previously held by the GM pension plans, were
converted to GM Class E common stock. In 1993 and 1992, GM Series E-1 preference
stock was converted to GM Class E common stock, or redeemed by GM. The issuances
and conversions of such preference stocks have no dilutive effect on the GM
Class E common stock because, to the extent that shares of GM Class E common
stock deemed to be outstanding would increase, such increased shares would
increase the numerator of the fraction used to determine Available Separate
Consolidated Net Income, but would have no effect on the denominator.
Additionally, unvested units in the Company's stock incentive plan would have no
material dilutive effect on the denominator.
The denominator used in determining the Available Separate Consolidated Net
Income of EDS is adjusted as deemed appropriate by the GM Board of Directors to
reflect subdivisions or combinations of the GM Class E common stock and to
reflect certain transfers of capital to or from EDS. The GM Board's
IV-26
<PAGE> 8
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
discretion to make such adjustments is limited by criteria set forth in GM's
Certificate of Incorporation. In 1988, EDS initiated a program to repurchase
11.0 million shares of GM Class E common stock in order to meet certain future
requirements of the Company's employee benefit plans. As of December 31, 1989,
the Company had purchased 11.0 million shares of GM Class E common stock to be
distributed to key employees under the provisions of the 1984 Plan. The GM Board
has generally caused the denominator used in calculating the Available Separate
Consolidated Net Income of EDS to decrease as shares are purchased and to
increase as shares are used for the employee benefit plans.
In March 1995, GM contributed 173 million newly issued shares of GM Class E
common stock to the General Motors Hourly-Rate Employees Pension Plan.
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.
DEBT AND MARKETABLE EQUITY SECURITIES
Marketable securities at December 31, 1995 and 1994 consist of securities
issued by the U.S. Treasury, states, and political subdivisions, as well as
mortgage-backed debt, corporate debt and corporate equity securities. The
Company adopted the provisions of Statement of Financial Accounting Standards
(SFAS) No. 115, Accounting for Certain Investments in Debt and Equity
Securities, effective January 1, 1994. Pursuant to SFAS No. 115, the provisions
of the Statement were not applied retroactively. The change had no material
cumulative effect on the Company's financial position or results of operations.
Under SFAS No. 115, the Company classifies all of its debt and marketable equity
securities as available-for-sale. Management determines the appropriate
classification of all securities at the time of purchase and re-evaluates such
designation as of each balance sheet date. Noncurrent available-for-sale
securities are reported within the balance sheet classification "Investment in
Leases and Other". The Company's available-for-sale securities are recorded at
fair value. Unrealized holding gains and losses, net of the related tax effect,
are excluded from earnings and are reported as a separate component of
stockholder's equity until realized. A decline in the fair value of any
available-for-sale security below cost that is deemed other than temporary is
charged to earnings, resulting in the establishment of a new cost basis for the
security (see Note 3).
INVENTORY VALUATION
Inventories are stated principally at the lower of cost or market using the
first-in, first-out method.
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost. Depreciation of property and
equipment is calculated using the straight-line method over the lesser of the
asset's estimated useful life, the life of the related customer contract, or the
term of the lease in the case of leasehold improvements. The ranges of estimated
useful lives are as follows:
<TABLE>
<CAPTION>
YEARS
------
<S> <C>
Buildings............................................................. 20-40
Facilities............................................................ 5-20
Computer equipment.................................................... 3-7
Other equipment and furniture......................................... 3-15
</TABLE>
IV-27
<PAGE> 9
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
SOFTWARE, GOODWILL, AND OTHER INTANGIBLES
Software purchased by the Company and utilized in designing, installing,
and operating business information and communications systems is capitalized and
amortized on a straight-line basis over a five- to eight-year period. Costs of
developing and maintaining software systems are incurred primarily in connection
with customer contracts and are considered contract costs. Software development
costs that meet the capitalization and recoverability requirements of SFAS No.
86, Accounting for the Costs of Computer Software to be Sold, Leased, or
Otherwise Marketed, are capitalized and generally amortized on a straight-line
basis over three years. Such amounts were not significant.
The cost of acquired companies is allocated first to identifiable assets
based on estimated fair values. The excess of the purchase price over the fair
value of identifiable assets acquired, net of liabilities assumed, is recorded
as goodwill and amortized on a straight-line basis over the useful life which is
determined based on the individual characteristics of the acquired entity,
generally five to 40 years. Costs allocated to identifiable intangible assets
are amortized on a straight-line basis over the remaining estimated useful lives
of the assets as determined by underlying contract terms or independent
appraisals. Such lives range from five to ten years.
The company periodically evaluates the carrying amounts of goodwill and
other intangibles, as well as the related amortization periods, to determine
whether adjustments to these amounts or useful lives are required based on
current events and circumstances. The evaluation is based on the Company's
projection of the undiscounted future operating cash flows of the acquired
operation over the remaining useful lives of the related intangible assets. To
the extent such projections indicate that future undiscounted cash flows are not
sufficient to recover the carrying amounts of related intangibles, the
underlying assets are written down by charges to expense so that the carrying
amount is equal to future undiscounted cash flows. The assessment of the
recoverability of goodwill will be impacted if estimated future operating cash
flows are not achieved.
REVENUE RECOGNITION
The Company provides services under level-of-effort and fixed-price
contracts, with the length of the Company's contracts ranging up to ten years.
For level-of-effort types of contracts, revenue is earned based on the
agreed-upon billing amounts as services are provided to the customer. For
certain fixed-price contracts, revenue is recognized on the
percentage-of-completion method. Revenue earned is based on the percentage that
incurred contract costs to date bear to total estimated contract costs after
giving effect to the most recent estimates of total cost. Changes to total
estimated contract costs, if any, are recognized in the period they are
determined. Deferred revenue of $629.3 million and $536.7 million at December
31, 1995 and 1994, respectively, represents billings in excess of costs and
related profits on certain contracts. Included in accounts receivable are
unbilled receivables of $622.2 million and $448.5 million at December 31, 1995
and 1994, respectively. Such unbilled receivables for certain contracts in
progress represent costs and related profits in excess of billings, and such
amounts were not billable at the balance sheet date but are recoverable over the
remaining life of the contract. These billings on fixed-price contracts will be
made in the future in accordance with contractual agreements. Of the unbilled
receivables at December 31, 1995, billings to such customers amounting to $108.3
million are expected to be collected in 1997 and thereafter.
CURRENCY TRANSLATION
Assets and liabilities of non-U.S. subsidiaries whose functional currency
is not the U.S. dollar are translated at current exchange rates. Revenue and
expense accounts are translated using an average rate for the period.
Translation gains (losses) are not included in determining net income but are
reflected as a separate component of stockholder's equity. Nonfunctional
currency transaction gains (losses) are included in determining net income and
were ($3.8) million, $4.5 million, and ($3.7) million, net of income taxes, for
the years ended December 31, 1995, 1994, and 1993, respectively.
IV-28
<PAGE> 10
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
INCOME TAXES
The Company provides for deferred taxes under the asset and liability
method. Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered. The Company is included in the
consolidated Federal tax returns filed by GM. Current Federal income taxes are
calculated on a separate return basis and remitted to GM. The deferral method is
used to account for investment tax credits.
STATEMENT OF CASH FLOWS
The Company uses the indirect method to present cash flows from operating
activities and considers certificates of deposit, as well as the following items
with original maturities of three months or less, to be cash equivalents:
commercial paper, repurchase agreements, and money market funds. (See Note 20.)
FINANCIAL INSTRUMENTS
The following table presents the carrying amounts and fair values of the
Company's financial instruments as defined under SFAS No. 107, Disclosures about
Fair Value of Financial Instruments, at December 31, 1995 and 1994:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------
1995 1994
-------------------- --------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- -------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Available for-sale marketable securities (Notes 3 and
6).................................................. $ 93.5 $ 93.5 $ 153.6 $ 153.6
Investment in joint ventures and partnerships, under
the cost method of accounting (Note 6).............. 215.1 271.4 149.6 172.0
Other long-term securities (Note 6)................... 263.2 307.4 201.2 192.6
Non-current notes receivable (Note 6)................. 89.6 86.0 158.1 154.4
Notes payable (Note 9)................................ 2,100.6 2,168.4 1,224.4 1,230.3
Foreign exchange forward contracts, net liability
(Note 15)........................................... (5.4) (5.4) (0.9) (0.9)
</TABLE>
The carrying value of other financial instruments such as cash equivalents,
accounts receivable, and accounts payable approximate their fair value.
Concentrations of credit risk with respect to accounts receivable are limited
due to the large number of customers comprising the Company's customer base and
their dispersion across different industry and geographic areas. Accounts
receivable are shown net of allowances of $99.5 million and $57.9 million as of
December 31, 1995 and 1994, respectively.
DERIVATIVES
Derivative financial instruments are used by the Company in the management
of its interest rate and foreign currency exposures. Net payments or receipts
under the Company's interest rate swap agreements are recorded as adjustments to
interest expense. Foreign exchange-forward contracts are recorded in the
Company's Consolidated Balance Sheets at fair value at the reporting date.
Realized and unrealized changes in fair value are recognized in income, as other
income (expense), in the period in which the changes occur.
USE OF ESTIMATES
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of
IV-29
<PAGE> 11
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the consolidated financial statements and the reported amounts of
revenues and expenses during the reporting period. Because of the use of
estimates inherent in the financial reporting process, actual results could
differ from those estimates.
SIGNIFICANT CUSTOMERS
The percentage of EDS' total revenues attributable to GM and its affiliates
has decreased significantly since GM's acquisition of EDS in 1984 as a result of
the revenue growth of EDS' non-GM business. During the year ended December 31,
1995, the portion of EDS' revenues attributable to GM was approximately 31%. On
August 7, 1995, GM announced that it intends to pursue a split-off (the
"Split-Off") of EDS to its GM Class E stockholders in a tax-free exchange.
Immediately before the Split-Off, GM and EDS will enter into a new master
services agreement and certain related agreements which would significantly
change the pricing and terms of the services currently provided by EDS. In
addition, it is also expected that at the time of the Split-Off, a Special
Inter-Company Payment will be made to GM by EDS to ensure the fairness of the
Split-Off to all classes of GM common stock. Therefore, EDS does not anticipate
the loss of GM as an ongoing major customer in the near future.
Other than General Motors, no single customer accounted for more than 10%
of the Company's revenues in 1995, 1994, or 1993.
RECLASSIFICATIONS
Certain reclassifications have been made to the 1994 and 1993 consolidated
financial statements to conform to the 1995 presentation.
NOTE 2: NATIONAL HERITAGE INSURANCE COMPANY
National Heritage Insurance Company (NHIC), a wholly owned subsidiary of
EDS, acts as underwriter for claims benefit payments for the Medicaid welfare
program contract for the state of Texas.
The contract provides that payments from the state be deposited in trust
accounts that are not included in the consolidated financial statements. In
accordance with contractual provisions, these funds will be returned to the
state if total benefit claims are less than the amounts received. Of such
payments received for the years ended December 31, 1995, 1994, and 1993,
$3,440.1 million, $4,188.7 million, and $4,453.4 million, respectively, were
designated for the payment of benefit claims or to be returned to the state. At
December 31, 1995 and 1994, $664.7 million and $983.5 million, respectively, of
such designated funds at amortized cost remained in the trust accounts.
Approximate market values of these invested funds at December 31, 1995 and 1994
were $663.3 million and $975.2 million, respectively. These investments
primarily consist of corporate and government bonds. NHIC has the ability and
intent to hold these investments until their full face value can be realized.
Gains and losses from the sale of these investments held in trust accounts are
combined with gains and losses from the Company's other investments.
IV-30
<PAGE> 12
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 3. DEBT AND MARKETABLE EQUITY SECURITIES
Following is a summary of available-for-sale securities:
<TABLE>
<CAPTION>
DECEMBER 31, 1995
-----------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- ------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Current
U.S. government and agency obligations............... $ 33.2 $0.1 $0.1 $ 33.2
Other debt securities................................ 35.6 0.1 1.8 33.9
------- ---- ---- ------
Total debt securities........................... 68.8 0.2 1.9 67.1
Equity securities.................................... 23.4 -- 0.8 22.6
------- ---- ---- ------
Total current available-for-sale securities..... $ 92.2 $0.2 $2.7 $ 89.7
======= ==== ==== ======
Noncurrent (Note 6)
Other debt securities................................ $ 0.6 $ -- $ -- $ 0.6
Equity securities.................................... 5.7 -- 2.5 3.2
------- ---- ---- ------
Total noncurrent available-for-sale
securities................................... $ 6.3 $ -- $2.5 $ 3.8
======= ==== ==== ======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1994
-----------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- ------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Current
U.S. government and agency obligations............... $ 31.9 $ -- $0.6 $ 31.3
Other debt securities................................ 94.9 0.2 4.7 90.4
------- ---- ---- ------
Total debt securities........................... 126.8 0.2 5.3 121.7
Equity securities.................................... 29.2 -- 1.3 27.9
------- ---- ---- ------
Total current available-for-sale securities..... $ 156.0 $0.2 $6.6 $149.6
======= ==== ==== ======
Noncurrent (Note 6)
Other debt securities................................ $ 0.6 $ -- $ -- $ 0.6
Equity securities.................................... 5.8 -- 2.4 3.4
------- ---- ---- ------
Total noncurrent available-for-sale
securities................................... $ 6.4 $ -- $2.4 $ 4.0
======= ==== ==== ======
</TABLE>
The amortized cost and estimated fair value of debt securities at December
31, 1995, by contractual maturity, are shown on the next page. Expected
maturities will differ from contractual maturities because the issuers of the
securities may have the right to repay obligations without prepayment penalties.
IV-31
<PAGE> 13
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
<TABLE>
<CAPTION>
DECEMBER 31, 1995
------------------
AMORTIZED FAIR
COST VALUE
--------- -----
(IN MILLIONS)
<S> <C> <C>
Debt securities
Due in one year or less.................................... $18.1 $18.1
Due after one year through five years...................... 30.7 30.7
Due after five years through 10 years...................... 2.0 2.0
Due after 10 years......................................... 0.7 0.7
Mortgage-backed securities................................. 17.9 16.2
----- -----
Total debt securities................................... $69.4 $67.7
===== =====
</TABLE>
The following table summarizes sales of available-for-sale securities:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-------------------
1995 1994
--------- ------
(IN MILLIONS)
<S> <C> <C>
Proceeds from sales......................................... $ 162.5 $374.4
Gross realized gains........................................ $ 0.7 $ 17.4
Gross realized losses....................................... $ (1.1) $ (4.1)
</TABLE>
Specific identification was used to determine cost in computing realized gain or
loss.
NOTE 4. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
ACCUMULATED
COST DEPRECIATION NET
-------- ------------ --------
(IN MILLIONS)
<S> <C> <C> <C>
DECEMBER 31, 1995
Land.......................................................... $ 136.9 $ -- $ 136.9
Buildings and facilities...................................... 925.1 383.5 541.6
Computer equipment............................................ 4,836.2 2,571.3 2,264.9
Other equipment and furniture................................. 663.6 364.6 299.0
-------- -------- --------
Total.................................................... $6,561.8 $3,319.4 $3,242.4
======== ======== ========
DECEMBER 31, 1994
Land.......................................................... $ 125.3 $ -- $ 125.3
Buildings and facilities...................................... 878.7 319.5 559.2
Computer equipment............................................ 3,967.6 2,096.6 1,871.0
Other equipment and furniture................................. 465.9 264.8 201.1
-------- -------- --------
Total.................................................... $5,437.5 $2,680.9 $2,756.6
======== ======== ========
</TABLE>
NOTE 5. LAND HELD FOR DEVELOPMENT
Land held for development at December 31, 1995 consists of approximately
2,260 acres located throughout the Dallas metropolitan area. Approximately 1,590
acres of land, site of a commercial real estate development, are located in
Plano, Texas. The carrying value of land is periodically compared to current
sales, market analysis and appraisals to determine whether an adjustment is
required.
IV-32
<PAGE> 14
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 6. INVESTMENT IN LEASES AND OTHER
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1994
-------- --------
(IN MILLIONS)
<S> <C> <C>
Lease contracts receivable (net of principal and interest on nonrecourse
debt).................................................................. $ 385.9 $ 384.5
Estimated residual values of leased assets (not guaranteed).............. 335.3 339.0
Unearned income, including deferred investment tax credits............... (246.8) (260.6)
-------- --------
Investment in leveraged leases (excluding deferred taxes of $303.0 and
$284.7 at December 31, 1995 and 1994, respectively)................. 474.4 462.9
Investment in securities, joint ventures, and partnerships............... 602.8 357.2
Investment in direct financing leases, net of unearned income............ 148.2 153.8
Noncurrent notes receivable.............................................. 89.6 158.1
GM Class E common stock held for benefit plans........................... 33.2 54.7
Investment in tax benefit transfers...................................... 36.2 38.6
Long-term prepaid software license fees.................................. 43.4 16.6
Other.................................................................... 145.7 66.9
-------- --------
Total............................................................... $1,573.5 $1,308.8
======== ========
</TABLE>
The fair values of certain long-term investments are estimated based on
quoted market prices for these or similar investments. For other investments, a
variety of methods are used to estimate fair value, including external
valuations and discounted cash flows. At December 31, 1995, the fair values of
investments in joint ventures and partnerships (accounted for using the cost
method), long-term securities, and noncurrent notes receivable were estimated to
be $271.4 million, $307.4 million, and $86.0 million, respectively, with
carrying amounts of $215.1 million, $263.2 million, and $89.6 million,
respectively. At December 31, 1994, the fair values of investments in joint
ventures and partnerships (accounted for using the cost method), long-term
securities, and noncurrent notes receivable were estimated to be $172.0 million,
$192.6 million, and $154.4 million, respectively, with carrying amounts of
$149.6 million, $201.2 million, and $158.1 million, respectively. The carrying
amount of securities, joint ventures and partnerships also includes investments
accounted for under the equity method, none of which are material to the
Company's consolidated financial statements. A decline in the market value of
any of these investments which is deemed to be other than temporary would be
charged to earnings. At December 31, 1995 and 1994, Investment in Leases and
Other was net of an allowance of $26.6 million and $17.5 million, respectively.
Long-term securities include GM Class E common stock and other securities. The
carrying value of the GM Class E common stock, which was less than the market
value, was utilized as the investment's fair value shown above, because the
stock will be used to satisfy future benefit plan obligations.
Financing leases that are financed with nonrecourse borrowings at lease
inception are accounted for as leveraged leases. Such borrowings are secured by
substantially all of the lessor's rights under the lease plus the residual value
of the asset. For Federal income tax purposes, the Company receives the
investment tax credit (if available) at lease inception and has the benefit of
tax deductions for depreciation on the leased asset and for interest on the
nonrecourse debt. A portion of the Company's leveraged lease portfolio is
concentrated within the airline industry. The Company historically has not
experienced credit losses from these transactions, and the portfolio is
diversified among unrelated lessees.
IV-33
<PAGE> 15
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 7. SOFTWARE, GOODWILL, AND OTHER INTANGIBLES
<TABLE>
<CAPTION>
ACCUMULATED
COST AMORTIZATION NET
-------- ------------ --------
(IN MILLIONS)
<S> <C> <C> <C>
DECEMBER 31, 1995
Software...................................................... $ 966.6 $606.8 $ 359.8
Goodwill...................................................... 1,225.6 129.6 1,096.0
Other intangibles............................................. 245.8 171.7 74.1
-------- ------ --------
Total....................................................... $2,438.0 $908.1 $1,529.9
======== ====== ========
DECEMBER 31, 1994
Software...................................................... $ 876.0 $462.1 $ 413.9
Goodwill...................................................... 833.9 80.4 753.5
Other intangibles............................................. 312.8 210.6 102.2
-------- ------ --------
Total....................................................... $2,022.7 $753.1 $1,269.6
======== ====== ========
</TABLE>
NOTE 8. ACCRUED LIABILITIES
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1994
-------- --------
(IN MILLIONS)
<S> <C> <C>
Contract related......................................................... $1,044.8 $ 880.9
Payroll related.......................................................... 291.4 196.4
Operating expenses....................................................... 157.7 196.1
Property, sales, and franchise taxes..................................... 135.1 100.1
Other.................................................................... 75.5 77.5
-------- --------
Total.................................................................. $1,704.5 $1,451.0
======== ========
</TABLE>
NOTE 9. NOTES PAYABLE
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1994
-------- --------
(IN MILLIONS)
<S> <C> <C>
Commercial paper, 5.6% to 5.9%........................................... $1,078.0 $ 933.0
Lines of credit, variable rate 5.9% to 9.6%, due 1996.................... 118.9 48.7
Notes, variable rate, 3.0% to 11.2%, due 1996 to 2006.................... 9.3 91.1
Notes to Banks, fixed rate, 4.9% to 11.7%, due 1996 to 2003.............. 121.6 107.2
Notes Payable, fixed rate, 6.85% to 7.125%, due 2000 to 2005, net of
discount............................................................... 645.8 --
Notes Payable, fixed rate, 1.2% to 10.4%, due 1996 to 2004............... 127.0 44.4
-------- --------
Total.................................................................. 2,100.6 1,224.4
Less current maturities classified as notes payable.................... (247.8) (203.4)
-------- --------
Noncurrent notes payable............................................... $1,852.8 $1,021.0
======== ========
</TABLE>
IV-34
<PAGE> 16
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Commercial paper is classified as noncurrent debt as it is intended to be
maintained on a long-term basis with ongoing credit availability provided by the
Company's revolving, committed lines of credit. During 1995, the Company revised
its agreement with a syndicate of banks, which increased to $2,500.0 million its
committed lines of credit, of which $1,250.0 million expires in 1996 with the
option to convert any outstanding amounts under these lines into term loans that
mature in 1998. The remaining $1,250.0 million expires in 2000. Upon expiration
of the commitment periods, the lenders and EDS have the option to extend the
commitment.
