SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549-1004
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report
(Date of earliest event reported) July 19, 1999
----------------
GENERAL MOTORS CORPORATION
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
STATE OF DELAWARE 1-143 38-0572515
- ---------------------------- ----------------------- -------------------
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
100 Renaissance Center, Detroit, Michigan 48265-1000
3044 West Grand Boulevard, Detroit, Michigan 48202-3091
- -------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (313)-556-5000
--------------
- 1 -
ITEM 5. OTHER EVENTS
On July 20, 1999, a news release was issued on the subject of second
quarter consolidated earnings for General Motors Corporation (GM). The news
release did not include certain financial statements, related footnotes and
certain other financial information that will be filed with the Securities and
Exchange Commission as part of GM's Quarterly Report on Form 10-Q. The following
are the second quarter earnings releases for Hughes Electronics Corporation
(Hughes) dated July 19, 1999 and GM dated July 20, 1999.
GM EARNS A RECORD $1.7 BILLION, OR $2.66 PER SHARE,
IN THE SECOND QUARTER OF 1999
DETROIT -- General Motors Corp. (NYSE: GM) today reported record
second-quarter income and earnings per share from continuing operations of $1.7
billion, or $2.66 diluted earnings per share of GM $1-2/3 par value common
stock, in the second quarter of 1999. That compares with net income of $306
million, or $0.40 per share, in the strike-impacted second quarter of 1998.
These results exclude Delphi Automotive Systems (NYSE: DPH), which was spun off
as an independent company May 28, 1999.
Delphi is now classified by GM as a discontinued operation and is treated as
such in the balance of this release. Including Delphi's results in the second
quarter through May 28, GM's consolidated net income totaled $1.9 billion, or
$2.94 per share, compared with $389 million, or $0.52 per share in the second
quarter of 1998. (All per-share amounts in this release are diluted unless
otherwise noted.)
"In one of the most intensely competitive markets in recent history, our
North American automotive operations took advantage of the strong demand and
recorded net income of $1.5 billion, despite the extremely tough pricing
environment in this key region," said GM Chairman and Chief Executive Officer
John F. Smith, Jr.
"The continued strong performance of GM North America, and improved financial
results from GM Europe and General Motors Acceptance Corporation (GMAC) in the
second quarter offset challenges in other business sectors and automotive
regions, which through intensive structural-cost reductions performed in line
with our expectations. The consolidated results show the strength of our
globally integrated company," Smith said.
Consolidated net sales and revenues in the second quarter of 1999 totaled
$45.1 billion, compared with $37.3 billion for the second quarter of 1998.
Cash, marketable securities and assets of the Voluntary Employees'
Beneficiary Association (VEBA) trust invested in fixed-income securities ($3.0
billion) totaled $16.7 billion at June 30, 1999, compared with $11.0 billion at
June 30, 1998, and $16.2 billion at March 31, 1999. These cash amounts exclude
GM's financing and insurance operations.
"While maintaining an appropriate cash position, we continued to fund our new
product programs, pursue strategic acquisitions and alliances to take advantage
of growth opportunities, and followed through on our shareholder-value
initiatives, including the May 28 tax-free spin-off of Delphi to GM
stockholders, and our ongoing share-repurchase program," Smith said.
- 2 -
During the second quarter and through July 19, 1999, GM repurchased 7.5
million shares of its $1-2/3 par value common stock worth $520 million. Combined
with earlier repurchases, this completes 58 percent of the corporation's most
recent $4 billion stock-repurchase program initiated in March of 1998. Since
January 1997, GM has repurchased approximately 115 million shares of GM $1-2/3
par value common stock worth $7.3 billion, or about 15.2 percent of the total
shares outstanding.
The corporation's 1999 second-quarter return on net assets (RONA) for
continuing operations on an annualized basis, excluding Hughes, was 16.3
percent. "We're pleased with this result but recognize that we need to continue
improving our RONA performance to meet our target of a 12.5-percent annualized
return on net assets over the automotive business cycle," Smith said.
Following is a summary of income from GM's business segments in the second
quarter of 1999, compared with the strike-impacted prior-year period (see
Highlights for additional information):
($ in Millions) Second Quarter Net Income (Loss)
1999 1998
---- ----
GM North America $1,473 ($194)
GM Europe $187 $124
GM Latin America/Africa/Mid-East ($38) $48
GM Asia Pacific ($81) ($36)
Other Automotive $10 $34
--- ---
Total Automotive $1,551 ($24)
GMAC $391 $365
Hughes ($92) $56
Other ($116) ($91)
------ -----
Total Income from
Continuing Operations $1,734 $306
GM Automotive's net margin was 4.2 percent in the second quarter of 1999,
compared with a net-margin loss of 0.1 percent in the same period last year. GM
North America's net margin was 5.1 percent in the second quarter of 1999,
continuing a positive trend and marking the third consecutive quarter that the
net margin exceeded the corporation's 5-percent objective.
"GM North America's product lineup continued to score with consumers, with
sales during June the best monthly performance for GM in more than ten years,"
said GM President and Chief Operating Officer G. Richard Wagoner, Jr. "The North
American market is red hot and brutally competitive. But the results show that
our focus on cost reduction and success in the marketplace lead to continued
strong financial results. We continue to make fundamental improvements in
quality and cost competitiveness, and we're determined to intensify these
efforts to maintain strong profitability even in an unforgiving pricing
environment."
Wagoner said, "We are seeing our momentum build in the United States, and
we're especially pleased that our market share topped 30 percent in the last
month of the quarter. We're committed to profitably sell all the vehicles we can
possibly make and grow our market share.
"We expect that our newly introduced products like the all-new Chevrolet
Impala and Buick LeSabre -- the first two among a total of 14 new introductions
during 1999 -- are really going to help us in the marketplace," he said.
- 3 -
GM Europe continued to build market momentum during the second quarter of
1999, ending with a 10.0-percent market share for the period, up from 9.2
percent in the second quarter of 1998. The first half of 1999 represents an
all-time high sales volume for the Opel/Vauxhall brand.
"The second-quarter improvement resulted from strong sales of the all-new
Opel/Vauxhall Zafira as well as increased Astra sales," Wagoner said.
The Latin America/Africa/Mid East region continues to be affected by an
economic downturn. "We improved operating efficiencies as well as increased our
unit sales and market share during the quarter, compared with the first quarter
this year," Wagoner said. "However, the overriding economic situation continued
to impact overall financial results."
In the Asia-Pacific region, although the Japanese market remains depressed,
there are signs of economic recovery elsewhere. "We are particularly pleased
with the progress of our major project in Shanghai, China," Wagoner said.
"Regular production started on schedule in April, quality levels are excellent,
and market reception to the Buick model produced there has been so good that we
had to increase build schedules for the year, with production through September
already sold out. In addition, we recently reached an agreement to begin
production of minivans in calendar-year 2000."
GMAC reported consolidated net income of $391 million in the second quarter
of 1999, compared with $365 million earned in the prior-year period. The
increase was led by a strong improvement in results by GMAC's mortgage
operations.
"The continued strong performance of our finance and insurance operations,
combined with increased synergies between GMAC and our automotive operations,
give us a competitive advantage in the marketplace," Smith said.
GMAC announced plans to acquire the asset-based lending and factoring
business of The Bank of New York (BNY). The acquired business unit, BNY
Financial Corporation and its affiliates, is one of the leading asset-based
lending and factoring operations in North America and the United Kingdom with
nearly 3,000 clients worldwide.
"This acquisition should provide GMAC with a solid platform to become an
industry leader in commercial finance," Smith said.
GMAC also announced plans to purchase Arriva Automotive Solutions Limited
(AAS), one of the United Kingdom's leading contract hire providers. The
acquisition will give GMAC significant full-service leasing capability in the UK
contract hire market. AAS has approximately 70,000 fleet vehicles under contract
hire and fleet management arrangements.
Hughes Electronics' net loss in the second quarter of 1999 totaled $92
million, compared with income of $56 million in the second quarter of 1998.
Revenues increased nearly 30 percent to $1.8 billion for the second quarter of
1999, from $1.4 billion in the prior-year period.
Second-quarter-1999 results were adversely impacted by a $125 million pretax
charge related to the previously announced increased development costs and
schedule delays at Hughes Space and Communications Company.
