SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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) July 16, 2003
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GENERAL MOTORS CORPORATION
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
STATE OF DELAWARE 1-143 38-0572515
---------------------------- ----------------------- -------------------
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
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 9. REGULATION FD DISCLOSURE (Information Furnished in this Item 9 is
Furnished under Item 12)
In accordance with Securities and Exchange Commission Release No. 33-8126, the
following information, which is intended to be furnished under Item 12, "Results
of Operations and Financial Condition," is instead being furnished under Item 9,
"Regulation FD Disclosure." This information shall not be deemed "filed" for
purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or incorporated by reference in any filing under the Securities
Act of 1933, as amended, or the Exchange Act, except as shall be expressly set
forth by specific reference in such a filing.
On July 17, 2003, a news release was issued on the subject of second quarter
consolidated earnings for General Motors Corporation (GM). The news release did
not include certain financial statements, related footnotes and certain other
financial information that will be filed with the Securities and Exchange
Commission as part of GM's Quarterly Report on Form 10-Q. The following is the
second quarter earnings release for GM, and their subsidiary Hughes Electronics
Corporation's (Hughes) earnings release dated July 16, 2003.
GM Reports Second Quarter Financial Results
- Net income of $901 million, or $1.58 per share
- Adjusted net income of $879 million, or $1.57 per share, excluding Hughes
- Total automotive cash exceeded $23 billion
DETROIT - General Motors Corp. (NYSE: GM, GMH) today reported net income of $901
million, or $1.58 per diluted share of GM's $1-2/3 par value common stock, in
the second quarter of 2003, compared with $1.3 billion, or $2.43 per share, in
the second quarter of 2002. Total revenues of $48.3 billion were essentially
unchanged from the prior-year quarter.
GM's adjusted income, which excludes results from Hughes, totaled $879 million,
or $1.57 per share, in the second quarter of 2003. GM's adjusted net income in
the second quarter of 2002 was $1.5 billion, or $2.63 per share, excluding
Hughes and special items.
GM's second-quarter performance reflected continued strong automotive cash flow,
record results at General Motors Acceptance Corp. (GMAC) where earnings of $834
million were nearly double the prior-year quarter, record net income of $163
million at GM Asia Pacific, an overall profit decline in the automotive sector
primarily caused by difficult economic conditions in most of GM's automotive
regions, and the effects of unfavorable currency-exchange rates in certain
regions.
"Overall we had reasonable financial results in a challenging global economic
environment," GM Chairman and Chief Executive Officer Rick Wagoner said. "These
results clearly demonstrate the benefits of our global portfolio of businesses,
ranging from our core automotive operations in all four regions of the world, to
vehicle financing and mortgage operations. We're especially pleased with the
strong cash generation by our automotive operations and continued strong
performance at GMAC, which set another new quarterly earnings record. Our
Asia-Pacific automotive operations continue to grow and generated record
profits."
2
Continued cost reductions and a revitalized product portfolio drove improved
financial performance to approximately breakeven at GM Europe. However, lower
volumes and continuing pricing pressures in North America eroded profits despite
aggressive cost reductions and improved revenue per unit.
"We're working hard to improve financial results in North America. We're going
to stay focused on the straight-forward business strategy that has worked very
well for us in recent times -- delivering great new products, being aggressive
in the market, and significantly improving our quality and cost," Wagoner said
GM financial results described throughout the remainder of this release exclude
special items unless otherwise noted. See Highlights for reconciliation of
adjusted results to results based on Generally Accepted Accounting Principles
(GAAP).
Cash and Liquidity
GM generated $3.1 billion in cash in the second quarter of 2003. Automotive
cash, marketable securities, and assets of the VEBA trust invested in short-term
fixed-income securities totaled $23.7 billion at June 30, 2003, excluding
financing and insurance operations and Hughes, compared with $20.6 billion on
March 31, 2003. In addition, as reported earlier, GM raised an additional $13.2
billion in early July through new offerings of debt securities and convertible
debt.
GM Automotive Operations
GM's global automotive operations earned $140 million in the second quarter of
2003, compared with $1.1 billion in the prior-year period. Global production
declined 6.6 percent in the second quarter, compared with the same period in
2002.
GM North America (GMNA) earned $83 million in the second quarter of 2003,
compared with $1.3 billion in the second quarter last year. Improvements in
sales mix, material cost, and productivity were more than offset by a production
decline of nearly 12 percent, intense pricing pressure, increased pension
expense, and currency-exchange losses versus the year-ago period. The results
also include the $168 million after taxes, or $0.30 per share, unfavorable
effect of the storm damage and resulting loss of production at GM's Oklahoma
City assembly plant. Strong quality performance allowed the corporation to
reduce its policy and warranty reserves in the second quarter by $199 million
after taxes, or $0.36 per share.
GM's quality and productivity gains were recognized recently in two major
independent surveys. "GM's quality drive is on track, producing significant
improvements that increasingly are being recognized by consumers and the
marketplace," Wagoner said. The J.D. Power 2003 Vehicle Dependability Study
showed Buick among the top three nameplates in long-term quality, and the best
nameplate outside the luxury brands. General Motors overall was the only
domestic manufacturer to score above the industry average, and 12 GM vehicles
were in the top three of their respective segment rankings. "Our goal is to be
the industry leader in all areas of quality, and this is another example of our
progress toward achieving that goal," he said.
3
"Once again, GM showed significant improvement in our journey to become the most
productive auto manufacturer with a 7.4 percent overall improvement in
manufacturing productivity according to the recently released Harbour Report
North America 2003," Wagoner said. "GM has led the industry in productivity
improvements in recent years, and we're committed to continuing this kind of
performance going forward."
GM's U.S. market share was 27.9 percent in the second quarter of 2003, down
slightly from 28.1 percent in the second quarter of 2002, but significantly
improved from the 26.6 percent level in the first quarter this year.
GM Europe (GME) reported a loss of $3 million in the second quarter of 2003, a
significant turnaround from a year ago when GME recorded a $115 million loss.
Aggressive cost reductions and increased vehicle sales at Opel/Vauxhall and Saab
drove these improved financial results, despite significant currency-exchange
losses. GM Europe's market share in the second quarter increased 0.3 percentage
points to 9.4 percent compared with the same period last year.
"Despite the challenging economic conditions and currency-exchange pressures
that are affecting our performance, we're on the right track in Europe with
exciting new products, significant quality improvement, and a steady and
broad-based approach to cost reduction," Wagoner said.
GM Asia Pacific earned a record $163 million in the second quarter of 2003, more
than four times the $39 million earned in the year-ago quarter. Strong financial
results at Shanghai GM and GM's Australia-based Holden continued to drive
improved financial results along with improved equity earnings from GM's
Japanese automotive alliances and lower-than-expected start-up losses at GM
Daewoo Auto & Technology Co. "Our aggressive growth strategy in the rapidly
expanding Asia-Pacific region is really paying off; we remain committed to
further expand our presence in this key region," Wagoner said.
Continuing economic weakness in Brazil was the primary factor in GM Latin
America/Africa/Mid-East (GMLAAM) region's $103 million loss in the second
quarter of 2003, which compared with a loss of $73 million in the year-ago
period. "Latin America is still suffering from economic uncertainty and weak
auto markets," Wagoner said. "Our focus continues to be on wringing out costs
while increasing our market share and strengthening our number-one position in
the region."
GMAC
GMAC earned $834 million in the second quarter of 2003, its best-ever quarterly
performance. The results were nearly double the $431 million earned in the same
period last year.
"We're extremely pleased with the continued outstanding overall financial
performance at GMAC," Wagoner said. Strong volumes in the residential and
commercial mortgage sectors, and continuing strength in GMAC's financing
operations were key drivers in GMAC's record performance.
Mortgage operations generated income of $415 million in the second quarter of
2003, up $357 million from the year-ago period, while earnings from financing
operations were $396 million, up $49 million from the same period last year.
4
Hughes
Hughes Electronics earned $22 million in the second quarter of 2003, compared
with a loss of $156 million in the prior-year period, led by a strong
performance at DirecTV. Revenues increased 6.6 percent to $2.4 billion.
In the United States, DirecTV added 136,000 net subscribers in the second
quarter of 2003, bringing the number of total U.S. subscribers to 11.6 million.
Looking Ahead
GM expects improving economic growth during the balance of 2003 in the United
States, with total U.S. industry vehicle sales expected to be at least 16.5
million units for the calendar year. In Europe, especially Germany, economic and
market conditions are expected to remain challenging in the second half of the
year. Total European industry vehicle sales are estimated to be about 18.5
million units for 2003.
GM expects to beat the current analysts' consensus for the third quarter of
approximately $0.50 per share, excluding Hughes and any special items, and
expects automotive operations to be profitable. Despite the continuing economic
uncertainty, GM is more optimistic about the outlook for the year, and now
expects full-year 2003 earnings could range from the current analysts' consensus
of approximately $4.50 up to $5.00 per share, excluding Hughes and any special
items.
General Motors, the world's largest vehicle manufacturer, designs, builds and
markets cars and trucks worldwide, and has been the global automotive sales
leader since 1931. More information on GM can be found at www.gm.com.
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# # #
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.
5
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
June 30, 2003 June 30, 2003
-------------- --------------
Net Net
Income EPS Income EPS
------ ----- ------ -----
Net Income $901 $1.58 $2,384 $4.29
Gain on Sale of GM Defense (A) - - (505) (0.90)
--- ---- ----- ----
Adjusted Income $901 $1.58 $1,879 $3.39
=== ==== ===== ====
(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.