In addition, as of December 31, 1995, the Company had available and had
used another $15.5 million in committed lines of credit. The Company also had
available $831.6 million in uncommitted short-term lines of credit, of which
$728.2 million remained unused at December 31, 1995.
In May 1995, EDS issued $350.0 million of its 6.85%, five-year notes and
$300.0 million of its 7.125% ten-year notes in a private placement to investment
banks.
Notes payable relate to land held for development, property and equipment,
acquisitions, and other items. Notes payable are generally unsecured with
certain notes secured by assets of a majority-owned subsidiary.
Maturities of notes payable for years subsequent to December 31, 1995 are
as follows (in millions):
<TABLE>
<S> <C>
1996................................... $ 247.8
1997................................... 60.6
1998................................... 35.5
1999................................... 6.9
2000................................... 1,433.1
Thereafter............................. 316.7
--------
$2,100.6
========
</TABLE>
The Company's credit facilities and the indenture governing its medium term
notes contain certain financial and other covenants, including the maintenance
of a minimum net worth and restrictions on mergers, consolidations and sales of
substantially all of the assets of the Company. As of December 31, 1995, the
Company was in compliance with all of these covenants.
For the years ended December 31, 1994 and 1993, interest costs of $1.2
million and $5.4 million, respectively, were capitalized, which, if charged to
expense, would have resulted in reductions in net income of $0.7 million and
$3.5 million, respectively. During 1995, the Company capitalized no interest
costs.
The fair value of notes payable is estimated based on the current rates
offered to the Company for the same remaining maturities. At December 31, 1995
and 1994, the estimated fair value was $2,168.4 million and $1,230.3 million,
respectively.
IV-35
<PAGE> 17
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 10. CONSOLIDATED STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
COMMON STOCK CURRENCY MARKET CONSOL.
--------------- TRANS. VALUE RETAINED STOCKHOLDER'S
SHARES AMOUNT ADJUST. ADJUST. EARNINGS EQUITY
------ ------ -------- ------- -------- -------------
(IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1992............... 479.3 $365.9 $(52.7) $ -- $2,750.2 $ 3,063.4
Separate consolidated net income......... -- -- -- -- 724.0 724.0
Cash dividends declared -- $0.40 per
share................................. -- -- -- -- (192.1) (192.1)
Stock option and award transactions...... 1.6 55.3 -- -- -- 55.3
Currency translation adjustment.......... -- -- (33.2) -- -- (33.2)
----- ------ ------ ----- -------- --------
Balance at December 31, 1993............... 480.9 421.2 (85.9) -- 3,282.1 3,617.4
Separate consolidated net income......... -- -- -- -- 821.9 821.9
Cash dividends declared -- $0.48 per
share................................. -- -- -- -- (231.1) (231.1)
Stock option and award transactions...... 0.8 33.9 -- -- -- 33.9
Currency translation adjustment.......... -- -- (3.0) -- -- (3.0)
Unrealized loss on securities, net (Note
3).................................... -- -- -- (6.6) -- (6.6)
----- ------ ------ ----- -------- --------
Balance at December 31, 1994............... 481.7 455.1 (88.9) (6.6) 3,872.9 4,232.5
Separate consolidated net income......... -- -- -- -- 938.9 938.9
Cash dividends declared -- $0.52 per
share................................. -- -- -- -- (251.3) (251.3)
Stock option and award transactions...... 2.0 62.6 -- -- -- 62.6
Currency translation adjustment.......... -- -- (6.6) -- -- (6.6)
Unrealized gain on securities, net (Note
3).................................... -- -- -- 2.4 -- 2.4
----- ------ ------ ----- -------- --------
Balance at December 31, 1995............... 483.7 $517.7 $(95.5) $(4.2) $4,560.5 $ 4,978.5
===== ====== ====== ===== ======== ========
</TABLE>
NOTE 11. INCOME TAXES
The current and deferred income tax liabilities (assets) are summarized as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1995 1994
------ ------
(IN MILLIONS)
<S> <C> <C>
Current payable............................................................. $ 4.3 $ 49.3
Current deferred............................................................ 71.6 61.7
------ ------
Total income taxes -- current............................................. 75.9 111.0
Noncurrent deferred......................................................... 739.7 659.8
------ ------
Total current and noncurrent income taxes................................. $815.6 $770.8
====== ======
</TABLE>
IV-36
<PAGE> 18
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
The provision for income tax expense is summarized as follows:
<TABLE>
<CAPTION>
U.S. U.S.
YEAR-ENDED FEDERAL NON-U.S. STATE TOTAL
- ------------------------------------------------------------ ------- -------- ----- ------
(IN MILLIONS)
<S> <C> <C> <C> <C>
DECEMBER 31, 1995
Current..................................................... $ 310.3 $117.3 $35.4 $463.0
Deferred.................................................... 44.5 20.6 -- 65.1
------ ------ ----- ------
Total..................................................... $ 354.8 $137.9 $35.4 $528.1
====== ====== ===== ======
DECEMBER 31, 1994
Current..................................................... $ 279.0 $167.9 $32.6 $479.5
Deferred.................................................... 15.8 (33.0) -- (17.2)
------ ------ ----- ------
Total..................................................... $ 294.8 $134.9 $32.6 $462.3
====== ====== ===== ======
DECEMBER 31, 1993
Current..................................................... $ 130.1 $ 77.8 $17.0 $224.9
Deferred.................................................... 161.0 21.4 -- 182.4
------ ------ ----- ------
Total..................................................... $ 291.1 $ 99.2 $17.0 $407.3
====== ====== ===== ======
</TABLE>
Income before income taxes included the following components:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1995 1994 1993
-------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C>
U.S. income...................................... $1,131.6 $ 963.5 $ 886.1
Non-U.S. income.................................. 335.4 320.7 245.2
-------- -------- --------
Total.......................................... $1,467.0 $1,284.2 $1,131.3
======== ======== ========
</TABLE>
A reconciliation of income tax expense using the statutory Federal income
tax rate of 35.0% for 1995, 1994, and 1993 to the actual income tax expense
follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1995 1994 1993
-------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C>
Income before income taxes..................................... $1,467.0 $1,284.2 $1,131.3
======== ======== ========
Statutory Federal income tax................................... $ 513.4 $ 449.5 $ 395.9
Non-U.S. taxes, net of credit.................................. 4.1 18.9 13.4
U.S. State income tax, net..................................... 23.0 21.2 11.1
Investment tax credit -- leveraged leases...................... (3.0) (3.1) (4.4)
Research and experimentation credits........................... (7.5) (11.3) (8.8)
Other.......................................................... (1.9) (12.9) 0.1
-------- -------- --------
Total........................................................ $ 528.1 $ 462.3 $ 407.3
======== ======== ========
Effective income tax rate...................................... 36.0% 36.0% 36.0%
==== ==== ====
</TABLE>
IV-37
<PAGE> 19
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
The tax effects of temporary differences and carryforwards, which result in
a significant portion of the deferred tax assets and liabilities, are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------
1995 1994
---------------------- ---------------------
ASSETS LIABILITIES ASSETS LIABILITIES
------- ----------- ------ -----------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Basis differences attributable to leasing activities.... $ 1.6 $ 488.4 $ 2.5 $ 504.8
Adjustments necessary to convert accruals to a tax
basis................................................. 129.9 246.8 111.9 215.1
Employee benefit plans.................................. 27.1 57.8 32.0 25.9
Accumulated tax depreciation/amortization versus
accumulated financial statement
depreciation/amortization............................. 12.0 259.5 18.7 211.2
Effect on deferred taxes of carryforwards............... 122.3 -- 102.9 --
Other................................................... 305.2 230.6 232.1 153.5
------- ------- ------- --------
Subtotal........................................... 598.1 1,283.1 500.1 1,110.5
Less valuation allowance........................... (126.3) -- (111.1) --
------- ------- ------- --------
Total deferred taxes............................... $ 471.8 $ 1,283.1 $389.0 $ 1,110.5
======= ======= ======= ========
</TABLE>
The net changes in the total valuation allowance for the years ended
December 31, 1995 and 1994 were increases of $15.2 million and $18.8 million,
respectively. Certain of the Company's foreign subsidiaries have net operating
loss carryforwards which expire over an indefinite period. A majority of such
carryforwards are included in the valuation allowance. In assessing the
realizability of deferred tax assets, the Company considers whether it is more
likely than not that some portion or all of the deferred tax assets will not be
realized.
NOTE 12. STOCK PURCHASE AND INCENTIVE PLANS
The 1984 Electronic Data Systems Corporation Employee Stock Purchase Plan
(Purchase Plan) enables EDS employees to purchase up to 80.0 million shares of
GM Class E common stock at 85% of the quoted market price through payroll
deductions of up to 10% of their compensation. Shares of GM Class E common stock
purchased under the Purchase Plan may not be sold or transferred within two
years of the date of purchase unless they are first offered to GM or EDS at the
lesser of the original purchase price or the fair market value on the date of
sale. The number of shares available for future sale under the Purchase Plan was
58.1 million shares at December 31, 1995.
The 1984 Electronic Data Systems Corporation Stock Incentive Plan (1984
Plan) covers up to 160.0 million shares of GM Class E common stock and expires
on October 17, 2004. The 1984 Plan permits shares and rights or options to
acquire shares, which may be subject to restrictions, to be granted or sold. The
maximum number of shares for which additional shares, rights, or options may be
granted or sold under the provisions of the 1984 Plan was 93.3 million shares at
December 31, 1995.
The EDS Incentive and Compensation Committee (the Committee) granted the
right to purchase a total of 27.6 million shares of GM Class E common stock, at
prices of $0.0125 and $0.025 per share, to key employees under the provisions of
the 1984 Plan. As of December 31, 1995, substantially all of these shares have
vested. The difference between the quoted market price as of the date of grant
and the purchase price of shares granted has been charged to operations over the
vesting period. Expense for these awards amounted to $1.6 million, $13.3
million, and $16.3 million for the years ended December 31, 1995, 1994, and
1993, respectively.
IV-38
<PAGE> 20
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
In 1995, 1994, 1991, and 1988, the Committee approved restricted stock unit
grants. The 1995 grant, related to the acquisition of A.T. Kearney (see Note
19), totals 6.6 million shares of GM Class E common stock. The 1995 grant and
the 1994 grant, which totaled 9.5 million shares, will be distributed to key
employees under the provisions of the 1984 Plan. The right to receive shares is
a restricted stock unit. All units granted are generally scheduled to vest over
a period of 10 years. The 1995 units are scheduled to vest beginning September
1996. The 1994, 1991, and 1988 grants began vesting in March 1995, March 1992,
and March 1989, respectively. The quoted market price as of the date of grant is
charged to operations over the vesting period. The total unvested number of
units as of December 31, 1995 was 19.8 million.
The Company has a bonus plan under which awards are granted to key
executives and employees. Bonus expense amounted to $96.9 million, $86.6
million, and $49.8 million for the years ended December 31, 1995, 1994, and
1993, respectively. Included in bonus expense is $57.2 million, $48.7 million,
and $17.5 million relating to the restricted stock unit grants for the years
ended December 31, 1995, 1994, and 1993, respectively.
NOTE 13. DEFERRED COMPENSATION PLAN
The EDS Deferred Compensation Plan (Plan) provides a long-term savings
program for participants. The Plan allows eligible employees to contribute a
percentage of their compensation to a savings program and to defer income taxes
until the time of distribution.
NOTE 14. SEGMENT INFORMATION
INDUSTRY SEGMENTS
The Company's business involves operations in principally one industry
segment: designing, installing, and operating business information and
communications systems. Revenues from GM contributed approximately 31%, 36%, and
39% of total revenues for the years ended December 31, 1995, 1994, and 1993,
respectively.
GEOGRAPHIC SEGMENTS
The following presents information about the Company's operations in
different geographic areas:
<TABLE>
<CAPTION>
U.S. EUROPE OTHER TOTAL
-------- -------- -------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C>
AS OF AND FOR THE YEAR ENDED DECEMBER 31, 1995
Systems and other contracts revenues
Outside customers.................................. $5,794.9 $2,001.5 $ 734.6 $ 8,531.0
GM and affiliates.................................. 2,926.1 659.2 305.8 3,891.1
-------- -------- -------- ---------
Total systems and other contracts revenues........... $8,721.0 $2,660.7 $1,040.4 $12,422.1
======== ======== ======== =========
Operating income..................................... $1,164.0 $ 271.5 $ 93.5 $ 1,529.0
======== ======== ======== =========
Identifiable assets.................................. $7,566.8 $2,490.1 $ 775.5 $10,832.4
======== ======== ======== =========
</TABLE>
IV-39
<PAGE> 21
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
<TABLE>
<CAPTION>
U.S. EUROPE OTHER TOTAL
-------- -------- -------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C>
AS OF AND FOR THE YEAR ENDED DECEMBER 31, 1994
Systems and other contracts revenues
Outside customers.................................. $4,611.2 $1,308.1 $ 493.6 $ 6,412.9
GM and affiliates.................................. 2,764.4 523.4 259.4 3,547.2
-------- -------- -------- ---------
Total systems and other contracts revenues........... $7,375.6 $1,831.5 $ 753.0 $ 9,960.1
======== ======== ======== =========
Operating income..................................... $1,008.6 $ 168.3 $ 66.7 $ 1,243.6
======== ======== ======== =========
Identifiable assets.................................. $6,618.0 $1,573.8 $ 594.7 $ 8,786.5
======== ======== ======== =========
AS OF AND FOR THE YEAR ENDED DECEMBER 31, 1993
Systems and other contracts revenues
Outside customers.................................. $4,004.5 $ 911.6 $ 267.5 $ 5,183.6
GM and affiliates.................................. 2,574.5 511.2 238.0 3,323.7
-------- -------- -------- ---------
Total systems and other contracts revenues........... $6,579.0 $1,422.8 $ 505.5 $ 8,507.3
======== ======== ======== =========
Operating income..................................... $ 906.5 $ 148.7 $ 56.1 $ 1,111.3
======== ======== ======== =========
Identifiable assets.................................. $5,350.6 $1,185.9 $ 405.6 $ 6,942.1
======== ======== ======== =========
</TABLE>
NOTE 15. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
The Company operates on a global basis receiving revenues and incurring
expenses in many different countries. As a result of these activities, the
Company has exposure to market risks arising from changes in interest rates and
foreign exchange rates. Derivative financial instruments are used by the Company
for the purpose of hedging against these risks, to which the Company is exposed
in the normal course of business, by creating offsetting market exposures. The
Company's use of such instruments in relation to such risks is explained below.
The Company does not hold or issue financial instruments for trading purposes.
The notional amounts of derivatives contracts are summarized below as part
of the description of the instruments utilized. The notional amounts do not
represent the amounts exchanged by the parties, and thus are not a measure of
the exposure of the Company through its use of derivatives. The amounts
exchanged by the parties are normally based upon the notional amounts and the
other terms of the derivatives. The Company is not a party to leveraged
derivatives.
INTEREST RISK MANAGEMENT
The Company has historically entered into interest rate swap agreements in
order to reduce the impact of changes in interest rates upon its floating-rate
debt. As of December 31, 1995 and 1994, the Company had no outstanding interest
rate swap agreements.
IV-40
<PAGE> 22
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
FOREIGN EXCHANGE RISK MANAGEMENT
The Company uses derivative financial instruments, particularly foreign
exchange-forward contracts, to hedge transactions denominated in different
currencies on a continuing basis. The purpose of the Company's hedging
activities is to reduce the levels of risk to which it is exposed resulting from
exchange-rate movements. At December 31, 1995 and 1994, the Company had forward
exchange contracts maturing in the following year to purchase various foreign
currencies in the amount of $651.9 million and $289.0 million, respectively, and
to sell $1,380.1 million and $766.5 million, respectively. The estimated fair
value of forward exchange contracts is based on quoted market prices. At
December 31, 1995, the estimated fair value of outstanding contracts in a gain
position was $5.5 million and the estimated fair value of outstanding contracts
in a loss position was ($10.9) million. At December 31, 1994, the estimated fair
value of outstanding contracts in a gain position was $3.3 million and the
estimated fair value of outstanding contracts in a loss position was ($4.2)
million. The Company recognizes realized and unrealized gains and losses on
foreign exchange contracts by marking to market all outstanding forward exchange
contracts. Fair value represents the cash required to settle foreign
exchange-forward contracts.
The Company is exposed to credit risk in the event of nonperformance by
counterparties to foreign exchange contracts, but because the Company deals only
with major commercial banks with high quality credit, the Company does not
anticipate nonperformance by any of these counterparties.
NOTE 16. RETIREMENT PLANS
The Company has pension plans (the Plans) covering substantially all of its
employees, the majority of which are noncontributory. In general, employees
become fully vested upon attaining five years of service, and benefits are based
on years of service and earnings. The actuarial cost method currently used is
the projected unit credit cost method. The Company's U.S. funding policy is to
contribute amounts that fall within the range of deductible contributions for
Federal income tax purposes.
The weighted average assumptions used for the Plans using a measurement
date of October 1 are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
-----------------------
1995 1994 1993
---- ----- ----
<S> <C> <C> <C>
Discount rate........................................................ 8.0% 8.9% 7.7%
Rate of increase in compensation levels.............................. 5.4% 5.7% 5.9%
Long-term rate of return on assets................................... 9.9% 10.0% 9.8%
</TABLE>
Net pension cost consisted of the following components:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1995 1994 1993
------- ------ -------
(IN MILLIONS)
<S> <C> <C> <C>
Service cost of the current period................................ $ 87.6 $ 96.1 $ 72.6
Interest cost on projected benefit obligation..................... 97.5 82.3 69.8
Actual return on assets........................................... (158.6) (22.3) (121.3)
Net amortization and deferral..................................... 59.9 (37.9) 75.2
------- ------ -------
Net pension cost.................................................. $ 86.4 $118.2 $ 96.3
======= ====== =======
</TABLE>
IV-41
<PAGE> 23
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
At December 31, 1995 and 1994, the Plans' assets consisted primarily of
equity and fixed income securities, commingled pension trust funds, and U.S.
Government obligations. Accrued and/or prepaid pension cost is included in
Accrued Liabilities or Investment in Leases and Other in the Company's
Consolidated Balance Sheets.
The following is a reconciliation of the funded status of the Plans:
<TABLE>
<CAPTION>
DECEMBER 31, 1995 DECEMBER 31, 1994
-------------------- --------------------
ASSETS ACCUM. ASSETS ACCUM.
