UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549-1004
==============================================================================
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report
(Date of earliest event reported) October 14, 2003
GENERAL MOTORS CORPORATION
--------------------------
(Exact Name of Registrant as Specified in its Charter)
STATE OF DELAWARE 38-0572515
----------------- ----------
(State or other jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
300 Renaissance Center, Detroit, Michigan 48265-3000
----------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (313) 556-5000
--------------
ITEM 12. Disclosure of information on financial conditions
On October 14, 2003, 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 14, 2003.
GM Reports Third Quarter Net Income of $425 million, or $0.79 per share
Adjusted net income $448 million, or $0.80 per share, excluding Hughes
Automotive operations profitable, global market share up in third quarter
Substantial contributions, strong asset returns bolster U.S. pension plans
DETROIT - General Motors Corp. (NYSE: GM, GMH) today reported net income of $425
million, or $0.79 per diluted share of GM's $1-2/3 par value common stock, in
the third quarter of 2003, compared with a net loss of $804 million, or $1.42 a
share, in the third quarter of 2002. Total net sales and revenues increased 5.4
percent to $45.9 billion.
GM's adjusted income, which excludes results from Hughes, totaled $448 million,
or $0.80 per share, in the third quarter of 2003. GM's adjusted net income in
the third quarter of 2002, excluding special items and Hughes, totaled $696
million, or $1.24 per share. The third-quarter-2002 results included special
items totaling an unfavorable $1.42 billion, or $2.62 per share. There were no
special items in the third quarter of 2003.
"On balance, General Motors posted solid business results despite ongoing
pricing pressure, lower production volumes and increased pension and health care
costs," said GM Chairman and Chief Executive Officer Rick Wagoner. "And the
accelerating U.S. economy and the enthusiastic response to our new products give
us reason for optimism as we look forward."
GM AUTOMOTIVE OPERATIONS
GM's global automotive operations earned $34 million in the third quarter of
2003, compared with $368 million in the year-ago quarter. GM North America, GM
Europe and GM Asia Pacific each reported market-share gains during the third
quarter. GM's global market share rose to 15.2 percent in the third quarter of
2003 from 15.1 percent in the third quarter of 2002.
Net income at GM North America (GMNA) totaled $128 million versus $533 million
in the third quarter of 2002. Improvements in sales mix, material-cost
performance, and productivity were offset by a production decline of nearly 5
percent, intense pricing pressure and increased pension and health care expense,
versus the year-ago period. The results were also affected by a $55 million
favorable adjustment in GMNA's recall reserves, reflecting reduced costs
associated with previously announced vehicle-recall programs, and a $27 million
unfavorable adjustment for the adoption of a new accounting interpretation, FIN
46, which relates to the consolidation of variable interest entities.
GM's U.S. market share rose to 28.7 percent in the quarter, compared with 28.0
percent in the same period last year and 27.9 percent in the second quarter of
2003.
2
GM continued to set numerous sales records during the third quarter. In the
United States, GM established a new industry sales record for total trucks,
sport utilities, and full-sized pickups. Through the first nine months of 2003,
GM sold 920,573 sport-utility vehicles, more than any other manufacturer has
previously sold in a full calendar year. Chevrolet continued to make progress
with sales rising 10 percent in the third quarter, and Cadillac is on pace to
surpass 200,000 annual vehicle sales for the first time since 1994.
"We expect that our sales momentum will continue to build, based on great new
vehicles that are just arriving in dealers' showrooms now such as the Chevrolet
Malibu and SSR, Cadillac XLR and SRX, and the Buick Rainier," Wagoner said. "In
addition, we will launch 17 more new car and truck models over the next year."
During the quarter GM reached an agreement with the United Auto Workers on a new
four-year contract.
"We believe this agreement very effectively addresses the needs of our
represented employees and the requirement that we continue to improve our
competitive position. Our close collaboration with the UAW remains an important
aspect of our steady improvement in quality and productivity," Wagoner said.
GM Europe (GME) reported a loss of $152 million in the third quarter of 2003, an
improvement from the $180 million loss in the year-ago period. Continued
progress in GME's cost-reduction efforts were partially offset by unfavorable
currency-exchange rates.
"Our market share in Europe has improved for the fourth consecutive quarter. We
expect this to continue as we launch new products, such as the highly
anticipated Opel Astra, early next year," Wagoner said.
GM Asia-Pacific reported a profit of $162 million in the third quarter of 2003
compared with earnings of $76 million a year ago, led by continued strong
performance at Shanghai GM and improved equity earnings from GM's Japanese
automotive alliances. GM Asia-Pacific wholesale vehicle sales rose 10 percent in
the third quarter, led by record sales in China.
"Our results in Asia were very encouraging. We are well positioned to
participate in the continued growth in the region as a result of our joint
ventures in China and South Korea," Wagoner said.
GM Latin America/Africa/Mid-East reported a loss of $104 million in the third
quarter of 2003 compared with a loss of $61 million a year ago. Results were
negatively affected by unfavorable economic and market conditions in Brazil and
lower sales in Venezuela.
3
GMAC
GMAC reported earnings of $630 million, up more than 30 percent from the $476
million earned in the third quarter of 2002. Financing operations remained
strong as lower credit provisions more than offset narrower net-interest
margins. Results from insurance operations more than doubled compared to the
prior year, when earnings were adversely affected by the write-down of certain
investment securities. Mortgage operations generated the biggest year-over-year
improvement reflecting higher origination and securitization volumes in both the
residential and commercial mortgage sectors.
"Once again, GMAC turned in an outstanding performance," Wagoner said. "GMAC is
firing on all cylinders, with all three business sectors contributing to a
record third quarter."
HUGHES
Hughes reported a loss of $23 million in the third quarter of 2003, compared
with a loss of $81 million in the year ago period. Revenue rose to $2.6 billion
in the third quarter of 2003, up from $2.2 billion in the same quarter last
year, led by the growing subscriber base of DIRECTV. Total DIRECTV U.S.
subscriptions increased approximately 326,000 from the third quarter of 2002 to
11.9 million.
Earlier this month, GM stockholders voted to approve transactions that would
result in the split off of Hughes and the acquisition of 34 percent of Hughes
common stock by News Corp. (NYSE: NWS, NWS.A). In September, GM received a
private-letter ruling from the Internal Revenue Service confirming that the
distribution of Hughes common stock to the holders of GM Class H common stock
would be tax-free to GM and its Class H stockholders for U.S. federal income-tax
purposes. The transactions remain subject to certain regulatory clearances,
including antitrust clearance from the U.S. Department of Justice and action by
the U.S. Federal Communications Commission. GM expects to complete the
transactions in late 2003 or early 2004.
4
CASH AND PENSION UPDATE
Automotive cash, marketable securities, and assets of the VEBA trust invested in
short-term fixed-income securities totaled $29.3 billion at Sept. 30, 2003,
excluding financing and insurance operations and Hughes, compared with $23.7
billion on June 30, 2003.
GM contributed $5.5 billion to its U.S. pension plans in September and another
$8.0 billion in early October, bringing its year-to-date contributions to $14.4
billion. In addition, GM contributed $3 billion to the VEBA trust for
retiree-health-care benefits in the third quarter.
As a result of the contributions, GM now expects 2003 pretax pension expense
will be approximately $2.6 billion, down from the previous estimate of $2.8
billion. For 2004, GM expects pretax pension expense to decline by at least $500
million to $2.1 billion or less. However, this reduction in pension expense will
be largely offset by higher interest expense related to the recent global debt
offerings.
Through the end of the third quarter, GM's pension-plan assets earned a return
of 14 percent. If asset returns remain at or above these levels for the
remainder of 2003, the funded status of GM's U.S. hourly and salaried pension
plans would improve dramatically by the end of the year and, with additional
contributions, could approach a fully funded position in the near term.
LOOKING AHEAD
General Motors said the U.S. vehicle market continues to be strong. GM expects
auto industry sales of approximately 16.9 million units in 2003. GM is
forecasting North American production of about 1.35 million vehicles in the
fourth quarter of 2003, which would bring total 2003-calendar-year production
volume to approximately 5.4 million vehicles.
GM expects to earn approximately $1.00 per share, excluding Hughes and any
special items, in the fourth quarter of 2003. As a result, GM said it would
exceed its original 2003-calendar-year earnings target of $5.00 per share,
excluding special items and Hughes.
GM financial results described throughout this release exclude special items
unless otherwise noted. See Highlights for reconciliation of adjusted results to
results based on Generally Accepted Accounting Principles (GAAP).
###
5
In this press release and related comments by General Motors management, our use
of the words "expect," "anticipate," "estimate," "forecast," "objective,"
"plan," "goal," "target," 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-18) 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.
In connection with the proposed transactions, on August 21, 2003, General Motors
Corporation ("GM"), Hughes Electronics Corporation ("Hughes") and The News
Corporation Limited ("News Corporation") filed definitive materials with the
Securities and Exchange Commission ("SEC"), including a Definitive Consent
Solicitation Statement of GM on Schedule 14A, a Registration Statement of Hughes
on Form S-4 and a Registration Statement of News Corporation on Form F-4 that
contain a consent solicitation statement of GM, a prospectus of Hughes and a
prospectus of News Corporation. Investors and security holders are urged to read
these materials, as well as any other relevant documents filed or that will be
filed with the SEC, as they become available, because these documents contain or
will contain important information. These materials and other relevant materials
(when they become available) and any other documents filed by GM, Hughes or News
Corporation with the SEC, may be obtained for free at the SEC's website,
www.sec.gov. In addition, the definitive materials contain information about how
to obtain transaction-related documents for free from GM.
This communication shall not constitute an offer to sell or the solicitation of
an offer to buy any securities, nor shall there be any sale of securities in any
jurisdiction in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such
jurisdiction. No offering of securities shall be made except by means of a
prospectus meeting the requirements of Section 10 of the Securities Act of 1933,
as amended.
6
Materials included in this document contain "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors that could cause actual results to be materially different from
historical results or from any future results expressed or implied by such
forward-looking statements. The factors that could cause actual results of GM,
Hughes and/or News Corporation to differ materially, many of which are beyond
the control of GM, Hughes or News Corporation include, but are not limited to,
the following: (1) operating costs, customer loss and business disruption,
including, without limitation, difficulties in maintaining relationships with
employees, customers, clients or suppliers, which may be greater than expected
following the transaction; (2) the regulatory approvals required for the
transaction may not be obtained on the terms expected or on the anticipated
schedule; (3) the effects of legislative and regulatory changes; (4) an
inability to retain necessary authorizations from the FCC; (5) an increase in
competition from cable as a result of digital cable or otherwise, direct
broadcast satellite, other satellite system operators, and other providers of
subscription television services; (6) the introduction of new technologies and
competitors into the subscription television business; (7) changes in labor,
programming, equipment and capital costs; (8) future acquisitions, strategic
partnerships and divestitures and the ability to access capital to maintain
financial flexibility; (9) general business and economic conditions; and (10)
other risks described from time to time in periodic reports filed by GM, Hughes
or News Corporation with the SEC. Those other risks relating to Hughes include,
but are not limited to, the uncertainties regarding the operations of DIRECTV
Latin America, LLC, Hughes' 75% owned subsidiary, which is currently operating
under Chapter 11 bankruptcy proceedings, and the performance of its satellites.