- 4 -
The revenue increase at Hughes was primarily driven by DIRECTV(R)
subscription growth. "Hughes took major steps during the quarter toward
achieving its vision of being the premier provider of integrated entertainment
and information services with the acquisitions of United States Satellite
Broadcasting Company, Inc. (USSB), and the PRIMESTAR medium-power satellite
business, which added significantly to the subscriber base," Smith said.
In addition, Hughes announced a strategic alliance with America Online (NYSE:
AOL), the world's leading interactive services company, to develop and market
uniquely integrated digital entertainment and Internet services nationwide.
Under the agreement, America Online made a $1.5 billion investment in a General
Motors security, which GM has invested in Hughes for infrastructure
enhancements.
"This alliance should enable Hughes to accelerate its rate of growth in the
expanding telecommunications market, as it jointly develops new content and
interactive services for the U.S. market and elsewhere in the world," Smith
said.
As a result of AOL's investment, General Motors and Hughes have decided not
to proceed with the previously planned public offering of $500 million of Class
H common stock nor GM's $500 million equity investment in Hughes.
GM North America's second-quarter-1998 results included an unfavorable impact
of $890 million after taxes, or $1.32 per share, related to major production
losses caused by strikes at two GM component plants in Flint, Mich. GM Europe's
second-quarter-1998 results include the unfavorable $44 million after-tax, or
$0.07 per share, effect of a special charge related to work-schedule
modifications at Opel Belgium.
In this news release, use of the words expect, should, believe, plan,
intensify, overcome and similar words are associated with forward-looking
statements that are inherently subject to numerous risks and uncertainties.
Accordingly, there can be no assurance that the results described in such
forward-looking statements will be realized. The principal risk factors that may
cause actual results to differ materially from those expressed in
forward-looking statements contained in this news release are described in
various documents filed by GM with the U.S. Securities and Exchange Commission,
including GM's Annual Report on Form 10-K for the year ended Dec. 31, 1998, (at
page II-22).
# # #
- 5 -
HIGHLIGHTS - Q2 Financial Results
(Dollars in Millions Except
Per Share Amounts)
Three Months Ended
June 30,
---------------------
1999 1998
--------- ---------
Net sales and revenues
Manufactured products $39,261 $31,845(2)
Financial services 3,571 3,420
Other income 2,235 2,007
------ ------
Total net sales and revenues $45,067 $37,272
------ ------
Income from continuing operations $1,734(5) $306(1)(2)
Income from discontinued operations 184 83
------ ------
Consolidated net income $1,918 $389
Net profit margin from
continuing operations 3.8% 0.8%
.............................................................
Earnings Attributable to Common Stocks
$1-2/3 par value
Continuing operations $1,754(5) $275(1)(2)
Discontinued operations 184 83
------ ------
$1-2/3 par value $1,938 $358
Class H $(27) $15
.............................................................
Basic Earnings Per Share Attributable to Common Stocks
$1-2/3 par value
Continuing operations $2.71(5) $0.41(1)(2)
Discontinued operations 0.28 0.13
------ ------
$1-2/3 par value $2.99 $0.54
Class H $(0.23) $0.14
.............................................................
Diluted Earnings Per Share Attributable to Common Stocks
$1-2/3 par value
Continuing operations $2.66(5) $0.40(1)(2)
Discontinued operations 0.28 0.12
------ ------
$1-2/3 par value $2.94 $0.52
Class H $(0.23) $0.14
.............................................................
Cash Dividends Per Share of Common Stocks
$1-2/3 par value $0.50 $0.50
Class H $ - $ -
.............................................................
Book Value Per Share of Common Stocks
June 30, Dec. 31, June 30,
1999 1998 1998
-------- ------- --------
$1-2/3 par value $20.02 $20.00 $21.02
Class H $12.01 $12.00 $12.61
.............................................................
See footnotes beginning on page 9.
continues
- 6 -
HIGHLIGHTS - Q2 Consolidated Net Income
(Dollars in Millions)
Income/(Loss)
Three Months Ended
June 30,
----------------------
1999 1998
-------- --------
GM North America (GMNA) $1,473 $(194)(2)
GM Europe (GME) 187 124 (1)
GM Latin America/Africa/Mid-East (GMLAAM) (38) 48
GM Asia/Pacific (GMAP) (81) (36)
Other Automotive 10 34
----- ----
Total GM Automotive (GMA) $1,551 $(24)
Hughes (6) (92) 56
Other (150) (120)
----- ----
Total Automotive, Electronics
and Other Operations $1,309 $(88)
GMAC $391 $365
Other 34 29
----- ----
Total Financing and Insurance Operations $425 $394
----- ----
Income from continuing operations $1,734(5) $306(1)(2)
Income from discontinued operations 184 83
----- ----
Consolidated Net Income $1,918 $389
===== ====
Three Months Ended
June 30, 1999
--------------------------------
GMNA GME GMLAAM GMAP
----- ------ ------ ------
Reported
--------
Revenues $28,673 $6,881 $1,206 $687
------ ----- ----- ---
Pre-tax income (loss) $2,122 $272 $(87) $(36)
Income tax expense (benefit) 670 84 (33) (13)
Equity income (loss) and
minority interests 21 (1) 16 (58)
----- ----- ----- ---
Net income (loss) $1,473 $187 $(38) $(81)
===== ===== ===== ===
Net profit (loss) margin 5.1% 2.7% (3.2%) (11.8%)
Effective income tax rate 31.6% 30.9% 37.9% 36.1%
Three Months Ended
June 30, 1998
--------------------------------
GMNA(2) GME(1) GMLAAM GMAP
----- ------ ------ ------
Reported
--------
Revenues $21,904 $6,227 $2,193 $756
------ ----- ----- ---
Pre-tax (loss) income $(335) $244 $17 $4
Income tax (benefit) expense (124) 129 (10) 4
Equity income (loss) and
minority interests 17 9 21 (36)
----- ----- ----- ---
Net (loss) income $(194) $124 $48 $(36)
==== ==== === ===
Net (loss) profit margin (0.9%) 2.0% 2.2% (4.8%)
Effective income tax rate 37.0% 52.9% (58.8%)100.0%
See footnotes beginning on page 9.
continues
- 7 -
HIGHLIGHTS - Q2 Operating Information
Three Months Ended
June 30,
---------------------
1999 1998
------- -------
Worldwide Wholesale Sales (units in 000s)
United States: Cars 664 549
Trucks 699 476
------ ------
Total United States 1,363 1,025
Canada and Mexico 174 166
------ ------
Total GM North America 1,537 1,191
------ ------
GME 556 589
GMLAAM 136 180
GMAP 98 98
------ ------
Total International 790 867
------ ------
Total Worldwide 2,327 2,058
====== ======
....................................................
Vehicle Unit Deliveries (units in 000s)
United States
Chevrolet - Cars 240 286
- Trucks 476 494
Pontiac 178 168
GMC 149 147
Buick 127 119
Oldsmobile 101 96
Saturn 66 66
Cadillac 56 49
Other 3 8
------ ------
Total United States 1,396 1,433
Canada and Mexico 178 193
------ ------
Total GM North America 1,574 1,626
------ ------
GME 538 451
GMLAAM 131 177
GMAP 109 118
------ ------
Total International 778 746
------ ------
Total Worldwide 2,352 2,372
====== ======
....................................................
Market share
United States
Cars 30.2% 32.1%
Trucks 28.8% 30.9%
Total 29.5% 31.6%
Total North America 29.3% 31.1%
Total Europe 10.0% 9.2%
Latin America 20.2% 20.3%
Asia and Pacific 4.0% 4.6%
Total Worldwide 16.5% 17.3%
.....................................................
U.S. Retail/Fleet Mix
% Fleet Sales - Cars 25.6% 22.3%
% Fleet Sales - Trucks 16.5% 14.1%
Total vehicles 21.2% 18.4%
....................................................
Days Supply of Inventory - U.S.
Cars 64 51
Trucks 75 53
.....................................................
Capacity Utilization %
U.S. and Canada (2-shift rated)(3)93.8% N/A
.....................................................
GMNA
Net Price (%) (0.2%) (2.6%)
.....................................................
