3rd Qtr & 9 Mths Rslts - Pt 1
General Motors Corp
18 October 2001
PART 1
-1-
On October 18, 2001, a news release was issued on the subject of third 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 is the
third quarter earnings release for GM, and their subsidiary Hughes Electronics
Corporation's (Hughes) earnings release dated October 17, 2001.
* GM EARNS $385 MILLION, UK $0.85 PER SHARE,
IN THIRD QUARTER, EXCLUDING SPECIAL ITEMS
* U.S. MARKET SHARE IMPROVES
* GMAC SETS THIRD-QUARTER EARNINGS RECORD
DETROIT - General Motors Corp. (NYSE: GM) today reported that it earned $385
million, or $0.85 diluted earnings per share, in the third quarter of 2001 -
excluding special items - on revenues of $42.5 billion. GM's global automotive
and financing operations earned a total of $527 million during the period, which
was partially offset by a loss of $142 million at Hughes. These earnings are in
line with the most recent guidance provided by GM, but down compared with the
prior-year period.
The third-quarter-2001 results exclude one-time charges totaling $753 million,
or $1.26 per share, related to the previously announced closing of an assembly
plant in Canada, and various special items at Hughes, including the resolution
of a dispute with Raytheon Company relating to the 1997 spin-off and merger of
Hughes Defense (see Highlights). GM had a loss of $368 million, or $0.41 per
share, in the quarter including the charges. GM financial results described
throughout the remainder of this release exclude these charges unless otherwise
noted. The third-quarter results compare with earnings of $829 million, or $1.55
per share, on revenue of $42.7 billion, in the third quarter of 2000.
'Overall, GM's Automotive Operations faced significant challenges during the
quarter but still delivered $212 million in net income,' said GM Chairman Jack
Smith. 'While North American profits were stronger than expected, Europe
remained in a significant loss position.' Asia Pacific was profitable while
Latin America/Africa/Mid-East posted a small loss.
'General Motors Acceptance Corp. (GMAC) delivered record third-quarter earnings,
driven by the continued strong performance of its core auto financing
operations,' Smith said.
-2-
'GM North America finished the quarter with particularly strong vehicle sales,'
said GM President and Chief Executive Officer Rick Wagoner. 'U.S. market share
was up in the third quarter, driven by strong sales of our full-size trucks,
utilities, and new entries such as the Chevrolet Avalanche and Buick Rendezvous,
as well as strong and effective merchandising. This is a great base that we plan
to build on going forward.
'In a very challenging environment, GM North America continued to deliver solid
cost improvements,' Wagoner said. 'With our ongoing improvement in manufacturing
and engineering productivity, plus continued reductions in material costs, we
were able to offset partially the tough pricing pressures and the drop in
overall vehicle demand. But we know we can do more to improve our cost
position.'
Wagoner said, 'GM Europe (GME) is implementing a major turnaround plan designed
to restore profitability. The plan, called Project Olympia, focuses on improving
revenue in a number of areas, especially through the introduction of a broad
range of new innovative Opel products, while taking aggressive actions to reduce
costs in all areas of the business.'
Cash and net liquidity held steady during the third quarter. Cash, marketable
securities, and assets of the Voluntary Employees' Beneficiary Association
(VEBA) trust invested in short-term fixed-income securities, excluding Hughes,
totaled $11.0 billion at Sept. 30, 2001, compared with $11.1 billion at June 30,
2001.
GMAC
GMAC achieved record third-quarter earnings of $437 million, a $36 million or 9-
percent improvement over the third quarter of 2000. GMAC's results were driven
by the continued strong performance of its core auto financing operations.
Financing operations benefited from higher asset levels and lower interest
rates, which more than offset continuing weakness in off-lease residual values
and higher credit losses.
-3-
Income from insurance operations was down slightly in the third quarter of 2001
as improved underwriting results were offset by lower capital gains, reflecting
general weakness in the equity markets. Mortgage operations continued to post
strong results, with origination volume in both residential and commercial
mortgage sectors growing at a record pace.
GM NORTH AMERICA
GMNA earned $445 million in the third quarter of 2001, excluding the charge of
$194 million for the previously announced September 2002 closing of its Ste.
Therese, Quebec, assembly plant. Including that special item, GMNA earned $251
million. The $445 million earnings performance compares with $728 million earned
in the third quarter of 2000, when industry demand was at near-record levels.
Continued cost improvements and a favorable mix of products were offset by lower
volume and unfavorable pricing. Third-quarter-2001 production fell 6 percent,
wholesale vehicle sales declined about 7 percent, and net vehicle pricing was
unfavorable compared with the prior-year period.
GM's share of the U.S. truck market increased 2.9 percentage points to 28.6
percent during the third quarter of 2001, compared with the same period last
year. GM captured 27.7 percent of the total U.S. vehicle market in the third
quarter, compared with 27.4 percent in the prior-year period.
GM sold more full-size pickups than any industry competitor during the first
nine months of 2001. Combined sales of the Chevy Silverado, Avalanche, and the
GMC Sierra increased more than 10 percent compared with the same period last
year. GM's full-size utility sales continued at a record pace for the first nine
months, outselling the nearest competitor by more than 196,000 units. GM's
overall lineup of utilities gained 1.5 percentage points of market share during
the first nine months of 2001.
-4-
The GMC Envoy was named Motor Trend's 2002 sport utility vehicle (SUV) of the
year last week, a prestigious award for a solid new product in an important
segment. In addition, four GM vehicles captured top rankings in the J.D. Power
and Associates 2001 Automotive Performance, Execution And Layout (APEAL) Study.