You are urged to consider statements that include the words "may," "will,"
"would," "could," "should," "believes," "estimates," "projects," "potential,"
"expects," "plans," "anticipates," "intends," "continues," "forecast,"
"designed," "goal," "outlook," "objectives," "strategy," "target," or the
negative of those words or other comparable words to be uncertain and
forward-looking. This cautionary statement applies to all forward-looking
statements included in this document.
7
General Motors Corporation
List of Special Items - After Tax
(dollars in millions except per share amounts)
Management believes that the adjusted information set forth herein is
useful to investors as it represents how Management views the results of
operations and cash of the Corporation and, therefore, is the basis on
which internal evaluation metrics are determined. The internal evaluation
metrics are those used by the Corporation's Board of Directors to evaluate
Management.
Three Months Ended Year to Date
Sept. 30, 2003 Sept. 30, 2003
-------------- --------------
Net $1-2/3 Net $1-2/3
Income EPS Income EPS
------ ----- ------ -----
Net Income $425 $0.79 $2,809 $5.08
Gain on Sale of GM Defense (A) - - (505) (0.90)
--- ---- ----- ----
Adjusted Income $425 $0.79 $2,304 $4.18
=== ==== ===== ====
(A) The Gain on Sale of GM Defense relates to the sale of GM's light
armored vehicle business to General Dynamics Corporation for net
proceeds of approximately $1.1 billion.
8
General Motors Corporation
List of Special Items - After Tax
(dollars in millions except per share amounts)
Three Months Ended Year to Date
Sept. 30, 2002 Sept. 30, 2002
-------------- --------------
Net $1-2/3 Net $1-2/3
Income EPS Income EPS
------ ----- ------ -----
Reported ($804) ($1.42) $716 $1.63
Write-down of
Fiat Investment (A) 1,371 2.44 1,371 2.43
GMNA Production
Footprint (B) 116 0.21 116 0.20
Hughes Sale of Equity
Interests (C) (68) (0.03) (68) (0.04)
GME End of Life Vehicle
Charge (D) - - 55 0.10
GME Restructuring
Charge (E) - - 407 0.73
Hughes Space Shuttle
Settlement (F) - - (59) (0.04)
Hughes GECC Contractual
Dispute (G) - - 51 0.03
Hughes Loan Guarantee
Charge (H) - - 18 0.01
----- ---- ----- ----
Adjusted $615 $1.20 $2,607 $5.05
===== ==== ===== ====
See Notes on next page.
9
General Motors Corporation
List of Special Items - After Tax
(A) The Write-down of Fiat Investment relates to GM's investment
in Fiat Auto Holdings, B.V. and reflects completion of an
impairment study relating to the carrying value of that
investment, which was reduced from $2.4 billion to $220
million.
(B) The GMNA Production Footprint charge primarily relates to
costs associated with the transfer of commercial truck
production from Janesville, Wis., to Flint, Michigan.
(C) The Hughes Sale of Equity Interests relates primarily to
the Hughes investment in Thomson Multimedia S.A.
(D) The GME End of Life Vehicle Charge relates to the European
Union's directive requiring member states to enact
legislation regarding end-of-life vehicles and the
responsibility of manufacturers for dismantling and
recycling vehicles they have sold.
(E) The GME Restructuring Charge relates to the initiative
implemented in the first quarter of 2002 to improve the
competitiveness of GM's automotive operations in Europe.
(F) The Hughes Space Shuttle Settlement relates to the
favorable resolution of a lawsuit that was filed against
the U.S. government on March 22, 1991, based upon the
National Aeronautics and Space Administration's (NASA)
breach of contract to launch ten satellites on the Space
Shuttle.
(G) The Hughes GECC Contractual Dispute relates to a loss
associated with a contractual dispute with General
Electric Capital Corporation.
(H) The Hughes Loan Guarantee Charge relates to a loan
guarantee for a Hughes Network Systems' affiliate in India.
10
General Motors Corporation
Summary Corporate Financial Results
Third Quarter Year to Date
-------------- --------------
2003 2002 2003 2002
---- ---- ---- ----
Total net sales and
revenues ($Mil's) $45,929 $43,580 $143,602 $138,133
Adjusted $45,929 $43,605 $142,788 $138,187
Adjusted excluding Hughes
(Automotive and Financing)$43,343 $41,402 $135,586 $131,702
Net income (loss)($Mil's) $425 $(804) $2,809 $716
Adjusted $425 $615 $2,304 $2,607
Adjusted excluding Hughes $448 $696 $2,359 $2,990
Net margin
(net income / total net
sales and revenues) 0.9% (1.8%) 2.0% 0.5%
Adjusted 0.9% 1.4% 1.6% 1.9%
Adjusted excluding Hughes 1.0% 1.7% 1.7% 2.3%
Earnings per share
Basic $1-2/3 $0.79 $(1.42) $5.09 $1.65
Diluted $1-2/3 $0.79 $(1.42) $5.08 $1.63
Basic Class H $(0.02) $(0.01) $(0.04) $(0.28)
Diluted Class H $(0.02) $(0.01) $(0.04) $(0.28)
Adjusted earnings per share
Basic $1-2/3 $0.79 $1.20 $4.19 $5.09
Diluted $1-2/3 $0.79(1) $1.20 $4.18 $5.05
Diluted $1-2/3
excluding Hughes $0.80 $1.24 $4.20 $5.29
Basic Class H $(0.02) $(0.06) $(0.04) $(0.32)
Diluted Class H $(0.02) $(0.06) $(0.04) $(0.32)
GM $1-2/3 par value average
shares outstanding (Mil's)
Basic shares 561 560 561 560
Diluted shares 561 561 561 565
Cash dividends per share
of common stocks
GM $1-2/3 par value $0.50 $0.50 $1.50 $1.50
Book value per share of
common stocks at Sept. 30
GM $1-2/3 par value $13.76 $25.44
GM Class H $2.75 $5.09
ACO total cash & marketable
securities at Sept.30
($Bil's') $28.6 $16.0
Cash in short-term VEBA $3.4 $3.0
---- ----
ACO total cash & marketable
securities plus short-term $32.0 $19.0
VEBA
Less: Hughes cash & marketable
securities $2.7 $0.8
--- ---
Total Automotive cash &
Marketable securities plus
Short-term VEBA $29.3 $18.2
==== ====
Automotive, Communication Services
and Other Operations ($Mil's)
Depreciation $1,326 $1,166 $3,904 $3,441
Amortization of special tools 676 645 2,029 1,896
Amortization of intangible
Assets 29 3 77 6
----- ----- ----- -----
Total $2,031 $1,814 $6,010 $5,343
===== ===== ===== =====
See reconciliation of adjusted financial results on pages 12 -15, and
and footnotes on page 17.
11
General Motors Corporation
Summary Corporate Financial Results
Third Quarter
2003 and 2002
--------------
(Dollars in millions)
Total net sales and Reported Special Items Adjusted
revenues -------- ------------- --------
2003 2002 2003 2002 2003 2002
---- ---- ---- ---- ---- ----
GMNA $26,810 $26,704 $ - $ - $26,810 $26,704
GME 6,270 5,564 - - 6,270 5,564
GMLAAM 1,304 1,161 - - 1,304 1,161
GMAP 1,384 1,158 - - 1,384 1,158
------ ------ -- -- ------ ------
Total GMA 35,768 34,587 - - 35,768 34,587
Hughes 2,586 2,178 - 25 2,586 2,203
Other 77 (108) - - 77 (108)
------ ------ -- -- ------ ------
Total ACO 38,431 36,657 - 25 38,431 36,682
------ ------ -- -- ------ ------
GMAC 7,473 6,801 - - 7,473 6,801
Other Financing 25 122 - - 25 122
------ ------ -- -- ------ ------
Total FIO 7,498 6,923 - - 7,498 6,923
------ ------ -- -- ------ ------
Total net sales and
revenues $45,929 $43,580 $ - $25 $45,929 $43,605
====== ====== == == ====== ======
Income / (expense)
before income taxes and
minority interest
GMNA $200 $586 $ - $186 $200 $772
GME (251) (248) - - (251) (248)
GMLAAM (146) (96) - - (146) (96)
GMAP - 9 - - - 9
--- ----- -- ----- --- ---
Total GMA (197) 251 - 186 (197) 437
Hughes (44) 5 - (109) (44) (104)
Other (374) (2,426) - 2,211 (374) (215)
--- ----- -- ----- --- ---
Total ACO (615) (2,170) - 2,288 (615) 118
--- ----- -- ----- --- ---
GMAC 962 789 - - 962 789
Other Financing (4) (24) - - (4) (24)
--- ----- -- ----- --- ---
Total FIO 958 765 - - 958 765
Total income / --- ----- -- ----- --- ---
(expense) before
income taxes and
minority interests $343 $(1,405) $ - $2,288 $343 $883
=== ===== == ===== === ===
12
General Motors Corporation
Summary Corporate Financial Results
Third Quarter
2003 and 2002
---------------
(Dollars in millions) Reported Special Items Adjusted
-------- ------------ --------
2003 2002 2003 2002 2003 2002
---- ---- ---- ---- ---- ----
Net income
GMNA $128 $417 $ - $ 116 $128 $533
GME (152) (180) - - (152) (180)
GMLAAM (104) (61) - - (104) (61)
GMAP 162 76 - - 162 76
----- ----- -- ----- ----- -----
Total GMA 34 252 - 116 34 368
Hughes (23) (13) - (68) (23) (81)
Other (212) (1,486) - 1,371 (212) (115)
----- ----- -- ----- ----- -----
Total ACO (201) (1,247) - 1,419 (201) 172
----- ----- -- ----- ----- -----
GMAC 630 476 - - 630 476
Other Financing (4) (33) - - (4) (33)
----- ----- -- -- ----- -----
Total FIO 626 443 - - 626 443
----- ----- -- ----- ----- -----
Net income (loss) $425 $(804) $ - $1,419 $425 $615
===== ===== == ===== ===== =====
Income tax expense
(benefit)
GMNA $52 $177 $ - $ 70 $52 $247
GME (96) (63) - - (96) (63)
GMLAAM (51) (47) - - (51) (47)
GMAP 7 21 - - 7 21
--- --- -- --- --- ---
Total GMA (88) 88 - 70 (88) 158
Hughes (45) (5) - (41) (45) (46)
Other (152) (918) - 840 (152) (78)
--- --- -- -- --- ---
Total ACO (285) (835) - 869 (285) 34
--- --- -- --- --- ---
GMAC 374 289 - - 374 289
Other Financing - (5) - - - (5)
--- --- -- --- --- ---
Total FIO 374 284 - - 374 284
--- --- -- --- --- ---
Income tax expense
(benefit) $89 $(551) $ - $869 $89 $318
=== ==== == === === ===
Effective tax rate
GMNA 26.0% 30.2% - 37.6% 26.0% 32.0%
GME 38.2% 25.4% - - 38.2% 25.4%
GMLAAM 34.9% 49.0% - - 34.9% 49.0%
GMAP - 233.3% - - - 233.3%
Hughes 102.3% (100.0%) - 37.6% 102.3% 44.2%
GMAC 38.9% 36.6% - - 38.9% 36.6%
Total GM Corp. 25.9% 39.2% - 38.0% 25.9% 36.0%
Equity income (loss)
and minority interests
GMNA $(20) $8 $ - $ - $(20) $8
GME 3 5 - - 3 5
GMLAAM (9) (12) - - (9) (12)
GMAP 169 88 - - 169 88
--- -- -- -- --- --
Total GMA $143 $89 $ - $ - $143 $89
=== == == == === ==
See footnotes on page 17.