See footnotes beginning on page 9.
continues
- 8 -
HIGHLIGHTS - Q2 Other Financial Information
(Dollars in Millions Except Per Share Amounts)
Three Months Ended
June 30,
----------------------
1999 1998
--------- ----------
Depreciation and Amortization (4)
Depreciation $1,269 $901
Amortization of special tools 635 519
Amortization of intangible
assets 48 24
------ -----
Total $1,952 $1,444
====== =====
....................................................
Worldwide Employment at June 30 (in 000s)
GMNA 227 231
GME 83 81
GMLAAM 22 26
GMAP 10 9
Hughes 18 15
GMAC 26 22
Other 11 9
------ ------
Total 397 393
====== ======
....................................................
Worldwide Payrolls $5,584 $5,048
....................................................
(1) The second-quarter 1998 results included a pre-tax charge of $74
million ($44 million after-tax, or $0.07 basic per share of $1-2/3
par value common stock), related to work schedule modifications at
Opel Belgium.
(2) GM North America's second-quarter-1998 results included an
unfavorable impact of $890 million after taxes, or $1.32 per share,
related to major production losses caused by strikes at two GM
component plants in Flint, Michigan.
(3) GM changed its method of calculating capacity utilization from mass
relief to tag relief in 1999. Quarterly 1998 figures are not
available, however capacity utilization for Calendar Year 1998 was
77.2% using the new methodology.
(4) Amounts exclude depreciation and amortization charges incurred by
the financing and insurance operations.
(5) Records for income and EPS are based upon reported amounts adjusted
to exclude the effects of significant dispositions not classified as
discontinued operations.
(6) Excludes the effects of purchase accounting adjustments related to
General Motors' acquisition of Hughes in 1985, and in 1999 excludes
series A Preferred Stock dividends payable to General Motors.
- 9 -
HIGHLIGHTS - Q2 Financial Results
(Dollars in Millions Except
Per Share Amounts)
Six Months Ended
June 30,
---------------------
1999 1998
--------- ---------
Net sales and revenues
Manufactured products $75,881 $66,738(2)
Financial services 7,080 6,730
Other income 4,541 3,828
------ ------
Total net sales and revenues $87,502 $77,296
------ ------
Income from continuing operations $3,554(6) $1,674(1)(2)
Income from discontinued operations 426 319
------ ------
Consolidated net income $3,980 $1,993
Net profit margin from
continuing operations 4.1% 2.2%
..................................................................
Earnings Attributable to Common Stocks
$1-2/3 par value
Continuing operations $3,535(6) $1,613(1)(2)
Discontinued operations 426 319
------ ------
$1-2/3 par value $3,961 $1,932
Class H $(4) $29(3)
.............................................................
Basic Earnings Per Share Attributable to Common Stocks
$1-2/3 par value
Continuing operations $5.44(6) $2.37(1)(2)
Discontinued operations 0.65 0.48
------ ------
$1-2/3 par value $6.09 $2.85
Class H $(0.04) $0.27(3)
.............................................................
Diluted Earnings Per Share Attributable to Common Stocks
$1-2/3 par value
Continuing operations $5.33(6) $2.33(1)(2)
Discontinued operations 0.64 0.46
------ ------
$1-2/3 par value $5.97 $2.79
Class H $(0.04) $0.27(3)
.............................................................
Cash Dividends Per Share of Common Stocks
$1-2/3 par value $1.00 $1.00
Class H $ - $ -
.............................................................
See footnotes beginning on page 13.
continues
- 10 -
HIGHLIGHTS - Q2 Consolidated Net Income
(Dollars in Millions)
Income/(Loss)
Six Months Ended
June 30,
------------------------
1999 1998
-------- --------
GM North America (GMNA) $2,881 $647(2)
GM Europe (GME) 361 223(1)
GM Latin America/Africa/Mid-East (GMLAAM) (63) 101
GM Asia/Pacific (GMAP) (141) (30)
Other Automotive 23 27
----- -----
Total GM Automotive (GMA) $3,061 $968
Hughes (7) (14) 110(3)
Other (291) (162)
----- -----
Total Automotive, Electronics
and Other Operations $2,756 $916
GMAC $783 $714
Other 15 44
----- -----
Total Financing and Insurance Operations $798 $758
----- -----
Income from continuing operations $3,554(6) $1,674(1)(2)
Income from discontinued operations 426 319
----- -----
Consolidated Net Income $3,980 $1,993
===== =====
Six Months Ended
June 30, 1999
--------------------------------
GMNA GME GMLAAM GMAP
----- ------ ------ ------
Reported
--------
Revenues $55,991 $13,015 $2,228 $1,307
------ ------ ----- -----
Pre-tax income (loss) $4,219 $553 $(145) $(61)
Income tax expense (benefit) 1,335 189 (69) (19)
Equity (loss) income and
minority interests (3) (3) 13 (99)
----- ----- ----- ---
Net income (loss) $2,881 $361 $(63) $(141)
===== ===== ===== ===
Net profit (loss) margin 5.1% 2.8% (2.8%) (10.8%)
Effective income tax rate 31.6% 34.2% 47.6% 31.1%
Six Months Ended
June 30, 1998
--------------------------------
GMNA(2) GME(1) GMLAAM GMAP
----- ------ ------ ------
Reported
--------
Revenues $47,793 $11,624 $4,217 $1,484
------ ----- ----- ---
Pre-tax income (loss) $889 $447 $33 $(4)
Income tax expense (benefit) 262 220 (29) 4
Equity income (loss) and
minority interests 20 (4) 39 (22)
----- ----- ----- ---
Net income (loss) $647 $223 $101 $(30)
===== ===== ===== ===
Net profit (loss) margin 1.4% 1.9% 2.4% (2.0%)
Effective income tax rate 29.5% 49.2% (87.9%)(100.0%)
See footnotes beginning on page 13.
continues
- 11 -
HIGHLIGHTS - Q2 Operating Information
Six Months Ended
June 30,
----------------------
1999 1998
--------- ----------
Worldwide Wholesale Sales (units in 000s)
United States: Cars 1,335 1,123
Trucks 1,336 1,068
------ ------
Total United States 2,671 2,191
Canada and Mexico 368 346
------ ------
Total GM North America 3,039 2,537
------ ------
GME 1,025 1,009
GMLAAM 258 358
GMAP 191 213
------ ------
Total International 1,474 1,580
------ ------
Total Worldwide 4,513 4,117
====== ======
....................................................
Vehicle Unit Deliveries (units in 000s)
United States
Chevrolet - Cars 451 495
- Trucks 853 872
Pontiac 332 290
GMC 270 264
Buick 235 215
Oldsmobile 195 169
Saturn 117 117
Cadillac 87 92
Other 18 13
------ ------
Total United States 2,558 2,527
Canada and Mexico 330 331
------ ------
Total GM North America 2,888 2,858
------ ------
GME 1,048 943
GMLAAM 256 350
GMAP 209 253
------ ------
Total International 1,513 1,546
------ ------
Total Worldwide 4,401 4,404
====== ======
....................................................
Market share
United States
Cars 30.6% 31.4%
Trucks 27.7% 30.5%
Total 29.2% 30.9%
Total North America 29.0% 30.5%
Total Europe 9.8% 9.5%
Latin America 19.7% 20.1%
Asia and Pacific 3.6% 4.5%
Total Worldwide 15.7% 16.3%
.....................................................
U.S. Retail/Fleet Mix
% Fleet Sales - Cars 28.0% 23.9%
% Fleet Sales - Trucks 15.3% 15.0%
Total vehicles 22.0% 19.7%
.....................................................
Capacity Utilization %
U.S. and Canada (2-shift rated)(4)90.3% N/A
.....................................................
See footnotes beginning on page 13.
continues
- 12 -
HIGHLIGHTS - Q2 Other Financial Information
(Dollars in Millions Except Per Share Amounts)
Six Months Ended
June 30,
----------------------
1999 1998
--------- ----------
Depreciation and Amortization (5)
Depreciation $2,071 $1,796
Amortization of special tools 1,254 1,082
Amortization of intangible
assets 79 49
----- -----
Total $3,404 $2,927
===== =====
....................................................
Worldwide Payrolls $10,981 $10,318
....................................................
(1) The second-quarter 1998 results included a pre-tax charge of $74
million ($44 million after-tax, or $0.07 basic per share of $1-2/3 par
value common stock), related to work schedule modifications at Opel
Belgium.