GM had the highest number of top-ranked models among the big three that
consumers consider to be 'most appealing.' Pontiac Aztek, Chevy TrailBlazer,
Cadillac Escalade and Chevrolet Corvette ranked best in the highly competitive
entry, midsize, luxury SUV, and premium sports car segments, respectively.
OTHER AUTOMOTIVE REGIONS
Tough price competition and unfavorable product mix and country mix were key
factors in GME's loss of $287 million in the third quarter of 2001. That
compares with a loss of $181 million in the third quarter last year.
GM Asia Pacific (GMAP) had net income of $60 million in the third quarter of
2001, a significant improvement from the loss of $10 million in the third
quarter of 2000. The improvement primarily resulted from stronger performance by
GM's Thailand operations and GM's joint venture in Shanghai, China.
GM's Latin America/Africa/Mid-East (GMLAAM) region incurred a loss of $6 million
in the third quarter of 2001, compared with net income of $31 million in the
same period last year. The region's economy was affected by financial turmoil in
Argentina and weakening in Brazil, the primary automotive market.
HUGHES
Hughes' loss of $142 million in the third quarter of 2001, excluding special
items, was primarily related to the costs of continued growth of DIRECTV. Hughes
lost $227 million during the period including special items. Hughes had a loss
of $88 million in the third quarter of 2000. Hughes added approximately 491,000
net new DIRECTV subscribers in the third quarter, bringing the total subscriber
base to 11.8 million.
-5-
LOOKING AHEAD
'There is considerable uncertainty regarding the strength of the key automotive
markets during the balance of the year and in 2002,' Wagoner said. 'We're
buckling down to enhance our cost position while remaining very aggressive in
our effort to maximize revenue and grow market share.'
GM currently estimates that in the fourth quarter of 2001 total industry sales
in the United States will be down approximately 6 percent compared with the
prior-year period, bringing industry sales for the calendar year to
approximately 16.8 million units. Total industry sales in Western and Central
Europe are expected to be down approximately 5 percent in the fourth quarter,
compared with the fourth quarter of 2000. Net vehicle prices in North America
are expected to be down approximately 1.3 percent for the fourth quarter and
calendar-year 2001, compared with the prior-year periods. The change in 2001-
calendar-year net price to negative 1.3 percent versus prior guidance of
negative 1.0 percent is attributable primarily to downward pressure on auction
prices for used cars due to daily rental fleet reductions. The negative pricing
trend also is expected to continue in Europe.
GM's fourth-quarter production schedule for North America remains at
approximately 1,270,000 vehicles, a 7 percent reduction from the same quarter
last year. Based on this, fourth-quarter earnings are now expected to be
approximately $0.50 per share.
For calendar year 2002, GM's preliminary outlook is for total U.S. vehicle sales
in the low- to mid-15-million-unit range. Industry sales in the Western and
Central European market are likely to be down about 3 percent and in the low-17-
million-unit range.
-----------
In this press release and related comments by General Motors management, our use
of the words 'outlook,' 'expect,' 'anticipate,' 'estimate,' 'forecast,'
'objective,' 'plan,' 'designed,' 'goal' and similar expressions is intended to
identify forward looking statements. While these statements represent our
current judgment on what the future may hold, and we believe these judgments are
reasonable, actual results may differ materially due to numerous important
factors that are described in GM's most recent report on SEC Form 10-K (at page
II-10,11) which may be revised or supplemented in subsequent reports on SEC
Forms 10-Q and 8-K. Such factors include, among others, the following: changes
in economic conditions, currency exchange rates or political stability;
shortages of fuel, labor strikes or work stoppages; market acceptance of the
corporation's new products; significant changes in the competitive environment;
changes in laws, regulations and tax rates; and, the ability of the corporation
to achieve reductions in cost and employment levels to realize production
efficiencies and implement capital expenditures at levels and times planned by
management.
-6-
General Motors Corporation
List of Special Items - After Tax
(dollars in millions)
Third Quarter 2001
----------------------------------------
Other Total Diluted
GMNA Hughes ACO GM EPS
----- ------ ----- ------ --------
Reported Net Income (Loss) $251 $(227) $(595) $(368) $(0.41)
Ste. Therese Charge (A) 194 - - 194 0.35
Raytheon Settlement (B) - - 474 474 0.86
Gain on Sale of Thomson (C) - (67) - (67) (0.04)
SkyPerfecTV! Writedown (D) - 133 - 133 0.08
Severance Charge (E) - 40 - 40 0.02
DirecTV Japan Adjustment (F) - (21) - (21) (0.01)
--- --- --- --- ----
Adjusted Net Income (Loss) $445 $(142) $(121) $385 $0.85
=== === === === ====
A) The Ste. Therese Charge relates to the previously announced closing of
the Ste. Therese, Quebec assembly plant.
B) The Raytheon Settlement relates to Hughes' settlement with the Raytheon
Company on a purchase price adjustment related to Raytheon's 1997 merger
with Hughes Defense.
C) The Gain on sale of Thomson relates to Hughes' sale of 4.1 million shares
of Thomson Multimedia common stock.
D) The SkyPerfecTV! Writedown relates to Hughes' non-cash charge from the
revaluation of its investment.
E) The Severance Charge relates to Hughes' 10% company-wide workforce
reduction in the U.S.