EXCEED BENEFITS EXCEED BENEFITS
ACCUM. EXCEED ACCUM. EXCEED
BENEFITS ASSETS BENEFITS ASSETS
-------- -------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Plans' assets at fair value.............................. $1,242.0 $ 8.2 $ 918.3 $ --
-------- ------- ------ -------
Actuarial present value of benefit obligation
Vested benefits........................................ 750.7 81.2 485.9 56.1
Nonvested benefits..................................... 78.4 13.3 57.6 11.2
-------- ------- ------ -------
Accumulated benefit obligation........................... 829.1 94.5 543.5 67.3
Effect of projected future salary increases.............. 462.9 57.9 326.4 25.5
-------- ------- ------ -------
Projected benefit obligation (PBO)....................... 1,292.0 152.4 869.9 92.8
-------- ------- ------ -------
Excess (deficiency) of Plans' assets over PBO............ (50.0) (144.2) 48.4 (92.8)
Unrecognized net (gain) loss............................. 126.7 (19.7) (28.3) (35.3)
Unrecognized net (asset) obligation at date of
adoption............................................... (3.1) 26.0 (9.6) 23.4
Unrecognized prior service cost.......................... 11.4 (0.8) 12.8 (1.0)
Additional minimum liability............................. -- (0.1) -- --
-------- ------- ------ -------
Net prepaid (accrued) pension cost....................... $ 85.0 $ (138.8) $ 23.3 $ (105.7)
======== ======= ====== =======
</TABLE>
NOTE 17. COMMITMENTS AND RENTAL EXPENSE
Commitments for rental payments under noncancellable operating leases for
each of the next five years ending December 31 and thereafter for computer
equipment, software, and facilities are as follows (in millions):
<TABLE>
<S> <C>
1996..................................... $371.5
1997..................................... 273.7
1998..................................... 193.1
1999..................................... 168.7
2000..................................... 142.9
Thereafter............................... 646.5
</TABLE>
Total rentals under cancelable and noncancelable leases, principally
computer equipment, leased facilities, and other leased assets, included in
costs and charged to expenses were $676.1 million, $524.3 million, and $564.9
million for the years ended December 31, 1995, 1994, and 1993, respectively.
Total rentals under cancelable and noncancelable leases for software included in
costs and charged to expenses were $306.8 million, $220.2 million, and $129.3
million for the years ended December 31, 1995, 1994, and 1993, respectively.
At December 31, 1995 and 1994, the Company had $43.9 million and $51.5
million, respectively, outstanding under standby letters of credit related to
payment and performance guarantees.
IV-42
<PAGE> 24
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 18. CONTINGENT LIABILITIES
There are various claims and pending actions against the Company arising in
the ordinary course of the conduct of its business. Certain of these actions
seek damages in significant amounts. The amount of liability on these claims and
actions at December 31, 1995 was not determinable, but in the opinion of
management, the ultimate liability, if any, will not have a material adverse
effect on the Company's consolidated results of operations or financial
position.
NOTE 19. ACQUISITIONS
On August 31, 1995, the Company acquired A.T. Kearney, a Chicago-based
international management consulting firm. At the acquisition date, the Company
paid approximately $112.7 million in cash and issued $162.3 million in short and
long-term notes to A.T. Kearney shareholders and principals. The terms of the
acquisition agreement also include a restricted stock grant of approximately 6.6
million shares of GM Class E common stock, which will vest over a ten-year
period for certain A.T. Kearney personnel remaining with the Company (see Note
12). Prior to December 31, 1995, $80.9 million of short-term notes related to
the acquisition were retired.
The acquisition was accounted for using the purchase method of accounting.
Accordingly, the excess purchase price over net assets acquired, based upon the
fair value of such assets and liabilities at the date of acquisition, was $252.1
million and is being amortized to expense over a ten-year period. The
Consolidated Statements of Income include the operations of A.T. Kearney since
the date of acquisition. Pro forma disclosure relating to A.T. Kearney's results
of operations is not presented, as the impact is immaterial to EDS.
In conjunction with acquisitions made during the years ended December 31,
1995 and 1994, assets were acquired and liabilities were assumed as follows:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
--------------------
1995 1994
------- -------
(IN MILLIONS)
<S> <C> <C>
Fair value of assets acquired............................ $ 674.7 $ 427.8
Less: Cash paid for stock and assets, net of cash
acquired........................................... (234.9) (186.6)
Debt issued for stock and assets................... (184.9) (94.9)
------- -------
Liabilities assumed................................. $ 254.9 $ 146.3
======= =======
</TABLE>
IV-43
<PAGE> 25
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 20. SUPPLEMENTARY FINANCIAL INFORMATION
The following summarizes certain costs charged to expense for the years
indicated:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1995 1994 1993
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Depreciation of property and equipment......................... $808.1 $577.5 $465.6
====== ====== ======
Amortization................................................... $299.7 $193.6 $161.2
====== ====== ======
</TABLE>
The components of Interest and other income, net, are presented below:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1995 1994 1993
------- ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Interest and other income..................................... $ 58.8 $ 92.3 $ 54.5
Interest expense.............................................. (120.8) (51.7) (34.5)
------- ------ ------
Total.................................................... $ (62.0) $ 40.6 $ 20.0
======= ====== ======
</TABLE>
Supplemental cash flow information is presented below:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1995 1994 1993
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Cash paid for
Income taxes, net of refunds................................. $407.8 $465.6 $183.8
====== ====== ======
Interest, net of amount capitalized.......................... $108.3 $ 49.7 $ 40.2
====== ====== ======
</TABLE>
IV-44
<PAGE> 26
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONCLUDED
NOTE 21. QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
(IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1995
Systems and other contracts revenues.................. $2,776.3 $2,950.1 $3,073.7 $3,622.0
Gross profit from operations.......................... 600.2 654.9 687.6 877.8
Income before income taxes............................ 307.5 354.5 384.0 421.0
Separate Consolidated Net Income...................... 196.8 226.9 245.7 269.5
Available Separate Consolidated Net Income............ $ 122.4 $ 205.8 $ 222.9 $ 244.4
Earnings Attributable to GM Class E Common Stock on a
Per Share Basis..................................... $0.42 $0.47 $0.51 $0.56
Stock price range of GM Class E Common Stock
High............................................. $41.38 $45.25 $47.50 $52.63
Low.............................................. $36.88 $38.38 $41.50 $43.88
YEAR ENDED DECEMBER 31, 1994
Systems and other contracts revenues.................. $2,217.2 $2,309.5 $2,522.8 $2,910.6
Gross profit from operations.......................... 506.6 584.1 602.1 737.9
Income before income taxes............................ 268.3 308.2 338.1 369.6
Separate Consolidated Net Income...................... 171.7 197.3 216.4 236.5
Available Separate Consolidated Net Income............ $ 92.1 $ 106.5 $ 117.3 $ 128.5
Earnings Attributable to GM Class E Common Stock on a
Per Share Basis..................................... $0.36 $0.41 $0.45 $0.49
Stock price range of GM Class E Common Stock
High............................................. $36.88 $38.00 $38.50 $39.50
Low.............................................. $27.50 $32.88 $33.00 $34.75
</TABLE>
IV-45
<PAGE> 27
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
SUPPLEMENTARY INFORMATION
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
AS OF AND FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------------------------
1995 1994 1993 1992 1991
--------- -------- -------- -------- --------
(IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Revenues.................................... $12,422.1 $9,960.1 $8,507.3 $8,155.2 $7,028.5
Separate Consolidated Net Income Before
Cumulative Effect of Accounting Change.... 938.9 821.9 724.0 635.5 563.0
Separate Consolidated Net Income After
Cumulative Effect of Accounting Change.... $ 938.9 $ 821.9 $ 724.0 $ 635.5 $ 547.5
Average number of shares of GM Class E
common stock outstanding (in millions).... 404.6 260.3 243.0 209.1 195.3
Class E dividend base (in millions)......... 483.7 481.7 480.6 479.3 478.1
Available Separate Consolidated Net
Income.................................... $ 795.5 $ 444.4 $ 367.2 $ 278.4 $ 223.6
Earnings Attributable to GM Class E
Common Stock on a Per Share Basis Before
Cumulative Effect of Accounting Change.... $1.96 $1.71 $1.51 $1.33 $1.17
Earnings Attributable to GM Class E
Common Stock on a Per Share Basis After
Cumulative Effect of Accounting Change.... $1.96 $1.71 $1.51 $1.33 $1.14
Expenditures for property and equipment..... $ 1,261.4 $1,186.0 $ 816.0 $ 639.0 $ 673.2
Cash and marketable securities.............. $ 638.6 $ 757.8 $ 607.5 $ 587.9 $ 415.8
Current assets.............................. $ 4,381.5 $3,354.1 $2,506.8 $2,157.0 $1,945.6
Current liabilities......................... $ 3,261.3 $2,873.2 $2,160.4 $1,903.1 $2,396.7
Total assets................................ $10,832.4 $8,786.5 $6,942.1 $6,123.5 $5,703.2
Long-term debt.............................. $ 1,852.8 $1,021.0 $ 522.8 $ 561.1 $ 281.9
</TABLE>
IV-46
<PAGE> 28
ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
GENERAL
EDS is a provider of information technology ("IT") services using computer
and communication technologies to meet the business needs of its clients. EDS
offers its clients a continuum of services, including the management and
operation of computers, networks, information systems, information processing
facilities, business operations, and related personnel, as well as management
consulting services.
Proposed Split-Off of EDS
The GM Board of Directors has approved a split-off (the "Split-Off") of EDS
to the holders of General Motors' Class E Common Stock in a transaction that is
tax-free for U.S. federal income tax purposes. GM's Board believes that the
Split-Off is in the best interest of and is fair to GM and the holders of each
of the three outstanding classes of GM common stock. The Split-Off will be
submitted for approval by the common stockholders of General Motors and, if
approved, is expected to be consummated in the second quarter of 1996.
The Split-Off is intended to accomplish three principal objectives from the
perspective of EDS and the holders of Class E Common Stock: (i) to remove
limitations on EDS' ability to participate in major strategic alliances
(including mergers and acquisitions which can be effected using EDS Common
Stock); (ii) to remove limitations on EDS' ability to obtain additional business
from and establish new customer relationships with companies that compete with
General Motors or its subsidiaries; and (iii) to enhance EDS' access to the
capital necessary for investment in its future growth.
In connection with the Split-Off, the GM Board of Directors approved a
Master Services Agreement (the "Master Services Agreement") to be entered into
between EDS and General Motors with respect to information technology services
to be provided after the Split-Off, as well as a special payment to be made by
EDS to GM (the "Special Inter-Company Payment"). If the Split-Off is not
completed, EDS will continue as an indirect wholly owned subsidiary of GM and no
Special Inter-Company Payment will be made. Under such circumstances, the
existing agreements and arrangements between GM and EDS with respect to IT
services (the "Existing IT Services Agreements") will continue with such changes
as GM and EDS may from time to time agree upon or as the GM Board of Directors
upon recommendation of its Capital Stock Committee may from time to time
determine to be fair to all classes of GM common stockholders. No agreement has
been reached between GM and EDS regarding any changes to the Existing IT
Services Agreements which would take effect if the Split-Off is not approved by
GM stockholders or is not consummated for any other reason. GM management has
advised EDS management that in such an eventuality it would seek substantial
changes in the Existing IT Services Agreements, including implementation of
substantially all of the changes provided for by the Master Services Agreement.
Neither the GM Board nor its Capital Stock Committee has determined whether to
require such changes to the Existing IT Services Agreements if the Split-Off is
not consummated, but they anticipate considering such changes if such
circumstances arise.
The Master Services Agreement and certain related agreements between
General Motors and EDS with respect to IT services to be provided after the
Split-Off (collectively, the "IT Services Agreements") contemplate that EDS
would continue to serve as General Motors' principal supplier of IT services for
a term of ten years, which may be extended by agreement of the parties, and that
the IT services to be provided by EDS after the Split-Off will generally be
similar to those provided to General Motors under the Existing IT Services
Agreements. Certain of the existing service arrangements applicable to
particular units, sectors or other organizations within General Motors will be
extended for additional terms of between approximately one and three years
beyond their current expiration dates. In addition, under the IT Services
Agreements, EDS will provide certain plant floor automation services in North
America that it has not previously provided. The IT Services Agreements also
provide that certain significant changes will be made to the pricing and terms
under which EDS will provide IT services to General Motors after the Split-Off.
Among other things, the IT Services Agreements provide that the rates charged by
EDS to General Motors for certain information
IV-47
<PAGE> 29
processing activities and communications services will be reduced and that the
parties will work together to achieve increased targets for structural cost
reductions. General Motors will also be given the right to competitively bid
and, subject to certain restrictions, outsource a limited portion of its IT
service requirements to third party providers. In addition, beginning in 1997,
the payment terms relating to IT services provided by EDS will be revised over a
two-year period to extend the due dates for payments from General Motors. The GM
Board of Directors believes that the changes reflected in the IT Services
Agreements are necessary (i) in light of the fact that, after the Split-Off, EDS
will no longer be a subsidiary of General Motors and the Capital Stock committee
of the GM Board of Directors will no longer be able to monitor the IT service
arrangements between the parties; (ii) to reflect the evolutionary nature of the
General Motors-EDS customer relationship and the IT services industry; and (iii)
to provide additional assurance to General Motors, as EDS' largest customer,
that the IT services performed by EDS will remain competitive.
Based on currently available information and assuming that the IT Services
Agreements had been effective as of January 1, 1996, EDS believes that revenues
generated from services performed for General Motors in 1996 would be slightly
lower than those generated from such services in 1995. In addition, EDS expects
that the contemplated changes in its arrangements with GM could reduce its 1996
earnings per share by as much as $0.07 to $0.14 (including $0.03 in the first
quarter of 1996). The long-term impact of the terms of the IT Services
Agreements cannot be precisely quantified at present, although such terms may
have an adverse effect on operating margins unless EDS is able to effect
reductions in the costs of providing services to General Motors. Although EDS
plans to implement certain cost reduction measures, there can be no assurance as
to the extent if any, to which such measures will mitigate the possible adverse
impact on its operating margins. In general, there can be no assurance that the
terms of the IT Services Agreements would not have a material adverse effect in
the long-term on the results of operations of EDS.
The Special Inter-Company Payment will be paid by EDS to GM at such time,
if any, as the Split-Off occurs. The amount of the Special Inter-Company Payment
will be $500.0 million. Interest costs related to the Special Inter-Company
Payment are expected to be approximately $.03 per share in 1996. In addition to
the Special Inter-Company Payment, EDS expects to incur approximately $35.0
million, or approximately $.05 per share in 1996, of one-time costs in
connection with the formulation and implementation of the Split-Off. Certain of
these costs will be incurred only if the Split-Off is consummated. In arriving
at the amount of the $500 million Special Inter-Company Payment, the parties
took into account the fact that in the Separation Agreement GM would provide EDS
an allowance of $50 million relating to the resolution of various uncertain,
contingent or other matters arising out of the separation of GM and EDS.
Statements about the effect of the proposed Split-Off and the impact of the
agreement relating to IT Services after the proposed Split-Off are
forward-looking statements which by their nature are subject to numerous
uncertainties that could cause actual results to vary. Further information about
the terms of the proposed Split-Off will be set forth in a joint consent
solicitation statement and prospectus of GM and EDS to be filed with the
Securities and Exchange Commission and distributed to GM common stockholders in
connection with the submission of the Split-Off for approval by such
stockholders. No offering of securities of EDS in connection with the proposed
Split-Off will be made other than by means of such prospectus.
RESTRUCTURING ACTIVITIES
On April 1, 1996, EDS announced that it is taking certain actions and
considering others to maintain and improve operating efficiencies and accelerate
EDS' move towards "user-centered" computing. In connection therewith, EDS also
announced the implementation of a voluntary early retirement offer and
involuntary severance arrangements affecting between 4,000 and 5,000 employees
and designed to both reduce labor costs and change the skill mix of EDS'
workforce. Communication of terms of these arrangements to employees began on
April 1 and will continue during the second quarter of 1996. It is expected that
substantially all of these workforce reductions would be completed by December
1996.
As part of its overall goal to improve operating efficiencies, EDS is also
in the process of evaluating certain aspects of its business to identify any
redundant facilities and related assets which may no longer fit its
IV-48
<PAGE> 30
long-term strategic objectives. Accordingly, the actions under consideration
could include the elimination by EDS of certain business functions and
consolidation of certain related facilities.
EDS will incur a pre-tax non-recurring charge in the second quarter of 1996
in connection with the restructuring actions discussed above. The amount of the
aggregate charge (including the employee related actions, asset writedowns, and
other actions being considered) will depend on the number of employees who elect
to accept early retirement offers and the determination of which EDS business
functions and related facilities would be eliminated or consolidated. EDS
estimates that all such actions could result in an aggregate pre-tax
non-recurring charge in the second quarter of 1996 in the range of $500.0
million to $750.0 million (between $.66 and $.99 per share, after tax). A
portion of the contemplated charge will be of a non-cash nature, the amount of
which has not yet been determined. EDS expects that any restructuring actions
implemented by it will result in savings commencing in the second half of 1996.
The restructuring activities discussed above are not contingent upon approval or
consummation of the Split-Off.
Statements about the effect of EDS' actions and the possible amount of a
non-recurring charge are forward-looking statements which by their nature are
subject to numerous uncertainties that could cause actual results to vary.
RESULTS OF OPERATIONS
THREE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
Revenues. The following table summarizes EDS' systems and other contracts
revenues in each geographic operating segment for each of the years ended
December 31, 1995, 1994 and 1993:
SYSTEMS AND OTHER CONTRACTS REVENUES
<TABLE>
<CAPTION>
1995 1994 1993
--------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C>
OUTSIDE CUSTOMERS:
United States............................................... $ 5,794.9 $4,611.2 $4,004.5
Europe...................................................... 2,001.5 1,308.1 911.6
Other....................................................... 734.6 493.6 267.5
--------- -------- --------
TOTAL OUTSIDE CUSTOMERS.................................. 8,531.0 6,412.9 5,183.6
--------- -------- --------
GM AND AFFILIATES:
United States............................................... 2,926.1 2,764.4 2,574.5
Europe...................................................... 659.2 523.4 511.2
Other....................................................... 305.8 259.4 238.0
--------- -------- --------
TOTAL GM AND AFFILIATES.................................. 3,891.1 3,547.2 3,323.7
--------- -------- --------
TOTAL SYSTEMS AND OTHER CONTRACTS REVENUES.................... $12,422.1 $9,960.1 $8,507.3
========= ======== ========
PERCENTAGE OF TOTAL REVENUES:
Outside Customers............................................. 69% 64% 61%
GM and Affiliates............................................. 31% 36% 39%
--- --- ---
Total....................................................... 100% 100% 100%
=== === ===
</TABLE>
Total revenues increased 25% in 1995 to $12,422.1 million from $9,960.1
million in 1994, which represented a 17% increase over 1993 total revenues of
$8,507.3 million. Revenues from customers other than General Motors and its
affiliates (outside customers) grew 33% in 1995 to $8,531.0 million, compared to
a 24% increase in 1994 from $5,183.6 million in 1993. Total revenues related to
GM and its affiliates were $3,891.1 million, $3,547.2 million, and $3,323.7
million in 1995, 1994 and 1993, respectively. The percentage of EDS' total
revenues generated from GM and its affiliates declined to 31% in 1995 from 36%
in 1994 and 39% in 1993. EDS expects this trend to continue as revenues from
outside customers continue to grow.
IV-49
<PAGE> 31
Total domestic revenues from outside customers increased 26% from $4,611.2
million in 1994 to $5,794.9 million for 1995. This compares with growth rates of
15% in 1994 and 8% in 1993. The increase in 1995 was attributable to full-year
revenues on contracts which began in late 1994 and to revenues related to
acquisitions, primarily the A.T. Kearney acquisition in August 1995. Domestic
revenues from outside customers in 1994 increased over 1993 results due to
revenues associated with new contracts signed in 1993 and 1994.
During 1995, non-U.S. revenues from outside customers increased $934.4
million compared with an increase of $622.6 million in 1994 from $1,179.1
million in 1993. Growth in revenues from outside customers in Europe increased
$693.4 million in 1995 from revenues associated with new contracts signed during
1994 and 1995, as well as certain acquisitions which occurred in late 1994 or
1995. In 1994, non-U.S. revenues from outside customers in Europe increased
$396.5 million, or 43%, to $1,308.1 million.
Other non-U.S. revenues from outside customers grew $241.0 million over
1994, to $734.6 million due to new contracts signed in Asia/Pacific and Canada,
as well as full-year revenues from acquisitions in New Zealand which occurred in
1994. Other non-U.S. revenues from outside customers in 1994 was up $226.1
million over 1993 due in part to business in Japan and New Zealand.
Costs and Expenses. Cost of revenues as a percentage of systems and other
contracts revenues was 77% in 1995, compared with 76% in 1994 and 75% in 1993,
and the higher costs are primarily due to the increasingly competitive
environment in which EDS operates. Selling, general and administrative expenses
increased 9% in 1995 to $1,291.5 million from $1,187.1 million in 1994, which
increased 18% from 1993. Selling, general and administrative expenses were 10%
of systems and other contracts revenues in 1995, down from 12% in 1994 and 1993
due to the fixed nature of certain of these costs.
Operating Income. Operating income increased $285.4 million to $1,529.0 in
1995. Operating income was $1,243.6 million and $1,111.3 million for 1994 and
1993, respectively. Operating margins declined from 12.5% in 1994 to 12.3% in
1995 due to the aforementioned changes in costs and expenses, as well as
increased reserves for certain customer receivables. The 1993 operating margin
was 13.1%.