6
General Motors Corporation
List of Special Items - After Tax
(dollars in millions except per share amounts)
Three Months Ended Year to Date
June 30, 2002 June 30, 2002
-------------- --------------
Net Net
Income EPS Income EPS
------ ----- ------ -----
Reported $1,292 $2.43 $1,520 $3.02
GME End of Life
Vehicle Charge (B) 55 0.10 55 0.10
GME Restructuring Charge (C) - - 407 0.72
Hughes Space Shuttle
Settlement (D) - - (59) (0.04)
Hughes GECC Contractual
Dispute (E) - - 51 0.03
Hughes Loan Guarantee
Charge (F) - - 18 0.01
----- ---- ----- ----
Adjusted $1,347 $2.53 $1,992 $3.84
===== ==== ===== ====
(B) The GME End of Life Vehicle Charge relates to the European
Union's directive requiring member states to enact legislation
regarding end-of-life vehicles to be the responsibility of
manufacturers for dismantling and recycling vehicles they
have sold.
(C) The GME Restructuring Charge relates to the initiative
implemented in the first quarter of 2002 to improve the
competitiveness of GM's automotive operations in Europe.
(D) The Hughes Space Shuttle Settlement relates to the favorable
resolution of a lawsuit that was filed against the U.S.
government on March 22, 1991, based upon the National
Aeronautics and Space Administration's (NASA) breach of
contract to launch ten satellites on the Space Shuttle.
(E) The Hughes GECC Contractual Dispute relates to an expected
loss associated with a contractual dispute with General
Electric Capital Corporation.
(F) The Hughes Loan Guarantee Charge relates to a loan
guarantee for a Hughes Network Systems' affiliate in India.
7
General Motors Corporation
Summary Corporate Financial Results
Second Quarter Year to Date
-------------- --------------
2003 2002 2003 2002
---- ---- ---- ----
Total net sales and
revenues ($Mil's) $48,308 $48,339 $97,673 $94,553
Adjusted $48,308 $48,339 $96,859 $94,582
Adjusted excluding Hughes
(Automotive and Financing)$45,919 $46,098 $92,243 $90,300
Net income ($Mil's) $901 $1,292 $2,384 $1,520
Adjusted $901 $1,347 $1,879 $1,992
Adjusted excluding Hughes $879 $1,503 $1,911 $2,294
Net margin
(net income / total net
sales and revenues) 1.9% 2.7% 2.4% 1.6%
Adjusted 1.9% 2.8% 1.9% 2.1%
Adjusted excluding Hughes 1.9% 3.3% 2.1% 2.5%
Earnings per share
Basic $1-2/3 $1.58 $2.48 $4.30 $3.06
Diluted $1-2/3 $1.58 $2.43 $4.29 $3.02
Basic Class H $0.02 $(0.14) $(0.02) $(0.27)
Diluted Class H $0.02 $(0.14) $(0.02) $(0.27)
Adjusted earnings per share
Basic $1-2/3 $1.58 $2.58 $3.39 $3.90
Diluted $1-2/3 $1.58(1) $2.53 $3.39 $3.84
Diluted $1-2/3
excluding Hughes $1.57 $2.63 $3.41 $4.04
Basic Class H $0.02 $(0.14) $(0.02) $(0.27)
Diluted Class H $0.02 $(0.14) $(0.02) $(0.27)
GM $1-2/3 par value average
shares outstanding (Mil's)
Basic shares 561 560 561 560
Diluted shares 561 572 561 568
Cash dividends per share
of common stocks
GM $1-2/3 par value $0.50 $0.50 $1.00 $1.00
Book value per share of
common stocks at June 30
GM $1-2/3 par value $13.27 $27.52
GM Class H $2.65 $5.50
ACO total cash & marketable
securities at June 30
($Bil's') $23.5 $15.4
Cash in short-term VEBA $3.4 $3.0
---- ----
ACO total cash & marketable
securities plus short-term $26.9 $18.4
VEBA
Less: Hughes cash & marketable
securities $3.2 $0.8
--- ---
Total Automotive cash &
Marketable securities plus
Short-term VEBA $23.7 $17.6
==== ====
Automotive, Communication Services
and Other Operations ($Mil's)
Depreciation $1,337 $1,140 $2,568 $2,266
Amortization of special tools 651 622 1,353 1,251
Amortization of intangible
Assets 29 3 58 12
----- ----- ----- -----
Total $2,017 $1,765 $3,979 $3,529
===== ===== ===== =====
See reconciliation of adjusted financial results on pages 9 - 12 and
footnotes on page 14.
8
General Motors Corporation
Summary Corporate Financial Results
Second Quarter
2003 and 2002
--------------
(Dollars in millions)
Total net sales and Reported Special Items Adjusted
revenues -------- ------------ --------
2003 2002 2003 2002 2003 2002
---- ---- ---- ---- ---- ----
GMNA $28,558 $30,576 $ - $ - $28,558 $30,576
GME 7,303 6,001 - - 7,303 6,001
GMLAAM 1,119 1,306 - - 1,119 1,306
GMAP 1,267 1,129 - - 1,267 1,129
------ ------ -- -- ------ ------
Total GMA 38,247 39,012 - - 38,247 39,012
Hughes 2,389 2,241 - - 2,389 2,241
Other 96 465 - - 96 465
------ ------ -- -- ------ ------
Total ACO 40,732 41,718 - - 40,732 41,718
------ ------ -- -- ------ ------
GMAC 7,580 6,599 - - 7,580 6,599
Other Financing (4) 22 - - (4) 22
------ ------ -- -- ------ ------
Total FIO 7,576 6,621 - - 7,576 6,621
------ ------ -- -- ------ ------
Total net sales and
revenues $48,308 $48,339 $ - $ - $48,308 $48,339
====== ====== == == ====== ======
Income / (expense)
before income taxes and
minority interest
GMNA $90 $1,781 $ - $ - $90 $1,781
GME (34) (244) - 85 (34) (159)
GMLAAM (123) (97) - - (123) (97)
GMAP 11 (31) - - 11 (31)
----- ----- -- -- ----- -----
Total GMA (56) 1,409 - 85 (56) 1,494
Hughes 89 (230) - - 89 (230)
Other (357) (88) - - (357) (88)
----- ----- -- -- ----- -----
Total ACO (324) 1,091 - 85 (324) 1,176
----- ----- -- -- ----- -----
GMAC 1,331 698 - - 1,331 698
Other Financing 13 (8) - - 13 (8)
----- ----- -- -- ----- -----
Total FIO $1,344 690 - - 1,344 690
Total income / ----- ----- -- -- ----- -----
(expense) before
income taxes and
minority interests $1,020 $1,781 $ - $85 $1,020 $1,866
===== ===== == == ===== =====
9
General Motors Corporation
Summary Corporate Financial Results
Second Quarter
2003 and 2002
---------------
(Dollars in millions) Reported Special Items Adjusted
-------- ------------ --------
2003 2002 2003 2002 2003 2002
---- ---- ---- ---- ---- ----
Net income
GMNA $83 $1,277 $ - $ - $83 $1,277
GME (3) (170) - 55 (3) (115)
GMLAAM (103) (73) - - (103) (73)
GMAP 163 39 - - 163 39
----- ----- -- -- ----- -----
Total GMA 140 1,073 - 55 140 1,128
Hughes (2) 22 (156) - - 22 (156)
Other (104) (57) - - (104) (57)
----- ----- -- -- ----- -----
Total ACO 58 860 - 55 58 915
----- ----- -- -- --- -----
GMAC 834 431 - - 834 431
Other Financing 9 1 - - 9 1
----- ----- -- -- ----- -----
Total FIO 843 432 - - 843 432
----- ----- -- -- ----- -----
Net income (loss) $901 $1,292 $ - $55 $901 $1,347
===== ===== == == ===== =====
Income tax expense
(benefit)
GMNA $25 $518 $ - $ - $25 $518
GME (13) (51) - 30 (13) (21)
GMLAAM (25) (31) - - (25) (31)
GMAP 8 (9) - - 8 (9)
--- --- -- -- --- ---
Total GMA (5) 427 - 30 (5) 457
Hughes 21 (93) - - 21 (93)
Other (251) (23) - - (251) (23)
--- --- -- -- --- ---
Total ACO (235) 311 - 30 (235) 341
--- --- -- -- --- ---
GMAC 496 254 - - 496 254
Other Financing 4 (2) - - 4 (2)
--- --- -- -- --- ---
Total FIO 500 252 - - 500 252
--- --- -- -- --- ---
Income tax expense
(benefit) $265 $563 $ - $30 $265 $593
=== === == == === ===
Effective tax rate
GMNA 27.8% 29.1% - - 27.8% 29.1%
GME 38.2% 20.9% - 35.3% 38.2% 13.2%
GMLAAM 20.3% 32.0% - - 20.3% 32.0%
GMAP 72.7% 29.0% - - 72.7% 29.0%
Hughes 23.6% 40.4% - - 23.6% 40.4%
GMAC 37.3% 36.4% - - 37.3% 36.4%
Total GM Corp. 26.0% 31.6% - 35.3% 26.0% 31.8%
Equity income (loss)
and minority interests
GMNA $18 $14 $ - $ - $18 $14
GME 18 23 - - 18 23
GMLAAM (5) (7) - - (5) (7)
GMAP 160 61 - - 160 61
--- -- -- -- --- --
Total GMA $191 $91 $ - $ - $191 $91
=== == == == === ==
See footnotes on page 14.