13
General Motors Corporation
Summary Corporate Financial Results
Year to Date
2003 and 2002
--------------
(Dollars in millions)
Total net sales and Reported Special Items Adjusted
revenues -------- ------------ --------
2003 2002 2003 2002 2003 2002
---- ---- ---- ---- ---- ----
GMNA $85,331 $86,619 $ - $ - $85,331 $86,619
GME 20,195 17,149 - - 20,195 17,149
GMLAAM 3,468 3,768 - - 3,468 3,768
GMAP 3,798 3,344 - - 3,798 3,344
------- ------- --- -- ------- -------
Total GMA 112,792 110,880 - - 112,792 110,880
Hughes 7,202 6,431 - 54 7,202 6,485
Other 1,211 837 (814) - 397 837
------- ------- --- -- ------- -------
Total ACO 121,205 118,148 (814) 54 120,391 118,202
------- ------- --- -- ------- -------
GMAC 22,383 19,753 - - 22,383 19,753
Other Financing 14 232 - - 14 232
------- ------- --- -- ------- -------
Total FIO 22,397 19,985 - - 22,397 19,985
------- ------- --- -- ------- -------
Total net sales and
revenues $143,602 $138,133 $(814) $54 $142,788 $138,187
======= ======= === == ======= =======
Income / (expense)
before income taxes
and minority interest
GMNA $1,029 $3,305 $ - $186 $1,029 $3,491
GME (399) (1,290) - 726 (399) (564)
GMLAAM (286) (234) - - (286) (234)
GMAP 30 (35) - - 30 (35)
----- ----- --- ----- ----- -----
Total GMA 374 1,746 - 912 374 2,658
Hughes (5) (456) - (92) (5) (548)
Other (282) (2,749) (814) 2,211 (1,096) (538)
----- ----- --- ----- ----- -----
Total ACO 87 (1,459) (814) 3,031 (727) 1,572
----- ----- --- ----- ----- -----
GMAC 3,440 2,223 - - 3,440 2,223
Other Financing (16) (34) - - (16) (34)
----- ----- --- ----- ----- -----
Total FIO 3,424 2,189 - - 3,424 2,189
Total income / ----- ----- --- ----- ----- -----
(expense) before
income taxes and
minority interests $3,511 $730 $(814) $3,031 $2,697 $3,761
===== ===== === ===== ===== =====
14
General Motors Corporation
Summary Corporate Financial Results
Year to Date
2003 and 2002
---------------
(Dollars in millions) Reported Special Items Adjusted
-------- ------------ --------
2003 2002 2003 2002 2003 2002
---- ---- ---- ---- ---- ----
Net income
GMNA $759 $2,348 $ - $116 $759 $2,464
GME (220) (882) - 462 (220) (420)
GMLAAM (219) (174) - - (219) (174)
GMAP 400 122 - - 400 122
----- ----- --- ----- --- -----
Total GMA 720 1,414 - 578 720 1,992
Hughes (2) (55) (325) - (58) (55) (383)
Other (7) (1,685) (505) 1,371 (512) (314)
----- ----- --- ----- ----- -----
Total ACO 658 (596) (505) 1,891 153 1,295
----- ----- --- ----- ----- -----
GMAC 2,163 1,346 - - 2,163 1,346
Other Financing (12) (34) - - (12) (34)
----- ----- --- ----- ----- -----
Total FIO 2,151 1,312 - - 2,151 1,312
----- ----- --- ----- ----- -----
Net income (loss) $2,809 $716 $(505) $1,891 $2,304 $2,607
===== ===== === ===== ===== =====
Income tax expense
(benefit)
GMNA $268 $967 $ - $70 $268 $1,037
GME (152) (374) - 264 (152) (110)
GMLAAM (83) (79) - - (83) (79)
GMAP 26 12 - - 26 12
----- ----- --- ----- ----- -----
Total GMA 59 526 - 334 59 860
Hughes (50) (190) - (34) (50) (224)
Other (303) (1,020) (309) 840 (612) (180)
----- ----- --- ----- ----- -----
Total ACO (294) (684) (309) 1,140 (603) 456
----- --- --- ----- ----- -----
GMAC 1,308 828 - - 1,308 828
Other Financing (4) (7) - - (4) (7)
----- --- --- ----- ----- -----
Total FIO 1,304 821 - - 1,304 821
----- --- --- ----- ----- -----
Income tax expense
(benefit) $1,010 $137 $(309) $1,140 $701 $1,277
===== === === ===== ===== =====
Effective tax rate
GMNA 26.0% 29.3% - 37.6% 26.0% 29.7%
GME 38.1% 29.0% - 36.4% 38.1% 19.5%
GMLAAM 29.0% 33.8% - - 29.0% 33.8%
GMAP 86.7% (34.3%) - - 86.7% (34.3%)
Hughes 1000.0% 41.7% - 37.0% 1000.0% 40.9%
GMAC 38.0% 37.2% - - 38.0% 37.2%
Total GM Corp. 28.8% 18.8% 38.0% 37.6% 26.0% 34.0%
Equity income (loss)
and minority interests
GMNA $(2) $10 $- $- $(2) $10
GME 27 34 - - 27 34
GMLAAM (16) (19) - - (16) (19)
GMAP 396 169 - - 396 169
--- --- --- --- --- ---
Total GMA $405 $194 $ - $ - $405 $194
=== === === === === ===
See footnotes on page 17.
15
General Motors Corporation
Operating Statistics
Third Quarter Year to Date
-------------- --------------
2003 2002 2003 2002
---- ---- ---- ----
(units in thousands)
Worldwide Wholesale Sales
United States - Cars 453 495 1,439 1,568
United States - Trucks 686 661 2,205 2,078
----- ----- ----- -----
Total United States 1,139 1,156 3,644 3,646
Canada, Mexico, and Other 113 152 479 581
----- ----- ----- -----
Total GMNA 1,252 1,308 4,123 4,227
GME 372 364 1,246 1,225
GMLAAM 134 162 377 476
GMAP 131 119 412 313
----- ----- ----- -----
Total Worldwide 1,889 1,953 6,158 6,241
===== ===== ===== =====
Vehicle Unit Deliveries
Chevrolet - Cars 221 187 612 585
Chevrolet - Trucks 517 485 1,395 1,430
Pontiac 125 132 352 401
GMC 163 151 426 415
Buick 90 135 258 324
Oldsmobile 29 38 96 123
Saturn 70 66 217 212
Cadillac 58 56 154 145
Other 25 20 72 50
----- ----- ----- -----
Total United States 1,298 1,270 3,582 3,685
Canada, Mexico, and Other 183 183 514 570
----- ----- ----- -----
Total GMNA 1,481 1,453 4,096 4,255
GME 433 416 1,387 1,354
GMLAAM 137 152 391 433
GMAP 192 174 542 509
----- ----- ----- -----
Total Worldwide 2,243 2,195 6,416 6,551
===== ===== ===== =====
Market Share
United States - Cars 26.3% 25.1% 25.4% 25.4%
United States - Trucks 30.6% 30.6% 29.9% 30.6%
Total United States 28.7% 28.0% 27.8% 28.1%
Total North America 28.2% 27.6% 27.3% 27.7%
Total Europe 9.2% 9.0% 9.4% 9.1%
Total LAAM 15.4% 16.7% 15.3% 15.8%
Asia and Pacific 4.9% 4.7% 4.6% 4.7%
Total Worldwide 15.2% 15.1% 14.5% 14.9%
U.S. Retail/Fleet Mix
% Fleet Sales - Cars 30.5% 31.0% 30.1% 28.6%
% Fleet Sales - Trucks 9.5% 10.9% 12.9% 11.6%
Total Vehicles 18.1% 19.6% 20.1% 19.0%
Retail Lease as % of Retail Sales
Total Smartlease
and Smartbuy 6.6% 8.4%
Days Supply of Inventory
at September 30
United States - Cars 69 75
United States - Trucks 104 96
GMNA Capacity Utilization
(2 shift rated) 86.1% 89.8% 88.3% 88.3%
GMNA Vehicle Revenue
Per Unit $18,984 $18,782
16
General Motors Corporation
Operating Statistics
Third Quarter Year to Date
-------------- --------------
2003 2002 2003 2002
---- ---- ---- ----
GMAC's U.S. Cost of Borrowing 3.40% 4.03%
Current Debt Spreads Over
U.S. Treasuries
2 Year 185 bp 340 bp
5 Year 210 bp 360 bp
10 Year 265 bp 380 bp
Worldwide Employment
at September 30 (in 000's)
United States Hourly 119 123
United States Salary 40 41
--- ---
Total United States 159 164
Canada, Mexico, and Other 31 33
--- ---
GMNA 190 197
GME 63 68
GMLAAM 23 23
GMAP 14 11
Hughes 12 12
GMAC 32 31
Other 6 8
--- ---
Total 340 350
=== ===
Worldwide Payrolls ($Mil's) $5,008 $5,146 $15,727 $15,568
Footnotes:
---------
(1) This amount is comparable to First Call analysts' consensus.