Interest and Other Income, net. Interest and other income, net, decreased
$102.6 million in 1995 to $(62.0) million, compared with $40.6 million in 1994
and $20.0 million in 1993. The primary reason for the decrease in 1995 was due
to increased interest expense. Interest expense increased to $120.8 million in
1995, compared with $51.7 million in 1994 and $34.5 million in 1993. The
increase in 1995 resulted from interest associated with the issuance of $350.0
million of 6.85% notes due May 15, 2000 (the "Five-year Notes") and $300.0
million of 7.125% notes due May 15, 2005 (the "Ten-year Notes"), as well as from
other borrowings. These borrowings were used for general corporate purposes,
including the repayment of outstanding commercial paper borrowings, property and
equipment expenditures, acquisitions, and other contract-related investments to
support business growth.
Income Taxes. The effective income tax rate was 36% in 1995, 1994 and 1993.
Net Income. EDS' separate consolidated net income increased 14% to $938.9
million in 1995, compared with $821.9 million for 1994 and $724.0 million in
1993. Earnings per share attributable to GM's Class E common stock increased 15%
to $1.96 per share in 1995 and 13% to $1.71 per share in 1994, based on EDS'
Available Separate Consolidated Net Income as described in Note 1 to EDS'
Consolidated Financial Statements.
EDS and its customers may, from time-to-time, modify their contractual
arrangements. For customer contracts accounted for under the
percentage-of-completion method, such changes would be reflected in results of
operations as a cumulative change in accounting estimate in the period the
revisions are determined.
FINANCIAL POSITION
Assets. In 1995, EDS' total assets increased to $10,832.4 million, a 23%
increase over total assets of $8,786.5 million at December 31, 1994. This change
represents increases in accounts receivable and property and equipment for
contract-related investments and an increase in intangible assets related to
acquisitions, primarily the acquisition of A.T. Kearney. Accounts receivable
from outside customers increased $789.9 million due to more competitive contract
terms, receivables acquired in the A.T. Kearney acquisition ($149.3 million),
and an increase in unbilled receivables on newer contracts.
IV-50
<PAGE> 32
At December 31, 1995, EDS held cash and cash equivalents of $548.9 million,
had working capital of $1,120.1 million, and a current ratio of 1.3-to-1. This
compares to $480.9 million in working capital and a 1.2-to-1 current ratio at
December 31, 1994.
On August 31, 1995, EDS acquired A.T. Kearney, a Chicago-based
international management consulting firm. At the acquisition date, EDS paid
approximately $113 million in cash and $162 million in short and long-term notes
to A.T. Kearney shareholders in connection with this acquisition. Additionally,
the terms include restricted stock grants of approximately 6.6 million shares of
GM Class E common stock, which will vest over a ten-year period for certain A.T.
Kearney personnel remaining with EDS. Prior to December 31, 1995, EDS retired
$80.9 million of short-term notes related to the acquisition. After the
acquisition, EDS' Management Consulting Services unit was combined with A.T.
Kearney to create a new wholly owned subsidiary operating under the A.T. Kearney
brand.
Return on assets was 9.6% in 1995, compared with 10.5% for 1994 and 11.1%
for 1993. Return on assets has declined due to the increasing capital intensity
of EDS' business and increased contract-related investments in computers and
telecommunications equipment, software, and other property and equipment.
Additionally, EDS' results for the year ended December 31, 1995, include the
results of A.T. Kearney's operations only since the acquisition date.
Liabilities and Stockholder's Equity. Total liabilities increased in 1995
to support business growth and as a result of the issuance of EDS' Five-year and
Ten-year Notes. Additionally, EDS revised its agreement with a syndicate of
banks, which increased EDS' committed lines of credit to $2,500.0 million. Total
debt was $2,100.6 million and $1,224.4 million at December 31, 1995 and 1994,
respectively, which consisted of long-and short-term notes payable. The total
debt-to-capital ratio (which includes current notes payable as a component of
capital) was 29.7% at December 31, 1995, and 22.4% at December 31, 1994. The
ratio of noncurrent debt-to-capital was 27% at December 31, 1995, and 19% at
December 31, 1994. At December 31, 1995, EDS had unused uncommitted short-term
lines of credit totaling $728.2 million and unused committed lines of credit of
$2,500.0 million. The unused committed lines of credit of $2,500.0 million serve
as a backup facility for EDS' commercial paper borrowings. At December 31, 1995.
EDS had total committed lines of credit of $2,515.5 million.
Stockholder's equity was $4,978.5 million at December 31, 1995, and
$4,232.5 million at December 31, 1994. Return on stockholder's equity was 20.4%
in 1995, compared with 20.9% in 1994 and 21.7% in 1993.
New Accounting Standards. The Financial Accounting Standards Board (FASB)
has issued Statement of Financial Accounting Standards (SFAS) No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of, which will become effective for fiscal years beginning in 1996.
The Statement requires that long-lived assets and certain identifiable
intangibles to be held and used be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable, and for the measurement of loss to be based on the fair value of
the asset. In addition, long-lived assets and certain identifiable intangibles
to be disposed of are generally to be reported at the lower of the carrying
amount or fair value less selling costs.
As discussed above, EDS is in the process of evaluating certain aspects of
its business to identify any redundant facilities and related assets which may
no longer fit its long-term strategic objectives. Since this evaluation is not
expected to be completed until the second quarter of 1996, EDS believes the
effects of initially adopting SFAS No. 121 as of January 1, 1996, will be
immaterial to its consolidated financial statements.
The FASB has issued SFAS No. 123, Accounting for Stock-Based Compensation,
which will become effective for fiscal years beginning in 1996. The Company
intends to remain on Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees, for the preparation of its basic consolidated
financial statements and provide pro forma disclosures as if the SFAS No. 123
fair value method had been applied. Accordingly, the Company expects no impact
on the basic consolidated financial statements upon adoption of this Statement.
LIQUIDITY AND CAPITAL RESOURCES
For the year ended December 31, 1995, net cash provided by operating
activities was $1,259.0 million, down $273.5 million from the same period in
1994 due to increases in accounts receivable, including an
IV-51
<PAGE> 33
increase in receivables from GM and its affiliates. For the year ended December
31, 1994, net cash provided by operating activities was $1,532.5 million, up
$111.5 million from 1993, due in part to increases in accounts payable and
accrued liabilities. Net cash provided by operating activities for 1993
consisted of depreciation and amortization as well as increases in working
capital items.
For the year ended December 31, 1995, net cash used in investing activities
increased $241.8 million, to $1,781.5 million when compared to the same period
for 1994. Net cash used in investing activities increased $472.0 million, to
$1,539.7 million in 1994 from $1,067.7 million in 1993. Consistent with the
increasing capital intensity of EDS' business, cash used in investing activities
consisted largely of payments for purchases of property and equipment of
$1,261.5 million, $1,186.0 million, and $816.4 million in 1995, 1994 and 1993,
respectively. Additionally, EDS used cash for investments in leases and other
assets and for payments related to acquisitions.
Net cash provided by financing activities was $465.1 million for the year
ended December 31, 1995, up $258.6 million from the corresponding period in 1994
due in part to the issuance of long-term debt and notes payable, particularly
the issuance of the Five-year Notes and Ten-year Notes. For the year ended
December 31, 1994, net cash provided by financing activities was $206.5 million,
compared with cash used in financing activities of $378.2 million in 1993. EDS
paid cash dividends to GM totaling $251.3 million, $231.1 million, and $192.1
million in 1995, 1994 and 1993, respectively.
EDS expects that its principal uses of funds for the foreseeable future
will be for capital expenditures, debt repayment, working capital and costs
associated with the Split-Off, as well as the payment of the Special
Inter-Company Payment to General Motors. Capital expenditures may consist of
purchases of computer and telecommunications equipment, buildings and
facilities, land, and software, as well as acquisitions. EDS' projected capital
expenditures for 1996 are approximately $1,400.0 to $1,700.0 million. However,
actual capital expenditures will depend to a significant extent on the level of
acquisition and joint venture activities by EDS, as well as capital requirements
for new business. EDS anticipates that cash flows from operations and unused
borrowing capacity under its existing lines of credit will provide sufficient
funds to meet its needs for at least the next year.
As noted above, under the IT Services Agreements, the payment terms
relating to IT services provided by EDS will be revised, beginning in 1997, over
a two-year period to extend the due dates for payments from General Motors.
These revised payment terms are expected to result in an increase in EDS'
working capital requirements. EDS will obtain the funds for this working capital
impact and for the Special Inter-Company Payment through borrowings under its
existing commercial paper or bank credit facilities. EDS currently anticipates
that it may seek to refinance such commercial paper or bank borrowings as part
of its general plan to extend maturities of its indebtedness.
The competitive environment and changing market forces are increasing the
capital intensity of EDS' business. Increasing amounts of capital will be
required by EDS in order to make investments in acquisitions, joint ventures and
strategic alliances in other parts of the information industry and in new
product development. In addition, information technology customer contracts
frequently require investments in computers and telecommunications equipment,
software, and other property, plant and equipment. For these reasons, EDS'
ability to continue to access the capital markets on an efficient basis will
become increasingly important to its ability to compete effectively.
The Split-Off is intended, among other things, to afford EDS more flexible
access to capital markets to meet its growing needs without regard to competing
considerations of GM and its affiliates. Following the Split-Off, EDS may over
time incur substantially more debt than it has while a subsidiary of GM. As a
result, EDS' financial leverage may increase in the future. To the extent that
EDS would become more highly leveraged following the Split-Off, EDS may be
required to pay higher interest rates on its outstanding borrowings. In order to
provide the funds necessary for EDS' future acquisition and expansion goals, EDS
expects that it might incur, from time to time, additional bank financing and/or
issue equity or debt securities, depending on market and other conditions.
* * * *
IV-52
<PAGE> 1
EXHIBIT 99(B)
HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES
RESPONSIBILITIES FOR CONSOLIDATED FINANCIAL STATEMENTS
The following consolidated financial statements of Hughes Electronics
Corporation and subsidiaries were prepared by management which is responsible
for their integrity and objectivity. The statements have been prepared in
conformity with generally accepted accounting principles and, as such, include
amounts based on judgments of management.
Management is further responsible for maintaining a system of internal
accounting controls, designed to provide reasonable assurance that the books and
records reflect the transactions of the companies and that its established
policies and procedures are carefully followed. Perhaps the most important
feature in the system of control is that it is continually reviewed for its
effectiveness and is augmented by written policies and guidelines, the careful
selection and training of qualified personnel, and a strong program of internal
audit.
Deloitte & Touche LLP, an independent auditing firm, is engaged to audit
the consolidated financial statements of Hughes Electronics Corporation and
subsidiaries and issue reports thereon. The audit is conducted in accordance
with generally accepted auditing standards which comprehend the consideration of
internal accounting controls and tests of transactions to the extent necessary
to form an independent opinion on the financial statements prepared by
management. The Independent Auditors' Report appears on the next page.
The Board of Directors, through its Audit Committee, is responsible for
assuring that management fulfills its responsibilities in the preparation of the
consolidated financial statements and engaging the independent auditors. The
Committee reviews the scope of the audits and the accounting principles being
applied in financial reporting. The independent auditors, representatives of
management, and the internal auditors meet regularly (separately and jointly)
with the Committee to review the activities of each, to ensure that each is
properly discharging its responsibilities, and to assess the effectiveness of
the system of internal accounting controls. It is management's conclusion that
the system of internal accounting controls at December 31, 1995 provides
reasonable assurance that the books and records reflect the transactions of the
companies and that its established policies and procedures are complied with. To
ensure complete independence, Deloitte & Touche LLP has full and free access to
meet with the Committee, without management representatives present, to discuss
the results of the audit, the adequacy of internal accounting controls, and the
quality of the financial reporting.
<TABLE>
<S> <C> <C>
/s/ C. MICHAEL ARMSTRONG /s/ CHARLES H. NOSKI /s/ ROXANNE S. AUSTIN
- ---------------------------- --------------------------- ----------------------------
C. Michael Armstrong Charles H. Noski Roxanne S. Austin
Chairman of the Board and Senior Vice President and Vice President and
Chief Executive Officer Chief Financial Officer Controller
</TABLE>
IV-53
<PAGE> 2
HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES
INDEPENDENT AUDITORS' REPORT
To the Stockholder and Board of Directors of
Hughes Electronics Corporation:
We have audited the Consolidated Balance Sheet of Hughes Electronics
Corporation and subsidiaries as of December 31, 1995 and 1994 and the related
Consolidated Statement of Income and Available Separate Consolidated Net Income
and Consolidated Statement of Cash Flows for each of the three years in the
period ended December 31, 1995. These financial statements are the
responsibility of Hughes Electronics Corporation's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Hughes Electronics Corporation and
subsidiaries at December 31, 1995 and 1994 and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1995 in conformity with generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, effective
January 1, 1994 Hughes Electronics Corporation changed its method of accounting
for postemployment benefits.
/s/ DELOITTE & TOUCHE LLP
- --------------------------------------
DELOITTE & TOUCHE LLP
Los Angeles, California
January 29, 1996
IV-54
<PAGE> 3
HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME AND
AVAILABLE SEPARATE CONSOLIDATED NET INCOME
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------
1995 1994 1993
--------- --------- ---------
(DOLLARS IN MILLIONS EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Revenues
Net sales
Outside customers......................................... $ 9,528.8 $ 9,108.7 $ 9,062.8
General Motors and affiliates (Note 2).................... 5,185.5 4,953.6 4,387.4
Other income -- net......................................... 57.5 37.1 67.3
--------- --------- ---------
Total Revenues.............................................. 14,771.8 14,099.4 13,517.5
--------- --------- ---------
Costs and Expenses
Cost of sales and other operating charges, exclusive of
items listed below (Note 2)............................... 11,325.1 10,943.4 10,557.5
Selling, general, and administrative expenses............... 1,234.2 1,018.3 929.1
Depreciation and amortization............................... 487.7 470.2 503.5
Amortization of GM purchase accounting adjustments related
to Hughes Aircraft Company (Note 1)....................... 123.4 123.8 123.8
Interest expense -- net..................................... 7.5 15.1 33.2
--------- --------- ---------
Total Costs and Expenses.................................... 13,177.9 12,570.8 12,147.1
--------- --------- ---------
Income before Income Taxes.................................. 1,593.9 1,528.6 1,370.4
Income taxes (Note 6)....................................... 645.6 572.8 572.6
--------- --------- ---------
Income before cumulative effect of accounting change........ 948.3 955.8 797.8
Cumulative effect of accounting change (Note 1)............. -- (30.4) --
--------- --------- ---------
Net Income.................................................. 948.3 925.4 797.8
Adjustments to exclude the effect of GM purchase accounting
adjustments related to Hughes Aircraft Company (Notes 1
and 7).................................................... 159.5 123.8 123.8
--------- --------- ---------
Earnings Used for Computation of Available Separate
Consolidated Net Income................................... $ 1,107.8 $ 1,049.2 $ 921.6
========= ========= =========
Available Separate Consolidated Net Income (Note 7)
Average number of shares of General Motors Class H
Common Stock outstanding (in millions) (Numerator)... 95.5 92.1 88.6
Class H dividend base (in millions) (Denominator)...... 399.9 399.9 399.9
Available Separate Consolidated Net Income............. $264.6 $241.6 $204.5
========= ========= =========
Earnings Attributable to General Motors Class H Common Stock
on a Per Share Basis (Note 7)
Before cumulative effect of accounting change.......... $2.77 $2.70 $2.30
Cumulative effect of accounting change (Note 1)........ -- (0.08) --
----- ----- -----
Net earnings attributable to General Motors Class H $2.77 $2.62 $2.30
Common Stock......................................... ===== ===== =====
</TABLE>
Reference should be made to the Notes to Consolidated Financial Statements.
IV-55
<PAGE> 4
HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1995 1994
--------- ---------
(DOLLARS IN MILLIONS
EXCEPT PER SHARE
AMOUNT)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents (Note 1)..................................... $ 1,139.5 $ 1,501.8
Accounts and notes receivable
Trade receivables (less allowances).................................. 1,235.6 1,039.5
General Motors and affiliates (Note 2)............................... 146.7 153.9
Contracts in process, less advances and progress payments of $1,327.2
and $2,311.2......................................................... 2,469.2 2,265.4
Inventories (less allowances) (Note 1)................................. 1,225.5 1,087.9
Prepaid expenses, including deferred income taxes of $484.4 and
$89.0................................................................ 594.3 195.1
--------- ---------
Total Current Assets............................................ 6,810.8 6,243.6
--------- ---------
Property-Net (Notes 8 and 9)........................................... 2,739.2 2,611.8
--------- ---------
Telecommunications and Other Equipment, net of accumulated depreciation
of $274.5 and $198.0................................................. 1,175.1 1,071.7
--------- ---------
Intangible Assets, net of amortization of $1,415.1 and $1,276.7 (Note
1)................................................................... 3,573.7 3,271.3
--------- ---------
Investments and Other Assets, including deferred income taxes of $47.3
and $214.0 -- principally at cost (less allowances).................. 1,675.6 1,652.1
--------- ---------
Total Assets.................................................... $15,974.4 $14,850.5
========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities
Accounts payable
Outside.............................................................. $ 748.7 $ 779.9
General Motors and affiliates (Note 2)............................... 52.2 80.5
Advances on contracts.................................................. 893.7 645.1
Notes and loans payable (Note 9)....................................... 432.5 125.7
Income taxes payable (Note 6).......................................... 190.8 31.4
Accrued liabilities (Note 10).......................................... 1,990.9 1,885.5
--------- ---------
Total Current Liabilities....................................... 4,308.8 3,548.1
--------- ---------
Long-Term Debt and Capitalized Leases (Note 9)......................... 258.8 353.5
--------- ---------
Postretirement Benefits Other Than Pensions (Note 5)................... 1,610.6 1,541.4
--------- ---------
Other Liabilities and Deferred Credits................................. 1,270.5 1,431.7
--------- ---------
Stockholder's Equity (Note 11)
Capital stock (outstanding, 1,000 shares, $0.10 par value) and
additional paid-in capital........................................ 6,338.1 6,326.5
Net income retained for use in the business.......................... 2,323.9 1,743.6
--------- ---------
Subtotal........................................................ 8,662.0 8,070.1
Minimum pension liability adjustment................................. (108.6) (76.1)
Accumulated foreign currency translation adjustments................. (27.7) (18.2)
--------- ---------
Total Stockholder's Equity...................................... 8,525.7 7,975.8
--------- ---------
Total Liabilities and Stockholder's Equity...................... $15,974.4 $14,850.5
========= =========
</TABLE>
Reference should be made to the Notes to Consolidated Financial Statements.
IV-56
<PAGE> 5
HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1995 1994 1993
-------- -------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Cash Flows from Operating Activities
Income before cumulative effect of accounting change......... $ 948.3 $ 955.8 $ 797.8
Adjustments to reconcile income before cumulative effect of
accounting change to net cash provided by operating
activities
Depreciation and amortization............................. 487.7 470.2 503.5
Amortization and adjustment of GM purchase accounting
adjustments related to Hughes Aircraft Company.......... 159.5 123.8 123.8
Pension expense (credit), net of cash contributions....... (51.9) 20.3 (25.6)
Provision for postretirement benefits other than pensions,
net of cash payments.................................... 43.5 78.4 91.0
Net loss on sale of property.............................. 6.1 14.3 36.1
Net gain on sale of investments and businesses............ (12.9) (3.6) (50.3)
Change in deferred income taxes and other*................ (150.1) (60.1) 207.1
Change in other operating assets and liabilities
Accounts receivable..................................... (147.3) (238.1) (153.7)
Contracts in process.................................... (186.2) 111.4 70.9
Inventories............................................. (160.1) (27.5) 104.6
Prepaid expenses........................................ (3.0) (15.2) 3.4
Accounts payable........................................ (92.0) 25.8 81.5
Income taxes............................................ 160.4 (70.7) 30.1
Accrued and other liabilities........................... 257.0 (28.2) (143.5)
Other*.................................................. (272.8) 20.2 (183.2)
-------- -------- --------
Net Cash Provided by Operating Activities...................... 986.2 1,376.8 1,493.5
-------- -------- --------
Cash Flows from Investing Activities
Investment in companies, net of cash acquired................ (309.5) (7.0) (149.3)
Expenditures for property and special tools.................. (545.7) (490.5) (448.9)
Increase in telecommunications and other equipment........... (198.9) (351.9) (230.3)
Proceeds from disposal of property........................... 50.6 90.6 115.0
Proceeds from sale of investments and businesses............. 127.2 3.6 281.6
(Increase) decrease in notes receivable...................... (13.6) 206.9 7.6
-------- -------- --------
Net Cash Used in Investing Activities.......................... (889.9) (548.3) (424.3)
-------- -------- --------
Cash Flows from Financing Activities
Net decrease in notes and loans payable...................... (80.9) (2.1) (189.4)
Increase in long-term debt................................... 28.0 7.5 84.0
Decrease in long-term debt................................... (37.7) (20.8) (369.8)
Cash dividends paid to General Motors........................ (368.0) (320.0) (288.0)
-------- -------- --------
Net Cash Used in Financing Activities.......................... (458.6) (335.4) (763.2)
-------- -------- --------
Net (decrease) increase in cash and cash equivalents........... (362.3) 493.1 306.0
Cash and cash equivalents at beginning of the year............. 1,501.8 1,008.7 702.7
-------- -------- --------
Cash and cash equivalents at end of the year................... $1,139.5 $1,501.8 $1,008.7
======== ======== ========
</TABLE>
- -------------------------
* 1994 amounts exclude the effect of accounting change.