(2) GM North America's second-quarter-1998 results included an unfavorable
impact of $890 million after taxes, or $1.32 per share, related to
major production losses caused by strikes at two GM component plants in
Flint, Michigan.
(3) 1998 results exclude the cumulative effect of accounting change of $9
million due to Hughes' adoption of SOP 98-5. GM had reported the $9
million change in fourth quarter 1998 results and Hughes reported the
change as a restatement of first quarter 1998 results.
(4) GM changed its method of calculating capacity utilization from mass
relief to tag relief in 1999. Quarterly 1998 figures are not available,
however capacity utilization for Calendar Year 1998 was 77.2% using the
new methodology.
(5) Amounts exclude depreciation and amortization charges incurred by the
financing and insurance operations.
(6) Records for income and EPS are based upon reported amounts adjusted to
exclude the effects of significant dispositions not classified as
discontinued operations.
(7) Excludes the effects of purchase accounting adjustments related to
General Motors' acquisition of Hughes in 1985, and in 1999 excludes
series A Preferred Stock dividends payable to General Motors.
- 13 -
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
1999 1998 1999 1998
---- ---- ---- ----
(Dollars in Millions Except Per Share Amounts)
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Manufactured products sales
and revenues $39,261 $31,845 $75,881 $66,738
Financing revenues 3,571 3,420 7,080 6,730
Other income 2,235 2,007 4,541 3,828
------- ------- ------- -------
Total net sales and revenues 45,067 37,272 87,502 77,296
------ ------ ------ ------
Cost of sales and other operating
expenses, exclusive of items
listed below 32,284 27,724 62,950 57,329
Selling, general and
administrative expenses 4,502 4,102 8,324 7,612
Depreciation and amortization
expense 3,227 2,648 5,951 5,355
Interest expense 1,794 1,691 3,639 3,261
Other expenses 476 596 914 1,145
------- ------- ------- -------
Total costs and expenses 42,283 36,761 81,778 74,702
Income from continuing operations
before income taxes
and minority interests 2,784 511 5,724 2,594
Income tax expense 956 159 1,985 854
Minority interests (7) - (21) (10)
Losses of nonconsolidated associates (87) (46) (164) (56)
----- ---- ------ -------
Income from continuing operations 1,734 306 3,554 1,674
Income from discontinued operations 184 83 426 319
------ ---- ------ ------
Net income 1,918 389 3,980 1,993
Dividends on preference stocks (7) (16) (23) (32)
------- ---- ------ ------
Earnings on common stocks $1,911 $373 $3,957 $1,961
===== === ===== =====
Basic earnings per share
attributable to common stocks
$1-2/3 par value common stock
Continuing operations $2.71 $0.41 $5.44 $2.37
Discontinued operations 0.28 0.13 0.65 0.48
---- ---- ---- ----
Earnings per share attributable
to $1-2/3 par value $2.99 $0.54 $6.09 $2.85
===== ===== ===== =====
Earnings per share attributable
to Class H $(0.23) $0.14 $(0.04) $0.27
====== ===== ====== =====
Diluted earnings per share
attributable to common stocks
$1-2/3 par value common stock
Continuing operations $2.66 $0.40 $5.33 $2.33
Discontinued operations 0.28 0.12 0.64 0.46
---- ---- ---- ----
Earnings per share attributable
to $1-2/3 par value $2.94 $0.52 $5.97 $2.79
===== ===== ===== =====
Earnings per share attributable
to Class H $(0.23) $0.14 $(0.04) $0.27
====== ===== ====== =====
- 14 -
CONSOLIDATED STATEMENTS OF INCOME - Concluded
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
1999 1998 1999 1998
---- ---- ---- ----
(Dollars in Millions)
AUTOMOTIVE, ELECTRONICS AND OTHER OPERATIONS
Manufactured products sales
and revenues $39,261 $31,845 $75,881 $66,738
Other income 856 826 1,759 1,503
------ ------ ------ ------
Total net sales and revenues 40,117 32,671 77,640 68,241
------ ------ ------ ------
Cost of sales and other operating
expenses, exclusive of items
listed below 32,284 27,724 62,950 57,329
Selling, general and
administrative expenses 3,370 3,086 6,111 5,655
Depreciation and
amortization expense 1,952 1,444 3,404 2,927
------ ------ ------ -------
Total operating costs
and expenses 37,606 32,254 72,465 65,911
------ ------ ------ ------
Interest expense 180 277 374 472
Other expenses 149 186 207 376
Net expense (income) from
transactions with Financing and
Insurance Operations 66 6 160 (12)
------ ------ ------ ------
Income (loss) from continuing
operations before income taxes
and minority interests 2,116 (52) 4,434 1,494
Income tax expense (benefit) 720 (6) 1,508 522
Minority interests - 4 (6) -
Losses of nonconsolidated associates (87) (46) (164) (56)
----- -- ------ ----
Income (loss) from continuing
operations 1,309 (88) 2,756 916
Income from discontinued operations 184 83 426 319
------ -- ------ ---
Net income (loss) -
Automotive, Electronics
and Other Operations $1,493 $(5) $3,182 $1,235
===== = ===== =====
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
---- ---- ---- ----
(Dollars in Millions)
FINANCING AND INSURANCE OPERATIONS
Financing revenues $3,571 $3,420 $7,080 $6,730
Insurance, mortgage and
other income 1,379 1,181 2,782 2,325
----- ----- ----- -----
Total revenues and other income 4,950 4,601 9,862 9,055
----- ----- ----- -----
Interest expense 1,614 1,414 3,265 2,789
Depreciation and amortization
expense 1,275 1,204 2,547 2,428
Operating and other expenses 1,132 1,016 2,213 1,957
Provisions for financing losses 111 128 230 229
Insurance losses and loss
adjustment expenses 216 282 477 540
----- ----- ----- -----
Total costs and expenses 4,348 4,044 8,732 7,943
----- ----- ----- -----
Net (income) expense from
transactions with Automotive,
Electronics and Other Operations (66) (6) (160) 12
---- ----- ------ -------
Income before income taxes 668 563 1,290 1,100
Income tax expense 236 165 477 332
Minority interests (7) (4) (15) (10)
----- ----- ---- ----
Net income - Financing and
Insurance Operations $425 $394 $798 $758
==== ==== ==== ====
- 15 -
<PAGE>
CONSOLIDATED BALANCE SHEETS
June 30, June 30,
1999 Dec. 31, 1998
GENERAL MOTORS CORPORATION AND SUBSIDIARIES (Unaudited) 1998 (Unaudited)
---------- ------ -----------
ASSETS (Dollars in Millions)
Automotive, Electronics and Other Operations
Cash and cash equivalents $11,997 $9,728 $7,569
Marketable securities 1,666 402 463
------- ------ ------
Total cash and marketable securities 13,663 10,130 8,032
Accounts and notes receivable (less allowances) 6,349 4,750 3,845
Inventories (less allowances) 10,766 10,437 11,317
Net assets of discontinued operations - 77 359
Equipment on operating leases
(less accumulated depreciation) 6,394 4,954 4,754
Deferred income taxes and other current assets 6,232 10,051 5,841
Net receivable from Financing and
Insurance Operations - - -
------ ------ ------
Total current assets 43,404 40,399 34,148
Equity in net assets of
nonconsolidated associates 1,691 950 1,098
Property - net 31,509 32,222 30,451
Intangible assets - net 11,934 9,994 11,330
Deferred income taxes 18,297 14,967 17,883
Other assets 14,016 16,062 15,085
------ ------ ------
Total Automotive, Electronics and
Other Operations assets 120,851 114,594 109,995
Financing and Insurance Operations
Cash and cash equivalents 2,694 146 164
Investments in securities 8,499 8,748 7,932
Finance receivables - net 74,305 70,436 59,875
Investment in leases and other receivables 33,451 32,798 32,130
Other assets 16,660 18,807 12,688
Net receivable from Automotive,
Electronics and Other Operations 478 816 1,154
------ ------ ------
Total Financing and Insurance
Operations assets 136,087 131,751 113,943
------- ------- -------
Total assets $256,938 $246,345 $223,938
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Automotive, Electronics and Other Operations
Accounts payable (principally trade) $15,814 $13,542 $10,311
Loans payable 854 1,204 1,907
Accrued expenses 34,530 30,548 29,239
Net payable to Financing and
Insurance Operations 478 816 1,154
------- ------- -------
Total current liabilities 51,676 46,110 42,611
Long-term debt 7,408 7,118 6,935
Postretirement benefits other than pensions 34,317 33,503 32,925
Pensions 3,149 4,410 2,925
Other liabilities and deferred income taxes 17,928 17,807 17,794
------ ------ ------
Total Automotive, Electronics and
Other Operations liabilities 114,478 108,948 103,190
Financing and Insurance Operations
Accounts payable 4,786 4,148 3,982
Debt 110,135 107,753 91,081
Deferred income taxes and other liabilities 10,517 9,661 9,174
Net payable to Automotive, Electronics
and Other Operations - - -
------ ------ ------
Total Financing and Insurance
Operations liabilities 125,438 121,562 104,237
Minority interests 591 563 510
General Motors - obligated mandatorily
redeemable preferred securities of
subsidiary trusts holding solely
junior subordinated debentures of
General Motors
Series D 79 79 79
Series G 141 141 143
Stockholders' equity
Preference stocks - 1 1
$1-2/3 par value common stock (issued,