F) The DirecTV Japan Adjustment relates to a favorable adjustment to the
expected costs associated with the shutdown of Hughes' DirecTV Japan
business.
-7-
General Motors Corporation
List of Special Items - After Tax
(dollars in millions)
Year to Date 2001
----------------------------------------
Other
GMNA GME GMLAAM GMAP Hughes ACO
---- --- ------ ---- ------ -----
Reported Net
Income (Loss) $878 $(525) $30 $(82) $(487) $(796)
Ste. Therese Charge (A) 194 - - - - -
Raytheon Settlement (B) - - - - - 474
Gain on Sale of Thomson (C) - - - - (67) -
SkyPerfecTV! Writedown (D) - - - - 133 -
Severance Charge (E) - - - - 40 -
DirecTV Japan
Adjustment (F) - - - - (21) -
Isuzu Restructuring (G) - - - 133 - -
SFAS 133 (H) 14 (2) 1 1 8 -
----- --- --- --- --- ---
Adjusted Net
Income(Loss) $1,086 $(527) $31 $52 $(394) $(322)
===== === == == === ===
Total Other Total Diluted
ACO GMAC FIO GM EPS
----- ------ ----- ----- -------
Reported Net Income (Loss) $(982) $1,351 $(23) $346 $1.16
Ste. Therese Charge (A) 194 - - 194 0.35
Raytheon Settlement (B) 474 - - 474 0.86
Gain on Sale of Thomson (C) (67) - - (67) (0.04)
SkyPerfecTV! Writedown (D) 133 - - 133 0.08
Severance Charge (E) 40 - - 40 0.02
DirecTV Japan Adjustment (F) (21) - - (21) (0.01)
Isuzu Restructuring (G) 133 - - 133 0.24
SFAS 133 (H) 22 (34) - (12) (0.03)
--- ----- --- ---- ----
Adjusted Net Income (Loss) $(74) $1,317 $(23) $1,220 $2.63
== ===== == ===== ====
See page 6 for footnotes (A) - (F).
G) The Isuzu restructuring charges include General Motors' portion of
severance payments and asset impairments that were part of the second quarter
restructuring of its affiliate Isuzu Motors Ltd.
H) The SFAS 133 represents the net impact during the first quarter 2001 from
initially adopting SFAS No. 133, Accounting for Derivatives and Hedging
Activities.
-8-
General Motors Corporation
Adjusted Corporate Financial Results
Third Quarter Year to Date
-------------- --------------
2001(1) 2000 2001(1) 2000
---- ---- ---- ----
Total net sales and
revenues ($Mil's) $42,475 $42,690 $131,318 $138,291
Consolidated net
income ($Mil's) $385 $829 $1,220 $4,363
Net margin from
consolidated net income 0.9% 1.9% 0.9% 3.2%
GM $1-2/3 par value
earnings per share
Basic EPS $0.86 $1.57 $2.65 $7.51
Diluted EPS $0.85 $1.55 $2.63 $7.37
GM Class H
earnings per share
Basic EPS $(0.13) $(0.09) $(0.36) $(0.23)
Diluted EPS $(0.13) $(0.09) $(0.36) $(0.23)
Earnings attributable to
GM $1-2/3 par value ($Mil's)
Consolidated net income $385 $829 $1,220 $4,363
Preferred dividends (25) (27) (76) (83)
Losses attributable
to GM Class H 113 76 314 144
--- --- ----- -----
Total earnings attributable
to GM $1-2/3 par value $473 $878 $1,458 $4,424
GM $1-2/3 par value average
shares outstanding (Mil's)
Basic shares 551 559 549 589
Diluted shares 558 567 556 600
Cash dividends per share
of common stocks
GM $1-2/3 par value $0.50 $0.50 $1.50 $1.50
GM Class H - - - -
Book value per share of
common stocks at Sept. 30
GM $1-2/3 par value $37.44 $40.39
GM Class H $7.49 $8.08
Total cash at Sept. 30
($Bil's) (2) $11.7 $13.5
Automotive, Communications Services,
and Other Operations ($Mil's)
Depreciation $1,123 $1,002 $3,291 $2,964
Amortization of special tools 609 537 1,747 1,852
Amortization of intangible
assets 80 57 238 209
----- ----- ----- -----
Total $1,812 $1,596 $5,276 $5,025
===== ===== ===== =====
See footnotes on page 12.