10
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 $58,521 $59,915 $ - $ - $58,521 $59,915
GME 13,925 11,585 - - 13,925 11,585
GMLAAM 2,164 2,607 - - 2,164 2,607
GMAP 2,414 2,186 - - 2,414 2,186
------ ------ -- -- ------ ------
Total GMA 77,024 76,293 - - 77,024 76,293
Hughes 4,616 4,253 - 29 4,616 4,282
Other 1,134 945 (814) - 320 945
------ ------ --- -- ------ ------
Total ACO 82,774 81,491 (814) 29 81,960 81,520
------ ------ --- -- ------ ------
GMAC 14,910 12,952 - - 14,910 12,952
Other Financing (11) 110 - - (11) 110
------ ------ --- -- ------ ------
Total FIO 14,899 13,062 - - 14,899 13,062
------ ------ --- -- ------ ------
Total net sales and
revenues $97,673 $94,553 $(814) $29 $96,859 $94,582
====== ====== === == ====== ======
Income / (expense)
before income taxes and
minority interest
GMNA $829 $2,719 $ - $ - $829 $2,719
GME (148) (1,042) - 726 (148) (316)
GMLAAM (140) (138) - - (140) (138)
GMAP 30 (44) - - 30 (44)
----- ----- --- --- ----- -----
Total GMA 571 1,495 - 726 571 2,221
Hughes 39 (461) - 17 39 (444)
Other 92 (323) (814) - (722) (323)
----- ----- --- --- ----- -----
Total ACO 702 711 (814) 743 (112) 1,454
----- ----- --- --- ----- -----
GMAC 2,478 1,434 - - 2,478 1,434
Other Financing (12) (10) - - (12) (10)
----- ----- --- --- ----- -----
Total FIO 2,466 1,424 - - 2,466 1,424
Total income / ----- ----- --- --- ----- -----
(expense) before
income taxes and
minority interests $3,168 $2,135 $(814) $743 $2,354 $2,878
===== ===== === === ===== =====
11
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 $631 $1,931 $ - $ - $631 $1,931
GME (68) (702) - 462 (68) (240)
GMLAAM (115) (113) - - (115) (113)
GMAP 238 46 - - 238 46
----- ----- --- --- --- -----
Total GMA 686 1,162 - 462 686 1,624
Hughes (2) (32) (312) - 10 (32) (302)
Other 205 (199) (505) - (300) (199)
----- ----- --- --- ----- -----
Total ACO 859 651 (505) 472 354 1,123
----- ----- --- --- ----- -----
GMAC 1,533 870 - - 1,533 870
Other Financing (8) (1) - - (8) (1)
----- ----- --- --- ----- -----
Total FIO 1,525 869 - - 1,525 869
----- ----- --- --- ----- -----
Net income (loss) $2,384 $1,520 $(505) $472 $1,879 $1,992
===== ===== === === ===== =====
Income tax expense
(benefit)
GMNA $216 $790 $ - $ - $216 $790
GME (56) (311) - 264 (56) (47)
GMLAAM (32) (32) - - (32) (32)
GMAP 19 (9) - - 19 (9)
--- --- --- --- --- ---
Total GMA 147 438 - 264 147 702
Hughes (5) (185) - 7 (5) (178)
Other (151) (102) (309) - (460) (102)
--- --- --- --- --- ---
Total ACO (9) 151 (309) 271 (318) 422
--- --- --- --- --- ---
GMAC 934 539 - - 934 539
Other Financing (4) (2) - - (4) (2)
--- --- --- --- --- ---
Total FIO 930 537 - - 930 537
--- --- --- --- --- ---
Income tax expense
(benefit) $921 $688 $(309) $271 $612 $959
=== === === === === ===
Effective tax rate
GMNA 26.1% 29.1% - - 26.1% 29.1%
GME 37.8% 29.8% - 36.4% 37.8% 14.9%
GMLAAM 22.9% 23.2% - - 22.9% 23.2%
GMAP 63.3% 20.5% - - 63.3% 20.5%
Hughes (12.8%) 40.1% - 41.2% (12.8%) 40.1%
GMAC 37.7% 37.6% - - 37.7% 37.6%
Total GM Corp. 29.1% 32.2% 38.0% 36.5% 26.0% 33.3%
Equity income (loss)
and minority interests
GMNA $18 $2 $- $- $18 $2
GME 24 29 - - 24 29
GMLAAM (7) (7) - - (7) (7)
GMAP 227 81 - - 227 81
--- --- --- --- --- ---
Total GMA $262 $105 $ - $ - $262 $105
=== === === === === ===
See footnotes on page 14.
12
General Motors Corporation
Operating Statistics
Second Quarter Year to Date
-------------- --------------
2003 2002 2003 2002
---- ---- ---- ----
(units in thousands)
Worldwide Wholesale Sales
United States - Cars 487 574 986 1,073
United States - Trucks 761 750 1,518 1,417
----- ----- ----- -----
Total United States 1,248 1,324 2,504 2,490
Canada, Mexico, and Other 185 233 367 429
----- ----- ----- -----
Total GMNA 1,433 1,557 2,871 2,919
GME 447 437 873 861
GMLAAM 122 159 243 314
GMAP 139 86 282 194
----- ----- ----- -----
Total Worldwide 2,141 2,239 4,269 4,288
===== ===== ===== =====
Vehicle Unit Deliveries
Chevrolet - Cars 220 213 391 399
Chevrolet - Trucks 505 481 878 945
Pontiac 120 151 227 269
GMC 155 137 263 264
Buick 85 107 168 189
Oldsmobile 34 42 68 85
Saturn 72 88 147 146
Cadillac 49 50 96 90
Other 26 15 46 27
----- ----- ----- -----
Total United States 1,266 1,284 2,284 2,414
Canada, Mexico, and Other 179 208 331 388
----- ----- ----- -----
Total GMNA 1,445 1,492 2,615 2,802
GME 477 471 951 937
GMLAAM 127 143 254 281
GMAP 184 178 350 335
----- ----- ----- -----
Total Worldwide 2,233 2,284 4,170 4,355
===== ===== ===== =====
Market Share
United States - Cars 24.8% 26.3% 24.9% 25.6%
United States - Trucks 30.4% 29.8% 29.4% 30.5%
Total United States 27.9% 28.1% 27.3% 28.1%
Total North America 27.2% 27.6% 26.7% 27.8%
Total Europe 9.4% 9.1% 9.5% 9.2%
Latin America 15.7% 15.4% 15.8% 15.3%
Asia and Pacific 4.9% 4.9% 4.4% 4.6%
Total Worldwide 15.0% 15.1% 14.2% 14.8%
U.S. Retail/Fleet Mix
% Fleet Sales - Cars 29.5% 29.3% 29.8% 27.4%
% Fleet Sales - Trucks 15.1% 13.7% 14.9% 12.0%
Total Vehicles 21.0% 20.9% 21.3% 18.8%
Retail Lease as % of Retail Sales
Total Smartlease
and Smartbuy 7.3% 15.1%
Days Supply of Inventory
at June 30
United States - Cars 73 57
United States - Trucks 98 78
GMNA Capacity Utilization
(2 shift rated) 87.4% 92.0% 89.2% 87.7%
GMNA Vehicle Revenue
Per Unit $18,565 $18,385
13
General Motors Corporation
Operating Statistics
Second Quarter Year to Date
-------------- --------------
2003 2002 2003 2002
---- ---- ---- ----
GMAC's U.S. Cost of Borrowing 3.50% 4.14%
Current Debt Spreads Over
U.S. Treasuries
2 Year 255 bp 165 bp
5 Year 330 bp 185 bp
10 Year 370 bp 230 bp
Worldwide Employment
at June 30 (in 000's)
United States Hourly 120 124
United States Salary 41 41
--- ---
Total United States 161 165
Canada, Mexico, and Other 31 34
--- ---
GMNA 192 199
GME 64 69
GMLAAM 23 24
GMAP 13 11
Hughes 11 12
GMAC 31 31
Other 7 11
--- ---
Total 341 357
=== ===
Worldwide Payrolls ($Mil's) $5,331 $5,385 $10,720 $10,418
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.
14
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------- --------
2003 2002 2003 2002
---- ---- ---- ----
(dollars in millions except per share amounts)
Total net sales and revenues $48,308 $48,339 $97,673 $94,553
------ ------ ------ ------
Cost of sales and other
expenses 38,940 38,396 78,323 76,797
Selling, general, and
administrative expenses 6,083 6,090 11,789 11,691
Interest expense 2,265 2,072 4,393 3,930
------ ------ ------ ------
Total costs and expenses 47,288 46,558 94,505 92,418
------ ------ ------ ------
Income before income taxes
and minority interests 1,020 1,781 3,168 2,135
Income tax expense 265 563 921 688
Equity income and minority
interests 146 74 137 73
--- ----- ----- -----
Net income 901 1,292 2,384 1,520
Dividends on preference stocks - (23) - (47)
--- ----- ----- -----
Earnings attributable to
common stocks $901 $1,269 $2,384 $1,473
=== ===== ===== =====
Basic earnings (losses) per
share attributable to common
stocks
Earnings per share
attributable to $1-2/3 par
value $1.58 $2.48 $4.30 $3.06
==== ==== ==== ====
Earnings (losses) per share
attributable to Class H $0.02 $(0.14) $(0.02) $(0.27)
==== ==== ==== ====
Earnings (losses) per share
attributable to common stocks
assuming dilution
Earnings per share
attributable to $1-2/3 par
value $1.58 $2.43 $4.29 $3.02
==== ==== ==== ====
Earnings (losses) per share
attributable to Class H $0.02 $(0.14) $(0.02) $(0.27)
==== ==== ==== ====
15
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION TO THE CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2003 2002 2003 2002
---- ---- ---- ----
(dollars in millions)
AUTOMOTIVE, COMMUNICATIONS SERVICES, AND OTHER OPERATIONS
Total net sales and revenues $40,732 $41,718 $82,774 $81,491
------ ------ ------ ------
Cost of sales and other
expenses 36,839 36,461 74,152 72,672
Selling, general, and
administrative expenses 3,781 3,818 7,122 7,508
------ ------ ------ ------
Total costs and expenses 40,620 40,279 81,274 80,180
------ ------ ------ ------
Interest expense 402 302 723 464
Net expense from transactions
with Financing and Insurance
Operations 34 46 75 136
--- ----- --- ---
Income (loss) before income
taxes and minority interests (324) 1,091 702 711
Income tax expense (benefit) (235) 311 (9) 151
Equity income and minority
interests 147 80 148 91
--- ----- --- ---
Net income - Automotive,
Communications Services, and
Other Operations $58 $860 $859 $651
== === === ===
FINANCING AND INSURANCE OPERATIONS
Total revenues $7,576 $6,621 $14,899 $13,062
----- ----- ------ ------
Interest expense 1,863 1,770 3,670 3,466
Depreciation and amortization
expense 1,578 1,353 3,084 2,714
Operating and other expenses 2,068 1,951 4,245 3,856
Provisions for financing and
insurance losses 757 903 1,509 1,738
----- ----- ------ ------
Total costs and expenses 6,266 5,977 12,508 11,774
----- ----- ------ ------
Net income from transactions
with Automotive, Communications
Services, and Other Operations ( 34) (46) (75) (136)
----- --- ------ -----
Income before income taxes
and minority interests 1,344 690 2,466 1,424
Income tax expense 500 252 930 537
Equity loss and minority
interests (1) (6) (11) (18)
----- --- ----- -----
Net income - Financing and
Insurance Operations $843 $432 $1,525 $869
=== === ===== ===
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.