Reference should be made to the Notes to Consolidated Financial Statements.
IV-57
<PAGE> 6
HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND CONSOLIDATION
The consolidated financial statements include the accounts of Hughes
Electronics Corporation (formerly GM Hughes Electronics Corporation) (Hughes)
and its domestic and foreign subsidiaries that are more than 50% owned,
principally Hughes Aircraft Company and Delco Electronics Corporation (Delco
Electronics). Investments in associated companies in which at least 20% of the
voting securities is owned are accounted for under the equity method of
accounting.
Effective December 31, 1985, General Motors Corporation (General Motors or
GM) acquired Hughes Aircraft Company and its subsidiaries for $2.7 billion in
cash and cash equivalents and 100 million shares of GM Class H common stock
having an estimated value of $2,561.9 million, which carried certain guarantees.
On February 28, 1989, GM and the Howard Hughes Medical Institute
(Institute) reached an agreement to terminate GM's then-existing guarantee
obligations with respect to the Institute's holding of GM Class H common stock.
Under terms of the agreement as amended, the Institute received put options
exercisable under most circumstances at $30 per share on March 1, 1991, 1992,
1993, and 1995 for 20 million, 10 million, 10.5 million, and 15 million shares,
respectively. The Institute exercised these put options at $30 per share on
March 1, 1991, March 2, 1992, and March 1, 1993. On February 15, 1995, GM and
the Institute entered into an agreement under which GM assisted the Institute in
selling 15 million shares of GM Class H common stock at $38.50 per share. The
March 1, 1995 put option expired unexercised.
The acquisition of Hughes Aircraft Company was accounted for as a purchase.
The purchase price exceeded the net book value of Hughes Aircraft Company by
$4,244.7 million, which was assigned as follows: $500.0 million to patents and
related technology, $125.0 million to the future economic benefits to GM of the
Hughes Aircraft Company Long-Term Incentive Plan (LTIP), and $3,619.7 million to
other intangible assets, including goodwill. The amounts assigned to patents and
related technology are being amortized on a straight-line basis over 15 years
and other intangible assets, including goodwill, over 40 years. The amount
assigned to the future economic benefits of the LTIP was fully amortized in
1990.
For the purpose of determining earnings per share and amounts available for
dividends on the common stocks of General Motors, the amortization and disposal,
if any, of these intangible assets is charged against earnings attributable to
GM $1 2/3 par value common stock and amounted to $159.5 million, $123.8 million,
and $123.8 million in 1995, 1994, and 1993, respectively. The 1995 amount
included a $36.1 million charge, included in other income, for the write-off of
such purchase accounting adjustments related to the disposition of certain
non-strategic business units.
The earnings of Hughes and its subsidiaries since the acquisition of Hughes
Aircraft Company form the base from which any dividends on the GM Class H common
stock are declared. These earnings include income earned from sales to GM and
its affiliates, but exclude purchase accounting adjustments (see Notes 2 and 7).
USE OF ESTIMATES IN THE PREPARATION OF THE FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect amounts reported therein. Due to the inherent
uncertainty involved in making estimates, actual results reported in future
periods may be based upon amounts which differ from those estimates.
IV-58
<PAGE> 7
HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
REVENUE RECOGNITION
Sales to General Motors and affiliates and to outside customers not
pursuant to long-term contracts are generally recognized as products are shipped
or services are rendered. Sales under long-term contracts are primarily
recognized using the percentage-of-completion (cost-to-cost) method of
accounting. Under this method, sales are recorded equivalent to costs incurred
plus a portion of the profit expected to be realized, determined based on the
ratio of costs incurred to estimated total costs at completion. Sales under
certain commercial long-term contracts are recognized using the
units-of-delivery method.
Profits expected to be realized on long-term contracts are based on
estimates of total sales value and costs at completion. These estimates are
reviewed and revised periodically throughout the lives of the contracts, and
adjustments to profits resulting from such revisions are recorded in the
accounting period in which the revisions are made. Estimated losses on contracts
are recorded in the period in which they are identified.
Certain contracts contain cost or performance incentives which provide for
increases in profits for surpassing stated objectives and decreases in profits
for failure to achieve such objectives. Amounts associated with incentives are
included in estimates of total sales values when there is sufficient information
to relate actual performance to the objectives.
CASH FLOWS
Cash equivalents consist of highly liquid investments purchased with
original maturities of 90 days or less.
Net cash provided by operating activities reflects cash payments for
interest and income taxes as follows:
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Interest......................................... $ 37.5 $ 40.7 $ 72.5
====== ====== ======
Income taxes..................................... $634.2 $686.2 $245.0
====== ====== ======
</TABLE>
ACCOUNTS RECEIVABLE AND CONTRACTS IN PROCESS
Trade receivables are principally related to long-term contracts and
programs. Amounts billed under retainage provisions of contracts are not
significant, and substantially all amounts are collectible within one year.
Contracts in process are stated at costs incurred plus estimated profit,
less amounts billed to customers and advances and progress payments applied.
Engineering, tooling, manufacturing, and applicable overhead costs, including
administrative, research and development, and selling expenses, are charged to
costs and expenses when incurred. Contracts in process include amounts relating
to contracts with long production cycles, and $400.9 million of the 1995 amount
is expected to be billed after one year. Contracts in process in 1995 also
include approximately $61.9 million relating to claims, requests for equitable
adjustments, and amounts withheld pending negotiation or settlement with
customers. Under certain contracts with the U.S. Government, progress payments
are received based on costs incurred on the respective contracts. Title to the
inventories related to such contracts (included in contracts in process) vests
with the U.S. Government.
INVENTORIES
Inventories are stated at the lower of cost or market principally using the
first-in, first-out (FIFO) or average cost methods.
IV-59
<PAGE> 8
HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
<TABLE>
<CAPTION>
1995 1994
-------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C>
MAJOR CLASSES OF INVENTORIES
Productive material, work in process, and supplies...... $1,060.4 $ 968.0
Finished product........................................ 165.1 119.9
-------- --------
Total.............................................. $1,225.5 $1,087.9
======== ========
</TABLE>
PROPERTY AND DEPRECIATION
Property is carried at cost. Depreciation of property is provided for based
on estimated useful lives (3 to 45 years) generally using accelerated methods.
TELECOMMUNICATIONS AND OTHER EQUIPMENT
Telecommunications and other equipment includes satellite transponders and
other equipment subject to operating leases or service agreements. Such
equipment is carried at Hughes' direct and indirect manufacturing cost and is
amortized over the estimated useful lives (7 to 23 years) using the
straight-line method. The net book value of equipment subject to operating
leases was $299.8 million and $452.9 million at December 31, 1995 and 1994,
respectively.
INTANGIBLE ASSETS
Intangible assets, principally the excess of cost over the fair value of
identifiable net assets of purchased businesses, are amortized using the
straight-line method over periods not exceeding 40 years. Hughes periodically
evaluates the recoverability of goodwill and other intangible assets by
assessing whether the unamortized intangible asset can be recovered over its
remaining life through undiscounted cash flows generated by underlying tangible
assets.
INCOME TAXES
The provision for income taxes is based on reported income before income
taxes. Deferred income tax assets and liabilities reflect the impact of
temporary differences between the amounts of assets and liabilities recognized
for financial reporting purposes and such amounts recognized for tax purposes,
as measured by applying currently enacted tax laws. Provision has been made for
U.S. Federal income taxes to be paid on that portion of the undistributed
earnings of foreign subsidiaries that has not been deemed permanently
reinvested.
Hughes and its domestic subsidiaries join with General Motors in filing a
consolidated U.S. Federal income tax return. The portion of the consolidated
income tax liability recorded by Hughes is generally equivalent to the liability
it would have incurred on a separate return basis.
RESEARCH AND DEVELOPMENT
Expenditures for research and development are charged to costs and expenses
as incurred and amounted to $761.7 million in 1995, $699.3 million in 1994, and
$612.1 million in 1993.
FINANCIAL INSTRUMENTS
Hughes enters into foreign exchange-forward contracts to reduce its
exposure to fluctuations in foreign exchange rates. Foreign exchange-forward
contracts are accounted for as hedges to the extent they are designated as, and
are effective as, hedges of firm foreign currency commitments.
IV-60
<PAGE> 9
HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
FOREIGN CURRENCY TRANSACTIONS
Foreign currency transaction net gains (losses) included in consolidated
operating results amounted to $(0.5) million in 1995, $(4.2) million in 1994,
and $2.4 million in 1993.
MARKET CONCENTRATIONS
Sales under United States Government contracts were 35.5%, 37.6%, and 44.2%
of net sales in 1995, 1994, and 1993, respectively. Hughes has reduced its
vulnerability to reductions in U.S. defense spending by diversifying its
customer base and product lines with an emphasis on international markets and
non-defense government agencies.
Sales to General Motors and affiliates, consisting of various automotive
electronic component parts, comprised approximately 35.2% of net sales in 1995
and 1994, and 32.6% in 1993.
NEW ACCOUNTING STANDARDS
In October 1995, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for
Stock-Based Compensation, effective for transactions entered into in fiscal
years beginning after December 15, 1995. As permitted by SFAS No. 123, Hughes
expects to continue to apply its current accounting policy under Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and
include the necessary disclosures in its 1996 financial statements.
In March 1995, the FASB issued SFAS No. 121, Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, which is
required to be adopted for fiscal years beginning after December 15, 1995. This
Statement establishes accounting standards for the impairment of long-lived
assets, certain identifiable intangibles, and goodwill related to those assets
to be held and used, and for long-lived assets and certain identifiable
intangibles to be disposed of. The cumulative effect of this accounting change
as of January 1, 1996 is not expected to be material.
ACCOUNTING CHANGES
Effective January 1, 1994, Hughes adopted SFAS No. 112, Employers'
Accounting for Postemployment Benefits. The Statement 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 charge primarily related to extended disability
benefits which are accrued on a service-driven basis.
NOTE 2. RELATED-PARTY TRANSACTIONS
SALES, PURCHASES, AND ADMINISTRATIVE EXPENSES
The amounts due from and to GM and affiliates result from sales of products
to and purchases of materials and services from units controlled by GM.
Purchases from GM and affiliates, including computer systems services provided
by Electronic Data Systems Corporation, a wholly-owned subsidiary of GM, and
common administrative expenses allocated by GM, amounted to approximately $233.7
million, $257.1 million, and $285.9 million in 1995, 1994, and 1993,
respectively.
INCENTIVE PLANS
Certain eligible employees of Hughes participate in various incentive plans
of GM and its subsidiaries.
IV-61
<PAGE> 10
HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 3. INCENTIVE PLAN
Under the Hughes Electronics Corporation Incentive Plan (the Plan), as
approved by the GM Board of Directors in 1987, 1992, and 1995, shares, rights,
or options to acquire up to 20 million shares of GM Class H common stock may be
granted through May 31, 1997.
The GM Executive Compensation Committee may grant options and other rights
to acquire shares of GM Class H common stock under the provisions of the Plan.
The option price is equal to 100% of the fair market value of GM Class H common
stock on the date the options are granted. These nonqualified options generally
expire 10 years from the dates of grant and are subject to earlier termination
under certain conditions.
Changes in the status of outstanding options were as follows:
<TABLE>
<CAPTION>
OPTION SHARES UNDER
GM CLASS H COMMON STOCK PRICES OPTION
- ------------------------------------------------------------------ ------------- ------------
<S> <C> <C>
Outstanding at January 1, 1993.................................... $17.07-$30.25 6,516,755
Granted........................................................... 28.00- 28.56 2,027,260
Exercised......................................................... 17.07- 30.25 (1,960,162)
Terminated........................................................ 17.07- 30.25 (217,845)
------------- ----------
Outstanding at December 31, 1993.................................. 17.07- 30.25 6,366,008
Granted........................................................... 36.75 1,612,640
Exercised......................................................... 17.07- 30.25 (712,107)
Terminated........................................................ 17.07- 36.75 (202,220)
------------- ----------
Outstanding at December 31, 1994.................................. 17.07- 36.75 7,064,321
Granted........................................................... 39.94 1,537,350
Exercised......................................................... 17.07- 36.75 (1,929,393)
Terminated........................................................ 28.00- 36.75 (14,425)
------------- ----------
Outstanding at December 31, 1995.................................. $17.07-$39.94 6,657,853
============= ==========
</TABLE>
Options for 4,422,618 shares of GM Class H common stock were exercisable at
December 31, 1995, and the maximum number of shares for which additional options
and other rights may be granted under the Plan was 3,905,786 shares.
NOTE 4. PENSION PROGRAMS
Hughes' total pension expense (credit) amounted to $39.0 million in 1995,
$54.9 million in 1994, and $(8.1) million in 1993.
Substantially all the employees of Delco Electronics participate in the
defined benefit pension plans of General Motors. Plans covering represented
employees generally provide benefits of negotiated stated amounts for each year
of service as well as significant supplemental benefits for employees who retire
with 30 years of service before normal retirement age. The benefits provided by
the plans covering salaried employees are generally based on years of service
and the employee's salary history. Certain nonqualified pension plans covering
executives are based on targeted wage replacement percentages and are unfunded.
The accumulated plan benefit obligation and plan net assets for the employees of
Delco Electronics are not determined separately; however, GM charged Delco
Electronics $50.9 million, $93.3 million, and $69.8 million for benefits earned
by these employees in 1995, 1994, and 1993, respectively.
IV-62
<PAGE> 11
HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Substantially all of Hughes' non-automotive employees are covered by
Hughes' contributory and non-contributory defined benefit retirement plans.
Benefits are based on years of service and compensation earned during a
specified period of time before retirement. Additionally, an unfunded,
nonqualified pension plan covers certain executives. The net pension credit,
related to these plans covering non-automotive employees, included the
components shown below:
<TABLE>
<CAPTION>
1995 1994 1993
--------- ------- -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Benefits earned during the year................................ $ 110.5 $ 146.7 $ 121.1
Interest accrued on benefits earned in prior years............. 403.6 377.0 369.1
Actual return on assets........................................ (1,198.3) (104.7) (953.7)
Net amortization and deferral.................................. 672.3 (457.4) 385.6
--------- ------- -------
Net pension credit........................................ $ (11.9) $ (38.4) $ (77.9)
========= ======= =======
</TABLE>
Costs are actuarially determined using the projected unit credit method and
are funded in accordance with U.S. Government cost accounting standards to the
extent such costs are tax-deductible. SFAS No. 87, Employers' Accounting for
Pensions, requires the recognition of an additional liability to increase the
amounts recorded up to the unfunded accumulated benefit obligation. The
adjustment required to recognize the minimum pension liability required by SFAS
No. 87 is recorded as an intangible asset to the extent of unrecognized prior
service cost and the remainder, net of applicable deferred income taxes, is
recorded as a reduction of Stockholder's Equity. At December 31, 1995 and 1994,
the additional minimum pension liability recorded was $204.9 million and $152.4
million, respectively, of which $108.6 million and $76.1 million, respectively,
was recorded as a reduction of Stockholder's Equity.
Plan assets are invested primarily in listed common stock, cash and
short-term investment funds, U.S. Government securities, and other investments.
The weighted average discount rates used in determining the actuarial
present values of the projected benefit obligation shown in the table on the
next page were 7.25% and 8.75% at December 31, 1995 and 1994, respectively. The
rate of increase in future compensation levels was 5.0% in 1995 and 1994. The
expected long-term rate of return on assets used in determining pension cost was
9.5% for 1995 and 9.75% for 1994.
IV-63
<PAGE> 12
HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
The following table sets forth the funded status of the Hughes
non-automotive employee plans and the amounts included in the Consolidated
Balance Sheet.
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------
1995 1994
-------------------- --------------------
ASSETS ACCUM. ASSETS ACCUM.
EXCEED BENEFITS EXCEED BENEFITS
ACCUM. EXCEED ACCUM. EXCEED
BENEFITS ASSETS BENEFITS ASSETS
-------- -------- -------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Actuarial present value of benefits based on service
to date and present pay levels
Vested............................................... $4,685.3 $ 327.5 $3,572.5 $ 195.9
Nonvested............................................ 225.6 4.7 337.9 0.9
-------- ------- -------- -------
Accumulated benefit obligation......................... 4,910.9 332.2 3,910.4 196.8
Additional amounts related to projected pay
increases............................................ 456.7 11.0 438.1 22.4
-------- ------- -------- -------
Total projected benefit obligation based on service to
date................................................. 5,367.6 343.2 4,348.5 219.2
Plan assets at fair value.............................. 6,397.7 65.9 5,717.4 --
-------- ------- -------- -------
Plan assets in excess of (less than) projected
benefit obligation................................... 1,030.1 (277.3) 1,368.9 (219.2)
Unamortized net amount resulting from changes in plan
experience and actuarial assumptions................. 173.3 193.3 (152.4) 150.2
Unamortized net asset at date of adoption.............. (161.9) -- (217.3) --
Unamortized net amount resulting from changes in plan
provisions........................................... (13.8) 22.6 (14.2) 24.6
Adjustment for unfunded pension liabilities............ -- (204.9) -- (152.4)
-------- ------- -------- -------
Net prepaid pension cost (accrued liability)........... $1,027.7 $ (266.3) $ 985.0 $ (196.8)
======== ======= ======== =======
</TABLE>
NOTE 5. OTHER POSTRETIREMENT BENEFITS
Substantially all of the employees of Delco Electronics participate in
various postretirement medical, dental, vision, and life insurance plans of
General Motors. Hughes maintains a program for eligible non-automotive retirees
to participate in health care and life insurance benefits generally until they
reach age 65. Qualified employees who elected to participate in the Hughes
contributory defined benefit pension plans may become eligible for these
benefits if they retire from Hughes between the ages of 55 and 65.
The total non-pension postretirement benefit cost of Hughes and its
subsidiaries included the components set forth as follows:
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Benefits earned during the year..................................... $ 33.9 $ 50.1 $ 49.2
Interest accrued on benefits earned in prior years.................. 123.3 130.3 127.2
Net amortization.................................................... (16.5) 7.6 --
------ ------ ------
Total non-pension postretirement benefit cost.................. $140.7 $188.0 $176.4
====== ====== ======
</TABLE>
IV-64
<PAGE> 13
HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
The following table displays the components of Hughes' obligation
recognized for postretirement benefit plans included in the Consolidated Balance
Sheet:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1995 1994
-------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Accumulated postretirement benefit obligation attributable to
Current retirees.................................................... $ 857.1 $ 816.6
Fully eligible active plan participants............................. 221.1 191.9
Other active plan participants...................................... 547.5 576.6
-------- --------
Accumulated postretirement benefit obligation......................... 1,625.7 1,585.1
Unrecognized net amount resulting from changes in plan experience and
actuarial assumptions............................................... 62.4 44.7
-------- --------
Net postretirement benefit obligation................................. 1,688.1 1,629.8
Less current portion.................................................. 77.5 88.4
-------- --------
Net long-term postretirement benefit obligation....................... $1,610.6 $1,541.4
======== ========
</TABLE>
The assumed weighted average discount rates used in determining the
actuarial present value of the accumulated postretirement benefit obligation
were 7.25% and 8.57% at December 31, 1995 and 1994, respectively. The assumed
weighted average rate of increase in future compensation levels related to pay-
related life insurance benefits was 4.4% at December 31, 1995 and 4.6% at
December 31, 1994.
The assumed weighted average health care cost trend rate was 7.78% in 1995,
increasing to 7.91% in 1996 and decreasing linearly each successive year until
it reaches 5.18% in 2006, after which it remains constant. A one percentage
point increase in each year of this annual trend rate would increase the
accumulated postretirement benefit obligation at December 31, 1995 by
approximately $171 million, and increase the service and interest cost
components of the 1995 postretirement benefit expense by approximately $18
million.