-9-
General Motors Corporation
Adjusted Segment Financial Results
Third Quarter Year to Date
-------------- --------------
2001(1) 2000 2001(1) 2000
---- ---- ---- ----
(dollars in millions)
Total net sales and revenues
GMNA $26,269 $26,171 $79,492 $85,984
GME 5,117 5,339 17,616 19,315
GMLAAM 1,312 1,524 4,446 4,282
GMAP 1,000 952 3,138 2,605
------ ------ ------- -------
Total GMA 33,698 33,986 104,692 112,186
Hughes 2,113 2,088 6,033 6,466
Other 486 528 1,467 2,015
------ ------ ------ -------
Total ACO 36,297 36,602 112,192 120,667
GMAC 6,116 6,067 18,915 17,443
Other Financing 62 21 211 181
------ ------ ------- -------
Total FIO 6,178 6,088 19,126 17,624
------ ------ ------- -------
Consolidated net sales
and revenues $42,475 $42,690 $131,318 $138,291
====== ====== ====== =======
Pre-tax income (loss)
GMNA $641 $1,086 $1,523 $5,068
GME (400) (265) (747) 362
GMLAAM (11) (9) 71 (77)
GMAP 9 (7) 44 26
--- ----- ----- -----
Total GMA 239 805 891 5,379
Hughes (3) (173) (155) (573) (420)
Other (143) (47) (402) (160)
--- ----- ----- -----
Total ACO (77) 603 (84) 4,799
GMAC 710 661 2,142 1,921
Other Financing (11) 2 (34) 13
--- ----- ----- -----
Total FIO 699 663 2,108 1,934
--- ----- ----- -----
Consolidated pre-tax
income $622 $1,266 $2,024 $6,733
=== ===== ===== =====
Net income (loss)
GMNA $445 $728 $1,086 $3,428
GME (287) (181) (527) 206
GMLAAM (6) 31 31 42
GMAP 60 (10) 52 (126)
--- --- ----- -----
Total GMA 212 568 642 3,550
Hughes (3)(4) (142) (88) (394) (229)
Other (121) (57) (322) (162)
--- --- ----- -----
Total ACO (51) 423 (74) 3,159
GMAC 437 401 1,317 1,193
Other Financing (1) 5 (23) 11
--- --- ----- -----
Total FIO 436 406 1,294 1,204
--- --- ----- -----
Consolidated net income $385 $829 $1,220 $4,363
=== === ===== =====
See footnotes on page 12.
-10-
General Motors Corporation
Supplementary Adjusted Segment Financial Results
Third Quarter Year to Date
-------------- --------------
2001(1) 2000 2001(1) 2000
---- ---- ---- ----
(dollars in millions)
Income tax expense (benefit)
GMNA $179 $344 $387 $1,604
GME (112) (81) (212) 164
GMLAAM (8) (27) 21 (74)
GMAP (12) 10 7 21
-- --- --- -----
Total GMA $47 $246 $203 $1,715
== === === =====
Equity income (loss) and
minority interests
GMNA $(17) $(14) $(50) $(36)
GME 1 3 8 8
GMLAAM (3) 13 (19) 45
GMAP 39 7 15 (131)
-- --- ----- -----
Total GMA $20 $9 $(46) $(114)
== = == ===
Effective income tax rate
GMNA 27.9% 31.7% 25.4% 31.6%
GME 28.0% 30.6% 28.4% 45.3%
GMLAAM 72.7% 300.0% 29.6% 96.1%
GMAP (133.3%) (142.9%) 15.9% 80.8%
Net margins
GMNA 1.7% 2.8% 1.4% 4.0%
GME (5.6%) (3.4%) (3.0%) 1.1%
GMLAAM (0.5%) 2.0% 0.7% 1.0%
GMAP 6.0% (1.1%) 1.7% (4.8%)
Total GMA 0.6% 1.7% 0.6% 3.2%
Hughes (3)(4) (6.7%) (4.2%) (6.5%) (3.5%)
Total ACO (0.1%) 1.2% (0.1%) 2.6%
GMAC 7.1% 6.6% 7.0% 6.8%
Consolidated net income 0.9% 1.9% 0.9% 3.2%
See footnotes on page 12.
-11-
General Motors Corporation
Operating Statistics
Third Quarter Year to Date
-------------- --------------
2001 2000 2001 2000
---- ---- ---- ----
(units in thousands)
Worldwide Wholesale Sales
United States - Cars 505 611 1,553 1,917
United States - Trucks 587 563 1,789 1,906
----- ----- ----- -----
Total United States 1,092 1,174 3,342 3,823
Canada, Mexico, and Other 145 154 482 570
----- ----- ----- -----
Total GMNA 1,237 1,328 3,824 4,393
GME 396 396 1,359 1,434
GMLAAM 154 181 500 470
GMAP 121 134 360 345
----- ----- ----- -----
Total Worldwide 1,908 2,039 6,043 6,642
===== ===== ===== =====
Vehicle Unit Deliveries
Chevrolet - Cars 179 230 637 706
Chevrolet - Trucks 431 420 1,320 1,342
Pontiac 138 167 419 487
GMC 123 123 392 412
Buick 119 108 301 322
Oldsmobile 53 67 189 225
Saturn 49 71 200 216
Cadillac 46 51 125 148
Other 14 12 40 29
----- ----- ----- -----
Total United States 1,152 1,249 3,623 3,887
Canada, Mexico, and Other 167 186 515 541
----- ----- ----- -----
Total GMNA 1,319 1,435 4,138 4,428
GME 414 413 1,415 1,460
GMLAAM 159 159 497 441
GMAP 136 125 381 348
----- ----- ----- -----
Total Worldwide 2,028 2,132 6,431 6,677
===== ===== ===== =====
Market Share
United States - Cars 26.6% 29.2% 27.2% 28.8%
United States - Trucks 28.6% 25.7% 28.3% 27.1%
Total United States 27.7% 27.4% 27.8% 27.9%
Total North America 27.2% 27.3% 27.4% 27.7%
Total Europe 9.1% 8.8% 9.3% 9.3%
Latin America (5) 22.3% 22.2% 22.1% 20.4%
Asia and Pacific 4.3% 3.8% 3.9% 3.6%
Total Worldwide 15.0% 15.1% 15.0% 15.1%
U.S. Retail/Fleet Mix
% Fleet Sales - Cars 29.3% 28.6% 28.9% 27.5%
% Fleet Sales - Trucks 12.1% 12.9% 14.0% 15.5%
Total Vehicles 20.2% 21.3% 21.3% 21.7%
Retail Lease as % of Retail Sales
Total Smartlease
and Smartbuy 12.5% 19.4%
Days Supply of Inventory
at Sept. 30
United States - Cars 62 66
United States - Trucks 95 101
Capacity Utilization
U.S. and Canada
(2 shift rated) 83.6% 87.8% 78.1% 90.2%
GMNA Net Price (6) (2.1)% (0.3)%
See footnotes on page 12.