16
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, June 30,
2003 Dec, 31, 2002
(Unaudited) 2002 (Unaudited)
-------- ------- --------
ASSETS (dollars in millions)
Cash and cash equivalents $31,009 $21,449 $18,363
Marketable securities 18,777 16,825 14,304
------ ------ ------
Total cash and marketable securities 49,786 38,274 32,667
Finance receivables - net 153,600 134,647 119,636
Accounts and notes receivable (less
allowances) 19,420 15,715 12,677
Inventories (less allowances) 11,093 9,967 9,757
Deferred income taxes 39,116 39,865 28,702
Equipment on operating leases - (less
accumulated depreciation) 36,576 32,988 33,598
Equity in net assets of nonconsolidated
associates 5,249 5,044 5,115
Property - net 38,384 37,514 36,451
Intangible assets - net 18,091 17,954 17,061
Other assets 39,530 37,028 40,665
------- ------- -------
Total assets $410,845 $368,996 $336,329
======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable (principally trade) $27,402 $27,452 $26,439
Notes and loans payable 232,150 201,940 177,035
Postretirement benefits other than
pensions 38,618 38,187 37,844
Pensions 23,968 22,762 9,451
Deferred income taxes 7,359 7,178 6,851
Accrued expenses and other liabilities 69,976 63,829 57,230
------- ------- -------
Total liabilities 399,473 361,348 314,850
Minority interests 991 834 788
Stockholders' equity
$1-2/3 par value common stock
(outstanding, 560,712,564;
560,447,797; and 560,223,424 shares) 935 936 936
Class H common stock (outstanding,
1,108,139,876; 958,284,272;
and 958,005,494 shares) 111 96 96
Capital surplus (principally additional
paid-in capital) 22,815 21,583 21,557
Retained earnings 11,855 10,031 10,376
------ ------ ------
35,716 32,646 32,965
Subtotal
Accumulated foreign currency translation
adjustments (2,292) (2,784) (2,770)
Net unrealized loss on derivatives (205) (205) (188)
Net unrealized gains on securities 612 372 268
Minimum pension liability adjustment (23,450) (23,215) (9,584)
------ ------ ------
(25,335) (25,832) (12,274)
------ ------ ------
Accumulated other comprehensive loss
10,381 6,814 20,691
------- ------ -------
Total stockholders' equity
Total liabilities and stockholders' equity $410,845 $368,996 $336,329
======= ======= =======
17
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION TO THE CONSOLIDATED BALANCE SHEETS
June 30, June 30,
2003 Dec, 31, 2002
(Unaudited) 2002 (Unaudited)
-------- ------- --------
ASSETS (dollars in millions)
Automotive, Communications Services, and
Other Operations
Cash and cash equivalents $18,582 $13,291 $14,421
Marketable securities 4,913 2,174 1,014
------- ------- -------
Total cash and marketable securities 23,495 15,465 15,435
Accounts and notes receivable (less
allowances) 6,584 5,861 5,686
Inventories (less allowances) 11,093 9,967 9,757
Equipment on operating leases - (less
accumulated depreciation) 5,946 5,305 4,390
Deferred income taxes and other current
assets 10,917 10,816 8,730
------ ------ -------
Total current assets 58,035 47,414 43,998
Equity in net assets of nonconsolidated
associates 5,249 5,044 5,115
Property - net 36,407 35,693 34,738
Intangible assets - net 14,715 14,611 13,763
Deferred income taxes 30,496 31,431 22,138
Other assets 8,016 7,781 17,307
------- ------- -------
Total Automotive, Communications Services,
and Other Operations assets 152,918 141,974 137,059
Financing and Insurance Operations
Cash and cash equivalents 12,427 8,158 3,942
Investments in securities 13,864 14,651 13,290
Finance receivables - net 153,600 134,647 119,636
Investment in leases and other receivables 41,470 35,517 34,168
Other assets 36,566 34,049 28,234
Net receivable from Automotive,
Communications Services, and
Other Operations 1,128 1,089 638
------- ------- -------
Total Financing and Insurance Operations
assets 259,055 228,111 199,908
------- ------- -------
Total assets $411,973 $370,085 $336,967
======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Automotive, Communications Services, and
Other Operations
Accounts payable (principally trade) $21,351 $20,169 $19,459
Loans payable 705 1,516 1,545
Accrued expenses 43,720 40,518 36,513
Net payable to Financing and Insurance
Operations 1,128 1,089 638
------ ------ ------
Total current liabilities 66,904 63,292 58,155
Long-term debt 20,513 16,651 16,831
Postretirement benefits other than pensions 34,674 34,275 33,990
Pensions 23,901 22,709 9,410
Other liabilities and deferred income taxes 15,634 15,461 14,506
------- ------- -------
Total Automotive, Communications Services,
and Other Operations liabilities 161,626 152,388 132,892
Financing and Insurance Operations
Accounts payable 6,051 7,283 6,980
Debt 210,932 183,773 158,659
Other liabilities and deferred income taxes 21,992 18,993 16,957
------- ------- -------
Total Financing and Insurance Operations
liabilities 238,975 210,049 182,596
------- ------- -------
Total liabilities 400,601 362,437 315,488
Minority interests 991 834 788
Stockholders' equity
$1-2/3 par value common stock (outstanding,
560,712,564; 560,447,797; and
560,223,424 shares) 935 936 936
Class H common stock (outstanding,
1,108,139,876; 958,284,272;
and 958,005,494 shares) 111 96 96
Capital surplus (principally additional
paid-in capital) 22,815 21,583 21,557
Retained earnings 11,855 10,031 10,376
------ ------ ------
Subtotal 35,716 32,646 32,965
Accumulated foreign currency translation
adjustments (2,292) (2,784) (2,770)
Net unrealized loss on derivatives (205) (205) (188)
Net unrealized gains on securities 612 372 268
Minimum pension liability adjustment (23,450) (23,215) (9,584)
------ ------ ------
Accumulated other comprehensive loss (25,335) (25,832) (12,274)
------ ------ ------
Total stockholders' equity 10,381 6,814 20,691
------ ------ ------
Total liabilities and stockholders' equity $411,973 $370,085 $336,967
======= ======= =======
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.
18
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended June 30,
-------------------------
2003 2002
---- ----
(dollars in millions)
Net cash provided by operating activities $13,079 $12,876
Cash flows from investing activities
Expenditures for property (3,325) (3,540)
Investments in marketable securities -
acquisitions (7,200) (24,374)
Investments in marketable securities -
liquidations 5,804 22,310
Net originations and purchases of mortgage
servicing rights (1,152) (959)
Increase in finance receivables (71,636) (67,200)
Proceeds from sales of finance receivables 49,635 56,852
Operating leases - acquisitions (6,728) (7,053)
Operating leases - liquidations 5,668 5,016
Investments in companies, net of cash
acquired (70) (274)
Proceeds from sale of business units 1,076 -
Other (1,111) 205
------ ------
Net cash used in investing activities (29,039) (19,017)
------ ------
Cash flows from financing activities
Net decrease in loans payable 825 (632)
Long-term debt - borrowings 42,622 18,473
Long-term debt - repayments (17,803) (11,407)
Repurchases of common and preference stocks - (97)
Proceeds from issuing common stocks - 69
Proceeds from sales of treasury stocks - 19
Cash dividends paid to stockholders (560) (607)
------ -----
Net cash provided by financing activities 25,084 5,818
------ -----
Effect of exchange rate changes on cash and
cash equivalents 436 131
------ ------
Net decrease in cash and cash equivalents 9,560 (192)
Cash and cash equivalents at beginning of
the period 21,449 18,555
------ ------
Cash and cash equivalents at end of the
period $31,009 $18,363
====== ======
19
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION TO THE
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Automotive, Comm. Financing and
Serv. and Other Insurance
----------------- --------------
Six Months Ended June 30,
-----------------------------------
2003 2002 2003 2002
---- ---- ---- ----
(dollars in millions)
Net cash provided by operating
activities $7,407 $5,580 $5,672 $7,296
Cash flows from investing activities
Expenditures for property (2,941) (3,494) (384) (46)
Investments in marketable securities
- acquisitions (2,839) (802) (4,361) (23,572)
Investments in marketable securities
- liquidations 100 578 5,704 21,732
Net originations and purchases of
mortgage servicing rights - - (1,152) (959)
Increase in finance receivables - - (71,636) (67,200)
Proceeds from sales of finance
receivables - - 49,635 56,852
Operating leases - acquisitions - - (6,728) (7,053)
Operating leases - liquidations - 5,668 5,016
Investments in companies, net of cash
acquired (70) (124) - (150)
Proceeds from sale of business units 1,076 - - -
Other (175) 510 (936) (305)
------ ----- ------ ------
Net cash used in investing activities (4,849) (3,332) (24,190) (15,685)
----- ----- ------ ------
Cash flows from financing activities
Net increase (decrease) in loans
payable (943) (857) 1,768 225
Long-term debt - borrowings 4,060 6,186 38,562 12,287
Long-term debt - repayments (236) (183) (17,567) (11,224)
Repurchase of common and preference
stocks - (97) - -
Proceeds from issuing common stocks - 69 - -
Proceeds from sales of treasury stocks - 19 - -
Cash dividends paid to stockholders (560) (607) - -
----- ---- ------ -----
Net cash provided by (used in)
financing activities 2,321 4,530 22,763 1,288
----- ----- ------ -----
Effect of exchange rate changes on
cash and cash equivalents 373 130 63 1
Net transactions with
Automotive/Financing Operations 39 (919) (39) 919
------ ----- ------ ------
Net increase (decrease) in cash and
cash equivalents 5,291 5,989 4,269 (6,181)
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 $18,582 $14,421 $12,427 $3,942
====== ====== ====== =====
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.