645,004,212, 655,008,344
and 655,007,825 shares) 1,075 1,092 1,092
Class H common stock (issued,
112,425,599, 106,159,776 and
105,731,028 shares) 11 11 11
Capital surplus (principally additional
paid-in capital) 15,533 12,661 12,773
Retained earnings 5,045 6,984 6,706
------- ------- -------
Subtotal 21,664 20,749 20,583
Accumulated foreign currency
translation adjustments (1,987) (1,089) (1,249)
Net unrealized gains on securities 561 481 507
Minimum pension liability adjustment (4,027) (5,089) (4,062)
------ ------ ------
Accumulated other comprehensive loss (5,453) (5,697) (4,804)
----- ----- -----
Total stockholders' equity 16,211 15,052 15,779
-------- -------- --------
Total liabilities and stockholders' equity $256,938 $246,345 $223,938
======= ======= ========
- 16 -
CONSOLIDATED BALANCE SHEETS - Concluded
June 30, June 30,
1999 Dec. 31, 1998
AUTOMOTIVE, ELECTRONICS AND OTHER OPERATIONS (Unaudited) 1998 (Unaudited)
---------- ------ -----------
ASSETS (Dollars in Millions)
Cash and cash equivalents $11,997 $9,728 $7,569
Marketable securities 1,666 402 463
------- ------ ------
Total cash and marketable securities 13,663 10,130 8,032
Accounts and notes receivable (less allowances) 6,349 4,750 3,845
Inventories (less allowances) 10,766 10,437 11,317
Net assets of discontinued operations - 77 359
Equipment on operating leases
(less accumulated depreciation) 6,394 4,954 4,754
Deferred income taxes and other current assets 6,232 10,051 5,841
Net receivable from Financing and
Insurance Operations - - -
------- ------ ------
Total current assets 43,404 40,399 34,148
Equity in net assets of nonconsolidated
associates 1,691 950 1,098
Property - net 31,509 32,222 30,451
Intangible assets - net 11,934 9,994 11,330
Deferred income taxes 18,297 14,967 17,883
Other assets 14,016 16,062 15,085
------ ------ ------
Total Automotive, Electronics and
Other Operations assets $120,851 $114,594 $109,995
======== ======== ========
LIABILITIES AND GM INVESTMENT
Accounts payable (principally trade) $15,814 $13,542 $10,311
Loans payable 854 1,204 1,907
Accrued expenses 34,530 30,548 29,239
Net payable to Financing and
Insurance Operations 478 816 1,154
------ ------ -------
Total current liabilities 51,676 46,110 42,611
Long-term debt 7,408 7,118 6,935
Postretirement benefits other than pensions 34,317 33,503 32,925
Pensions 3,149 4,410 2,925
Other liabilities and deferred income taxes 17,928 17,807 17,794
------ ------ ------
Total Automotive, Electronics and
Other Operations liabilities 114,478 108,948 103,190
Minority interests 524 511 467
GM investment in Automotive, Electronics
and Other Operations 5,849 5,135 6,338
----- ----- -----
Total Automotive, Electronics and
Other Operations liabilities
and GM investment $120,851 $114,594 $109,995
======== ======== ========
June 30, June 30,
1999 Dec. 31, 1998
FINANCING AND INSURANCE OPERATIONS (Unaudited) 1998 (Unaudited)
---------- ------ -----------
ASSETS (Dollars in Millions)
Cash and cash equivalents $2,694 $146 $164
Investments in securities 8,499 8,748 7,932
Finance receivables - net 74,305 70,436 59,875
Investment in leases and other receivables 33,451 32,798 32,130
Other assets 16,660 8,807 12,688
Net receivable from Automotive,
Electronics and Other Operations 478 816 1,154
-------- -------- --------
Total Financing and Insurance
Operations assets $136,087 $131,751 $113,943
======== ======== ========
LIABILITIES AND GM INVESTMENT
Accounts payable $4,786 $4,148 $3,982
Debt 110,135 107,753 91,081
Deferred income taxes and other liabilities 10,517 9,661 9,174
Net payable to Automotive, Electronics
and Other Operations - - -
------- ------- -------
Total Financing and Insurance
Operations liabilities 125,438 121,562 104,237
Minority interests 67 52 43
GM investment in Financing and
Insurance Operations 10,582 10,137 9,663
------ ------ -----
Total Financing and Insurance Operations
liabilities and GM investment $136,087 $131,751 $113,943
======== ======== ========
- 17 -
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended June 30,
-------------------------
1999 1998
-------- ------
(Dollars in Millions)
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Net cash provided by operating activities $21,342 $4,405
Cash flows from investing activities
Expenditures for property (3,125) (3,827)
Investments in other marketable securities
- acquisitions (13,739) (12,969)
Investments in other marketable securities
- liquidations 12,168 16,766
Mortgage servicing rights - acquisitions (662) (742)
Mortgage servicing rights - liquidations 4 7
Finance receivables - acquisitions (90,613) (78,491)
Finance receivables - liquidations 67,691 58,991
Proceeds from sales of finance receivables 18,683 17,356
Operating leases - acquisitions (12,814) (12,379)
Operating leases - liquidations 6,896 7,556
Investments in companies, net of cash acquired (2,684) (424)
Other 121 (185)
------ ------
Net cash used in investing activities (18,074) (8,341)
------ -----
Cash flows from financing activities
Net (decrease) increase in loans payable (6,035) 2,464
Increase in long-term debt 17,681 11,019
Decrease in long-term debt (9,360) (7,591)
Repurchases of common and preference stocks (1,868) (3,071)
Proceeds from issuing common stocks 299 343
Proceeds from issuing preference stocks 1,500 -
Cash dividends paid to stockholders (673) (702)
------ ------
Net cash provided by financing activities 1,544 2,462
----- -----
Effect of exchange rate changes on cash and
cash equivalents (123) (67)
------ ------
Net cash provided by (used in)
continuing operations 4,689 (1,541)
Net cash provided by (used in)
discontinued operations 128 (999)
------ ------
Net increase (decrease) in cash and
cash equivalents 4,817 (2,540)
Cash and cash equivalents at beginning
of the period 9,874 10,273
------ ------
Cash and cash equivalents at end
of the period $14,691 $7,733
====== =====
- 18 -
<TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - Concluded
(Unaudited)
<CAPTION>
Six Months Ended June 30,
-------------------------
1999 1998
---- ----
Automotive, Financing Automotive, Financing
Electronics and Electronics and
and Other Insurance and Other Insurance
--------------------------------------------------
(Dollars in Millions)
<S> <C> <C> <C> <C>
Net cash provided by operating activities $12,803 $8,539 $368 $4,037
Cash flows from investing activities
Expenditures for property (3,019) (106) (3,753) (74)
Investments in other marketable securities
- acquisitions (3,119) (10,620) (4,466) (8,503)
Investments in other marketable securities
- liquidations 1,855 10,313 7,815 8,951
Mortgage servicing rights - acquisitions - (662) - (742)
Mortgage servicing rights - liquidations - 4 - 7
Finance receivables - acquisitions - (90,613) - (78,491)
Finance receivables - liquidations - 67,691 - 58,991
Proceeds from sales of finance receivables - 18,683 - 17,356
Operating leases - acquisitions (4,613) (8,201) (3,042) (9,337)
Operating leases - liquidations 2,889 4,007 2,815 4,741
Investments in companies, net of
cash acquired (2,558) (126) (409) (15)
Net investing activity with Financing and
Insurance Operations 75 - 150 -
Other (876) 997 (1,049) 864
------ ------ ----- ------
Net cash used in investing activities (9,366) (8,633) (1,939) (6,252)
----- ----- ----- -----
Cash flows from financing activities
Net (decrease) increase in loans payable (393) (5,642) 898 1,566
Increase in long-term debt 2,433 15,248 2,648 8,371
Decrease in long-term debt (2,130) (7,230) (1,079) (6,512)
Net financing activity with Automotive,
Electronics and Other Operations - (75) - (150)
Repurchases of common and preference stocks (1,868) - (3,071) -
Proceeds from issuing common stocks 299 - 343 -
Proceeds from issuing preference stocks 1,500 - - -
Cash dividends paid to stockholders (673) - (702) -
--- ----- --- ------
Net cash (used in) provided by
financing activities (832) 2,301 (963) 3,275
--- ----- --- -----
Effect of exchange rate changes on cash and
cash equivalents (126) 3 (67) -
Net transactions with Automotive/Financing
Operations (338) 338 1,473 (1,473)
----- ----- ----- -----
Net cash provided by (used in) continuing
operations 2,141 2,548 (1,128) (413)
Net cash provided by (used in) discontinued
operations 128 - (999) -
----- ----- ---- -----
Net increase (decrease) in cash and
cash equivalents 2,269 2,548 (2,127) (413)
Cash and cash equivalents at beginning
of the period 9,728 146 9,696 577
----- ----- ----- ---
Cash and cash equivalents at end
of the period $11,997 $2,694 $7,569 $164
====== ===== ===== ===
</TABLE>
- 19 -
Record DIRECTV Growth
Highlights Second Quarter Hughes Results
El Segundo, Calif., July 19, 1999--Hughes Electronics Corporation
(Hughes), the world's leading provider of digital television entertainment, and
satellite and wireless systems and services, today reported second quarter 1999
revenues increased 29.7% to $1,776.0 million, compared with $1,369.0 million in
the second quarter of 1998.