-12-
General Motors Corporation
Operating Statistics
Third Quarter Year to Date
-------------- --------------
2001 2000 2001 2000
---- ---- ---- ----
GMAC's U.S. Cost of Borrowing 5.04% 6.84%
Current Debt Spreads Over
U.S. Treasuries
2 Year 205 bp 90 bp
5 Year 230 bp 133 bp
10 Year 245 bp 177 bp
Worldwide Employment
at Sept. 30 (in 000's)
United States Hourly 126 132
United States Salary 42 44
--- ---
Total United States 168 176
Canada, Mexico, and Other 33 36
--- ---
GMNA 201 212
GME 74 90
GMLAAM 24 24
GMAP 11 11
Hughes 11 18
GMAC 29 27
Other 13 13
--- ---
Total 363 395
=== ===
Worldwide Payrolls ($Bil's) $4.9 $5.2 $15.0 $16.6
Footnotes:
---------
(1) Adjusted amounts represent the reported amounts less the effects of special
items. Special items for third quarter 2001 are detailed on page x. Special
items for year to date 2001 are detailed on page x.
(2) Represents total cash for Automotive, Communications Services, and Other
Operations which includes cash and marketable securities, as well as $3.0
billion invested in short-term fixed income securities of the Corporation's
Voluntary Employees' Beneficiary Association Trust.
(3) Excludes the effects of purchase accounting adjustments related to General
Motors' acquisition of Hughes in 1985.
(4) Excludes Hughes Series A Preferred Stock dividends payable to General
Motors.
(5) Latin America excludes the Middle East and Africa.
(6) The third quarter 2001 percentage includes a dealer stock adjustment of
(0.6%) related to the Keep America Rolling sales incentive. This recognizes
units in dealer inventory on September 30,2001 but not yet delivered to retail
customers.
-13-
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2001 2000 2001 2000
(dollars in millions except per share amounts)
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Total net sales and revenues $42,475 $42,690 $131,310 $138,291
Cost of sales and other expenses 34,866 33,678 106,557 108,888
Selling, general, and
administrative expenses 5,926 5,266 17,171 15,604
Interest expense 1,968 2,480 6,438 7,066
Total costs and expenses 42,760 41,424 130,166 131,558
Income (loss) before income taxes
and minority interests (285) 1,266 1,144 6,733
Income tax expense 76 436 588 2,148
Equity income/(loss) and
minority interests (7) (1) (210) (222)
Net income (loss) (368) 829 346 4,363
Dividends on preference stocks (25) (27) (76) (83)
Earnings attributable
to common stocks $(393) $802 $270 $4,280
Basic earnings (losses) per share
attributable to common stocks
Earnings per share attributable
to $1-2/3 par value $(0.41) $1.57 $1.18 $7.51
Earnings per share
attributable to Class H $(0.19) $(0.09) $(0.43) $(0.23)
Earnings (losses) per share
attributable to common
stocks assuming dilution
Earnings per share attributable
to $1-2/3 par value $(0.41) $1.55 $1.16 $7.37
Earnings per share attributable
to Class H $(0.19) $(0.09) $(0.43) $(0.23)
-14-
CONSOLIDATED STATEMENTS OF INCOME - concluded
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2001 2000 2001 2000
(dollars in millions)
AUTOMOTIVE, COMMUNICATIONS SERVICES, AND OTHER OPERATIONS
Total net sales and revenues $36,297 $36,602 $112,192 $120,667
Cost of sales and other expenses 32,861 31,827 100,537 103,408
Selling, general, and
administrative expenses 4,107 3,765 11,837 11,304
Total costs and expenses 36,968 35,592 112,374 114,712
Interest expense 216 210 529 648
Net expense from transactions with
Financing and Insurance
Operations 97 197 315 508
Income (loss) before income
taxes and minority interests (984) 603 (1,026) 4,799
Income tax (benefit) expense (181) 193 (194) 1,433
Equity income/(loss) and
minority interests (1) 13 (150) (207)
Net income (loss) -
Automotive, Communications
Services, and Other
Operations $(804) $423 $(982) $3,159
FINANCING AND INSURANCE OPERATIONS
Total revenues $6,178 $6,088 $19,118 $17,624
Interest expense 1,752 2,270 5,909 6,418
Depreciation and
amortization expense 1,477 1,474 4,429 4,480
Operating and other expenses 1,774 1,450 5,220 4,147
Provision for financing and
insurance losses 573 428 1,705 1,153
Total costs and expenses 5,576 5,622 17,263 16,198
Net income from transactions
with Automotive,
Communications Services,
and Other Operations 97 197 315 508
Income before income taxes
and minority interests 699 663 2,170 1,934
Income tax expense 257 243 782 715
Equity income/(loss) and
minority interests (6) (14) (60) (15)
Net income - Financing and
Insurance Operations $436 $406 $1,328 $1,204
-15-
CONSOLIDATED BALANCE SHEETS
Sept. 30, 2001 Dec. 31, Sept. 30, 2000
GENERAL MOTORS CORPORATION (Unaudited) 2000 (Unaudited)
AND SUBSIDIARIES
ASSETS (dollars in millions)
Automotive, Communications Services,
and Other Operations
Cash and cash equivalents $7,899 $9,119 $9,351
Marketable securities 829 1,161 1,176
Total cash and
marketable securities 8,728 10,280 10,527
Accounts and notes receivable
(less allowances) 6,200 5,835 5,975
Inventories (less allowances) 10,508 10,945 11,300
Equipment on operating leases
(less accumulated depreciation) 4,974 5,699 5,980
Deferred income taxes and
other current assets 8,751 8,388 9,489
Total current assets 39,161 41,147 43,271
Equity in net assets of
nonconsolidated associates 4,913 3,497 3,301
Property - net 34,555 33,977 34,036