# # # #
20
HUGHES REPORTS STRONG SECOND QUARTER 2003 RESULTS; ATTAINS POSITIVE NET
INCOME AND INCREASES COMPANY AND DIRECTV U.S. FULL-YEAR GUIDANCE
DIRECTV U.S. Operating Profit before Depreciation and Amortization More
Than Doubles to Record $325 Million and Operating Profit More Than Triples to
$201 Million;
DIRECTV U.S. Attains Net Owned and Operated Subscriber Additions of 181,000
El Segundo, Calif., July 16, 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 second quarter 2003 revenues increased 8.1% to
$2,370.7 million compared with $2,192.3 million in the second quarter of 2002.
Operating profit before depreciation and amortization/1/ for the quarter
increased 167.0% to $404.7 million and operating profit increased to $140.0
million compared with operating profit before depreciation and amortization of
$151.6 million and an operating loss of $98.7 million in the same period of
2002. In addition, HUGHES had second quarter 2003 net income of $21.6 million
compared to a net loss of $155.1 million in the same period of 2002.
"Continued strong performance by our DIRECTV U.S. business drove HUGHES'
revenues and operating profit before depreciation and amortization growth in the
quarter," said Jack A. Shaw, HUGHES' president and chief executive officer. "In
particular, DIRECTV U.S. achieved revenue growth of over 16% to $1.8 billion and
more than doubled its operating profit before depreciation and amortization to
an all-time record of $325 million in the quarter. These results reflect
continued solid subscriber growth including 181,000 net additions in the second
quarter, a $2.80 increase in ARPU - or average monthly revenue per subscriber -
to nearly $61, and significant improvement in operating profit margins.
Primarily due to these strong results, we are increasing both the HUGHES and
DIRECTV U.S. full year 2003 guidance for revenue, operating profit before
depreciation and amortization, operating profit and cash flow."
Shaw added, "Hughes Network Systems, or HNS, also contributed to growth in
both our revenue and operating profit before depreciation and amortization in
the quarter due to solid performance in their set-top box and broadband consumer
businesses. The revenue and operating profit before depreciation and
amortization comparison in the quarter was also impacted by the additional
revenues generated and losses recognized in 2002 from the World Cup programming
provided by DIRECTV Latin America."
Shaw finished, "Over the past two years, we have executed on a growth
strategy that focuses on cost management and cash flow, and as a result, we
reached another important milestone in the quarter: net income. In fact,
excluding one-time gains related to the sale of businesses, this is the first
time since early 1999 that HUGHES has generated net income. In addition, HUGHES
generated positive cash flow for the second consecutive quarter."
HUGHES had second quarter 2003 net income of $21.6 million compared to a
net loss of $155.1 million in the same period of 2002. This increase was
principally due to an increase in operating profit driven by the DIRECTV U.S.,
DIRECTV Latin America and HNS operational improvements mentioned above, lower
interest expense primarily related to a charge of $47 million for losses
associated with the final settlement of a contractual dispute with General
Electric Capital Corporation ("GECC") in 2002 and lower net losses at DIRECTV
Broadband, now accounted for as a discontinued operation due to its shutdown on
February 28, 2003. These improvements were partially offset by income tax
expense in the second quarter of 2003 compared with an income tax benefit in the
same period of 2002 due primarily to HUGHES generating pre-tax income instead of
pre-tax losses. Also impacting the second quarter of 2002 was a $37 million gain
resulting from the favorable resolution of remaining contingencies associated
with the exit from the DIRECTV Japan business (recorded in Other, net).
21
***Based upon recent SEC guidance and to improve the clarity of its
earnings releases, HUGHES will no longer use the acronym previously referred to
as "EBITDA" or "earnings before interest, taxes, depreciation and amortization"
and instead will now use the phrase "operating profit before depreciation and
amortization." This is a change in name only and HUGHES has not changed the way
it calculates current or prior results for this financial measure. HUGHES
believes operating profit before depreciation and amortization is a measure of
performance used by some investors, equity analysts and others to make informed
investment decisions. HUGHES' management and its board of directors use
operating profit before depreciation and amortization to evaluate the operating
performance of HUGHES and its business segments, as a measure of performance for
incentive compensation purposes, and for other purposes discussed in footnote 1,
below. HUGHES reconciles this non-GAAP measure to operating profit in the
schedule below titled Non-GAAP Financial Reconciliation Schedule. HUGHES
calculates "cash flow" as the sum of the GAAP measures "cash flows from
operating activities" and "cash flows from investing activities."***
SIX-MONTH FINANCIAL REVIEW
For the first half of 2003, revenues increased 9.0% to $4,598.0 million,
compared to $4,217.1 million in the first half of 2002 primarily due to
continued subscriber growth and higher ARPU at DIRECTV U.S. and increased sales
of set-top boxes at HNS, partially offset by higher DIRECTV Latin America
revenues in 2002 associated with the World Cup programming services and a larger
sub-base, and further devaluations in 2003 to several Latin American currencies.
Operating profit before depreciation and amortization for the first six
months of 2003 was $709.7 million and operating profit before depreciation and
amortization margin was 15.4%, compared to operating profit before depreciation
and amortization of $316.1 million and operating profit before depreciation and
amortization margin of 7.5% in the first half of 2002. The 124.5% 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 World Cup
programming at DIRECTV Latin America and improved efficiencies associated with
HNS' larger residential and small office/home office ("SOHO") DIRECWAY(R)
subscriber base. Also impacting the 2002 operating profit before depreciation
and amortization results was a charge of $48 million related to the GECC
settlement and a $95 million one-time gain based on the favorable resolution of
a lawsuit filed against the U.S. government on March 22, 1991. The lawsuit was
based upon the National Aeronautics and Space Administration's ("NASA") breach
of contract to launch ten satellites on the Space Shuttle.
HUGHES' operating profit for the first six months of 2003 was $181.9
million compared with an operating loss of $186.4 million in the first half of
2002. The improvement was due to the higher operating profit before depreciation
and amortization partially offset by higher depreciation and amortization
expense, particularly at DIRECTV U.S. resulting from the launch of two new
satellites and additional infrastructure expenditures made during the last year.
For the first six months of 2003, HUGHES had a net loss of $29.3 million
compared to a net loss of $992.8 million 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 $681.3 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 higher income tax benefit generated in 2002 resulting from the larger
pre-tax loss.
SEGMENT FINANCIAL REVIEW: SECOND QUARTER 2003
Direct-To-Home Broadcast
Second quarter 2003 revenues for the segment increased 9.4% to $1,943.1
million from $1,776.3 million in the second quarter of 2002. The segment had
operating profit before depreciation and amortization of $299.4 million compared
with operating profit before depreciation and amortization of $60.5 million in
the second quarter of 2002. Operating profit for the segment was $129.9 million
in the second quarter of 2003 compared to an operating loss of $85.2 million in
the same period of 2002.
Also, on February 28, 2003, HUGHES completed the shutdown of the DIRECTV
DSL/TM/ service. DIRECTV Broadband is now 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.
22
United States/2/: Excluding subscribers in the National Rural
Telecommunications Cooperative ("NRTC") territories, DIRECTV U.S. added 633,000
gross subscribers and after accounting for churn, 181,000 net subscribers in the
quarter. DIRECTV U.S. owned and operated subscribers totaled 9.95 million as of
June 30, 2003, 10.7% more than the 8.99 million cumulative subscribers as of
June 30, 2002. For the second quarter of 2003, the total number of subscribers
in NRTC territories fell by 45,000, reducing the total number of NRTC
subscribers as of June 30, 2003, to 1.61 million. As a result, the DIRECTV U.S.
platform ended the quarter with 11.56 million total subscribers.
DIRECTV U.S. reported quarterly revenues of $1,800.2 million, an increase
of 16.2% from last year's second quarter revenues of $1,549.6 million. The
increase was primarily due to continued strong subscriber growth as well as
higher ARPU. ARPU increased approximately $2.80 to $60.90 in the quarter
primarily due to a March 2003 price increase, increased customer purchases of
local channels, as well as additional fees from the increased number of
customers that have multiple set-top receivers.
Operating profit before depreciation and amortization for the second
quarter of 2003 more than doubled to a record $324.8 million compared to
operating profit before depreciation and amortization of $156.6 million in last
year's second quarter. The 107.4% increase was due to the additional gross
profit gained from the DIRECTV U.S. increased revenue, an improved mix of
higher-margin revenues primarily related to increased sales of local channel
packages and fees from customers that have multiple set-top receivers, and the
favorable impact from a continued emphasis on cost management.