(2) 2002 amounts exclude Hughes Series A Preferred Stock dividends
paid to General Motors and Hughes write off of goodwill for
DirecTV Latin America and DirecTV Broadband recorded as a
cumulative effect of accounting change in the first quarter of
2002 in Hughes' stand alone financial statements. In accordance
with SFAS 142, GM evaluated the carrying value of goodwill
associated with its Direct-to-Home Broadcast reporting unit in
the aggregate and determined that the goodwill was not impaired.
17
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
2003 2002 2003 2002
---- ---- ---- ----
(dollars in millions except per share amounts)
Total net sales and revenues $45,929 $43,580 $143,602 $138,133
------ ------ ------- -------
Cost of sales and other expenses 37,016 36,957 115,339 113,754
Selling, general, and
administrative expenses 6,003 6,104 17,792 17,795
Interest expense 2,567 1,924 6,960 5,854
------ ------ ------- -------
Total costs and expenses 45,586 44,985 140,091 137,403
------ ------ ------- -------
Income before income taxes and
minority interests 343 (1,405) 3,511 730
Income tax expense (benefit) 89 (551) 1,010 137
Equity income (loss) and minority
interests 171 50 308 123
--- ---- ------ ---
Net income (loss) 425 (804) 2,809 716
Dividends on preference stocks - - - (47)
--- --- ----- ---
Earnings attributable to common
stocks $425 $(804) $2,809 $669
=== === ===== ===
Basic earnings (losses) per share
attributable to common stocks
Earnings per share attributable to
$1-2/3 par value $0.79 $(1.42) $5.09 $1.65
==== ==== ==== ====
Earnings (losses) per share
attributable to Class H $(0.02) $(0.01) $(0.04) $(0.28)
==== ==== ==== ====
Earnings (losses) per share
attributable to common stocks
assuming dilution
Earnings per share attributable to
$1-2/3 par value $0.79 $(1.42) $5.08 $1.63
==== ==== ==== ====
Earnings (losses) per share
attributable to Class H $(0.02) $(0.01) $(0.04) $(0.28)
==== ==== ==== ====
18
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION TO THE CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
2003 2002 2003 2002
---- ---- ---- ----
(dollars in millions)
AUTOMOTIVE, COMMUNICATIONS SERVICES,
AND OTHER OPERATIONS
Total net sales and revenues $38,431 $36,657 $121,205 $118,148
------ ------ ------- -------
Cost of sales and other expenses 34,900 34,868 109,052 107,540
Selling, general, and
administrative expenses 3,495 3,645 10,617 11,153
Interest expense 587 242 1,310 706
------ ------ ------- -------
Total costs and expenses 38,982 38,755 120,979 119,399
Net expense from transactions with
Financing and Insurance
Operations 64 72 139 208
------ ------ ------- -------
Income (loss) before income taxes
and minority interests (615) (2,170) 87 (1,459)
Income tax expense (benefit) (285) (835) (294) (684)
Equity income and minority
interests 129 88 277 179
--- ----- --- -----
Net income - Automotive,
Communications Services, and
Other Operations $(201) $(1,247) $658 $(596)
=== ===== === ===
Operations
FINANCING AND INSURANCE OPERATIONS
Total revenues $7,498 $6,923 $22,397 $19,985
----- ----- ------ ------
Interest expense 1,980 1,682 5,650 5,148
Depreciation and amortization
expense 1,484 1,395 4,568 4,109
Operating and other expenses 2,315 2,315 6,560 6,171
Provisions for financing and
insurance losses 825 838 2,334 2,576
----- ----- ------ ------
Total costs and expenses 6,604 6,230 19,112 18,004
Net income from transactions with
Automotive, Communications
Services, and Other Operations (64) (72) (139) (208)
----- ----- ------ ------
Income before income taxes and
minority interests 958 765 3,424 2,189
Income tax expense 374 284 1,304 821
Equity income (loss) and minority
interests 42 (38) 31 (56)
--- --- ----- -----
Net income - Financing and
Insurance Operations $626 $443 $2,151 $1,312
=== === ===== =====
The above Supplemental Information is intended to facilitate analysis
of General Motors Corporation's businesses: (1) Automotive,
Communications Services, and Other Operations; and (2) Financing
and Insurance Operations.
19
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Sept. 30, Sept. 30,
2003 Dec. 31, 2002
(Unaudited) 2002 (Unaudited)
----------- ---- -----------
ASSETS (dollars in millions)
Cash and cash equivalents $41,854 $21,449 $22,008
Marketable securities 21,368 16,825 15,022
------ ------ ------
Total cash and marketable securities 63,222 38,274 37,030
Finance receivables - net 160,233 134,647 125,958
Accounts and notes receivable (less allowances) 17,817 15,715 14,116
Inventories (less allowances) 11,229 9,967 10,673
Deferred income taxes 38,902 39,865 29,778
Equipment on operating leases - net 35,982 32,988 32,871
Equity in net assets of nonconsolidated
associates 5,803 5,044 5,045
Property - net 39,171 37,514 36,328
Intangible assets - net 18,064 17,954 17,100
Other assets 44,054 37,028 38,777
------- ------- -------
Total assets $434,477 $368,996 $347,676
======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable (principally trade) $30,129 $25,082 $24,572
Notes and loans payable 261,323 201,940 186,531
Postretirement benefits other than pensions 35,875 38,186 37,976
Pensions 19,127 22,762 9,785
Deferred income taxes 6,965 7,178 5,969
Accrued expenses and other liabilities 68,965 66,200 62,894
------- ------- -------
Total liabilities 422,384 361,348 327,727
Minority interests 1,324 834 817
Stockholders' equity
$1-2/3 par value common stock
(outstanding, 560,741,759;
560,447,797; and 560,322,989 shares) 935 936 936
Class H common stock (outstanding,
1,108,731,138; 958,284,272;
and 958,110,288 shares) 111 96 96
Capital surplus (principally additional
paid-in capital) 22,884 21,583 21,561
Retained earnings 12,000 10,031 9,291
------ ------ -------
Subtotal 35,930 32,646 31,884
Accumulated foreign currency translation
adjustments (2,099) (2,784) (3,009)
Net unrealized loss on derivatives (130) (205) (286)
Net unrealized gains on securities 515 372 141
Minimum pension liability adjustment (23,447) (23,215) (9,598)
------ ------ ------
Accumulated other comprehensive loss (25,161) (25,832) (12,752)
------ ------ ------
Total stockholders' equity 10,769 6,814 19,132
------- ------- -------
Total liabilities and stockholders' equity $434,477 $368,996 $347,676
======= ======= =======
20
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION TO THE CONSOLIDATED BALANCE SHEETS
Sept. 30, Sept. 30,
2003 Dec. 31, 2002
(Unaudited) 2002 (Unaudited)
----------- ---- -----------
ASSETS (dollars in millions)
Automotive, Communications Services,
and Other Operations
Cash and cash equivalents $20,530 $13,291 $14,670
Marketable securities 8,022 2,174 1,360
------- ------- -------
Total cash and marketable securities 28,552 15,465 16,030
Accounts and notes receivable
(less allowances) 6,613 5,861 5,649
Inventories (less allowances) 11,229 9,967 10,673
Equipment on operating leases
(less accumulated depreciation) 6,401 5,305 4,524
Deferred income taxes and
other current assets 10,842 10,816 9,061
------ ------ -------
Total current assets 63,637 47,414 45,937
Equity in net assets of
nonconsolidated associates 5,803 5,044 5,045
Property - net 37,174 35,693 34,569
Intangible assets - net 14,808 14,611 13,796
Deferred income taxes 30,353 31,431 22,884
Other assets 7,980 7,781 15,112
------- ------- -------
Total Automotive, Communications Services, and
Other Operations assets 159,755 141,974 137,343
Financing and Insurance Operations
Cash and cash equivalents 21,324 8,158 7,338
Investments in securities 13,346 14,651 13,662
Finance receivables - net 160,233 134,647 125,958
Investment in leases and other receivables 38,781 35,517 34,629
Other assets 41,038 34,049 28,746
Net receivable from Automotive, Communications
Services, and Other Operations 1,735 1,089 529
------- ------- -------
Total Financing and Insurance
Operations assets 276,457 228,111 210,862
------- ------- -------
Total assets $436,212 370,085 $348,205
======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Automotive, Communications Services,
and Other Operations
Accounts payable (principally trade) $22,727 $20,169 $19,851
Loans payable 836 1,516 1,472
Accrued expenses 42,207 40,518 36,817
Net payable to Financing and
Insurance Operations 1,735 1,089 529
------- ------- -------
Total current liabilities 67,505 63,292 58,669
Long-term debt 34,419 16,651 16,794
Postretirement benefits other than pensions 31,949 34,275 34,138
Pensions 19,063 22,709 9,742
Other liabilities and deferred income taxes 15,560 15,461 15,764
------- ------- -------
Total Automotive, Communications Services, and
Other Operations liabilities 168,496 152,388 135,107
Financing and Insurance Operations
Accounts payable 7,402 4,913 4,721
Debt 226,068 183,773 168,265
Other liabilities and deferred income taxes 22,153 21,363 20,163
------- ------- -------
Total Financing and Insurance Operations 255,623 210,049 193,149
------- ------- -------
liabilities
Total liabilities 424,119 362,437 328,256
Minority interests 1,324 834 817
Stockholders' equity
$1-2/3 par value common stock
(outstanding, 560,741,759;
560,447,797; and 560,322,989 shares) 935 936 936
Class H common stock (outstanding,
1,108,731,138; 958,284,272;
and 958,110,288 shares) 111 96 96
Capital surplus (principally
additional paid-in capital) 22,884 21,583 21,561
Retained earnings 12,000 10,031 9,291
------ ------ ------
Subtotal 35,930 32,646 31,884
Accumulated foreign currency translation
adjustments (2,099) (2,784) (3,009)
Net unrealized loss on derivatives (130) (205) (286)
Net unrealized gains on securities 515 372 141
Minimum pension liability adjustment (23,447) (23,215) (9,598)
------ ------ ------
Accumulated other comprehensive loss (25,161) (25,832) (12,752)
------ ------ ------
Total stockholders' equity 10,769 6,814 19,132
------- ------- -------
Total liabilities and stockholders' equity $436,212 $370,085 $348,205
======= ======= =======
The above Supplemental Information is intended to facilitate
analysis of General Motors Corporation's businesses: (1) Automotive,
Communications Services, and Other Operations; and (2) Financing
and Insurance Operations.