Hughes has disclosed in the consolidated financial statements certain
amounts associated with estimated future postretirement benefits other than
pensions and characterized such amounts as "accumulated postretirement benefit
obligations", "liabilities", or "obligations". Notwithstanding the recording of
such amounts and the use of these terms, Hughes does not admit or otherwise
acknowledge that such amounts or existing postretirement benefit plans of Hughes
(other than pensions) represent legally enforceable liabilities of Hughes.
IV-65
<PAGE> 14
HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 6. INCOME TAXES
The income tax provision consisted of the following:
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Taxes currently payable
U.S. Federal...................................................... $664.6 $532.2 $222.0
Foreign........................................................... 13.4 10.3 10.7
U.S. state and local.............................................. 138.4 100.5 94.3
------ ------ ------
Total.......................................................... 816.4 643.0 327.0
------ ------ ------
Deferred tax (assets) liabilities -- net
U.S. Federal...................................................... (130.0) (62.2) 229.7
Foreign........................................................... 2.0 1.3 --
U.S. state and local.............................................. (42.8) (9.3) 15.9
------ ------ ------
Total.......................................................... (170.8) (70.2) 245.6
------ ------ ------
Total income tax provision................................ $645.6 $572.8* $572.6
====== ====== ======
</TABLE>
- -------------------------
* Excluding effect of accounting change.
The deferred income tax benefit in 1994 included a $63.0 million credit
that resulted from an adjustment to the beginning of the year valuation
allowance because of a change in circumstances with respect to Hughes' ability
to realize the benefit from a capital loss carryforward.
Income before income taxes included the following components:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
U.S. income.................................................... $1,494.7 $1,448.1 $1,286.7
Foreign income................................................. 99.2 80.5 83.7
-------- -------- --------
Total........................................................ $1,593.9 $1,528.6 $1,370.4
======== ======== ========
</TABLE>
The consolidated income tax provision was different than the amount
computed using the U.S. statutory income tax rate for the reasons set forth in
the following table:
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Expected tax at U.S. statutory income tax rate...................... $557.9 $535.0 $479.5
U.S. state and local income taxes................................... 62.2 59.3 70.1
Purchase accounting adjustments..................................... 55.8 43.3 43.3
Foreign sales corporation tax benefit............................... (22.2) (19.2) (11.2)
Change in valuation allowance....................................... -- (63.0) --
Deferred tax impact of U.S. Federal income tax rate change.......... -- -- (10.0)
Other............................................................... (8.1) 17.4 0.9
------ ------ ------
Consolidated income tax provision................................. $645.6 $572.8* $572.6
====== ====== ======
</TABLE>
- -------------------------
Certain amounts for 1994 and 1993 have been reclassified to conform with the
1995 presentation.
* Excluding effect of accounting change.
IV-66
<PAGE> 15
HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Temporary differences and carryforwards which gave rise to deferred tax
assets and liabilities were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------
1995 1994
----------------------- -----------------------
DEFERRED DEFERRED DEFERRED DEFERRED
TAX TAX TAX TAX
ASSETS LIABILITIES ASSETS LIABILITIES
-------- ----------- -------- -----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Postretirement benefits other than pensions........... $ 704.9 $ -- $ 695.3 $ --
Profits on long-term contracts........................ 384.5 203.5 259.3 417.3
Leveraged leases...................................... 74.9 -- 86.7 --
Employee benefit programs............................. 185.2 393.3 173.1 372.9
Depreciation.......................................... -- 479.5 -- 399.4
Special provision for restructuring................... 56.4 -- 151.8 --
Other................................................. 445.2 220.3 356.3 215.6
-------- -------- -------- --------
Subtotal............................................ 1,851.1 1,296.6 1,722.5 1,405.2
Valuation allowance................................... (22.8) -- (16.1) --
-------- -------- -------- --------
Total deferred taxes.................................. $1,828.3 $ 1,296.6 $1,706.4 $ 1,405.2
======== ======== ======== ========
</TABLE>
- -------------------------
Certain amounts for 1994 have been reclassified to conform with the 1995
presentation.
Provision has been made for U.S. Federal income taxes to be paid on that
portion of the undistributed earnings of foreign subsidiaries that has not been
deemed permanently reinvested. At December 31, 1995 and 1994, undistributed
earnings of foreign subsidiaries amounted to approximately $397.4 million and
$311.4 million, respectively. Repatriation of all accumulated foreign earnings
would have resulted in tax liabilities of $110.3 million and $90.3 million,
respectively, for which Hughes has provided deferred tax liabilities of $82.8
million and $66.2 million, respectively.
At December 31, 1995, Hughes had $34.9 million of foreign operating loss
carryforwards which expire in varying amounts between 1996 and 2000. The
valuation allowance includes a provision for all of the foreign operating loss
carryforwards. In addition, Hughes had $89.5 million of capital loss
carryforwards, of which $51.3 million will expire in 1998 and $38.2 million will
expire in 2000. No valuation allowance has been provided for the capital loss
carryforwards.
NOTE 7. EARNINGS ATTRIBUTABLE TO GENERAL MOTORS CLASS H COMMON STOCK ON A PER
SHARE BASIS AND AVAILABLE SEPARATE CONSOLIDATED NET INCOME
Earnings attributable to General Motors Class H common stock on a per share
basis have been determined based on the relative amounts available for the
payment of dividends to holders of the GM Class H common stock. Holders of GM
Class H common stock have no direct rights in the equity or assets of Hughes,
but rather have rights in the equity and assets of GM (which includes 100% of
the stock of Hughes).
Dividends on the GM Class H common stock are declared by GM's Board of
Directors out of the Available Separate Consolidated Net Income of Hughes earned
since the acquisition of Hughes Aircraft Company by GM. The Available Separate
Consolidated Net Income of Hughes is determined quarterly and is equal to the
separate consolidated net income of Hughes, excluding the effects of GM purchase
accounting adjustments arising from the acquisition of Hughes Aircraft Company
(Earnings Used for Computation of Available Separate Consolidated Net Income),
multiplied by a fraction, the numerator of which is a number equal to the
weighted average number of shares of GM Class H common stock outstanding during
the period and the denominator of which was 399.9 million during the fourth
quarters of 1995, 1994, and 1993.
IV-67
<PAGE> 16
HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
The denominator used in determining the Available Separate Consolidated Net
Income of Hughes is adjusted as deemed appropriate by the GM Board of Directors
to reflect subdivisions or combinations of the GM Class H common stock and to
reflect certain transfers of capital to or from Hughes. The GM Board's
discretion to make such adjustments is limited by criteria set forth in GM's
Certificate of Incorporation. In this regard, the GM Board has generally caused
the denominator to decrease as shares are purchased by Hughes, and to increase
as such shares are used, at Hughes expense, for Hughes employee benefit plans or
acquisitions.
Dividends may be paid on GM Class H common stock only when, as, and if
declared by the GM Board of Directors in its sole discretion. The current policy
of the GM Board with respect to GM Class H common stock is to pay cash dividends
approximately equal to 35% of the Available Separate Consolidated Net Income of
Hughes for the prior year. Notwithstanding the current dividend policy, the
dividends paid on the GM Class H Common Stock during 1995, 1994, and 1993 were
based on an annual rate higher than 35% of the Available Separate Consolidated
Net Income of Hughes for the preceding year.
NOTE 8. PROPERTY -- NET
<TABLE>
<CAPTION>
1995 1994
-------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Land and improvements................................... $ 189.7 $ 196.5
Buildings and unamortized leasehold improvements........ 1,293.3 1,291.2
Machinery and equipment................................. 2,874.2 2,623.8
Furniture, fixtures, and office machines................ 118.3 81.9
Construction in progress................................ 439.9 448.9
-------- --------
Total.............................................. 4,915.4 4,642.3
Less accumulated depreciation........................... 2,244.2 2,047.5
-------- --------
Net real estate, plants, and equipment.................. 2,671.2 2,594.8
Special tools -- less amortization...................... 68.0 17.0
-------- --------
Property -- net.................................... $2,739.2 $2,611.8
======== ========
</TABLE>
NOTE 9. NOTES AND LOANS PAYABLE AND LONG-TERM DEBT AND CAPITALIZED LEASES
<TABLE>
<CAPTION>
1995 1994
------ ------
(DOLLARS IN
MILLIONS)
<S> <C> <C>
Loans payable to banks..................................... $ 15.1 $ 17.6
Current portion of long-term debt.......................... 7.2 55.4
Current portion of GM term loan............................ 85.0 --
Other...................................................... 325.2 52.7
------ ------
Total notes and loans payable......................... $432.5 $125.7
====== ======
Foreign bank debt.......................................... $ 53.8 $ 59.8
Term loans
GM....................................................... 143.8 143.8
Other.................................................... 150.0 200.0
Other debt................................................. 2.9 3.9
------ ------
Total................................................. 350.5 407.5
Less current portion....................................... 92.2 55.4
------ ------
Long-term debt............................................. 258.3 352.1
Capitalized leases......................................... 0.5 1.4
------ ------
Total long-term debt and capitalized leases........... $258.8 $353.5
====== ======
</TABLE>
IV-68
<PAGE> 17
HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
At December 31, 1995, Hughes had $450.0 million and $650.0 million of
unused credit available under short-term lines of credit and an unsecured
revolving credit loan agreement, respectively. The unsecured revolving credit
loan agreement provides for a commitment of $650.0 million through January 2000,
subject to a facility fee of 0.10% per annum. Borrowings under the agreement
bear interest at a rate which approximates the London Interbank Offered Rate
plus 0.175%. No amounts were outstanding under the agreement or the short-term
lines of credit at December 31, 1995.
At December 31, 1995, foreign bank debt included $53.8 million denominated
in British pounds sterling, bearing interest at rates ranging from 6.1% to
10.3%, with maturity dates from 1996 to 2005.
The GM term loans bear interest at rates ranging from 5.7% to 6.1%, with
maturity dates in 1996 and 1997. The other term loans consisted of notes payable
to an insurance company and other investors bearing interest at rates ranging
from 7.7% to 8.0%, with maturity dates in 1997.
Other notes and loans payable included $302.7 million related to the
acquisition of Magnavox Electronic Systems Company (see Note 13). The note,
which bore interest at a rate of 5.3%, was repaid in full on January 5, 1996.
Annual maturities of long-term debt and capitalized leases are $92.2
million in 1996, $213.5 million in 1997, $3.9 million in 1998, $4.2 million in
1999, $4.6 million in 2000, and $32.6 million thereafter.
Property with a net book value of $34.6 million at December 31, 1995 was
pledged as collateral under such debt.
NOTE 10. ACCRUED LIABILITIES
<TABLE>
<CAPTION>
1995 1994
-------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Payrolls and other compensation......................... $ 553.2 $ 540.2
Provision for losses on contracts....................... 408.4 277.0
Accrual for restructuring............................... 115.9 143.3
Other................................................... 913.4 925.0
-------- --------
Total.............................................. $1,990.9 $1,885.5
======== ========
</TABLE>
IV-69
<PAGE> 18
HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 11. STOCKHOLDER'S EQUITY
The authorized capital stock of Hughes consists of 1,000 shares of $0.10
par value common stock. At December 31, 1995, 1994, and 1993, 1,000 shares
having an aggregate par value of $100 were issued and outstanding. All of the
outstanding capital stock of Hughes is held by General Motors.
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Capital stock and additional paid-in capital
Balance at beginning of the year............................. $6,326.5 $6,323.1 $6,314.7
Tax benefit from exercise of GM Class H common stock
options................................................... 11.6 3.4 8.4
-------- -------- --------
Balance at end of the year................................ $6,338.1 $6,326.5 $6,323.1
======== ======== ========
Net income retained for use in the business
Balance at beginning of the year............................. $1,743.6 $1,138.2 $ 628.4
Net income................................................... 948.3 925.4 797.8
Cash dividends paid to General Motors........................ (368.0) (320.0) (288.0)
-------- -------- --------
Balance at end of the year................................ $2,323.9 $1,743.6 $1,138.2
======== ======== ========
Minimum pension liability adjustment
Balance at beginning of the year............................. $ (76.1) $ (120.4) $ (104.3)
Change during the year....................................... (32.5) 44.3 (16.1)
-------- -------- --------
Balance at end of the year................................ $ (108.6) $ (76.1) $ (120.4)
======== ======== ========
Accumulated foreign currency translation adjustments
Balance at beginning of the year............................. $ (18.2) $ (12.8) $ (23.8)
Change during the year....................................... (9.5) (5.4) 11.0
-------- -------- --------
Balance at end of the year................................ $ (27.7) $ (18.2) $ (12.8)
======== ======== ========
</TABLE>
As sole stockholder of Hughes, GM is able to cause Hughes to pay cash
dividends and make advances to or otherwise enter into transactions with GM as
GM deems desirable and appropriate. GM reserves the right to cause Hughes to pay
cash dividends to GM in such amounts as GM determines are desirable under the
then prevailing facts and circumstances. Such amounts may be the same as,
greater than, or less than the cash dividends paid by GM on its Class H common
stock. There is no fixed relationship, on a per share or aggregate basis,
between the cash dividends that may be paid by GM to holders of its Class H
common stock and the cash dividends or other amounts that may be paid by Hughes
to GM.
NOTE 12. SPECIAL PROVISION FOR RESTRUCTURING
In 1992, Hughes recorded a special restructuring charge of $1,237.0 million
primarily attributable to redundant facilities and related employment costs. The
special charge comprehended a reduction of Hughes' worldwide employment, a major
facilities consolidation, and a reevaluation of certain business lines that no
longer met Hughes' strategic objectives. Restructuring costs of $208.8 million,
$228.3 million, and $527.6 million were charged against the reserve during 1995,
1994, and 1993, respectively. In addition, in 1994 and 1993 the restructuring
reserve was increased by $35.0 million and $78.0 million, respectively,
primarily due to changes in the estimated loss on disposition of two
subsidiaries. The remaining liability of $134.4 million relates primarily to
reserves for excess facilities and other site consolidation costs. Approximately
$119.3 million of this total will require future cash outflows. It is expected
that these costs will be expended predominantly over the next two years.
IV-70
<PAGE> 19
HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 13. ACQUISITIONS AND DIVESTITURES
In February 1995, Hughes acquired substantially all of the assets of
CAE-Link Corporation for $176.0 million in cash. CAE-Link is an established
supplier of simulation, training, and technical services, primarily to the U.S.
military and NASA. In December 1995, Hughes acquired all of the stock of
Magnavox Electronic Systems Company (Magnavox) for $382.4 million, consisting of
cash of $70.5 million, a note payable of $302.7 million, and estimated
additional amounts to be paid of $9.2 million. Magnavox is a leading supplier of
military tactical communications, electronic warfare, and command and control
systems. In addition, Hughes acquired several other enterprises with operations
that complement existing technological capabilities at aggregate purchase
prices, paid in cash, of $63.0 million and $10.4 million in 1995 and 1993,
respectively.
All acquisitions were accounted for using the purchase method of
accounting. The operating results of the entities acquired were consolidated
with those of Hughes from their respective acquisition dates. These acquisitions
did not have a material impact on the operating results of Hughes. The purchase
price of each acquisition was allocated to the net assets acquired, including
intangible assets, based upon their estimated fair values at the date of
acquisition.
During 1995, Hughes divested several non-strategic enterprises generating
aggregate proceeds of approximately $127.2 million and a net loss of
approximately $8.2 million, which included the write-off of $30.1 million of
purchase accounting adjustments related to GM's acquisition of Hughes Aircraft
Company. Also in 1995, Hughes recorded a $46.0 million charge for the estimated
loss on disposition of a business unit (including $6.0 million related to the
write-off of GM purchase accounting adjustments) and completed the divestiture
of Hughes LAN Systems, for which a pre-tax charge of $35.0 million was taken in
1994.
NOTE 14. DERIVATIVE FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
Hughes is a party to financial instruments with off-balance sheet risk in
the normal course of business to reduce its exposure to fluctuations in foreign
exchange rates. The primary class of derivatives used by Hughes is foreign
exchange-forward contracts. These instruments involve, to varying degrees,
elements of credit risk in the event a counterparty should default and market
risk as the instruments are subject to rate and price fluctuations. Credit risk
is managed through the periodic monitoring and approval of financially sound
counterparties. Market risk is mitigated because the derivatives are used to
hedge underlying transactions. Cash receipts or payments on these contracts
normally occur at maturity. Hughes holds derivatives only for purposes other
than trading.
Foreign exchange-forward contracts are legal agreements between two parties
to purchase and sell a foreign currency, for a price specified at the contract
date, with delivery and settlement in the future. Hughes uses these agreements
to hedge risk of changes in foreign currency exchange rates associated with
certain firm commitments denominated in foreign currency.
The total notional amount of foreign exchange-forward contracts Hughes held
at December 31, 1995 and 1994 was approximately $289 million and $144 million,
respectively. Hughes' open contracts extend for periods averaging nine months.
IV-71
<PAGE> 20
HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 15. FAIR VALUE OF FINANCIAL INSTRUMENTS
In accordance with the requirements of SFAS No. 107, Disclosures about Fair
Value of Financial Instruments, and SFAS No. 119, Disclosures about Derivative
Financial Instruments and Fair Value of Financial Instruments, the following
fair value estimates and information about valuation methodologies are
presented. For all financial instruments not described below, fair value
approximates book value.
For notes and loans payable and long-term debt, the estimated fair value
(which approximates book value) was $694.9 million and $479.9 million at
December 31, 1995 and 1994, respectively. Such fair value is based on the quoted
market prices for similar issues or on the current rates offered to Hughes for
debt of similar remaining maturities. The carrying value of debt with an
original term of less than 90 days is assumed to approximate fair value.
The fair values of derivative financial instruments reflect the estimated
amounts Hughes would receive or pay to terminate the contracts at the reporting
date, which takes into account the current unrealized gains or losses on open
contracts. The fair value of foreign exchange-forward contracts is estimated
based on foreign exchange rate quotes at the reporting date. At December 31,
1995 and 1994, the estimated fair value of open contracts, which were in a net
gain position, was $10.7 million and $3.9 million, respectively. No amounts were
recorded in the Consolidated Balance Sheet for these contracts in 1995 and 1994.
NOTE 16. SEGMENT REPORTING
Prior to 1995, Hughes reported its operations in four business segments:
Automotive Electronics, Defense Electronics, Telecommunications and Space, and
Commercial Technologies. In connection with organizational changes, effective
January 1, 1995, Hughes now reports its operations in three segments: Automotive
Electronics, Telecommunications and Space, and Aerospace and Defense Systems.
This new segment presentation better reflects Hughes' strategic direction and
the manner in which its businesses are managed. All 1994 and 1993 financial data
have been restated to reflect the new segment reporting format.
Hughes operates within the field of modern high-technology electronics for
use in Automotive Electronics, Telecommunications and Space, and Aerospace and
Defense Systems business segments. Radios, controls for engines and
transmissions, navigation and communication systems, monitors and sensors for
air bags, controllers for anti-lock brakes, climate control, dashboard
instrumentation, vehicle security electronics, and other automotive electronic
products are included in the Automotive Electronics segment. The
Telecommunications and Space segment includes satellite construction, ownership
and operation, communications services, ground equipment, and direct-to-home
satellite television entertainment services. The Aerospace and Defense Systems
segment includes missile systems, command and control systems, torpedoes and
sonar systems, electro-optical systems, airborne radar systems, military
training and simulation systems, air traffic control systems, information
systems, and guidance and control systems. Intercompany transfers between
segments are not material. Information concerning operations by segment is shown
on the next page:
IV-72
<PAGE> 21
HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
<TABLE>
<CAPTION>
AEROSPACE
AUTOMOTIVE TELECOM. AND DEFENSE CORPORATE
ELECTRONICS AND SPACE SYSTEMS AND OTHER TOTAL
----------- --------- ----------- --------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Revenues
1995.................................... $ 5,561.3 $3,092.7 $ 5,945.4 $ 172.4 $14,771.8
1994.................................... 5,221.7 2,596.2 6,023.6 257.9 14,099.4
1993.................................... 4,453.4 2,238.3 6,472.2 353.6 13,517.5
Operating Profit (Loss)(1)
1995.................................... $ 869.0 $ 168.2 $ 587.1 $ (80.4) $ 1,543.9
1994.................................... 794.8 250.0 562.7 (100.9) 1,506.6
1993.................................... 624.3 188.6 563.3 (39.9) 1,336.3
Identifiable Assets at Year End(2)
1995.................................... $ 3,934.0 $4,121.8 $ 7,247.3 $ 671.3 $15,974.4
1994.................................... 3,429.8 3,727.8 6,712.0 980.9 14,850.5
1993.................................... 2,748.7 3,070.3 7,322.1 976.0 14,117.1
Depreciation and Amortization(1)
1995.................................... $ 151.4 $ 199.3 $ 232.9 $ 27.5 $ 611.1
1994.................................... 142.2 161.8 259.4 30.6 594.0
1993.................................... 146.8 135.0 302.1 43.4 627.3
Capital Expenditures(3)
1995.................................... $ 264.7 $ 436.5 $ 109.8 $ 9.3 $ 820.3
1994.................................... 166.4 399.3 159.5 21.1 746.3
1993.................................... 148.2 271.8 131.4 28.6 580.0
</TABLE>
- -------------------------
(1) Includes purchase accounting adjustments associated with GM's purchase of
Hughes Aircraft Company of $123.4 million in 1995 ($21.0 million, $100.9
million, and $1.5 million related to Telecommunications and Space, Aerospace
and Defense Systems, and Corporate and Other, respectively) and $123.8
million in 1994 and 1993 ($21.0 million, $100.9 million, and $1.9 million
related to Telecommunications and Space, Aerospace and Defense Systems, and
Corporate and Other, respectively).