Operating profit in the quarter increased to $200.7 million compared to an
operating profit of $60.6 million in the second 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
increased depreciation and amortization related to the launch of DIRECTV 5 in
May of 2002, and additional infrastructure expenditures made 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 service in Latin America lost 35,000 net subscribers in the
second quarter of 2003 primarily due to the negative market impact related to
the Chapter 11 reorganization and the economic turmoil in Venezuela. The total
number of DIRECTV subscribers in Latin America as of June 30, 2003, was
approximately 1,493,000 compared to about 1,669,000 as of June 30, 2002,
representing a decline of approximately 10.5%.
Revenues for DIRECTV Latin America declined to $143 million in the quarter
from $227 million in the second quarter of 2002 primarily due to the higher 2002
revenues generated from the World Cup soccer tournament, the devaluation of the
Venezuelan and Mexican currencies over the past year, as well as the reduced
number of subscribers.
DIRECTV Latin America recorded an operating loss before depreciation and
amortization of $29 million in the quarter compared to an operating loss before
depreciation and amortization of $99 million in the same period of 2002. The
operating loss in the quarter was $74 million compared to an operating loss of
$148 million in the second quarter of 2002. The smaller operating loss before
depreciation and amortization and lower operating loss were primarily due to the
$75 million loss associated with the World Cup in 2002 and 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 a decline in gross profit related to the
lower revenues.
23
Satellite Services
PanAmSat Corporation ("PanAmSat"), which is approximately 81%-owned by
HUGHES, generated second quarter 2003 revenues of $203.5 million compared with
$209.3 million in the same period of the prior year. The decrease was primarily
due to higher occasional-use revenues booked in 2002 related to the World Cup
partially offset by additional revenues recorded in 2003 related to PanAmSat's
new G2 Satellite Solutions division, which was formed after the acquisition of
Hughes Global Services on March 7, 2003.
Operating profit before depreciation and amortization for the quarter was
$149.3 million and operating profit before depreciation and amortization margin
was 73.4%, compared with second quarter 2002 operating profit before
depreciation and amortization of $150.7 million and operating profit before
depreciation and amortization margin of 72.0%. The decrease in operating profit
before depreciation and amortization was primarily due to the lower revenues,
partially offset by improved operational efficiencies.
PanAmSat generated operating profit of $74.4 million in the second quarter
of 2003 compared with operating profit of $61.0 million in the same period of
2002. The improved operating profit was primarily due to reduced satellite
depreciation expense partially offset by the operating profit before
depreciation and amortization changes discussed above.
As of June 30, 2003, PanAmSat had contracts for satellite services
representing future payments (backlog) of approximately $5.30 billion compared
to approximately $5.46 billion at the end of the first quarter of 2003.
Network Systems
HNS generated second quarter 2003 revenues of $299.6 million compared with
$254.4 million in the second quarter of 2002. The increase was principally due
to higher sales of DIRECTV(R) receiver systems and revenues from the larger
DIRECWAY residential and SOHO subscriber base. HNS shipped 750,000 DIRECTV
receiver systems in the second quarter of 2003 compared to 512,000 units in the
same period last year. Additionally, as of June 30, 2003, DIRECWAY had
approximately 166,000 residential and SOHO subscribers in North America compared
to 123,000 one year ago, representing an increase of approximately 35.0%.
HNS reported an operating loss before depreciation and amortization of $9.2
million compared to an operating loss before depreciation and amortization of
$27.0 million in the second quarter of 2002. The operating loss in the quarter
was $29.8 million compared to an operating loss of $43.6 million in the second
quarter of 2002. The smaller operating loss before depreciation and amortization
and operating loss was primarily attributable to a smaller loss in the
residential and SOHO DIRECWAY business due to improved efficiencies associated
with the larger subscriber base, and increased revenues and margins in the
set-top box business.
24
BALANCE SHEET
From December 31, 2002, to June 30, 2003, the company's consolidated cash
balance increased $2,056.8 million to $3,185.4 million and total debt increased
$1,891.0 million to $5,008.8 million. These changes resulted in a decline in net
debt of $165.8 million to $1,823.4 million. Net debt is defined as the
difference between the consolidated cash balance and the consolidated debt
balance of HUGHES. The change in net debt was primarily driven by the strong
operational performance at DIRECTV U.S.
In the first quarter of 2003, DIRECTV U.S. completed several financing
transactions. On February 28, DIRECTV U.S. closed a $1.4 billion senior notes
offering. The $1.4 billion senior notes were offered in a Rule 144A / Regulation
S private placement and bear interest at an 8.375 percent annual rate, payable
semi-annually. The notes will mature on March 15, 2013, and are callable on or
after March 15, 2008. The notes are guaranteed by all of DIRECTV U.S.' domestic
subsidiaries. On March 6, DIRECTV U.S. closed senior secured credit facilities
totaling $1.675 billion. The facilities consist of a $250 million five-year
revolving credit facility, a $375 million five-year Term A loan and a $1.05
billion seven-year Term B loan. The Term A loan includes a $200 million delayed
draw component. The facilities are secured by substantially all of DIRECTV U.S.'
assets and are guaranteed by all of DIRECTV U.S.' domestic subsidiaries.
Approximately $2.56 billion of the proceeds from the financings, after
transaction fees, were distributed to HUGHES and used by HUGHES to repay $506
million of outstanding short-term debt. These proceeds are expected to fund
HUGHES' business plan through projected cash flow breakeven and fund HUGHES'
other corporate purposes.
As announced on July 15, HUGHES and The Boeing Company reached an agreement
whereby HUGHES will pay Boeing $360 million to settle the outstanding purchase
price adjustment disputes arising from Boeing's October 2000 acquisition of
HUGHES' satellite manufacturing operations. The payment will be made to Boeing
in the month of July, 2003.
Also subsequent to the end of the second quarter, on July 14, 2003,
PanAmSat made an optional prepayment of $350 million under its $1.25 billion
credit facility from available cash on hand due to strong financial performance
over the past year. The prepayment was applied pro rata against PanAmSat's Term
Loan A and Term Loan B. PanAmSat maintains a cash position of over $500 million
and an unused credit line of an additional $250 million.
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' second quarter 2003 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. The dial in number for the call is (913) 981-5517. 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: 493096) beginning at 7:00 p.m. ET on Thursday, July 17
through Tuesday, July 22, at 1:00 a.m. ET.
25
HUGHES FINANCIAL GUIDANCE
Third Quarter Prior Full Year
------------- ---------------
2003 2003
---- ----
HUGHES
Revenues ................................ ~$2.45B $9.5 - 9.6B
Operating profit before depreciation
and amortization ...................... $300 - 350M 1.15 -1.2B
Operating profit/a/ ..................... $0 - 50M $50 - 100M
Cash Flow/b/ ............................ N/A ~$(200)M
DIRECTV U.S. ...............................
Revenues ................................ ~$1,875M ~$7.3B
Operating profit before depreciation
and amortization ...................... $225 - 250M ~$900M
Operating profit ........................ $90 - 115M ~$375M
Net subscriber adds/c/ .................. N/A 800 - 850K
DIRECTV Latin America ......................
Revenues ................................ $140 - 160M $550 - 600M
Operating loss before depreciation
and amortization ...................... $(20) - (30)M $(50)- (75)M
Operating loss .......................... $(80) - (100)M $(250) - (275)M
Hughes Network Systems
Revenues ................................ $280 - 310M $1.1 - 1.2B
Operating profit (loss) before
depreciation and amortization ......... $(5) - 5M Breakeven
Operating loss .......................... $(15) - (25)M $(65) - (75)M
PanAmSat
Revenues ................................ $205 - 215M $800 - 840M/d/
New outright sales and
sales-type leases ..................... None None/d/
Operating profit before depreciation
and amortization ...................... $145 - 155M $580 - 600M/d/
Operating profit/a/ ..................... $65 - 85M $250 - 300M/d/
Revised Full Year
2003
----
HUGHES
Revenues........................................ $9.7 - 9.8B
Operating profit before depreciation
and amortization.............................. $1.25 - 1.35B
Operating profit/a/............................. $125 - 225M
Cash Flow/b/.................................... $100 - 200M
DIRECTV U.S.
Revenues........................................ ~$7.5B
Operating profit before depreciation
and amortization.............................. ~$1.0B
Operating profit................................ ~$475M
Net subscriber adds/c/.......................... ~900K
DIRECTV Latin America.
Revenues........................................ No Change
Operating loss before depreciation
and amortization............................. $(90) - (110)M
Operating loss.................................. $(310) - (330)M
Hughes Network Systems
Revenues........................................ No Change
Operating profit (loss) before
depreciation and amortization................. No Change
Operating loss.................................. No Change
PanAmSat
Revenues........................................ No Change
New outright sales and sales-type
leases........................................ No Change
Operating profit before depreciation
and amortization.............................. No Change
Operating profit/a/............................. No Change
a Excludes the potential impact associated with the Galaxy IVR and PAS VIB
anomalies as discussed in PanAmSat's Form-8K filing on 7/11/03.
b Defined as "cash flows from operating activities" less "cash flows from
investing activities".
c Excludes subscribers in NRTC territories.
d Includes Hughes Global Services, which was formerly included in HUGHES'
consolidated guidance.
26
NON-GAAP FINANCIAL RECONCILIATION SCHEDULE*
Second Second
Quarter 2003 Quarter 2002 Third Quarter
Actual Actual 2003 Guidance
------ ------ -------------
HUGHES
Operating profit/(loss) ........................ $140.0M $(98.7)M $0 - 50M
Plus: depreciation & amortization (D&A)......... $264.7M $250.3M ~$300M
------- ------- -------
Operating profit before depreciation and
amortization ................................. $404.7M $151.6M $300 - 350M
======= ====== ==========
DIRECTV U.S. ......................................