21
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
September 30,
---------------------
2003 2002
---- ----
(dollars in millions)
Net cash provided by operating activities $10,299 $17,190
Cash flows from investing activities
Expenditures for property (5,224) (4,990)
Investments in marketable securities -
acquisitions (12,600) (35,024)
Investments in marketable securities -
liquidations 7,997 32,425
Net originations and purchases of mortgage
servicing rights (2,029) (1,290)
Increase in finance receivables (103,738) (102,899)
Proceeds from sales of finance receivables 76,177 85,492
Operating leases - acquisitions (9,282) (9,817)
Operating leases - liquidations 8,137 7,722
Investments in companies, net of cash acquired (206) (306)
Proceeds from sale of business units 1,076 -
Other (918) 223
------ ------
Net cash used in investing activities (40,610) (28,464)
------ ------
Cash flows from financing activities
Net increase (decrease) in loans payable (436) 7,528
Long-term debt - borrowings 80,065 25,731
Long-term debt - repayments (28,579) (18,009)
Repurchases of common and preference stocks - (97)
Proceeds from issuing common stocks - 64
Proceeds from sales of treasury stocks - 19
Cash dividends paid to stockholders (840) (887)
------ ------
Net cash provided by financing activities 50,210 14,349
------ ------
Effect of exchange rate changes on cash and
cash equivalents 506 378
------ ------
Net increase (decrease) in cash and cash
equivalents 20,405 3,453
Cash and cash equivalents at beginning of the
period 21,449 18,555
------ ------
Cash and cash equivalents at end of the period $41,854 $22,008
====== ======
22
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION TO THE
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Automotive, Comm. Financing and
Serv. and Other Insurance
--------------- -------------
Nine Months Ended September 30,
-----------------------------------
2003 2002 2003 2002
---- ---- ---- ----
(dollars in millions)
Net cash provided by operating
activities $1,121 $8,147 $9,178 $9,043
Cash flows from investing activities
Expenditures for property (4,756) (4,920) (468) (70)
Investments in marketable securities
- acquisitions (7,033) (1,391) (5,567) (33,633)
Investments in marketable securities
- liquidations 1,185 821 6,812 31,604
Net originations and purchases of
mortgage servicing rights - - (2,029) (1,290)
Increase in finance receivables - - (103,738) (102,899)
Proceeds from sales of finance
receivables - - 76,177 85,492
Operating leases - acquisitions - - (9,282) (9,817)
Operating leases - liquidations - - 8,137 7,722
Investments in companies, net of cash
acquired (64) (156) (142) (150)
Proceeds from sale of business units 1,076 - - -
Other (277) 258 (641) (35)
----- ----- ------ ------
Net cash used in investing activities (9,869) (5,388) (30,741) (23,076)
----- ----- ------ ------
Cash flows from financing activities
Net increase (decrease) in loans
payable (866) (930) 430 8,458
Long-term debt - borrowings 17,262 6,149 62,803 19,582
Long-term debt - repayments (588) (183) (27,991) (17,826)
Repurchase of common and preference
stocks - (97) - -
Proceeds from issuing common stocks - 64 - -
Proceeds from sales of treasury stocks - 19 - -
Cash dividends paid to stockholders (840) (887) - -
------ ----- ------ ------
Net cash provided by financing
activities 14,968 4,135 35,242 10,214
------ ----- ------ ------
Effect of exchange rate changes on
cash and cash equivalents 373 372 133 6
Net transactions with
Automotive/Financing Operations 646 (1,028) (646) 1,028
------ ----- ------ ------
Net increase (decrease) in cash and
cash equivalents 7,239 6,238 13,166 (2,785)
Cash and cash equivalents at
beginning of the period 13,291 8,432 8,158 10,123
------ ------ ------ ------
Cash and cash equivalents at end of
the period $20,530 $14,670 $21,324 $7,338
====== ====== ====== =====
The above Supplemental Information is intended to facilitate
analysis of General Motors Corporation's businesses: (1) Automotive,
Communications Services, and Other Operations; and (2) Financing and
Insurance Operations.
23
HUGHES ANNOUNCES THIRD QUARTER GROWTH OF 17% IN REVENUES AND
33% IN OPERATING PROFIT BEFORE D&A; OPERATING PROFIT QUADRUPLES
DIRECTV U.S. Adds 326,000 Owned and Operated
Subscribers in the Quarter, a 58% Increase over Last Year
El Segundo, Calif., October 14, 2003 -- Hughes Electronics Corporation
("HUGHES"), a world-leading provider of digital television entertainment,
broadband satellite networks and services, and global video and data
broadcasting, today reported that third quarter 2003 revenues increased 17% to
$2.57 billion compared with $2.19 billion in the third quarter of 2002.
Operating profit before depreciation and amortization1 for the quarter increased
33% to $359 million compared with $270 million in the same period last year.
Operating profit increased to $77 million compared with operating profit of $16
million in the third quarter of 2002. In addition, HUGHES reported a third
quarter 2003 net loss of $23 million compared to a net loss of $14 million in
the same period of 2002.
"This quarter's results are yet another indication of the rather
significant changes we have made across our company to continuously improve
operational performance. Compared to last year, each of our businesses generated
higher revenues and operating profit before depreciation and amortization in the
quarter," said Jack A. Shaw, HUGHES' president and chief executive officer.
"Importantly, DIRECTV U.S. had its second best quarter ever in terms of gross
owned and operated subscriber additions, and the 326,000 net new subscribers
added in the quarter represented a 58% increase over last year's third quarter.
I believe that this sharp increase in DIRECTV's subscriber growth reflects
consumers' desire for DIRECTV's superior, all digital television programming as
well as their continued dissatisfaction with their cable television service."
Shaw continued: "At the top line, DIRECTV U.S. once again was the major
contributor to our growth in the quarter with a nearly 20% increase in revenues
driven by continued strong subscriber growth and a $4.50 increase in average
monthly revenue per subscriber to $63.70. Hughes Network Systems - or HNS - also
contributed to HUGHES' growth with a 17% increase in revenues principally due to
strong sales in its enterprise and residential DIRECWAY broadband businesses, as
well as in its set-top box business. Driven by the gross profit on this revenue
growth, DIRECTV U.S. and HNS were also the primary contributors to HUGHES' 33%
growth in operating profit before depreciation and amortization."
Shaw finished: "We're also demonstrating significant improvement in our
cash flow--which we define as cash flows from operating activities plus cash
flows from investing activities--where, for the third quarter in a row, HUGHES
generated positive cash flow. Also for the third consecutive quarter, HUGHES is
increasing its full-year guidance for revenues, operating profit and cash flow
primarily due to the strong DIRECTV U.S. and HNS results in the third quarter as
well as the continued solid results expected for the remainder of the year."
HUGHES' operating profit increased to $77 million in the third quarter of
2003 from $16 million in the same period of last year. The improvement was due
to the higher operating profit before depreciation and amortization partially
offset by higher depreciation and amortization, primarily at DIRECTV U.S. due to
the reinstatement of amortization expense during the fourth quarter of 2002
related to certain intangible assets in accordance with Emerging Issues Task
Force ("EITF") Issue No. 02-17, as well as additional infrastructure
expenditures during the last year.
HUGHES recorded a third quarter 2003 net loss of $23 million compared to a
net loss of $14 million in the same period of 2002. The higher net loss was
primarily due to a $159 million pre-tax gain in 2002 resulting from the sale of
8.8 million shares of Thomson Multimedia common stock and a third quarter 2003
non-cash charge of $65 million recorded as "Cumulative effect of accounting
change, net of taxes" related to the adoption of FASB Interpretation No. 46
("FIN 46"). These changes were partially offset by the higher 2003 operating
profit discussed above, the favorable resolution of certain tax refund claims
for $48 million in the quarter, a $32 million write-down of two equity
investments and a pre-tax loss of $25 million related to the sale of
SkyPerfecTV! common stock in the third quarter of 2002, and the absence of net
losses in 2003 at DIRECTV Broadband due to its shutdown on February 28, 2003.
24
NINE-MONTH FINANCIAL REVIEW
For the first nine months of 2003, revenues increased 12% to $7.17
billion, compared to $6.41 billion in the first nine months of 2002. The
increase was primarily due to continued subscriber growth and higher average
monthly revenue per subscriber ("ARPU") at DIRECTV U.S. as well as increased
sales in the residential DIRECWAY(R) broadband business at HNS, partially offset
by lower DIRECTV Latin America revenues related to the World Cup programming
services in 2002 as well as a smaller subscriber base and further devaluations
to several Latin American currencies in 2003.
Operating profit before depreciation and amortization for the first nine
months of 2003 was $1.07 billion compared with $586 million in the same period
of 2002. Operating profit before depreciation and amortization margin was 15%
compared to 9% in the first nine months of 2002. The 82% increase in operating
profit before depreciation and amortization and the corresponding increase in
margin were primarily attributable to the additional gross profit gained from
the DIRECTV U.S. revenue growth, reduced losses from the 2002 World Cup
programming at DIRECTV Latin America and improved efficiencies associated with
HNS' larger residential DIRECWAY subscriber base. Also impacting the 2002
operating profit before depreciation and amortization results was a charge of
$48 million related to a settlement with GECC and a $95 million one-time gain
due to the favorable resolution of a lawsuit filed against the U.S. government
on March 22, 1991.
HUGHES' operating profit for the first nine months of 2003 was $258
million compared with an operating loss of $170 million in the same period of
2002. The improvement was due to the higher operating profit before depreciation
and amortization discussed above partially offset by higher depreciation and
amortization expense, particularly at DIRECTV U.S. resulting from the
reinstatement of amortization expense related to certain intangible assets in
accordance with EITF Issue No. 02-17 during the fourth quarter of 2002, as well
as additional infrastructure expenditures during the last year.
For the first nine months of 2003, HUGHES had a net loss of $52 million
compared to a net loss of $1.01 billion in the same period of 2002. The
improvement was primarily due to a first quarter 2002 charge associated with
HUGHES' adoption of Statement of Financial Accounting Standards ("SFAS") No.
142, "Goodwill and Other Intangible Assets" of $681 million, recorded as
"Cumulative effect of accounting change, net of taxes." Also contributing to the
change was the improved 2003 operating profit discussed above, a 2002 net
interest expense charge of $74 million related to the GECC settlement and higher
losses in 2002 at DIRECTV Broadband. These improvements were partially offset by
the $159 million pre-tax gain on the sale of Thomson shares in 2002, a higher
income tax benefit generated in 2002 resulting from the larger pre-tax loss and
the $65 million charge related to the adoption of FIN 46 in 2003.
Segment Financial Review: third Quarter 2003
Direct-To-Home Broadcast
Third quarter 2003 revenues for the segment increased 18% to $2.09 billion
from $1.76 billion in the third quarter of 2002. The segment had operating
profit before depreciation and amortization of $222 million compared with $177
million in the third quarter of 2002. Operating profit for the segment was $42
million in the third quarter of 2003 compared to $21 million in the same period
of 2002.