(2) Identifiable assets include the unamortized purchase accounting adjustments
associated with the purchase of Hughes Aircraft Company as detailed below:
<TABLE>
<CAPTION>
AEROSPACE
TELECOM. AND DEFENSE CORP. AND
AND SPACE SYSTEMS OTHER TOTAL
--------- ----------- --------- --------
<S> <C> <C> <C> <C>
1995.................................. $ 489.0 $ 2,348.7 $ 8.1 $2,845.8
1994.................................. 510.0 2,449.6 45.7 3,005.3
1993.................................. 531.0 2,550.5 47.6 3,129.1
</TABLE>
(3) Telecommunications and Space includes expenditures related to
telecommunications and other equipment amounting to $274.6 million, $255.8
million, and $131.1 million in 1995, 1994, and 1993, respectively.
IV-73
<PAGE> 22
HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
A reconciliation of operating profit shown on the previous page to Income
before Income Taxes shown in the Consolidated Statement of Income and Available
Separate Consolidated Net Income follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Operating Profit............................................... $1,543.9 $1,506.6 $1,336.3
Other Income -- net............................................ 57.5 37.1 67.3
Interest Expense............................................... (7.5) (15.1) (33.2)
-------- -------- --------
Income before Income Taxes................................ $1,593.9 $1,528.6 $1,370.4
======== ======== ========
</TABLE>
Export sales from the U.S. were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Africa......................................................... $ 25.4 $ 25.8 $ 28.2
Asia........................................................... 948.9 758.2 593.4
Canada......................................................... 861.8 876.3 820.7
Europe......................................................... 929.4 678.6 503.1
Mexico......................................................... 143.4 96.9 122.9
Other Latin America............................................ 76.0 90.3 68.3
Middle East.................................................... 327.0 370.1 404.4
-------- -------- --------
Total..................................................... $3,311.9 $2,896.2 $2,541.0
======== ======== ========
</TABLE>
NOTE 17. COMMITMENTS AND CONTINGENT LIABILITIES
Hughes signed agreements in 1995 to procure commercial satellite launches,
a significant number of which are expected to be used in connection with
satellites ordered by outside customers. The agreements provide for launches
beginning in 1998 and also contain options for additional launch vehicles. The
total amount of the commitment, which is dependent upon the number of options
exercised, market conditions, and other factors, is in excess of $1 billion.
In December 1994, Hughes entered into an agreement with Computer Sciences
Corporation (CSC) whereby CSC provides a significant amount of the
non-automotive data processing services required by Hughes. Baseline service
payments to CSC are expected to aggregate approximately $1.5 billion over the
term of the eight-year agreement. The contract is cancelable by Hughes with
substantial early termination penalties.
Minimum future commitments under operating leases having noncancelable
lease terms in excess of one year, primarily for real property and satellite
transponders, aggregating $2,010.3 million, are payable as follows: $232.3
million in 1996, $198.5 million in 1997, $174.3 million in 1998, $172.7 million
in 1999, $165.6 million in 2000, and $1,066.9 million thereafter. Certain of
these leases contain escalation clauses and renewal or purchase options. Rental
expenses under operating leases were $257.9 million in 1995, $306.2 million in
1994, and $296.3 million in 1993.
Hughes 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. The aggregate ultimate liability of Hughes and its
subsidiaries under these government regulations, and under these claims and
actions, was not determinable at December 31, 1995. In the opinion of management
of Hughes, such liability is not expected to have a material adverse effect on
Hughes' consolidated operations or financial position.
IV-74
<PAGE> 23
HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONCLUDED
In 1973, Hughes Aircraft Company filed a lawsuit against the U.S.
Government in the U.S. Court of Claims for infringement of a patent utilized in
the design of satellites (the "Williams Patent"). In late 1983, the U.S. Court
of Appeals ruled that the patent was valid and that the Government had infringed
the patent. In June 1994, the U.S. Court of Claims issued a decision awarding
Hughes damages of $114 million. Both parties to the lawsuit have appealed the
judgment, with Hughes asserting that the award did not adequately compensate it
for damages suffered. In the opinion of the management of Hughes, there is a
reasonable possibility that this matter could be resolved in the near term.
While no amount has been recorded in Hughes' financial statements pending the
outcome of the case, resolution could result in a gain that would be material to
the financial statements.
NOTE 18. SUBSEQUENT EVENT
In January 1996, Hughes and DIRECTV, a wholly-owned subsidiary of Hughes,
reached a tentative agreement with AT&T wherein AT&T is to market and distribute
DIRECTV entertainment service and DSS(R) equipment. In addition, AT&T agreed to
acquire a 2.5% equity interest in DIRECTV for $137.5 million, with options to
increase its ownership interest, under certain conditions. These transactions
are subject to completion of definitive agreements and regulatory approvals.
* * * *
IV-75
<PAGE> 24
HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
SELECTED QUARTERLY DATA (UNAUDITED)
<TABLE>
<CAPTION>
1ST 2ND 3RD 4TH
-------- -------- -------- --------
(DOLLARS IN MILLIONS
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
1995 QUARTERS
Revenues.............................................. $3,578.8 $3,723.6 $3,441.3 $4,028.1
======== ======== ======== ========
Income before income taxes............................ $ 403.3 $ 436.3 $ 310.6 $ 443.7
Income taxes.......................................... 165.4 178.8 121.6 179.8
-------- -------- -------- --------
Net income............................................ $ 237.9 $ 257.5 $ 189.0 $ 263.9
======== ======== ======== ========
Earnings used for computation of available separate
consolidated net income............................. $268.9 $288.4 $256.1 $294.4
Average number of shares of General Motors Class H
common stock outstanding (in millions).............. 94.2 95.4 95.9 96.5
Class H dividend base (in millions)................... 399.9 399.9 399.9 399.9
Available separate consolidated net income............ $ 63.3 $ 68.8 $ 61.4 $ 71.1
======== ======== ======== ========
Net earnings attributable to General Motors Class H
common stock on a per share basis................... $0.67 $0.72 $0.64 $0.74
======== ======== ======== ========
Stock price range of General Motors Class H common
stock
High............................................. $41.75 $41.63 $42.75 $50.00
Low.............................................. $33.25 $37.75 $39.13 $39.50
1994 QUARTERS
Revenues.............................................. $3,587.3 $3,535.9 $3,354.5 $3,621.7
======== ======== ======== ========
Income before income taxes............................ $ 477.3 $ 400.6 $ 361.4 $ 289.3
Income taxes.......................................... 195.8 164.2 148.2 64.6
-------- -------- -------- --------
Income before cumulative effect of accounting
change.............................................. 281.5 236.4 213.2 224.7
Cumulative effect of accounting change................ (30.4)* -- -- --
-------- -------- -------- --------
Net income............................................ $ 251.1 $ 236.4 $ 213.2 $ 224.7
======== ======== ======== ========
Earnings used for computation of available separate
consolidated net income............................. $282.1 $267.3 $244.2 $255.6
Average number of shares of General Motors Class H
common stock outstanding (in millions).............. 90.6 91.7 92.7 93.3
Class H dividend base (in millions)................... 399.9 399.9 399.9 399.9
Available separate consolidated net income............ $ 64.0 $ 61.3 $ 56.6 $ 59.7
======== ======== ======== ========
Earnings attributable to General Motors Class H
common stock on a per share basis
Before cumulative effect of accounting change.... $0.78 $0.67 $0.61 $0.64
Cumulative effect of accounting change........... (0.08)* -- -- --
--------- -------- -------- --------
Net earnings attributable to General Motors Class
H common stock on a per share basis............ $0.70 $0.67 $0.61 $0.64
===== ===== ===== =====
Stock price range of General Motors Class H common
stock
High............................................. $40.38 $38.75 $38.00 $37.75
Low.............................................. $32.63 $31.75 $34.63 $31.00
</TABLE>
- -------------------------
* Effective January 1, 1994, Hughes adopted SFAS No. 112. The unfavorable
cumulative effect of adopting SFAS No. 112 was $30.4 million, or $6.8 million
attributable to GM Class H common stock.
IV-76
<PAGE> 25
HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION -- CONCLUDED
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
--------- --------- --------- --------- ---------
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Revenues........................... $14,771.8 $14,099.4 $13,517.5 $12,297.1 $11,540.6
Earnings (Loss) used for
computation of available separate
consolidated net income (loss)... $ 1,107.8 $ 1,049.2 $ 921.6 $ (921.6) $ 559.4
Average number of shares of General
Motors Class H common stock
outstanding (in millions)........ 95.5 92.1 88.6 75.3 73.7
Class H dividend base (in
millions)........................ 399.9 399.9 399.9 399.9 399.9
Available separate consolidated net
income (loss).................... $ 264.6 $ 241.6 $ 204.5 $ (142.3) $ 104.6
GM Class H cash dividends.......... $ 87.9 $ 73.8 $ 64.1 $ 53.3 $ 54.3
Dividend payout ratio(1)........... 36.4% 36.0% N/A 51.0% 33.9%
Earnings (Loss) attributable to
General Motors Class H common
stock on a per share basis before
cumulative effect of accounting
changes.......................... $2.77 $2.70 $2.30 $(0.11) $1.26
Earnings (Loss) attributable to
General Motors Class H common
stock on a per share basis after
cumulative effect of accounting
changes.......................... $2.77 $2.62 $2.30 $(2.29) $1.39
Capital expenditures(2)............ $ 820.3 $ 746.3 $ 580.0 $ 558.5 $ 681.3
Cash and cash equivalents.......... $ 1,139.5 $ 1,501.8 $ 1,008.7 $ 702.7 $ 348.3
Working capital.................... $ 2,502.0 $ 2,695.5 $ 2,165.2 $ 1,692.4 $ 1,548.8
Total assets....................... $15,974.4 $14,850.5 $14,117.1 $14,209.2 $12,930.8
Long-term debt and capitalized
leases........................... $ 258.8 $ 353.5 $ 416.8 $ 711.0 $ 147.1
Return on equity*(3)............... 11.5% 12.1% 11.3% (13.9)% 5.3%
Income (Loss) before interest and
taxes as a percent of
capitalization(4)................ 18.7% 19.0% 18.0% (2.3)% 8.1%
Pre-tax return on total
assets(5)........................ 10.3% 10.6% 9.7% (1.8)% 5.2%
</TABLE>
- -------------------------
* Includes favorable (unfavorable) cumulative effect of accounting changes of
$(30.4) million in 1994, $(872.1) million in 1992, and $54.4 million in
1991.
(1) GM Class H cash dividends divided by available separate consolidated net
income for the prior year.
(2) Includes expenditures related to telecommunications and other equipment
amounting to $274.6 million, $255.8 million, $131.1 million, $101.6 million,
and $88.3 million in 1995, 1994, 1993, 1992, and 1991, respectively.
(3) Net Income (Loss) divided by average stockholder's equity (General Motors'
equity in its wholly-owned subsidiary, Hughes). Holders of GM Class H common
stock have no direct rights in the equity or assets of Hughes, but rather
have rights in the equity and assets of GM (which includes 100% of the stock
of Hughes).
(4) Income (Loss) before interest and taxes divided by average stockholder's
equity plus average debt.
(5) Income (Loss) before Income Taxes divided by average Total Assets.
IV-77
<PAGE> 26
HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OPERATING AND FINANCIAL REVIEW
The following discussion excludes purchase accounting adjustments related
to General Motors' acquisition of Hughes Aircraft Company (see Supplemental Data
beginning on page IV-82).
RESULTS OF OPERATIONS
REVENUES. Hughes reported record revenues of $14,807.9 million in 1995, a
5.0% increase over 1994. Revenues in 1994 were $14,099.4 million, an increase of
4.3% compared with 1993 revenues of $13,517.5 million. The increases in revenues
were largely the result of continued growth in the Automotive Electronics and
Telecommunications and Space segments, partially offset by Aerospace and Defense
Systems segment revenue declines caused by lower production rates and planned
terminations on several defense programs. (Pro forma segment information is
presented on page IV-85).
Automotive Electronics. Revenues in the Automotive Electronics segment
continued to increase in 1995 to $5,561.3 million from $5,221.7 million in 1994
and $4,453.4 million in 1993. The growth was primarily attributable to an
increase in Hughes-supplied electronic content in GM vehicles produced in North
America to $888 in 1995 from $857 in 1994 and $782 in 1993, and an increase in
sales to international and non-GM-NAO customers to $841 million in 1995 from
$672 million and $603 million in 1994 and 1993, respectively. Revenue growth was
also impacted by an increase in GM North American vehicle production of 8%
between 1993 and 1994, while vehicle production remained relatively unchanged
between 1994 and 1995.
Telecommunications and Space. Revenues in the Telecommunications and Space
segment were $3,092.7 million in 1995, a 19.1% increase over 1994, and $2,596.2
million in 1994, a 16.0% increase over 1993 revenues of $2,238.3 million. The
increases were primarily due to the commencement of operations and subscriber
growth at DIRECTV(R) and increased sales of satellites, Galaxy(R) satellite
transponders, cellular communications equipment and private business networks.
Aerospace and Defense Systems. Aerospace and Defense Systems segment
revenues were $5,945.4 million in 1995, a 1.3% decrease from 1994 revenues of
$6,023.6 million. The decline was principally due to lower production rates on
several missile programs, partially offset by the additional revenues related to
the 1995 acquisition of CAE-Link Corporation. Revenues decreased $448.6 million,
or 7.4%, between 1993 and 1994, due largely to the full-year impact of lower
production rates and planned terminations on several defense programs.
Other Income. Included in revenues is other income of $93.6 million, $37.1
million, and $67.3 million for 1995, 1994, and 1993, respectively. 1995 and 1994
included pre-tax charges of $40.0 million and $35.0 million, respectively, for
the estimated losses on disposition of certain non-strategic business units.
Also included in 1995 was $35.9 million of revenue earned for providing services
to GM. The 1993 amount included a gain of $89.7 million on the sale of Hughes'
30% interest in Japan Communications Satellite Company, Inc. and a $55.0 million
charge related to the sale of Hughes Rediffusion Simulation Limited
(Rediffusion) and related entities.
OPERATING PROFIT. Operating profit was $1,667.3 million in 1995, $1,630.4
million in 1994, and $1,460.1 million in 1993. Operating profit margins, as a
percentage of net sales, were 11.3%, 11.6%, and 10.9% in 1995, 1994, and 1993,
respectively. The improvement in profitability over this time period was
primarily the result of the continued emphasis on cost reduction efforts, most
notably in the Automotive Electronics and Aerospace and Defense Systems
segments, and the overall growth in revenues, partially offset by a planned
increase in operating expenses associated with DIRECTV.
Automotive Electronics. Operating profit has increased significantly over
the last three years. In 1995, operating profit was $869.0 million compared with
$794.8 million in 1994 and $624.3 million in 1993. The improvement in
profitability was attributable not only to increased revenues, but also to an
aggressive cost reduction program, which has yielded cost savings before
inflation of 13.5% in 1995, 11% in 1994, and 10% in
IV-78
<PAGE> 27
1993. The operating profit margin was 15.9%, 15.4%, and 14.0% in 1995, 1994, and
1993, respectively. Operating profit margins beyond 1995 are not expected to be
maintained at the current level due to the potential for reduced auto production
volumes, increased pricing pressures, and GM's global sourcing initiatives.
Telecommunications and Space. Operating profit for 1995 was $189.2 million,
a 30.2% decrease from the $271.0 million reported in 1994. The reduction was
primarily a result of increased operating expenses associated with the continued
expansion of DIRECTV and increased development costs on a geostationary
satellite mobile telephony product line. Also contributing to the decline in
operating profit were the reduced 1994 construction costs associated with the
replacement of a Galaxy satellite, that was destroyed by a launch vehicle
failure in August 1992, and 1994 earnings recognized by DIRECTV related to a
contract with the National Rural Telecommunications Cooperative. Operating
profit in 1994 increased 29.3% from 1993 operating profit of $209.6 million. The
improvement in 1994, compared with 1993, was a result of the 1994 events
discussed above as well as the sale of additional Galaxy satellite transponders,
increased sales at Hughes Network Systems (HNS) relating to cellular
communications equipment and services, and increased satellite construction
sales, partially offset by higher DIRECTV operating expenses relating to the
commencement of service in 1994. Operating profit margins were 6.2% in 1995,
10.3% in 1994, and 9.8% in 1993. After 1995, the Telecommunications and Space
segment's operating margins are expected to increase as DIRECTV's subscriber
base grows.
Aerospace and Defense Systems. Operating profit was $688.0 million in 1995
compared with $663.6 million in 1994 and $664.2 million in 1993. The increase
between 1995 and 1994 was largely a result of a provision taken in 1994 for
certain air traffic control contracts, partly offset by reduced revenues in
1995. Future operating profits could be adversely impacted by further reductions
in the U.S. defense budget.
COSTS AND EXPENSES. Selling, general, and administrative expenses were
$1,234.2 million in 1995, $1,018.3 million in 1994, and $929.1 million in 1993.
The increases were primarily due to the commencement of operations and continued
expansion of DIRECTV and increased international sales activities at Delco
Electronics.
Interest expense decreased 50.3% in 1995 and 54.5% in 1994 primarily due to
a decrease in average debt balances and an increase in the amount of capitalized
interest associated with the construction of telecommunications and other
equipment.
The effective income tax rate was 36.8%, 34.7%, and 38.3% in 1995, 1994,
and 1993, respectively. The lower effective income tax rate in 1994 resulted
from the recognition of capital loss carryforward benefits.
EARNINGS. Hughes' 1995 earnings were $1,107.8 million, or $2.77 per share
of GM Class H common stock, compared with 1994 earnings of $1,049.2 million, or
$2.62 per share, and 1993 earnings of $921.6 million, or $2.30 per share.
Earnings in 1994 included the unfavorable effect of an accounting change for
postemployment benefits. Excluding the accounting change, Hughes' earnings in
1994 would have been $1,079.6 million, or $2.70 per share.
BACKLOG. The 1995 year-end backlog of $14,929 million increased from
$13,210 million at the end of 1994, primarily due to increased satellite orders
in the Telecommunications and Space segment. The 1994 year-end backlog remained
relatively unchanged from the 1993 value of $13,399 million. A portion of the
backlog is subject to appropriation decisions by the U.S. Government subsequent
to award. In addition, Hughes' contracts with the U.S. Government are subject to
termination by the Government either for its convenience or for default by
Hughes. Sales to the U.S. Government may be affected by changes in acquisition
policies, budget considerations, changing concepts in national defense, spending
priorities, and other factors that are outside of Hughes' control.
SPECIAL PROVISION FOR RESTRUCTURING. In 1992, Hughes recorded a special
charge of $749.4 million (after-tax), for the restructuring of Hughes'
operations. The special charge comprehended a reduction of Hughes' worldwide
employment, a major facilities consolidation, and a reevaluation of certain
business lines that no longer met Hughes' strategic objectives. Restructuring
costs of $208.8 million, $228.3 million, and $527.6 million were charged against
the reserve during 1995, 1994, and 1993, respectively. In addition, in 1994
IV-79
<PAGE> 28
and 1993, the restructuring reserve was increased by $35.0 million and $78.0
million, respectively, primarily due to changes in the estimated loss on
disposition of two subsidiaries. The remaining liability at December 31, 1995 of
$134.4 million relates primarily to reserves for excess facilities and other
site consolidation costs. Approximately $119.3 million of this amount will
require future cash outflows. It is expected that these costs will be expended
predominantly over the next two years.