Operating profit ............................... $200.7M $60.6M $90 - 115M
Plus: D&A ...................................... $124.1M $96.0M ~$135M
------ ------ ---------
Operating profit before D&A .................... $324.8M $156.6M $225 - 250M
======= ====== ==========
DIRECTV Latin America
Operating loss ................................. $(74)M $(148)M $(80) - (100)M
Plus: D&A ...................................... $45M $49M $60 - 70M
------ ------ ---------
Operating loss before D&A ...................... $(29)M $(99)M $(20) - (30)M
======= ====== ==========
Hughes Network Systems
Operating loss ................................. $(29.8)M $(43.6)M $(15) - (25)M
Plus: D&A ...................................... $20.6 M $16.6M ~$20M
------ ------ ---------
Operating profit (loss) before D&A.............. $(9.2) M $(27.0)M $(5) - 5M
======= ====== ==========
PanAmSat
Operating profit ............................... $74.4M $61.0M $65 - 85M
Plus: D&A ...................................... $74.9M $89.7M $70 - 80M
------ ------ ---------
Operating profit before D&A .................... $149.3M $150.7M $145 - 155M
======= ====== ==========
Prior Full Year Revised Full Year
2003 Guidance 2003 Guidance
------------- -------------
HUGHES
Operating profit/(loss) ................. $50 - 100M $125 - 225M
Plus: depreciation & amortization (D&A) . ~$1.1B $1.125B
----------- -----------
Operating profit before depreciation and
amortization .......................... $1.15 - 1.2B $1.25 - 1.35B
============ =============
DIRECTV U.S. ...............................
Operating profit ........................ ~$375M ~$475M
Plus: D&A ............................... ~$525M ~$525M
----------- -----------
Operating profit before D&A ............. ~$900M ~$1,000M
============ =============
DIRECTV Latin America
Operating loss .......................... $(250) - (275)M $(310) - (330)M
Plus: D&A ............................... ~$200M ~$220M
----------- --------------
Operating loss before D&A ............... $(50) - (75)M $(90) - (110)M
============ ==============
Hughes Network Systems
Operating loss .......................... $(65) - (75)M $(65) - (75)M
Plus: D&A ............................... $65 - 75M $65 - 75M
------------- -------------
Operating profit (loss) before D&A ...... ~$0 ~$0
PanAmSat
Operating profit ........................ $250 -300M $250 - 300M
Plus: D&A ............................... $300 - 330M $300 - 330M
----------- -----------
Operating profit before D&A ............. $580 - 600M $580 - 600M
=========== ===========
Six months Six months
ended ended
June 30, 2003 June 30, 2002
Actual Actual
------ ------
HUGHES
Operating profit/(loss)...................... $181.9M $(186.4)M
Plus: Depreciation & Amortization (D&A)...... $527.8M $502.5M
------- -------
Operating profit before depreciation
and amortization............................ $709.7M $316.1M
======= =======
* Additional DIRECTV U.S. non-GAAP financial reconciliation is included with
the DIRECTV U.S. stand-alone financial statements included in this earnings
release.
27
(1) Operating profit (loss) before depreciation and amortization, which is
a non-GAAP financial measure, can be calculated by adding amounts under the
caption "Depreciation and amortization" to "Operating Profit (Loss)", as
presented in the Consolidated Statements of Operations and Available Separate
Consolidated Net Income (Loss). This 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. Hughes' management and its
Board of Directors use operating profit before depreciation and amortization to
evaluate the operating performance of Hughes and its business segments, to
allocate resources and capital to its business segments and as a measure of
performance for incentive compensation purposes. Hughes' management also uses
this metric to measure income generated from operations that could be used to
fund capital expenditures, service debt, or pay taxes. Depreciation and
amortization expense primarily represents an allocation to current expense of
the cost of historical capital expenditures and for intangible assets resulting
from prior business acquisitions. To compensate for the exclusion of
depreciation and amortization from operating profit, Hughes' management and
Board of Directors separately measure and budget for capital expenditures and
business acquisitions.
Hughes believes this measure is useful to investors, along with other GAAP
measures (such as revenues, operating profit and net income), to compare Hughes'
operating performance to other communications, entertainment and media service
providers. Hughes believes that investors use current and projected operating
profit before depreciation and amortization and similar measures to estimate
Hughes' current or prospective enterprise value and make investment decisions.
This metric provides investors with a means to compare operating results
exclusive of depreciation and amortization. Hughes' management believes this is
useful given the significant variation in depreciation and amortization expense
that can result from the timing of capital expenditures, the capitalization of
intangible assets in purchase accounting, potential variations in expected
useful lives when compared to other companies and periodic changes to estimated
useful lives.
Operating profit before depreciation and amortization margin is calculated
by dividing operating profit before depreciation and amortization by total
revenues.
(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 second 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 believes 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' 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
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 Latin
America DIRECTV 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, Hughes' ability to access capital to maintain its financial
flexibility and the effects of the strategic transactions that GM and Hughes
have entered into with News Corporation.
###
28
HUGHES ELECTRONICS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND
AVAILABLE SEPARATE CONSOLIDATED NET INCOME (LOSS)
(Dollars in Millions)
(Unaudited)
Three Months Six Months
Ended June 30, Ended June 30,
-------------- --------------
2003 2002 2003 2002
---- ---- ---- ----
Revenues.
Direct broadcast, leasing and other services $2,186.1 $1,986.6 $4,267.9 $3,831.2
Product sales .............................. 184.6 205.7 330.1 385.9
----- ----- ----- -----
Total Revenues ............................. 2,370.7 2,192.3 4,598.0 4,217.1
======= ======= ======= =======
Operating Costs and Expenses, Exclusive of
Depreciation and Amortization
Expenses Shown Separately Below
Broadcast programming and other costs ...... 1,075.3 1,080.1 2,137.0 1,985.8
Cost of products sold ...................... 169.8 184.7 312.8 357.7
Selling, general and administrative expenses 720.9 775.9 1,438.5 1,557.5
Depreciation and amortization .............. 264.7 250.3 527.8 502.5
----- ----- ----- -----
Total Operating Costs and Expenses ......... 2,230.7 2,291.0 4,416.1 4,403.5
======= ======= ======= =======
Operating Profit (Loss) .................... 140.0 (98.7) 181.9 (186.4)
Interest income ............................ 15.7 7.4 21.9 11.7
Interest expense ........................... (84.2) (121.4) (164.7) (197.7)
Reorganization expense ..................... (4.1) -- (11.0) --
Other, net ................................. (10.5) 8.9 (38.6) (32.7)
----- --- ----- -----
Income (Loss) From Continuing Operations
Before Income Taxes, Minority
Interests and Cumulative Effect
of Accounting Change ..................... 56.9 (203.8) (10.5) (405.1)
Income tax (expense) benefit ............... (20.5) 77.5 3.7 154.0
Minority interests in net earnings
of subsidiaries .......................... (7.4) (3.5) (14.8) (10.2)
---- ---- ----- -----
Income (loss) from continuing operations
before cumulative effect of accounting
change ................................... 29.0 (129.8) (21.6) (261.3)
Loss from discontinued operations,
net of taxes ............................. (7.4) (25.3) (7.7) (50.2)
Income (loss) before cumulative
effect of accounting change .............. 21.6 (155.1) (29.3) (311.5)
Cumulative effect of accounting
change, net of taxes ..................... -- -- -- (681.3)
---- ---- ----- -----
Net Income (Loss) .......................... 21.6 (155.1) (29.3) (992.8)
Preferred stock dividends .................. -- (22.8) -- (46.9)
Earnings (Loss) Used for Computation of
Available Separate Consolidated Net
Income (Loss) ............................ $21.6 $(177.9) $(29.3) $(1,039.7)
----- ------- ------ ---------
Available Separate Consolidated
Net Income (Loss)
Average number of shares of General
Motors Class H Common Stock
outstanding (in millions) (Numerator) ... 1,107.8 884.0 1,048.8 880.8
Average Class H dividend base
(in millions) (Denominator) ............. 1,382.1 1,307.6 1,382.0 1,304.4
Available Separate Consolidated
Net Income (Loss) ....................... $17.3 $(120.3) $(22.2) $(702.1)
===== ======= ====== =======
29
HUGHES ELECTRONICS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in Millions)
June 30,
2003 December 31,
Unaudited) 2002
---------- ----
ASSETS.
Current Assets.
Cash and cash equivalents.................... $3,185.4 $1,128.6
Accounts and notes receivable, n
net of allowances of $115.9 and $102.4..... 1,061.6 1,133.9
Contracts in process......................... 117.6 165.9
Inventories.................................. 297.3 230.3
Deferred income taxes........................ 88.7 97.7
Prepaid expenses and other................... 825.4 900.0
----- -----
Total Current Assets......................... 5,576.0 3,656.4
Satellites, net.............................. 4,892.4 4,922.6
Property, net................................ 1,906.4 2,017.4
Goodwill, net................................ 5,777.5 5,775.2
Intangible Assets, net....................... 607.7 644.7
Net Investment in Sales-type Leases.......... 149.6 161.9
Investments and Other Assets................. 757.4 706.9
----- -----
Total Assets................................. $19,667.0 $17,885.1
========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY.
Current Liabilities
Accounts payable............................. $1,021.7 $1,039.0
Deferred revenues............................ 156.6 166.4
Short-term borrowings and current
portion of long-term debt.................. 62.7 727.8
Accrued liabilities and other................ 1,320.8 1,269.9
------- -------
Total Current Liabilities.................... 2,561.8 3,203.1
Long-Term Debt............................... 4,946.1 2,390.0
Other Liabilities and Deferred Credits....... 1,094.3 1,178.4
Deferred Income Taxes........................ 512.3 581.2
Commitments and Contingencies
Minority Interests........................... 576.7 555.3
Stockholder's Equity......................... 9,975.8 9,977.1
------- -------
Total Liabilities and Stockholder's Equity... $19,667.0 $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).