On February 28, 2003, HUGHES completed the shutdown of the DIRECTV DSLTM
service. As a result, DIRECTV Broadband is accounted for as a discontinued
operation in the consolidated financial statements and its revenues, operating
costs and expenses, and non-operating results are no longer included in the
Direct-To-Home Broadcast segment for the periods presented.
United States2: Excluding subscribers in the National Rural
Telecommunications Cooperative ("NRTC") territories, DIRECTV U.S. added 811,000
gross subscribers and after accounting for churn, 326,000 net subscribers in the
quarter. DIRECTV U.S. owned and operated subscribers totaled 10.28 million as of
September 30, 2003, 12% more than the 9.20 million subscribers as of September
30, 2002. For the third quarter of 2003, the total number of subscribers in NRTC
territories fell by 32,000, reducing the total number of NRTC subscribers as of
September 30, 2003, to 1.57 million. As a result, the DIRECTV U.S. platform
ended the quarter with 11.85 million total subscribers.
DIRECTV U.S. reported quarterly revenues of $1.93 billion, an increase of
20% over last year's third quarter revenues of $1.62 billion. The increase was
primarily due to continued strong subscriber growth as well as higher ARPU. ARPU
increased approximately $4.50, or 8%, to $63.70 in the quarter primarily due to
the March 2003 price increase, additional fees from the increased number of
customers that have multiple set-top receivers, the adoption of EITF Issue No.
00-21 that relates to the recognition of certain customer-related revenues,
increased revenues from the NFL SUNDAY TICKET(R) package and increased customer
purchases of local channels.
25
Operating profit before depreciation and amortization for the third
quarter of 2003 increased 15% to $235 million compared to $205 million in last
year's third quarter. The increase was due to the additional gross profit gained
from the increased revenues, an improved mix of higher-margin revenues primarily
related to fees from customers that have multiple set-top receivers and
increased sales of local channel packages, and the favorable impact from a
continued emphasis on cost management. These were partially offset by increased
marketing expenses associated with the larger gross subscriber additions and
higher acquisition costs per subscriber ("SAC") in the quarter.
Operating profit in the quarter increased to $112 million compared to $102
million in the third quarter of 2002. The improved operating profit was
primarily due to the reasons discussed above for the change in operating profit
before depreciation and amortization partially offset by the reinstatement of
amortization expense related to certain intangible assets in accordance with
EITF Issue No. 02-17 during the fourth quarter of 2002, as well as increased
depreciation expense due to additional infrastructure expenditures during the
last year.
Latin America: On March 18, 2003, DIRECTV Latin America, LLC announced
that in order to aggressively address the company's financial and operational
challenges, it had filed a voluntary petition for reorganization under Chapter
11 of the U.S. Bankruptcy Code. The filing applies only to DIRECTV Latin
America, LLC, a U.S. company, and does not include any of its operating
companies in Latin America and the Caribbean. DIRECTV Latin America, LLC and its
operating companies are continuing regular operations.
The DIRECTV(R) service in Latin America lost 44,000 net subscribers in the
third quarter of 2003 mostly due to significantly higher involuntary churn in
Mexico resulting from changes in disconnection processes associated with
past-due subscribers. The total number of DIRECTV subscribers in Latin America
as of September 30, 2003, was 1.45 million compared to 1.60 million as of
September 30, 2002, representing a decline of 10%.
Revenues for DIRECTV Latin America increased to $155 million in the
quarter from $146 million in the third quarter of 2002 primarily due to the
consolidation of the local operating companies in Puerto Rico and Venezuela in
accordance with HUGHES' adoption of FIN 46, partially offset by lower revenues
from the smaller subscriber base.
DIRECTV Latin America recorded an operating loss before depreciation and
amortization of $17 million in the quarter compared to an operating loss before
depreciation and amortization of $29 million in the same period of 2002. The
operating loss in the quarter was $74 million compared to an operating loss of
$84 million in the third quarter of 2002. These improvements were primarily due
to aggressive cost cutting over the past year including programming cost
reductions resulting from the rejection of certain contracts in connection with
the Chapter 11 reorganization, partially offset by reduced revenues associated
with the smaller subscriber base.
Satellite Services
PanAmSat Corporation ("PanAmSat"), which is approximately 81%-owned by
HUGHES, generated third quarter 2003 revenues of $210 million compared with $199
million in the same period of the prior year. The increase was primarily due to
additional government revenues related to PanAmSat's new G2 Satellite
Solutions(TM) division, which was formed after the acquisition of Hughes Global
Services on March 7, 2003, and an increase in network service revenues.
PanAmSat's operating profit before depreciation and amortization for the
quarter was $152 million compared with $145 million in the third quarter 2002.
Operating profit remained relatively unchanged at $67 million in the third
quarter of 2003. The increase in operating profit before depreciation and
amortization was primarily due to lower bad debt expense and improved
operational efficiencies. The operating profit was also impacted by higher
depreciation expense primarily related to the shorter estimated useful lives of
two satellites that experienced anomalies in 2003.
As of September 30, 2003, PanAmSat's contracts for satellite services
representing future payments (backlog) declined to approximately $4.8 billion
compared to approximately $5.3 billion at the end of the second quarter of 2003
primarily due to reduced contract values related to a satellite anomaly.
26
Network Systems
HNS generated third quarter 2003 revenues of $353 million compared with
$300 million in the third quarter of 2002. The 17% increase was principally due
to higher revenues in the enterprise and residential DIRECWAY(R) broadband
businesses, and increased sales of DIRECTV(R) receiver systems. HNS shipped
946,000 DIRECTV receiver systems in the third quarter of 2003 compared to
737,000 units in the same period last year. Additionally, as of September 30,
2003, the DIRECWAY service had approximately 178,000 residential subscribers in
North America compared to 138,000 one year ago, representing an increase of
approximately 29%.
HNS reported operating profit before depreciation and amortization of $9
million compared to an operating loss before depreciation and amortization of
$23 million in the third quarter of 2002. The operating loss in the quarter was
$10 million compared to an operating loss of $43 million in the third quarter of
2002. These improvements were primarily attributable to a smaller loss in the
residential DIRECWAY business due to improved efficiencies associated with the
larger subscriber base, increased revenues and profit margins in the set-top box
and DIRECWAY enterprise businesses, as well as a $9 million charge taken in the
third quarter of 2002 related to severance costs and an inventory provision.
BALANCE SHEET
From December 31, 2002, to September 30, 2003, HUGHES' consolidated cash
balance increased $1.50 billion to $2.63 billion and total debt increased $1.58
billion to $4.70 billion.
In the third quarter, HUGHES' consolidated cash balance decreased by $558
million and debt decreased by $311 million compared to the June 30, 2003,
balances. During the quarter, HUGHES generated over $100 million of cash flow
(cash flows from operating activities plus cash flows from investing
activities) bringing the total cash flow generated by HUGHES to approximately
$400 million through September 30, 2003. Also in the quarter, HUGHES and The
Boeing Company reached an agreement whereby HUGHES paid Boeing $360 million to
settle the outstanding purchase price adjustment disputes arising from Boeing's
October 2000 acquisition of HUGHES' satellite manufacturing operations. This
payment will be reported as "Net cash used in discontinued operations" in the
Condensed Consolidated Statements of Cash Flows. Additionally, PanAmSat made an
optional prepayment of $350 million in the quarter under its $1.25 billion bank
facility from available cash on hand. The prepayment was applied pro rata
against PanAmSat's Term Loan A and Term Loan B.
During 2003, DIRECTV U.S. completed several financing transactions, which
included $1.40 billion of borrowings under a senior notes offering and
approximately $1.23 billion of borrowings under a $1.68 billion credit facility.
Approximately $2.56 billion of the proceeds from the financings were distributed
to HUGHES to repay $506 million of outstanding short-term debt and to fund
HUGHES' business plan through projected cash flow breakeven.
Hughes Electronics Corporation is a unit of General Motors Corporation.
The earnings of HUGHES are used to calculate the earnings attributable to the
General Motors Class H common stock (NYSE:GMH).
A live webcast of HUGHES' third quarter 2003 earnings call will be
available on the company's website at www.hughes.com or www.directv.com. The
call will begin at 2:00 p.m. ET, today. The dial in number for the call is (913)
981-4900. The webcast will be archived on the Investor Relations portion of the
HUGHES' website and a replay of the call will be available (dial in number:
719-457-0820, code: 438314) beginning at 7:00 p.m. ET on Wednesday, October 15
through Monday, October 20 at 1:00 a.m. ET.
(1) Operating profit (loss) before depreciation and amortization, which is a
non-GAAP financial measure, should be used in conjunction with other GAAP
financial measures and is not presented as an alternative measure of operating
results, as determined in accordance with accounting principles generally
accepted in the United States of America. Please see HUGHES and DIRECTV Holdings
LLC recent SEC filings for further discussion of operating profit (loss) before
depreciation and amortization.
27
(2) The discussion of financial results for DIRECTV U.S. reflects amounts
included in the stand-alone financial statements of DIRECTV Holdings LLC that
are included later in this earnings release. HUGHES records certain items as
corporate expenses in HUGHES consolidated financial statements pursuant to
Statement of Financial Accounting Standards No. 131, "Disclosure about Segments
of an Enterprise and Related Information." Generally accepted accounting
principles also require these expenses to be reflected in the stand-alone
financial statements of DIRECTV Holdings LLC. As a result, the DIRECTV U.S.
operating profit before depreciation and amortization and operating profit
results include approximately $3 million and $4 million of pension expense in
the third quarter of 2002 and 2003, respectively, which HUGHES includes in
"Eliminations and Other" for segment reporting purposes in its consolidated
statements.
------------------------------
NOTE: This release may contain certain statements that Hughes and/or
DIRECTV U.S. believe are, or may be considered to be, "forward-looking
statements," within the meaning of various provisions of the Securities Act of
1933 and of the Securities Exchange Act of 1934. These forward-looking
statements generally can be identified by use of statements that include phrases
such as we "believe," "expect," "anticipate," "intend," "plan," "foresee" or
other similar words or phrases. Similarly, statements that describe our
objectives, plans or goals also are forward-looking statements. All of these
forward-looking statements are subject to certain risks and uncertainties that
could cause Hughes' and/or DIRECTV U.S.' actual results to differ materially
from historical results or from those expressed or implied by the relevant
forward-looking statement. Risk factors which could cause actual performance and
future actions to differ materially from forward-looking statements made herein
may include, but are not limited to, economic conditions, product demand and
market acceptance, government action, local political or economic developments
in or affecting countries where Hughes has operations, including political,
economic and social uncertainties in many Latin American countries in which the
DIRECTV Latin America businesses operate, potential adverse effects of the
DIRECTV Latin America, LLC Chapter 11 bankruptcy proceedings, foreign currency
exchange rates, ability to obtain export licenses, competition, the outcome of
legal proceedings, ability to achieve cost reductions, ability to timely perform
material contracts, ability to renew programming contracts under favorable
terms, technological risk, limitations on access to distribution channels, the
success and timeliness of satellite launches, in-orbit performance of
satellites, loss of uninsured satellites, ability of customers to obtain
financing, ability to access capital to maintain financial flexibility and the
effects of the strategic transactions that GM and Hughes have entered into with
News Corporation.