"Our revenue growth reflects our transformation into a high-growth,
subscriber-driven, services company," said Michael T. Smith, Hughes chairman and
chief executive officer. "As a result of our merger with United States Satellite
Broadcasting Company, Inc., the purchase of the PRIMESTAR medium-power satellite
business and the Tempo high-power satellite assets, plus our alliance with
America Online, Inc., we took major strides toward achieving our vision of being
the premier provider of integrated entertainment and information services. With
more than 60% growth over last year, we had our best second quarter ever for new
DIRECTV(R) subscribers in the United States, and our best quarter ever for sales
of DIRECTV receiving equipment manufactured by Hughes Network Systems. We also
saw growth at PanAmSat due to increased revenues from operating leases."
EBITDA(1) for the second quarter of 1999 was $63.2 million and EBITDA
margin(1) was 3.6%, compared to EBITDA of $178.4 million and EBITDA margin of
13.0% in the second quarter of 1998.
The decline in EBITDA was principally due to the previously announced
increased development costs and schedule delays experienced by Hughes Space and
Communications Company (HSC), which resulted in a second quarter 1999 pre-tax
charge (after intercompany eliminations) of $125.0 million. This decline was
partially offset by improved EBITDA at Hughes Network Systems (HNS) and
PanAmSat.
"Although our company's overall EBITDA declined principally due to the
increased costs incurred by HSC," Smith added, "we again had positive EBITDA in
our DIRECTV U.S. business and expect it to achieve significant EBITDA growth
going forward."
Hughes had a second quarter 1999 loss(2) of $92.3 million, compared to
earnings(2) of $56.1 million in the same period for 1998. This resulted in a
loss per share, including the effect of preferred stock dividends, of $0.23 in
the second quarter of 1999 versus earnings per share (EPS) of $0.14 in the
second quarter of 1998. The change in earnings and EPS was primarily
attributable to the decline in EBITDA (described above), higher depreciation and
amortization expenses related principally to the United States Satellite
Broadcasting Company, Inc. (USSB) and PRIMESTAR transactions and increased
PanAmSat satellite expenditures, and an increase in net interest expense.
- 20 -
Six-Month Financial Review
For the first half of 1999, revenues increased 21.3% to $3,227.8 million,
compared to $2,660.0 million in the first half of 1998. This growth was
primarily the result of record subscriber growth in the company's DIRECTV U.S.
business, as well as additional revenues resulting from the USSB and PRIMESTAR
transactions. HNS also contributed to the revenue growth through its record
sales of DIRECTV receiving equipment.
EBITDA for the first six months of 1999 was $149.4 million and EBITDA
margin was 4.6%, compared to EBITDA of $359.7 million and EBITDA margin of 13.5%
in the same period of 1998. The declines were principally due to the
aforementioned $125.0 million pre-tax charge related to the Company's satellite
manufacturing unit, and a first quarter 1999 pre-tax charge of $92.0 million
resulting from the termination of the Asia-Pacific Mobile Telecommunications
(APMT) satellite system contract due to export licenses not being issued. These
declines were partially offset by EBITDA improvements by the Company's DIRECTV
businesses, HNS and PanAmSat.
In the first half of 1999, Hughes incurred a loss of $14.0 million and a
loss per share, including the effect of preferred stock dividends, of $0.04,
compared to earnings of $100.6 million and EPS of $0.25 for the same period in
1998. The decline was principally due to the reduced EBITDA, higher depreciation
and amortization expenses related principally to the USSB and PRIMESTAR
transactions and increased PanAmSat satellite expenditures, and an increase in
net interest expense. These declines were partially offset by an after-tax gain
of $94.3 million ($154.6 million pre-tax) related to the settlement of the
Williams patent infringement case(3).
Segment Financial Review: Second Quarter 1999
Direct-To-Home Broadcast
Second quarter revenues for the segment more than doubled to $870.2
million from $401.5 million in the second quarter of 1998. The segment had
negative EBITDA of $6.8 million compared with negative EBITDA of $16.7 million
in the second quarter of 1998.
United States: DIRECTV reported quarterly revenues of $778 million, more
than twice last year's second quarter revenues of $368 million. The increase was
due to strong subscriber growth and higher monthly revenue per subscriber, as
well as additional revenues resulting from the USSB and PRIMESTAR transactions.
DIRECTV added 369,000 net new subscribers in the quarter, excluding
subscribers added through the USSB and PRIMESTAR transactions. This compared to
227,000 net new subscribers in the second quarter of 1998, or a 63% increase on
the same basis. As of June 30, 1999, DIRECTV had approximately 7.4 million
subscribers. The principal second quarter changes in net subscribers are shown
below:
- 21 -
Total, March 31, 1999 4,762,000
Second Quarter 1999 Results:
- Net new DIRECTV (high-power service) subscribers 369,000
- Former USSB-only subscribers 145,000
- Subscribers converted to DIRECTV
(high-power service) from "PRIMESTAR
by DIRECTV" (medium-power service) 25,000
- Remaining "PRIMESTAR by DIRECTV"
(medium-power service) subscribers 2,074,000
----------
Total, June 30, 1999 7,375,000
==========
EBITDA for the second quarter of 1999 was $13 million compared to $12
million in the preceding year's second quarter. This increase was due to EBITDA
contributions from the USSB and PRIMESTAR transactions, which were mostly offset
by higher marketing and advertising expenses.
Latin America and Japan: Hughes' DIRECTV business in Latin America
generated $77 million in revenues for the quarter compared with $32 million in
the second quarter of 1998. This increase was due to continued subscriber growth
and additional revenues resulting from the consolidation of SurFin Ltd.(4), and
Grupo Galaxy Mexicana, S.A. de C.V. (GGM)(4).
The DIRECTV service in Latin America added 47,000 net new subscribers in
the second quarter of 1999, compared to 49,000 acquired in the same period last
year, bringing total DIRECTV subscribers in Latin America to 601,000 as of June
30, 1999.
In the quarter, the Latin American DIRECTV operations reported negative
EBITDA of $13 million compared to negative EBITDA of $26 million for the same
period in 1998. This improvement was primarily due to higher revenue growth and
EBITDA contributions resulting from the consolidation of SurFin.