30
HUGHES ELECTRONICS CORPORATION
SELECTED SEGMENT DATA
(Dollars in Millions)
(Unaudited)
Three Months Six Months
Ended June 30, Ended June 30,
-------------- --------------
2003 2002 2003 2002
---- ---- ---- ----
DIRECT-TO-HOME BROADCAST
Total Revenues ..................... $1,943.1 $1,776.3 $3,791.0 $3,406.7
Operating Profit Before Depreciation
and Amortization (1) ............. 299.4 60.5 510.7 39.6
Operating Profit Before Depreciation
and Amortization Margin (1) ..... 15.4% 3.4% 13.5% 1.2%
Operating Profit (Loss) ............ $129.9 $(85.2) $168.2 $(249.2)
Operating Profit Margin ............ 6.7% N/A 4.4% N/A
Depreciation and Amortization ...... $169.5 $145.7 $342.5 $288.8
Capital Expenditures ............... 65.6 140.0 138.8 264.6
---- ----- ----- -----
SATELLITE SERVICES
Total Revenues ..................... $203.5 $209.3 $403.3 $416.4
Operating Profit Before Depreciation
and Amortization (1) .............. 149.3 150.7 297.9 301.8
Operating Profit Before Depreciation
and Amortization Margin (1) ...... 73.4% 72.0% 73.9% 72.5%
Operating Profit ................... $74.4 $61.0 $150.7 $118.1
Operating Profit Margin ............ 36.6% 29.1% 37.4% 28.4%
Depreciation and Amortization ...... $74.9 $89.7 $147.2 $183.7
Capital Expenditures ............... 21.7 109.5 54.8 183.5
---- ----- ---- -----
NETWORK SYSTEMS ....................
Total Revenues ..................... $299.6 $254.4 $547.0 $497.2
Operating Loss Before Depreciation
and Amortization (1) ............. (9.2) (27.0) (31.4) (57.5)
Operating Loss ..................... (29.8) (43.6) (69.6) (92.1)
Depreciation and Amortization ...... 20.6 16.6 38.2 34.6
Capital Expenditures ............... 55.3 87.8 109.4 216.1
---- ---- ----- -----
ELIMINATIONS and OTHER
Total Revenues ..................... $(75.5) $(47.7) $(143.3) $(103.2)
Operating Profit (Loss) Before
Depreciation and Amortization (1) (34.8) (32.6) (67.5) 32.2
Operating Profit (Loss) ............ (34.5) (30.9) (67.4) 36.8
Depreciation and Amortization ...... (0.3) (1.7) (0.1) (4.6)
Capital Expenditures ............... 29.3 13.1 56.4 32.1
---- ---- ---- ----
TOTAL ..............................
Total Revenues ..................... $2,370.7 $2,192.3 $4,598.0 $4,217.1
Operating Profit Before
Depreciation and Amortization (1) 404.7 151.6 709.7 316.1
Operating Profit Before Depreciation
and Amortization Margin (1) ...... 17.1% 6.9% 15.4% 7.5%
Operating Profit (Loss) ............ $140.0 $(98.7) $181.9 $(186.4)
Operating Profit Margin ............ 5.9% N/A 4.0% N/A
Depreciation and Amortization ...... $264.7 $250.3 $527.8 $502.5
Capital Expenditures ............... 171.9 350.4 359.4 696.3
===== ===== ===== =====
(1) See footnote 1 above.
31
The Following Pages Reflect DIRECTV U.S.' Financial Statements and
Other Data as a Stand Alone Entity
32
DIRECTV HOLDINGS LLC
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Six Months
Ended June 30, Ended June 30,
----------------- ---------------
2003 2002 2003 2002
---- ---- ---- ----
(dollars in millions)
Revenues................................... $1,800.2 $1,549.6 $3,508.3 $3,015.4
Operating Costs and Expenses, exclusive
of depreciation and amortization expense
shown below.
Programming and other costs............. 702.9 623.0 1,398.4 1,227.4
Subscriber service expenses............. 150.8 150.4 307.2 297.7
Subscriber acquisition costs:
Third party customer acquisitions...... 306.1 320.8 619.2 682.5
Direct customer acquisitions........... 69.5 36.4 137.2 65.8
Retention, upgrade and other
marketing costs....................... 88.7 116.4 182.5 194.0
Broadcast operations expenses........... 38.2 29.3 72.1 60.2
General and administrative expenses..... 119.2 116.7 236.5 237.5
Depreciation and amortization expense...... 124.1 96.0 248.5 181.1
----- ---- ----- -----
Total Operating Costs and Expenses...... 1,599.5 1,489.0 3,201.6 2,946.2
------- ------- ------- -------
Operating Profit........................... 200.7 60.6 306.7 69.2
Interest expense, net...................... (57.3) (26.7) (86.5) (54.8)
Other loss, net............................ (2.9) (0.1) (4.0) (0.3)
---- ---- ---- ----
Income Before Income Taxes................. 140.5 33.8 216.2 14.1
Income tax expense......................... (52.7) (12.6) (81.1) (5.3)
----- ----- ----- ----
Net Income................................. $87.8 $21.2 $135.1 $8.8
===== ===== ====== ====
33
DIRECTV HOLDINGS LLC
CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, December 31,
2003 2002
(dollars in millions)
ASSETS
Current Assets
Cash and cash equivalents................................. $324.5 $14.1
Accounts receivable, net of allowances of $54.8 and $54.3. 447.7 506.7
Inventories, net.......................................... 98.9 62.6
Prepaid expenses and other................................ 480.2 545.8
----- -----
Total Current Assets.................................. 1,351.3 1,129.2
Satellites, net............................................... 1,001.0 1,011.3
Property, net................................................. 748.0 838.6
Goodwill, net................................................. 2,890.8 2,888.5
Intangible Assets, net........................................ 586.7 623.7
Other Assets.................................................. 115.5 87.3
----- ----
Total Assets.......................................... $6,693.3 $6,578.6
======== ========
LIABILITIES AND OWNER'S EQUITY
Current Liabilities
Accounts payable and accrued liabilities.................. 1,167.0 1,139.2
Unearned subscriber revenue............................... 144.8 156.6
Current portion of long-term debt......................... 16.0 --
---- -------
Total Current Liabilities............................. 1,327.8 1,295.8
Long-Term Debt................................................ 2,609.0 --
Other Liabilities and Deferred Credits........................ 411.8 477.6
Deferred Income Taxes......................................... 245.0 246.7
Commitments and Contingencies
Owner's Equity
Capital stock and additional paid-in capital.............. 2,788.3 5,385.1
Accumulated deficit....................................... (688.6) (823.7)
------ ------
Subtotal Owner's Equity 2,099.7 4,561.4
------- -------
Accumulated Other Comprehensive Loss
Accumulated unrealized losses on securities............. -- (2.9)
------- -------
Total Owner's Equity.................................. 2,099.7 4,558.5
------- -------
Total Liabilities and Owner's Equity.................. $6,693.3 $6,578.6
======== ========
34
DIRECTV Holdings LLC
Non-GAAP Financial Reconciliation and Other Data
(Unaudited)
Pre-Marketing Margin Reconciliation to Operating Profit
For the Quarter For the Six Months Guidance
Ended June 30, Ended June 30, Full Year
-------------- -------------- ---------
2003 2002 2003 2002 2003
---- ---- ---- ---- ----
(dollars in millions)
Operating profit............................ $200.7 $60.6 306.7 $69.2 ~ $475
Add back: Subscriber acquisition costs
Third party customer acquisitions... 306.1 320.8 619.2 682.5 **
Direct customer acquisitions........ 69.5 36.4 137.2 65.8 **
Depreciation and amortization expense. 124.1 96.0 248.5 181.1 **
Retention, upgrade and other
marketing costs..................... 88.7 116.4 182.5 194.0 **
---- ----- ----- ----- -------------
Subtotal.................................... 588.4 569.6 1,187.4 1,123.4 2,600 - 2,675
----- ----- ------- ------- -------------
Pre-marketing margin*....................... $789.1 $630.2 1,494.1 $1,192.6 $3,075 - $3,150
====== ===== ======= ======= ==============
Pre-marketing margin as a percentage
of revenue* 43.8% 40.7% 42.6% 39.6% 41% - 42%
Other Data
For the Quarter For the Six Months
Ended June 30, Ended June 30,
-------------- --------------
2003 2002 2003 2002
---- ---- ---- ----
Average monthly revenue per subscriber
(ARPU)................................ $60.90 $58.10 $60.10 $57.50
Average monthly subscriber churn--%..... 1.5% 1.7% 1.5% 1.7%
Average subscriber acquisition costs
(SAC)................................. $595 $545 $565 $530
Total number of subscribers--platform
(000's)............................... 11,557 10,746 11,557 10,746
Total owned and operated subscribers
(000's)............................... 9,949 8,995 9,949 8,995
(*) 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 management use Pre-Marketing Margin to
evaluate the profitability of DIRECTV'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 before depreciation and amortization expense to measure
profitability.
Hughes and DIRECTV believe this measure is useful to investors, along with other
GAAP measures (such as revenues, operating profit and net income), to compare
DIRECTV's operating performance to other communications, entertainment and media
companies. Hughes and DIRECTV believe that investors also use current and
projected Pre-Marketing Margin to determine the ability of DIRECTV's current and
projected subscriber base to fund discretionary spending and to determine the
financial returns for subscriber additions.
(**) No individual guidance provided.
35
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
GENERAL MOTORS CORPORATION
--------------------------
(Registrant)
Date July 17, 2003
-------------
By
/s/Peter R. Bible
--------------------------
(Peter R. Bible,
Chief Accounting Officer)
36