28
Hughes Financial Guidance
-------------------------------------------------------------------------------
Fourth Quarter 2003 Prior Full Year Revised Full Year
2003 2003
-------------------------------------------------------------------------------
HUGHES
-------------------------------------------------------------------------------
Revenues $2.75 - 2.8B $9.7 - 9.8B $9.9 - 9.95B
-------------------------------------------------------------------------------
Operating profit
before depreciation
and amortization $250 - 300M $1.25 - 1.35B $1.3B - 1.35B
-------------------------------------------------------------------------------
Operating
profit/(loss) $0 - (50)M $125 - 225M $200 - 250M
-------------------------------------------------------------------------------
Cash Flow(a) N/A $100 - 200M ~$500M
-------------------------------------------------------------------------------
DIRECTV U.S.
-------------------------------------------------------------------------------
Revenues ~$2.16B ~$7.5B ~$7.6B(c)
-------------------------------------------------------------------------------
Operating profit
before depreciation
and amortization ~$200M ~$1.0B ~$1.0Bc
-------------------------------------------------------------------------------
Operating profit ~$60M ~$475M ~$475Mc
-------------------------------------------------------------------------------
Net subscriber
additions(b) N/A ~900K ~1.05M(c)
-------------------------------------------------------------------------------
DIRECTV Latin America
-------------------------------------------------------------------------------
Revenues $140 - 160M $550 - 600M $575 - 600M
-------------------------------------------------------------------------------
Operating loss
before depreciation
and amortization $(20) -(40)M $(90) - (110)M No Change
-------------------------------------------------------------------------------
Operating loss $(90) - (110)M $(310) - (330)M No Change
-------------------------------------------------------------------------------
Hughes Network Systems
-------------------------------------------------------------------------------
Revenues ~$350M $1.1 - 1.2B ~$1.25B
-------------------------------------------------------------------------------
Operating profit
before depreciation
and amortization $20 - 25M Breakeven No Change
-------------------------------------------------------------------------------
Operating
profit/(loss) $5 - 10M $(65) - (75)M $(70) - (75)M
-------------------------------------------------------------------------------
PanAmSat
-------------------------------------------------------------------------------
Revenues $200 - 215M $800 - 840M $813 - 828M
-------------------------------------------------------------------------------
New outright sales
and sales-type leases None None None
-------------------------------------------------------------------------------
Operating profit
before depreciation
and amortization $140 - 150M $580 - 600M $589 - 599M
-------------------------------------------------------------------------------
Operating profit $55 - 75M $250 - 300M $272 - 292M
-------------------------------------------------------------------------------
a Defined as "cash flows from operating activities" plus "cash flows from
investing activities"
b Excludes subscribers in NRTC territories
c Originally updated on September 29, 2003
29
NON-GAAP FINANCIAL RECONCILIATION SCHEDULE*
----------------------------------------------------------------------------------------------
Third Third Fourth Prior Full Revised Full
Quarter Quarter Quarter Year 2003 Year 2003
2003 Actual 2002 Actual 2003 Guidance Guidance Guidance
----------------------------------------------------------------------------------------------
HUGHES
Operating
profit/(loss) $77M $16M $0 - (50)M $125 - 225M $200 - 250M
Plus: depreciation
& amortization (D&A) $282M $254M ~$300M ~$1.125B ~$1.1B
----- ----- ------ -------- ------
Operating profit
before depreciation
and amortization $359M $270M $250 - 300M $1.25 - 1.35B $1.3B - 1.35B
----------------------------------------------------------------------------------------------
DIRECTV U.S.
Operating profit $112M $102 ~$60M ~$475M No Change
Plus: D&A $123M $102 ~$140M ~$525M No Change
----- ---- ------ ------ ---------
Operating profit
before D&A $235M $205+ ~$200M ~$1.00B No Change
----------------------------------------------------------------------------------------------
DIRECTV Latin America
Operating loss $(74)M $(84)M $(90) - (110)M $(310) - (330)M No Change
Plus: D&A $57M $55M ~$70M ~$220M No Change
---- ---- ----- ------
Operating loss before
D&A $(17)M $(29)M $(20) -(40)M $(90) - (110)M No Change
----------------------------------------------------------------------------------------------
Hughes Network Systems
Operating
profit/(loss) $(10)M $(43)M $5 - 10M $(65) - (75)M $(70) - (75)M
Plus: D&A $19M $20M ~$15M $65 - 75M $70 - 75M
---- ---- ----- --------- ---------
Operating profit
(loss)
before D&A $9M $(23)M $20 - 25M ~$0 ~$0
----------------------------------------------------------------------------------------------
PanAmSat
Operating profit $67M $66M $55 - 75M $250 - 300M $272 - 292M
Plus: D&A $85M $79M $75 - 85M $300 - 330M $307 - 317M
---- ---- --------- ----------- -----------
Operating profit
before D&A $152M $145M $140 - 150M $580 - 600M $589 - 599M
----------------------------------------------------------------------------------------------
Nine months ended Nine months ended
September 30, 2003 September 30, 2002
Actual Actual
-----------------------------------------------------------------
HUGHES
Operating $258M $(170)M
profit/(loss)
Plus: Depreciation
& Amortization (D&A) $810M $756M
----- -----
Operating profit
before depreciation
and amortization $1.07B $586M
-----------------------------------------------------------------
*Additional DIRECTV U.S. non-GAAP financial reconciliation is included with the
DIRECTV U.S. stand-alone financial statements included in this earnings release.
+ Does not add due to rounding.
###
30
HUGHES ELECTRONICS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND
AVAILABLE SEPARATE CONSOLIDATED NET INCOME (LOSS)
(Dollars in Millions)
(Unaudited)
Three Months Nine Months
Ended September 30, Ended September 30,
------------------- -------------------
2003 2002 2003 2002
-------------------------------------------------------------------------------
Revenues
Direct broadcast, leasing and
other services $2,311.8 $1,952.8 $6,579.7 $5,784.0
Product sales 258.4 241.9 588.5 627.8
-------------------------------------------------------------------------------
Total Revenues 2,570.2 2,194.7 7,168.2 6,411.8
-------------------------------------------------------------------------------
Operating Costs and Expenses,
Exclusive of Depreciation and
Amortization Expenses Shown
Separately Below
Broadcast programming and
other costs 1,186.9 965.1 3,323.9 2,950.9
Cost of products sold 234.7 209.5 547.5 567.2
Selling, general and
administrative expenses 789.8 750.3 2,228.3 2,307.8
Depreciation and amortization 282.3 253.8 810.1 756.3
-------------------------------------------------------------------------------
Total Operating Costs and Expenses 2,493.7 2,178.7 6,909.8 6,582.2
-------------------------------------------------------------------------------
Operating Profit (Loss) 76.5 16.0 258.4 (170.4)
Interest income 10.6 5.4 32.5 17.1
Interest expense (76.3) (76.1) (241.0) (273.8)
Reorganization expense (8.2) - (19.2) -
Other, net 0.6 78.7 (38.0) 46.0
-------------------------------------------------------------------------------
Income (Loss) From Continuing
Operations Before Income Taxes,
Minority Interests and Cumulative
Effect of Accounting Change 3.2 24.0 (7.3) (381.1)
Income tax benefit (expense) 44.3 (9.2) 48.0 144.8
Minority interests in net
earnings of subsidiaries (6.0) (4.1) (20.8) (14.3)
-------------------------------------------------------------------------------
Income (loss) from continuing
operations before cumulative
effect of accounting changes 41.5 10.7 19.9 (250.6)
Income (loss) from discontinued
operations, net of taxes 0.1 (24.3) (7.6) (74.5)
-------------------------------------------------------------------------------
Income (loss) before cumulative
effect of accounting changes 41.6 (13.6) 12.3 (325.1)
Cumulative effect of accounting
changes, net of taxes (64.6) - (64.6) (681.3)
-------------------------------------------------------------------------------
Net Loss (23.0) (13.6) (52.3) (1,006.4)
Preferred stock dividends - - - (46.9)
-------------------------------------------------------------------------------
Loss Used for Computation of Available
Separate Consolidated Net
Income (Loss) $(23.0) $(13.6) $(52.3) $(1,053.3)
===============================================================================
Available Separate Consolidated Net
Income (Loss)
Average number of shares of General
Motors Class H Common Stock outstanding
(in millions) (Numerator) 1,108.4 958.1 1,068.7 906.6
Average Class H dividend base
(in millions) (Denominator) 1,382.8 1,381.7 1,382.2 1,330.2
Available Separate Consolidated
Net Income (Loss) $(18.4) $(9.4) $(40.4) $(717.9)
===============================================================================
31
HUGHES ELECTRONICS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in Millions) September
30,
2003 December 31,
ASSETS (Unaudited) 2002
------------------------------------------------------------------------------
Current Assets
Cash and cash equivalents $2,627.9 $1,128.6
Accounts and notes receivable,
net of allowances of $122.9
and $102.4 835.6 1,133.9
Contracts in process 127.4 165.9
Inventories 292.5 230.3
Deferred income taxes 6.0 97.7
Prepaid expenses and other 954.6 900.0
------------------------------------------------------------------------------
Total Current Assets 4,844.0 3,656.4
Satellites, net 4,715.2 4,922.6
Property, net 2,018.6 2,017.4
Goodwill, net 5,779.4 5,775.2
Intangible Assets, net 594.0 644.7
Net Investment in Sales-type Leases 120.9 161.9
Investments and Other Assets 859.8 706.9
------------------------------------------------------------------------------
Total Assets $18,931.9 $17,885.1
==============================================================================
LIABILITIES AND STOCKHOLDER'S EQUITY
------------------------------------------------------------------------------
Current Liabilities
Accounts payable $1,040.3 $1,039.0
Deferred revenues 241.1 166.4
Short-term borrowings and current portion of
long-term debt 96.1 727.8
Accrued liabilities and other 948.0 1,269.9
------------------------------------------------------------------------------
Total Current Liabilities 2,325.5 3,203.1
Long-Term Debt 4,601.7 2,390.0
Other Liabilities and Deferred Credits 1,011.0 1,178.4
Deferred Income Taxes 424.2 581.2
Commitments and Contingencies
Minority Interests 583.9 555.3
Stockholder's Equity 9,985.6 9,977.1
------------------------------------------------------------------------------
Total Liabilities and Stockholder's Equity $18,931.9 $17,885.1
==============================================================================
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).