ACCOUNTING CHANGES. Effective January 1, 1994, Hughes adopted Statement of
Financial Accounting Standards (SFAS) No. 112, Employers' Accounting for
Postemployment Benefits. The Statement requires accrual of the costs of benefits
provided to former or inactive employees after employment, but before
retirement. The unfavorable cumulative effect of this accounting change was
$30.4 million after-tax, or $0.08 per share of GM Class H common stock. The
charge primarily related to extended disability benefits which are accrued on a
service-driven basis.
NEW ACCOUNTING STANDARDS. In October 1995, the Financial Accounting
Standards Board (FASB) issued SFAS No. 123, Accounting for Stock-Based
Compensation, effective for transactions entered into in fiscal years beginning
after December 15, 1995. As permitted by SFAS No. 123, Hughes expects to
continue to apply its current accounting policy under Accounting Principles
Board Opinion No. 25, Accounting for Stock Issued to Employees, and include the
necessary disclosures in its 1996 financial statements.
In March 1995, the FASB issued SFAS No. 121, Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, which is
required to be adopted for fiscal years beginning after December 15, 1995. This
Statement establishes accounting standards for the impairment of long-lived
assets, certain identifiable intangibles, and goodwill related to those assets
to be held and used, and for long-lived assets and certain identifiable
intangibles to be disposed of. The cumulative effect of this accounting change
as of January 1, 1996 is not expected to be material.
LIQUIDITY AND CAPITAL RESOURCES
CASH AND CASH EQUIVALENTS. Cash and cash equivalents were $1,139.5 million
at December 31, 1995, a decrease of $362.3 million from December 31, 1994.
Operating activities generated cash of $986.2 million as Hughes achieved record
earnings. However, cash used to fund capital expenditures, pay dividends to
General Motors, and acquire new businesses more than offset the cash generated
by operating activities.
In 1994, cash and cash equivalents increased $493.1 million to $1,501.8
million at December 31, 1994, from $1,008.7 million at December 31, 1993.
Operating activities provided net cash of $1,376.8 million in 1994 as Hughes
increased earnings while aggressively managing working capital. Additional cash
of $200.0 million was generated by the collection of a note receivable from
General Motors. Cash was used to fund capital expenditures for property and
special tools and telecommunications and other equipment (primarily related to
DIRECTV), as well as to pay dividends to General Motors.
LIQUIDITY MEASUREMENT. As a measure of liquidity, the current ratio (ratio
of current assets to current liabilities) was 1.58 at December 31, 1995, 1.76 at
December 31, 1994, and 1.61 at December 31, 1993. The decrease from 1994 to 1995
was principally due to the decrease in cash described above and increases in the
notes and loans payable balance, primarily caused by a loan related to an
acquisition. (See Note 13 to the Consolidated Financial Statements.) The
increase in 1994 from 1993 was primarily the result of the increase in cash
described above.
PROPERTY AND EQUIPMENT. Property, net of accumulated depreciation,
increased $127.4 million in 1995 while telecommunications and other equipment,
net of accumulated depreciation, increased $103.4 million, primarily due to
expenditures related to the Galaxy satellite fleet.
Expenditures for property and equipment were $545.7 million in 1995
compared with $490.5 million and $448.9 million in 1994 and 1993, respectively.
Management anticipates that capital expenditures in 1996 will increase
approximately $100 million over 1995 and will be financed primarily from cash
provided by operating activities.
IV-80
<PAGE> 29
Telecommunications and other equipment expenditures were $274.6 million in
1995 compared with $255.8 million and $131.1 million in 1994 and 1993,
respectively. Management anticipates that telecommunications and other equipment
expenditures in 1996 will decrease approximately $50 million from 1995 and will
be financed primarily from cash provided by operating activities.
Automotive Electronics. Capital expenditures increased to $264.7 million in
1995, compared with $166.4 million in 1994, and $148.2 million in 1993. The
increased capital spending in 1995 reflects expenditures for additional program
requirements related to new product changes associated with the 1996 model year
combined with a decrease in tool bill recoveries. The 1994 increase reflected
expenditures for technology upgrades of certain facilities.
Telecommunications and Space. Capital expenditures, including expenditures
related to telecommunications and other equipment, increased to $436.5 million
in 1995 from $399.3 million in 1994 and $271.8 million in 1993. The increase in
1995 was due primarily to additions to the Galaxy satellite fleet while the 1994
increase primarily reflected continuing investment in satellite and ground
equipment associated with DIRECTV.
Aerospace and Defense Systems. Capital expenditures in the Aerospace and
Defense Systems segment for 1995, 1994, and 1993 were $109.8 million, $159.5
million, and $131.4 million, respectively. The 1995 decrease and the increase in
1994 were due to the high level of expenditures in 1994 related to the
consolidation of facilities in an effort to increase the operational
efficiencies of manufacturing and engineering activities.
LONG-TERM DEBT AND CAPITALIZED LEASES. Long-term debt and capitalized
leases was $258.8 million at December 31, 1995, a decrease from $353.5 million
at December 31, 1994, and $416.8 million at December 31, 1993, reflecting
scheduled principal repayments. The ratio of long-term debt and capitalized
leases to the total of such debt and pro forma stockholder's equity decreased to
4.4% in 1995 from 6.6% in 1994 and 9.0% in 1993.
OTHER BALANCE SHEET ITEMS. In evaluating both its pension and retiree
medical liabilities, Hughes recognized the impact of the recent decrease in
long-term interest rates by decreasing the discount rate used in determining the
actuarial present values of the projected benefit obligations. In 1995, the
weighted average discount rate for Hughes' non-automotive pension obligations
decreased from 8.75% to 7.25% and the weighted average discount rate for Hughes'
other postretirement benefits decreased from 8.57% to 7.25%.
ACQUISITIONS AND DIVESTITURES. In February 1995, Hughes completed the
acquisition of CAE-Link Corporation, an established supplier of simulation,
training, and technical services, primarily to the U.S. military and NASA, for
$176.0 million. In December 1995, Hughes acquired Magnavox Electronic Systems
Company, a leading supplier of military tactical communications, electronic
warfare, and command and control systems, for $382.4 million. These acquisitions
are strategic to Hughes' goal to strengthen market leadership around core
competencies in Aerospace and Defense Systems.
During 1995, Hughes divested several non-strategic enterprises resulting in
aggregate proceeds of approximately $127.2 million and a net gain of
approximately $21.9 million. Also in 1995, Hughes recorded a $40.0 million
charge for the estimated loss on disposition of a business unit and completed
the divestiture of Hughes LAN Systems, for which a pre-tax charge of $35.0
million was taken in 1994.
On December 31, 1993, Hughes completed the sale of Rediffusion and related
entities comprising the majority of its commercial aircraft simulation and
training equipment business to Thomson-CSF. The sale resulted in a $55.0 million
pre-tax charge against earnings, and included Rediffusion's core flight
simulation businesses and its U.S. airline marketing support organization.
STRATEGIC OBJECTIVES AND ALTERNATIVES. In light of the many opportunities
for strategic growth in the highly dynamic global telecommunications and
automotive electronics industries, and the continuing consolidation of
businesses in the defense industry, General Motors and Hughes from time-to-time
reevaluate their strategic objectives and consider and hold discussions with
third parties concerning a wide variety of possible transactions including
acquisitions, divestitures, joint ventures, business combinations or
IV-81
<PAGE> 30
restructurings that could serve to strengthen the businesses of General Motors
and Hughes and better enable them to achieve their strategic objectives. In this
regard, General Motors and Hughes also from time-to-time review their strategic
alternatives, including those relating to the businesses and capital structure
of General Motors and Hughes, and their relationship to one another.
General Motors and Hughes do not currently contemplate that they would
enter into any agreement committing them to effect any specific transaction of
the type described in the preceding paragraph, nor would they take any strategic
action relating to their business or capital structure of the type described in
the preceding paragraph, if, in the judgment of General Motors, any of its
principal ratings agencies would as a result thereof lower General Motors'
credit ratings from the levels which they are at today. Hughes and General
Motors do not intend to comment further on any specific discussions that may
occur or actions that may be considered until such time, if any, as they
determine it is appropriate to do so.
Statements made herein concerning the ongoing consideration and discussion
of transactions and strategic alternatives and the possibility of future action
in relation thereto constitute forward-looking information. In the event that
any transaction or action of the type described in such statements were to be
pursued, it would necessarily be subject to numerous conditions and
uncertainties. Accordingly, there can be no assurance that any such action would
be pursued or consummated, or if consummated, accomplish the strategic
objectives of Hughes or General Motors.
DIVIDEND POLICY. As discussed in Note 7 to the Consolidated Financial
Statements, it is GM's current policy to pay aggregate annual cash dividends on
the GM Class H common stock approximately equal to 35% of the Available Separate
Consolidated Net Income of Hughes for the prior year. In February 1996, the
Board of Directors of GM increased the quarterly dividend on GM Class H common
stock from $0.23 per share to $0.24 per share.
SECURITY RATINGS. Hughes' security ratings are tied to the security ratings
of General Motors.
In October 1995, Standard & Poor's Corporation (S&P) raised Hughes'
long-term debt rating from BBB+ to A-. The S&P A- credit rating is the seventh
highest within the 10 investment grade ratings available from S&P for long-term
debt, based on a strong capability to pay interest and repay principal, although
somewhat more susceptible to the adverse effects of changes in circumstances and
economic conditions than debt in higher rated categories. S&P's rating for
Hughes' commercial paper remained unchanged at A-2.
In May 1995, Moody's Investors Service, Inc. (Moody's) raised the long-term
debt rating of Hughes to A3 from Baa1. Moody's defines A3 long-term debt as
having "upper-medium grade" quality, whereas the Baa1 rating signifies "medium
grade" quality. Moody's rating for Hughes' commercial paper remained unchanged
at Prime-2. The rating indicates a strong ability for repayment relative to
other issuers.
Debt ratings by the various rating agencies reflect each agency's opinion
of the ability of issuers to repay debt obligations punctually. Lower ratings
generally result in higher borrowing costs. 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 organization. Each rating should be
evaluated independently of any other rating.
SUPPLEMENTAL DATA
The Consolidated Financial Statements reflect the application of purchase
accounting adjustments as described in Note 1 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 and
disposal of these intangible assets associated with GM's purchase of Hughes
Aircraft Company amounted to $159.5 million in 1995 and $123.8 million in 1994
and 1993. The 1995 amount included a $36.1 million charge, included in other
income, for the write-off of such purchase accounting adjustments related to the
disposition of certain non-strategic business units. 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
IV-82
<PAGE> 31
stock. Unamortized purchase accounting adjustments associated with GM's purchase
of Hughes Aircraft Company were $2,845.8 million, $3,005.3 million, and $3,129.1
million at December 31, 1995, 1994, and 1993, respectively.
In order to provide additional analytical data to the users of Hughes'
financial information, supplemental data in the form of unaudited summary pro
forma financial data are provided. Consistent with the basis on which earnings
of Hughes available for the payment of dividends on the GM Class H common stock
is determined, the pro forma data exclude purchase accounting adjustments
related to General Motors' acquisition of Hughes Aircraft Company. Included in
the supplemental data are certain financial ratios which provide measures of
financial returns excluding the impact of purchase accounting adjustments. The
pro forma data are not presented as a measure of GM's total return on its
investment in Hughes.
IV-83
<PAGE> 32
HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES
SUMMARY PRO FORMA FINANCIAL DATA*
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------
1995 1994 1993
--------- --------- ---------
(DOLLARS IN MILLIONS
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Total Revenues.............................................. $14,807.9 $14,099.4 $13,517.5
Total Costs and Expenses.................................... 13,054.5 12,447.0 12,023.3
--------- --------- ---------
Income before Income Taxes.................................. 1,753.4 1,652.4 1,494.2
Income taxes................................................ 645.6 572.8 572.6
--------- --------- ---------
Income before cumulative effect of accounting change........ 1,107.8 1,079.6 921.6
Cumulative effect of accounting change...................... -- (30.4) --
--------- --------- ---------
Earnings Used for Computation of Available Separate
Consolidated Net Income................................... $ 1,107.8 $ 1,049.2 $ 921.6
========= ========= =========
Earnings Attributable to General Motors Class H Common Stock
on a Per Share Basis
Before cumulative effect of accounting change............. $2.77 $ 2.70 $2.30
Cumulative effect of accounting change.................... -- (0.08) --
----- ------ -----
Net earnings attributable to General Motors Class H Common $2.77 $ 2.62 $2.30
Stock.................................................. ===== ====== =====
</TABLE>
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1995 1994
--------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C>
ASSETS
Total Current Assets................................................... $ 6,810.8 $ 6,243.6
Property -- Net........................................................ 2,739.2 2,611.8
Telecommunications and Other Equipment -- Net.......................... 1,175.1 1,071.7
Intangible Assets, Investments, and Other Assets -- Net................ 2,403.5 1,918.1
--------- ---------
Total Assets........................................................... $13,128.6 $11,845.2
========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY
Total Current Liabilities.............................................. $ 4,308.8 $ 3,548.1
Long-Term Debt and Capitalized Leases.................................. 258.8 353.5
Postretirement Benefits Other Than Pensions, Other Liabilities, and
Deferred Credits..................................................... 2,881.1 2,973.1
Total Stockholder's Equity**........................................... 5,679.9 4,970.5
--------- ---------
Total Liabilities and Stockholder's Equity**........................... $13,128.6 $11,845.2
========= =========
</TABLE>
- -------------------------
* The summary is unaudited and excludes purchase accounting adjustments related
to GM's acquisition of Hughes Aircraft Company.
** General Motors' equity in its wholly-owned subsidiary, Hughes. Holders of GM
Class H common stock have no direct rights in the equity or assets of Hughes,
but rather have rights in the equity and assets of GM (which includes 100% of
the stock of Hughes).
IV-84
<PAGE> 33
HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES
SUMMARY PRO FORMA FINANCIAL DATA* -- CONTINUED
PRO FORMA SELECTED SEGMENT DATA
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1995 1994 1993
-------- -------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
AUTOMOTIVE ELECTRONICS
Revenues................................................... $5,561.3 $5,221.7 $4,453.4
Revenues as a percentage of Hughes Revenues................ 37.6% 37.0% 32.9%
Net Sales.................................................. $5,479.7 $5,170.6 $4,451.0
Operating Profit(1)........................................ 869.0 794.8 624.3
Operating Profit Margin(2)................................. 15.9% 15.4% 14.0%
Identifiable Assets at Year-End............................ $3,934.0 $3,429.8 $2,748.7
Depreciation and Amortization.............................. 151.4 142.2 146.8
Capital Expenditures....................................... 264.7 166.4 148.2
TELECOMMUNICATIONS AND SPACE
Revenues................................................... $3,092.7 $2,596.2 $2,238.3
Revenues as a percentage of Hughes Revenues................ 20.9% 18.4% 16.6%
Net Sales.................................................. $3,075.8 $2,633.8 $2,135.8
Operating Profit(1)........................................ 189.2 271.0 209.6
Operating Profit Margin(2)................................. 6.2% 10.3% 9.8%
Identifiable Assets at Year-End............................ $3,632.8 $3,217.8 $2,539.3
Depreciation and Amortization.............................. 178.3 140.8 114.0
Capital Expenditures(3).................................... 436.5 399.3 271.8
AEROSPACE AND DEFENSE SYSTEMS
Revenues................................................... $5,945.4 $6,023.6 $6,472.2
Revenues as a percentage of Hughes Revenues................ 40.2% 42.7% 47.9%
Net Sales.................................................. $5,899.7 $6,007.3 $6,442.9
Operating Profit(1)........................................ 688.0 663.6 664.2
Operating Profit Margin(2)................................. 11.7% 11.0% 10.3%
Identifiable Assets at Year-End............................ $4,898.6 $4,262.4 $4,771.6
Depreciation and Amortization.............................. 132.0 158.5 201.2
Capital Expenditures....................................... 109.8 159.5 131.4
CORPORATE AND OTHER
Operating Loss(1).......................................... $ (78.9) $ (99.0) $ (38.0)
Identifiable Assets at Year-End............................ 663.2 935.2 928.4
</TABLE>
- -------------------------
Certain amounts for 1994 and 1993 have been reclassified to conform with 1995
classifications.
* The summary is unaudited and excludes purchase accounting adjustments
related to GM's acquisition of Hughes Aircraft Company.
(1) Net Sales less Total Costs and Expenses other than Interest Expense.
(2) Operating Profit as a percentage of Net Sales.
(3) Includes expenditures related to telecommunications and other equipment
amounting to $274.6 million, $255.8 million, and $131.1 million,
respectively.
IV-85
<PAGE> 34
HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES
SUMMARY PRO FORMA FINANCIAL DATA* -- CONCLUDED
PRO FORMA SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------
1995 1994 1993 1992 1991
------ ------ ------ ------ ------
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Operating profit (loss)......................... $1,667 $1,630 $1,460 $ (194) $ 800
Income (Loss) before income taxes and cumulative
effect of accounting changes.................. $1,753 $1,652 $1,494 $ (127) $ 795
Earnings (Loss) used for computation of
available separate consolidated net income
(loss)**...................................... $1,108 $1,049 $ 922 $ (922) $ 559
Average number of GM Class H dividend base
shares(1)..................................... 399.9 399.9 399.9 399.9 399.9
Stockholder's equity**.......................... $5,680 $4,971 $4,199 $3,562 $4,841
Dividends per share of GM Class H common
stock......................................... $0.92 $0.80 $0.72 $0.72 $0.72
Working capital................................. $2,502 $2,696 $2,165 $1,692 $1,549
Operating profit (loss) as a percent of net
sales......................................... 11.3% 11.6% 10.9% (1.6)% 7.0%
Pre-tax income (loss) as a percent of net
sales......................................... 11.9% 11.8% 11.1% (1.0)% 6.9%
Net income (loss) as a percent of net sales**... 7.5% 7.5% 6.9% (7.6)% 4.9%
Return on equity**(2)........................... 20.8% 22.9% 23.7% (21.9)% 11.9%
Income (Loss) before interest and taxes as a
percent of capitalization(3).................. 29.8% 32.9% 33.1% (1.3)% 15.3%
Pre-tax return on total assets(4)............... 14.0% 14.5% 13.6% (1.2)% 8.5%
</TABLE>
- -------------------------
* The summary is unaudited and excludes purchase accounting adjustments
related to GM's acquisition of Hughes Aircraft Company.
** Includes favorable (unfavorable) cumulative effect of accounting changes of
$(30.4) million in 1994, $(872.1) million in 1992, and $54.4 million in
1991.
(1) Class H dividend base shares is used in calculating earnings attributable to
GM Class H common stock on a per share basis. This is not the same as the
average number of GM Class H shares outstanding, which was 95.5 million in
1995.
(2) Earnings (Loss) used for Computation of Available Separate Consolidated Net
Income (Loss) divided by average stockholder's equity (General Motors'
equity in its wholly-owned subsidiary, Hughes). Holders of GM Class H common
stock have no direct rights in the equity or assets of Hughes, but rather
have rights in the equity and assets of GM (which includes 100% of the stock
of Hughes).
(3) Income (Loss) before interest and income taxes divided by average
stockholder's equity plus average total debt.
(4) Income (Loss) before Income Taxes divided by average Total Assets.
* * * *
IV-86
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM GENERAL
MOTORS CORPORATION DECEMBER 31, 1995 CONSOLIDATED FINANCIAL STATEMENTS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO 1995 FORM 10-K.
</LEGEND>
<CIK> 0000040730
<NAME> GENERAL MOTORS CORPORATION
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 11,044
<SECURITIES> 5,599
<RECEIVABLES> 68,720
<ALLOWANCES> 0
<INVENTORY> 11,530
<CURRENT-ASSETS> 0
<PP&E> 81,823
<DEPRECIATION> 44,083
<TOTAL-ASSETS> 217,123
<CURRENT-LIABILITIES> 0
<BONDS> 83,324
0
1
<COMMON> 1,309
<OTHER-SE> 22,035
<TOTAL-LIABILITY-AND-EQUITY> 217,123
<SALES> 143,666
<TOTAL-REVENUES> 168,829
<CGS> 126,535
<TOTAL-COSTS> 138,302
<OTHER-EXPENSES> 255
<LOSS-PROVISION> 449
<INTEREST-EXPENSE> 5,302
<INCOME-PRETAX> 9,776
<INCOME-TAX> 2,844
<INCOME-CONTINUING> 6,933
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (52)
<NET-INCOME> 6,881
<EPS-PRIMARY> 7.21
<EPS-DILUTED> 0
</TABLE>