Intangible assets - net 7,675 7,622 8,651
Deferred income taxes 15,930 14,870 13,202
Other assets 30,984 32,243 33,015
Total Automotive, Communications
Services, and
Other Operations assets 133,218 133,356 135,476
Financing and Insurance Operations
Cash and cash equivalents 10,530 1,165 912
Investments in securities 9,598 9,595 9,309
Finance receivables - net 90,190 92,415 87,534
Investment in leases and
other receivables 36,441 36,752 37,551
Other assets 33,624 27,846 24,864
Net receivable from Automotive,
Communications
Services, and Other Operations 1,243 1,971 1,599
Total Financing and Insurance
Operations assets 181,626 169,744 161,769
Total assets $314,844 $303,100 $297,245
LIABILITIES AND STOCKHOLDERS' EQUITY
Automotive, Communications Services,
and Other Operations
Accounts payable (principally trade) $19,335 $18,309 $18,190
Loans payable 1,744 2,208 3,321
Accrued expenses 35,417 33,252 31,997
Net payable to Financing and
Insurance Operations 1,243 1,971 1,599
Total current liabilities 57,739 55,740 55,107
Long-term debt 9,320 7,410 8,245
Postretirement benefits
other than pensions 34,276 34,306 34,376
Pensions 3,443 3,480 3,226
Other liabilities and deferred
income taxes 14,183 15,768 16,088
Total Automotive, Communications
Services, and
Other Operations liabilities 118,961 116,704 117,042
Financing and Insurance Operations
Accounts payable 6,936 7,416 5,316
Debt 144,846 135,037 129,325
Other liabilities and deferred
income taxes 14,577 12,922 13,238
Total Financing and Insurance
Operations liabilities 166,359 155,375 147,879
Minority interests 700 707 670
General Motors - obligated mandatorily
redeemable preferred
securities of subsidiary
trusts holding solely junior
subordinated debentures of
General Motors Series G - 139 139
Stockholders' equity
$1-2/3 par value common stock
(issued, 554,439,259; 548,181,757;
and 565,371,465 shares) 924 914 943
Class H common stock
(issued, 877,032,955; 875,286,559;
and 874,807,080 shares) 88 88 87
Capital surplus (principally
additional paid-in capital) 21,330 21,020 21,818
Retained earnings 9,565 10,119 10,335
Subtotal 31,907 32,141 33,183
Accumulated foreign currency
translation adjustments (2,825) (2,502) (2,480)
Net unrealized loss on derivatives (392) - -
Net unrealized gains on securities 179 581 933
Minimum pension liability adjustment (45) (45) (121)
Accumulated other comprehensive loss (3,083) (1,966) (1,668)
Total stockholders' equity 28,824 30,175 31,515
Total liabilities and
stockholders' equity $314,844 $303,100 $297,245
-16-
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended September 30,
2001 2000
Automotive, Financing Automotive, Financing
Comm.Serv. and Comm.Serv. and
and Other Insurance and Other Insurance
(dollars in millions)
Net cash provided by
(used in) operating
activities $5,509 $(651) $9,066 $4,746
Cash flows from investing activities
Expenditures for property (6,287) (53) (6,314) (335)
Investments in marketable
securities - acquisitions (840) (25,071) (2,425) (18,198)
Investments in marketable
securities - liquidations 1,172 25,205 2,947 17,998
Mortgage servicing rights
- acquisitions - (884) - (698)
Mortgage servicing rights
- liquidations - 17 - -
Finance receivables - acquisitions - (166,597) - (140,295)
Finance receivables - liquidations - 103,919 - 88,560
Proceeds from sales of
finance receivables - 63,798 - 43,407
Operating leases - acquisitions (4,480) (10,586) (5,342) (12,147)
Operating leases - liquidations 4,783 9,239 4,615 7,313
Investments in companies,
net of cash acquired (679) (446) (3,911) -
Net investing activity with
Financing and
Insurance Operations - - (998) -
Other (146) 110 (558) 356
Net cash used in investing
activities (6,477) (1,349) (11,986) (14,039)
Cash flows from financing activities
Net (decrease) increase in
loans payable (464) (18,332) 1,255 1,121
Long-term debt - borrowings 4,533 42,791 4,130 19,450
Long-term debt - repayments (2,673) (13,817) (4,213) (11,482)
Net financing activity with
Automotive, Communications
Services, and Other Operations - - - 998
Repurchases of common and
preference stocks (264) - (652) -
Proceeds from issuing common stocks 91 - 2,778 -
Proceeds from sales of
treasury stocks 222 - - -
Cash dividends paid to stockholders (900) - (989) -
Net cash provided by financing
activities 545 10,642 2,309 10,087
Effect of exchange rate changes on cash and
cash equivalents (69) (5) (365) 3
Net transactions with
Automotive/Financing Operations (728) 728 597 (597)
Net (decrease) increase in cash
and cash equivalents (1,220) 9,365 (379) 200
Cash and cash equivalents at
beginning of the period 9,119 1,165 9,730 712
Cash and cash equivalents at
end of the period $7,899 $10,530 $9,351 $912
HUGHES REPORTS THIRD QUARTER 2001 FINANCIAL RESULTS
HUGHES Revenue Grows by 25%; Strong DIRECTV U.S. Subscriber Growth Beats
Expectations
EL SEGUNDO, Calif. - October 17, 2001 - Hughes Electronics Corporation, the
world's leading provider of digital television entertainment, broadband
services, satellite-based private business networks, and global video and data
broadcasting, today reported third quarter 2001 revenues increased 24.6% to
$2,103.3 million, compared with $1,688.5 million in the third quarter of 2000.