32
HUGHES ELECTRONICS CORPORATION
SELECTED SEGMENT DATA
(Dollars in Millions)
(Unaudited) Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
2003 2002 2003 2002
--------------------------------------------------------------------------------
DIRECT-TO-HOME BROADCAST
Total Revenues $ 2,087.2 $ 1,761.5 $ 5,878.2 $ 5,168.2
Operating Profit Before
Depreciation and Amortization (1) 221.8 (177.1) 732.5 216.7
Operating Profit Before
Depreciation and Amortization
Margin (1) 10.6% 10.1% 12.5% 4.2%
Operating Profit (Loss) $ 42.1 $ 20.8 $ 210.3 $ (228.4)
Operating Profit Margin 2.0% 1.2% 3.6% N/A
Depreciation and Amortization $ 179.7 $ 156.3 $ 522.2 $ 445.1
Capital Expenditures 79.6 89.2 218.4 353.8
--------------------------------------------------------------------------------
SATELLITE SERVICES
Total Revenues $ 210.1 $ 199.1 $ 613.4 $ 615.5
Operating Profit Before
Depreciation and Amortization (1) 151.5 (145.4) 449.4 447.2
Operating Profit Before
Depreciation and Amortization
Margin (1) 72.1% 73.0% 73.3% 72.7%
Operating Profit $ 66.5 $ 66.4 $ 217.2 $ 184.5
Operating Profit Margin 31.7% 33.4% 35.4% 30.0%
Depreciation and Amortization $ 85.0 $ 79.0 $ 232.2 $ 262.7
Capital Expenditures 32.4 76.5 87.2 260.0
--------------------------------------------------------------------------------
NETWORK SYSTEMS
Total Revenues $ 352.7 $ 300.2 $ 899.7 $ 797.4
Operating Profit Before
Depreciation and Amortization (1) 8.6 (22.9) (22.8) (80.4)
Operating Profit Before
Depreciation and Amortization
Margin (1) 2.4% N/A N/A N/A
Operating Loss $ (10.1) $ (42.9) $ (79.7) $ (135.0)
Depreciation and Amortization 18.7 20.0 56.9 54.6
Capital Expenditures (18.3) 99.3 91.1 315.4
--------------------------------------------------------------------------------
ELIMINATIONS and OTHER
Total Revenues $ (79.8) $ (66.1) $ (223.1) $ (169.3)
Operating Profit Before
Depreciation and Amortization (1) (23.1) (29.8) (90.6) 2.4
Operating Profit (Loss) (22.0) (28.3) (89.4) 8.5
Depreciation and Amortization (1.1) (1.5) (1.2) (6.1)
Capital Expenditures 25.8 22.6 82.2 54.7
--------------------------------------------------------------------------------
TOTAL
Total Revenues $ 2,570.2 $ 2,194.7 $ 7,168.2 $ 6,411.8
Operating Profit Before
Depreciation and Amortization (1) 358.8 (269.8) 1,068.5 585.9
Operating Profit Before
Depreciation and Amortization
Margin (1) 14.0% 12.3% 14.9% 9.1%
Operating Profit (Loss) $ 76.5 $ 16.0 $ 258.4 $ (170.4)
Operating Profit Margin 3.0% 0.7% 3.6% N/A
Depreciation and Amortization $ 282.3 $ 253.8 $ 810.1 $ 756.3
Capital Expenditures 119.5 287.6 478.9 983.9
================================================================================
(1) See footnote 1 on page 27.
33
The Following Pages Reflect DIRECTV U.S.' Financial Statements and
Other Data as a Stand Alone Entity
34
DIRECTV HOLDINGS LLC
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Millions)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- ------------------
2003 2002 2003 2002
------- ------- ------- -------
Revenues $1,932.2 $1,616.4 $5,440.5 $4,631.8
Operating Costs and Expenses,
exclusive of depreciation and
amortization expense shown
separately below
Programming and other costs 770.1 651.0 2,168.5 1,878.4
Subscriber service expenses 159.3 147.0 466.5 444.7
Subscriber acquisition costs:
Third party customer
acquisitions 366.4 332.4 985.6 1,014.9
Direct customer acquisitions 111.9 45.9 249.1 111.7
Retention, upgrade and other
marketing costs 143.3 92.2 325.8 286.2
Broadcast operations expenses 26.8 32.9 98.9 93.1
General and administrative
expenses 119.6 110.5 356.1 348.0
Depreciation and amortization expense 122.6 102.1 371.1 283.2
------- ------- ------- -------
Total Operating Costs and
Expenses 1,820.0 1,514.0 5,021.6 4,460.2
------- ------- ------- -------
Operating Profit 112.2 102.4 418.9 171.6
Interest expense, net (54.6) 19.2) (141.1) (74.0)
Other income (loss), net - 159.7 (4.0) 159.4
------- ------- ------- -------
Income Before Income Taxes 57.6 242.9 273.8 257.0
Income tax expense (21.6) (91.4) (102.7) (96.7)
------- ------- ------- -------
Net Income $36.0 $151.5 $171.1 $160.3
======= ======= ======= =======
35
DIRECTV HOLDINGS LLC
CONSOLIDATED BALANCE SHEETS
(Dollars in Millions)
(Unaudited)
September 30, December 31,
2003 2002
------------- ------------
ASSETS
Current Assets
Cash and cash equivalents $380.2 $14.1
Accounts receivable, net of allowances
of $51.2 and $54.3 450.9 506.7
Inventories, net 129.0 62.6
Prepaid expenses and other 554.3 545.8
------- -------
Total Current Assets 1,514.4 1,129.2
Satellites, net 981.5 1,011.3
Property, net 728.7 838.6
Goodwill, net 2,891.1 2,888.5
Intangible Assets, net 568.2 623.7
Other Assets 118.3 87.3
------- -------
Total Assets $6,802.2 $6,578.6
======= =======
LIABILITIES AND OWNER'S EQUITY
Current Liabilities
Accounts payable and accrued liabilities $1,223.0 $1,139.2
Unearned subscriber revenue and deferred credits 214.9 156.6
Current portion of long-term debt 12.2 --
------- -------
Total Current Liabilities 1,450.1 1,295.8
Long-Term Debt 2,612.8 --
Other Liabilities and Deferred Credits 354.3 477.6
Deferred Income Taxes 244.0 246.7
Commitments and Contingencies
Owner's Equity
Capital stock and additional paid-in capital 2,793.6 5,385.1
Accumulated deficit (652.6) (823.7)
------- -------
Subtotal Owner's Equity 2,141.0 4,561.4
------- -------
Accumulated Other Comprehensive Loss
Accumulated unrealized losses on securities -- (2.9)
------- -------
Total Owner's Equity 2,141.0 4,558.5
------- -------
Total Liabilities and Owner's Equity $6,802.2 $6,578.6
======= =======
36
DIRECTV HOLDINGS LLC
Non-GAAP Financial Reconciliation and Other Data
(Dollars in Millions)
(Unaudited)
------------------------------------------------------------------------------
Pre-Marketing Margin Reconciliation to Operating Profit
------------------------------------------------------------------------------
For the Three For the Nine Guidance
Months Ended Months Ended Full
September 30, September 30, Year
2003 2002 2003 2002 2003
------------------------------------ --------
Operating Profit $112.2 $102.4 $418.9 $171.6 ~ $475
Add back: Subscriber
acquisition costs:
Third party customer
acquisitions 366.4 332.4 985.6 1,014.9 **
Direct customer
acquisitions 111.9 45.9 249.1 111.7 **
Retention, upgrade and
other marketing costs 143.3 92.2 325.8 286.2 **
Depreciation and
amortization expense 122.6 102.1 371.1 283.2 ~ 525
------------------------------------- --------
Subtotal 744.2 572.6 1,931.6 1,696.0 ~ 2,715
------------------------------------- --------
Pre-marketing margin* $856.4 $675.0 $2,350.5 $1,867.6 ~$3,190
====================================== ========
percentage of revenue* 44.3% 41.8% 43.2% 40.3% ~ 42%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Other Data
----------------------------------------------------------------------------
For the Three For the Nine
Months Ended Months Ended
September 30, September 30,
2003 2002 2003 2002
-------------------------------------
Average monthly revenue per
subscriber (ARPU) $63.70 $59.20 $61.20 $58.10
Average monthly churn-%: 1.6% 1.7% 1.5% 1.7%
Average subscriber acquisition
costs (SAC) $590 $555 $575 $535
Total number of subscribers-
platform (000's) 11,852 10,921 11,852 10,921
Total owned and operated
subscribers (000's) 10,275 9,201 10,275 9,201
----------------------------------------------------------------------------
--------------------------------------------------------------------------------
(*) Pre-Marketing Margin, which is a financial measure that is not determined in
accordance with accounting principles generally accepted in the United States of
America, or GAAP, is calculated by adding amounts under the captions "Subscriber
acquisition costs", "Retention, upgrade and other marketing costs" and
"Depreciation and amortization expense" to "Operating Profit". This financial
measure should be used in conjunction with other GAAP financial measures and is
not presented as an alternative measure of operating results, as determined in
accordance with GAAP. Hughes and DIRECTV U.S. management use Pre-Marketing
Margin to evaluate the profitability of DIRECTV U.S.'s current subscriber base
for the purpose of allocating resources to discretionary activities such as,
adding new subscribers, retaining and upgrading existing subscribers and for
capital expenditures. To compensate for the exclusion of "Subscriber acquisition
costs" and "Retention, upgrade and other marketing costs", management also uses
operating profit and operating profit before depreciation and amortization
expense to measure profitability.
Hughes and DIRECTV U.S. believe this measure is useful to investors, along with
other GAAP measures (such as revenues, operating profit and net income), to
compare DIRECTV U.S.'s operating performance to other communications,
entertainment and media companies. Hughes and DIRECTV U.S. believe that
investors also use current and projected Pre-Marketing Margin to determine the
ability of DIRECTV U.S.'s current and projected subscriber base to fund
discretionary spending and to determine the financial returns for subscriber
additions.
(**) No individual guidance provided.
--------------------------------------------------------------------------------
37
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
GENERAL MOTORS CORPORATION
(Registrant)
Date: October 15, 2003 By: /s/PETER R. BIBLE.
--- ------------------
(Peter R. Bible,
Chief Accounting Officer)
38