In addition, DIRECTV Japan reported a total of 291,200 subscribers at the
end of the second quarter of 1999. Hughes' minority share of DIRECTV Japan's
losses were $23 million for the quarter, compared with $16 million in the second
quarter of 1998. These losses are reported in "Other, net" in the Statement of
Income (Loss) and Available Separate Consolidated Net Income (Loss).
- 22 -
Satellite Services
PanAmSat, which is 81% owned by Hughes, reported second quarter 1999
revenues of $200.4 million compared with $191.1 million in the prior year's
period. The revenue growth was primarily due to a 2% increase in overall video
services revenues, which grew to $142 million. This growth was driven by an
increase in operating lease revenue principally from new revenues on the PAS-6B
satellite, which were partially offset by lower revenues on the PAS-5 satellite
as a result of a reduction in its usable capacity. In addition,
telecommunications services revenue grew 19% to $47 million during the quarter,
primarily due to the growth in data and Internet-related service agreements.
EBITDA for the quarter was $151.0 million, a 13.4% increase over second
quarter 1998 EBITDA of $133.1 million. EBITDA margin in the second quarter of
1999 was 75.3%, compared to 69.6% in the same period of 1998. The increases in
EBITDA and EBITDA margin were principally due to lower leaseback expense
resulting from the exercise of certain early buy-out opportunities under
sale-leaseback agreements and a provision for loss recorded during the second
quarter of 1998 related to the Galaxy IV satellite in-orbit failures.
Satellite Systems
Second quarter 1999 revenues declined to $553.8 million from $674.8
million for the same period in 1998. This variance was principally due to
contract revenue adjustments and delayed revenue recognition related to the
previously announced increased costs and schedule delays on several new product
lines at HSC.
The segment reported negative EBITDA of $119.6 million, compared to EBITDA
of $71.5 million in the second quarter of 1998. This variance was due to a
second quarter 1999 pre-tax charge, before intercompany eliminations, of $178.0
million related to the previously announced increased costs and schedule delays.
Network Systems
Second quarter 1999 revenues grew 53.9% at HNS, reaching $341.1 million
versus $221.7 million in the same period last year. This was primarily due to
increased sales of DIRECTV receiving equipment.
HNS achieved EBITDA of $25.0 million in the quarter, compared to a
negative EBITDA of $15.3 million in the second quarter of 1998. EBITDA margin in
the second quarter of 1999 was 7.3%. The 1999 increase in EBITDA and EBITDA
margin is primarily attributable to a second quarter 1998 provision of $26
million associated with the bankruptcy filing by a customer.
- 23 -
BALANCE SHEET
From December 31, 1998 to June 30, 1999, the Company's consolidated cash
balance declined $483.4 million to $858.7 million and long-term debt increased
$460.9 million to $1,239.6 million. The principal cash requirements for the
first six months were for the acquisition of PRIMESTAR's medium-power satellite
business, purchase of the Tempo high-power satellite assets, early buy-out of
certain PanAmSat satellite sale-leaseback agreements and working capital
requirements.
These requirements were partially offset by a $1.5 billion investment by
America Online, Inc. (AOL) and the proceeds from the settlement of the Williams
patent infringement case.(3) On June 21, 1999, Hughes and AOL announced a
strategic alliance to develop and market uniquely integrated digital
entertainment and Internet services nationwide. The alliance is expected to
accelerate subscriber growth and revenue per subscriber for DIRECTV and the
DirecPC(R) satellite-based broadband Internet delivery system. Under the
agreement, AOL made a $1.5 billion investment in a General Motors Corp. (GM)
preferred equity security, which carries a 6.25% coupon rate, that is
automatically convertible to GM Class H common stock at a 24% premium in three
years.
Also in the second quarter of 1999, approximately 4.9 million new shares
of GM Class H common stock were issued in conjunction with Hughes' acquisition
of the PRIMESTAR medium-power satellite business. In July 1999, an additional
22.6 million new shares of GM Class H common stock were issued in connection
with Hughes' merger with USSB. For purposes of calculating EPS, the additional
4.9 million shares were considered outstanding as of April 27, 1999, the 22.6
million shares were considered outstanding as of May 20, 1999 and the GM Class H
dividend base was adjusted accordingly.
Hughes Electronics Corporation is a unit of GM. The earnings of Hughes
Electronics are used to calculate the earnings per share attributable to GMH
(NYSE symbol) common stock.
NOTE: Hughes Electronics Corporation believes that certain statements in
this press release may constitute forward-looking statements within the meaning
of The Private Securities Litigation Reform Act of 1995. When used in this press
release, the words "estimate," "plan," "project," "anticipate," "expect,"
"intend," "outlook," "believe," and other similar expressions are intended to
identify forward-looking statements and information. Actual results of Hughes
may differ materially from anticipated results as a result of certain risks and
uncertainties, which include but are not limited to those associated with: (1)
the failure to maintain leading technologies, (2) satellite failures, (3)
manufacturing delays, (4) product demand and market acceptance, (5) ability to
achieve cost reductions and successfully integrate acquired businesses, (6)
regulatory approvals (including the failure to obtain export licenses), (7)
pending litigation (including a pending grand jury investigation regarding
export control laws) and (8) Year 2000 compliance. Hughes cautions that these
important factors are not exclusive.
- 24 -
- ----------------------
(1) EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) is
the sum of operating profit (loss) and depreciation and amortization. EBITDA
margin is calculated by dividing EBITDA by total revenues.
(2) Excludes the effects of purchase accounting adjustments related to General
Motors' acquisition of Hughes in 1985.
(3) Hughes was awarded a final judgement arising from its long-running Williams
patent infringement case, which was originally filed by Hughes in 1973. The
award resulted from the repeated infringement by the U.S. Government over a span
of two decades of a patent that revolutionized communications satellite attitude
control and made the geosynchronous satellite practical. A payment of $154.6
million was received in the first quarter of 1999 and was recorded in "Other,
net."
(4) SurFin Ltd., provides financing for DIRECTV receiving equipment in Latin
America. Grupo Galaxy Mexicana, S.A. de C.V. (GGM) is the local operating
company providing DIRECTV service in Mexico. As a result of transactions that
were completed in November 1998 (SurFin) and February 1999 (GGM), Hughes owns a
majority position in each company.
###
- 25 -
STATEMENT OF INCOME (LOSS) AND
AVAILABLE SEPARATE CONSOLIDATED NET INCOME (LOSS)
(Dollars in Millions Except Per Share Amounts)
Six Months Ended
Second Quarter June 30,
-------------- --------
1999 1998 1999 1998
- ---------------------------------------------------------------------------
Revenues
Direct broadcast, leasing and
other services $1,065.1 $606.4 $1,800.8 $1,205.3
Product sales 710.9 762.6 1,427.0 1,454.7
- ----------------------------------------------------------------------------
Total Revenues 1,776.0 1,369.0 3,227.8 2,660.0
- ----------------------------------------------------------------------------
Operating Costs and Expenses
Cost of products sold 685.7 580.6 1,354.9 1,122.9
Broadcast programming and
other costs 478.6 250.8 770.2 515.6
Selling, general and
administrative expenses 548.5 359.2 953.3 661.8
Depreciation and amortization 159.8 100.2 282.8 197.9
Amortization of GM purchase
accounting adjustments (1) 5.3 5.3 10.6 10.6
- ----------------------------------------------------------------------------
Total Operating Costs
and Expenses 1,877.9 1,296.1 3,371.8 2,508.8
- ----------------------------------------------------------------------------
Operating Profit (Loss) (101.9) 72.9 (144.0) 151.2
Interest income 4.9 30.6 18.5 68.1
Interest expense (12.4) (2.9) (19.3) (5.9)
Other, net (37.5) (35.1) 100.2 (69.4)
- -----------------------------------------------------------------------------
Income (Loss) Before Income Taxes,
Minority Interests and Cumulative
Effect of Accounting Change (146.9) 65.5 (44.6) 144.0
Income tax provision (benefit) (42.5) 23.3 (6.7) 54.7
Minority interests in net
losses of subsidiaries 6.8 8.6 13.3 9.9
- ----------------------------------------------------------------------------
Income (Loss) before cumulative
effect of accounting change (97.6) 50.8 (24.6) 99.2
Cumulative effect of accounting
change, net of taxes - - - (9.2)
- ----------------------------------------------------------------------------
Net Income (Loss) (97.6) 50.8 (24.6) 90.0
Adjustments to exclude the
effect of GM purchase
accounting adjustments (1) 5.3 5.3 10.6 10.6
- ----------------------------------------------------------------------------
Earnings (Loss) excluding GM purchase
Accounting adjustments (92.3) 56.1 (14.0) 100.6
Preferred Stock Dividends (1.6) - (1.6) -
- ---------------------------------------------------------------------------
Earnings (Loss) Used for Computation of
Available Separate Consolidated
Net Income (Loss) $(93.9) $56.1 $(15.6) $100.6
============================================================================
Available Separate Consolidated Net
Income (Loss)
Average number of shares of
General Motors Class H
Common Stock outstanding
(in millions) (Numerator) 121.0 105.2 113.6 104.7
Average Class H dividend base
(in millions) (Denominator) 414.9 399.9 407.5 399.9
Available Separate Consolidated
Net Income (Loss) $(27.4) $14.7 $(4.3) $26.2
============================================================================
Earnings (Loss) Attributable to General Motors
Class H Common Stock on a Per Share
Basis - Basic and Diluted $(0.23) $0.14 $(0.04) $0.25
============================================================================
(1) Relates to General Motors' purchase of Hughes in 1985.