EBITDA(1) for the quarter was $76.5 million. Excluding a one-time charge
primarily related to severance of $65.3 million, EBITDA for the quarter was
$141.8 million and EBITDA margin1 was 6.7%. In the third quarter of 2000, EBITDA
was $107.9 million and EBITDA margin was 6.4%.
'The third quarter was very important for HUGHES because we made key structural
and management changes across the businesses. As a result, we are now positioned
to generate substantially improved operating results,' said Jack A. Shaw,
HUGHES' chief executive officer. 'I'm particularly pleased with our third
quarter financial results because, despite a slowing economy, we grew our
revenues by about 25%, exceeded DIRECTV U.S. subscriber growth expectations by
adding 425,000 net new subscribers, and met or exceeded our third quarter
operational targets in each of our businesses.'
Shaw continued, 'Our revenue growth was again driven by strong demand for
DIRECTV(R) services, as well as new satellite transponder sales at PanAmSat and
increased sales in all of Hughes Network Systems' product lines.'
Shaw also noted that the $65 million severance charge was related to a 10%
company-wide workforce reduction in the U.S. that is expected to result in
savings of over $110 million annually. Excluding this one-time charge, HUGHES'
EBITDA increased 31%, primarily due to continued operational improvements in
DIRECTV Latin America, the new satellite transponder sales at PanAmSat and lower
corporate expenses. These improvements were partially offset by losses from the
new DIRECTV DSL(TM) service (formerly known as Telocity) and increased
investment in Hughes Network Systems' (HNS) DIRECWAY(TM) broadband business.
HUGHES had a third quarter 2001 net loss of $227.2 million compared to a net
loss of $93.8 million in the same period of 2000. The increased loss was
primarily due to a pre-tax non-cash charge of $212 million resulting from the
revaluation of HUGHES' SkyPerfecTV! investment, increased depreciation and
amortization expense in the Direct-To-Home Broadcast segment and at PanAmSat,
and the lower EBITDA. These declines were partially offset by a pre-tax gain of
about $108 million that resulted from the sale of 4.1 million shares of Thomson
Multimedia common stock, and a favorable adjustment to the expected costs
associated with the shutdown of the DIRECTV Japan business.
Subsequent to the end of the third quarter, HUGHES reached a settlement with the
Raytheon Company on a purchase price adjustment related to Raytheon's 1997
merger with Hughes Defense. Under the terms of the agreement, HUGHES will
reimburse Raytheon $635.5 million of the original $9.5 billion purchase price.
Of the total payment to Raytheon, $500 million was paid on October 16, 2001 and
the remaining balance will be paid within six months. There is no impact to
HUGHES' earnings from this settlement.
NINE-MONTH FINANCIAL REVIEW
For the first nine months of 2001, revenues increased 14.4% to $5,981.4 million,
compared to $5,228.6 million for the same period in 2000. This increase was
primarily due to continued subscriber growth at DIRECTV in the United States and
Latin America, partially offset by fewer sales and sales-type leases at
PanAmSat.
EBITDA through September 2001 was $271.7 million and EBITDA margin was 4.5%,
compared to EBITDA of $440.2 million and EBITDA margin of 8.4% in the same
period of 2000. The decrease in EBITDA and EBITDA margin was primarily
attributable to the higher outright sales of satellite transponders at PanAmSat
in the first nine months of 2000, as well as the 2001 one-time severance
charges, increased investment in DIRECWAY and the losses from the new DIRECTV
DSL service. These items were partially offset by improved DIRECTV operating
performance due to the larger subscriber bases in the United States and Latin
America and lower corporate expenses.
For the first nine months of 2001, net losses totaled $489.0 million compared to
net losses of $244.8 million in 2000. The change was primarily due to an
increase in depreciation and amortization expense in the Direct-To-Home
Broadcast segment and at PanAmSat, as well as the lower EBITDA. These declines
were partially offset by reduced losses related to HUGHES' Direct-To-Home
television ventures in Japan, as well as the gain from the sale of Thomson
Multimedia common stock and improved net interest expense.
SEGMENT FINANCIAL REVIEW: THIRD QUARTER 2001
Direct-To-Home Broadcast
Third quarter 2001 revenues for the segment increased 21.8% to $1,572.6 million
from $1,291.5 million in the third quarter of 2000. The segment had negative
EBITDA of $74.2 million compared with negative EBITDA of $17.7 million in the
third quarter of 2000.
United States: DIRECTV reported quarterly revenues of $1,363 million, an
increase of 18% from last year's third quarter revenues of $1,154 million. The
increase was primarily due to continued subscriber growth.
DIRECTV substantially exceeded expectations by adding a record 953,000 gross
subscribers and, after accounting for churn, 425,000 net subscribers in the
quarter. In addition, DIRECTV made a one-time downward adjustment of
approximately 143,000 subscribers. This adjustment corrected errors that
accumulated over the past 18 months related to subscribers who discontinued
service prior to June 30, 2001 but were counted as active subscribers in
DIRECTV's database. As a result, DIRECTV had 10.3 million subscribers as of
September 30, 2001, representing a 14% increase over the 9.0 million customers
attained as of September 30, 2000.
Excluding a $48 million one-time charge primarily related to severance, EBITDA
for the third quarter of 2001 was $20 million, compared to EBITDA of $36 million
in last year's third quarter. EBITDA declined due to increased marketing
expenses related to DIRECTV's record number of gross subscriber additions in the
quarter, which more than offset the additional gross profit gained from
DIRECTV's larger subscriber base.
DIRECTV DSL: The DIRECTV DSL service was created following HUGHES' April 2001
acquisition of Telocity. No comparative financial data for DIRECTV DSL is
provided for the third quarter 2000.
The DIRECTV DSL service had third quarter 2001 revenues of $9 million and
negative EBITDA of $33 million. Approximately 5,000 net customers were added to
the DIRECTV DSL service in the quarter. Subscriber additions in the quarter were
negatively impacted by the bankruptcy of Rhythms NetConnections, formerly a
wholesale provider of broadband services. As of September 30, 2001, DIRECTV DSL
had about 73,000 residential broadband customers in the United States compared
to about 23,000 customers as of September 30, 2000.
Latin America: DIRECTV Latin America generated $201 million in revenues for the
quarter compared with $136 million in the third quarter of 2000. This 48%
increase was primarily due to continued subscriber growth as well as the
consolidation of the Argentinean and Colombian local operating companies in the
first half of 2001.
The DIRECTV service in Latin America added 66,000 net subscribers in the third
quarter of 2001. The total number of DIRECTV subscribers in Latin America as of
September 30, 2001 was approximately 1,497,000 compared to about 1,136,000 as of
September 30, 2000, representing an increase of approximately 32%.
Excluding a $10 million one-time severance charge, DIRECTV Latin America had
negative EBITDA of $7 million in the quarter, compared to negative EBITDA of $50
million in the same period of 2000. The change was primarily due to the
increased gross profit generated from the larger subscriber base, the
consolidation of the Argentinean and Colombian local operating companies, and
reduced marketing and administrative costs.
Satellite Services
PanAmSat, which is 81%-owned by HUGHES, generated third quarter 2001 revenues of
$252.9 million compared with $199.3 million in the prior year's period. The
increase was principally driven by a $46 million sales-type lease of long-term
capacity on the company's new PAS-10 Indian Ocean region satellite.
Excluding a $7 million one-time severance charge, EBITDA for the quarter was
$173 million and EBITDA margin was 68.5%, compared with third quarter 2000
EBITDA of $135.5 million and EBITDA margin of 68.0%. The increase in EBITDA was
principally due to the sales-type lease in the quarter.
As of September 30, 2001, PanAmSat had contracts for satellite services
representing future payments (backlog) of approximately $5.85 billion compared
to approximately $5.8 billion at the end of the third quarter of 2000.
Network Systems
Hughes Network Systems (HNS) generated third quarter 2001 revenues of $339.7
million versus $284.0 million in the third quarter of 2000. The 19.6% increase
was driven by increased sales of phones and systems for mobile satellite
programs, higher sales of enterprise networks and growth in the DIRECWAY
subscriber base. HNS added approximately 13,000 net DIRECWAY broadband customers
in the quarter, bringing the cumulative total to approximately 87,000
subscribers in the United States. Additionally, HNS shipped 500,000 DIRECTV
receiver systems in the third quarter of 2001 compared to 470,000 units in the
same period last year.
In the quarter, HNS reported better than expected EBITDA of negative $22.6
million compared to EBITDA of $16.8 million in the third quarter of 2000. The
decline in EBITDA is primarily attributable to increased investment in the
DIRECWAY broadband business and a one-time gain in the third quarter of 2000
that resulted from successful negotiations with certain narrowband wireless
customers for receivables previously written-off.
BALANCE SHEET
From December 31, 2000 to September 30, 2001, the company's consolidated cash
balance decreased $809.6 million to $698.5 million and total debt increased
$496.7 million to $1,813.3 million. The major uses of cash were for satellite
and capital expenditures, as well as for the purchase of Telocity. The $635.5
million settlement with Raytheon was treated as an increase in accrued
liabilities and a reduction in stockholder's equity in the quarter. The impact
of the $500 million payment made on October 16, 2001 will be reflected in
HUGHES' fourth quarter cash balance.
Hughes Electronics Corporation is a unit of General Motors Corporation. The
earnings of Hughes Electronics are used to calculate the earnings attributable
to the General Motors Class H common stock (NYSE:GMH).
A live webcast of HUGHES' third quarter 2001 earnings call will be available on
the company's website at www.hughes.com. The call will begin at 2:00 p.m. ET,
today. Investors are advised to allow 15 minutes prior to the call to register
and download any necessary software. Following the completion of the call, the
webcast will be archived on the Investor Relations portion of the HUGHES
website.
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