- 26 -
BALANCE SHEET
(Dollars in Millions)
June 30, December 31,
ASSETS 1999 1998
- ----------------------------------------------------------------------------
Current Assets
Cash and cash equivalents $858.7 $1,342.1
Accounts and notes receivable 1,345.0 922.4
Contracts in process 690.6 783.5
Inventories 653.8 471.5
Prepaid expenses, deferred income taxes and other 591.5 326.9
- ----------------------------------------------------------------------------
Total Current Assets 4,139.6 3,846.4
Satellites - Net 3,515.8 3,197.5
Property - Net 1,303.0 1,059.2
Net Investment in Sales-type Leases 162.0 173.4
Intangible Assets - Net 7,420.0 3,552.2
Investments and Other Assets 1,732.6 1,606.3
- ----------------------------------------------------------------------------
Total Assets $18,273.0 $13,435.0
============================================================================
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities
Accounts payable $1,020.4 $764.1
Advances on contracts 178.0 291.8
Deferred revenues 94.7 43.8
Current portion of long-term debt 184.4 156.1
Accrued liabilities 1,542.2 753.7
- ----------------------------------------------------------------------------
Total Current Liabilities 3,019.7 2,009.5
Long-Term Debt 1,239.6 778.7
Deferred Gains on Sales and Leasebacks 59.6 121.5
Postretirement Benefits Other Than Pensions 153.9 150.7
Other Liabilities and Deferred Credits 1,495.1 867.1
Deferred Income Taxes 447.2 643.9
Minority Interests 502.2 481.7
Stockholder's Equity 11,355.7 8,381.9
- ----------------------------------------------------------------------------
Total Liabilities and Stockholder's Equity $18,273.0 $13,435.0
============================================================================
Holders of GM Class H common stock have no direct rights in the equity or assets
of Hughes, but rather have rights in the equity and assets of General Motors
(which includes 100% of the stock of Hughes).
- 27 -
PRO FORMA SELECTED SEGMENT DATA*
(Dollars in Millions)
Six Months Ended
Second Quarter June 30,
-------------- --------
1999 1998 1999 1998
- -------------------------------------------------------------------------
DIRECT-TO-HOME BROADCAST
Total Revenues $870.2 $401.5 $1,426.8 $789.4
EBITDA (1) $(6.8) $(16.7) $(2.9) $(25.8)
Operating Loss $(68.4) $(40.2) $(91.8) $(71.8)
Depreciation and Amortization $61.6 $23.5 $88.9 $46.0
Capital Expenditures (2) $78.2 $34.4 $155.8 $48.1
- --------------------------------------------------------------------------
SATELLITE SERVICES
Total Revenues $200.4 $191.1 $393.9 $384.1
EBITDA (1) $151.0 $133.1 $296.9 $273.3
EBITDA Margin (1) 75.3% 69.6% 75.4% 71.2%
Operating Profit $83.2 $74.4 $162.3 $160.1
Operating Profit Margin 41.5% 38.9% 41.2% 41.7%
Depreciation and Amortization $67.8 $58.7 $134.6 $113.2
Capital Expenditures (3) $135.4 $164.7 $475.2 $414.3
- --------------------------------------------------------------------------
SATELLITE SYSTEMS
Total Revenues $553.8 $674.8 $1,184.1 $1,299.1
EBITDA (1)(4) $(119.6) $71.5 $(121.0) $137.3
EBITDA Margin (1) N/A 10.6% N/A 10.6%
Operating Profit (Loss) (4) $(133.0) $60.0 $(147.4) $115.1
Operating Profit Margin N/A 8.9% N/A 8.9%
Depreciation and Amortization $13.4 $11.5 $26.4 $22.2
Capital Expenditures $22.8 $21.6 $35.1 $32.3
- --------------------------------------------------------------------------
NETWORK SYSTEMS
Total Revenues $341.1 $221.7 $572.0 $406.4
EBITDA (1)(4) $25.0 $(15.3) $19.1 $(18.7)
EBITDA Margin (1) 7.3% N/A 3.3% N/A
Operating Profit (Loss) (4) $11.3 $(25.2) $(6.5) $(37.1)
Operating Profit Margin 3.3% N/A N/A N/A
Depreciation and Amortization $13.7 $9.9 $25.6 $18.4
Capital Expenditures $15.5 $10.9 $17.7 $15.7
- --------------------------------------------------------------------------
ELIMINATIONS and OTHER
Total Revenues $(189.5) $(120.1) $(349.0) $(219.0)
EBITDA (1) $13.6 $5.8 $(42.7) $(6.4)
Operating Profit (Loss) $10.3 $9.2 $(50.0) $(4.5)
Depreciation and Amortization $3.3 $(3.4) $7.3 $(1.9)
Capital Expenditures $36.7 $10.0 $4.5 $135.9
- --------------------------------------------------------------------------
TOTAL
Total Revenues $1,776.0 $1,369.0 $3,227.8 $2,660.0
EBITDA (1)(4) $63.2 $178.4 $149.4 $359.7
EBITDA Margin (1) 3.6% 13.0% 4.6% 13.5%
Operating Profit (Loss) (4) $(96.6) $78.2 $(133.4) $161.8
Operating Profit Margin N/A 5.7% N/A 6.1%
Depreciation and Amortization $159.8 $100.2 $282.8 $197.9
Capital Expenditures $288.6 $241.6 $688.3 $646.3
- --------------------------------------------------------------------------
See notes on next page.
- 28 -
* The Financial Statements reflect the application of purchase accounting
adjustments related to GM's acquisition of Hughes. However, as provided
in the General Motors' Restated Certificate of Incorporation, the
earnings attributable to GM Class H common stock for purposes of
determining the amount available for the payment of dividends on GM Class
H common stock specifically excludes such adjustments. In order to
provide additional analytical data, the above unaudited pro forma
selected segment data, which exclude the purchase accounting adjustments
related to GM's acquisition of Hughes, are presented.
(1) EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) is
the sum of operating profit (loss) and depreciation and amortization. EBITDA
margin is calculated by dividing EBITDA by total revenues.
(2) Includes satellite expenditures amounting to $22.5 million and $75.5 million
in the second quarter and first six months of 1999, respectively.
(3) Includes satellite expenditures amounting to $125.9 million, $94.4 million,
$315.6 million and $240.0 million, respectively. Also included are
expenditures related to the early buy-out of satellite sale-leasebacks
totaling $58.9 million for the second quarter of 1998 and $141.3 million and
$155.5 million for the first six months of 1999 and 1998, respectively.
(4) Amounts for the six months ended June 30, 1999 include charges of $81.0
million and $11.0 million for the Satellite Systems and Network Systems,
respectively, relating to the termination of the Asia-Pacific Mobile
Telecommunications satellite systems contract due to export licenses not
being issued.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
GENERAL MOTORS CORPORATION
--------------------------
(Registrant)
Date July 20, 1999
-----------------
By
s/Peter R. Bible
-------------------------------
(Peter R. Bible,
Chief Accounting Officer)
- 29 -
