SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended JUNE 30, 1997
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____ to ____
Commission file number 1-35
GENERAL ELECTRIC COMPANY
(Exact name of registrant as specified in its charter)
NEW YORK 14-0689340
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3135 EASTON TURNPIKE, FAIRFIELD, CT 06431-0001
- ----------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (203) 373-2211
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-------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
There were 3,266,090,538 shares with a par value of $0.16 per share
outstanding at June 30, 1997.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED STATEMENT OF EARNINGS
GENERAL ELECTRIC COMPANY AND CONSOLIDATED AFFILIATES
<TABLE>
<CAPTION>
(DOLLARS, EXCEPT PER-SHARE AMOUNTS, IN MILLIONS) SECOND QUARTER ENDED JUNE 30 (UNAUDITED)
-------------------------------------------------------------------------
CONSOLIDATED GE GECS
--------------------- --------------------- ---------------------
1997 1996 1997 1996 1997 1996
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Sales of goods $ 9,257 $ 8,551 $ 9,258 $ 8,557 $ -- $ --
Sales of services 3,323 2,929 3,362 2,963 -- --
Earnings of GECS -- -- 798 683 -- --
GECS revenues from operations 9,280 7,421 -- -- 9,317 7,457
Other income 137 165 136 164 -- --
-------- -------- -------- -------- -------- --------
Total revenues 21,997 19,066 13,554 12,367 9,317 7,457
-------- -------- -------- -------- -------- --------
Cost of goods sold 6,558 6,034 6,559 6,040 -- --
Cost of services sold 2,136 1,970 2,175 2,005 -- --
Interest and other financial charges 2,021 1,920 165 137 1,862 1,789
Insurance losses and policyholder and annuity benefits 2,012 1,558 -- -- 2,012 1,558
Provision for losses on financing receivables 337 228 -- -- 337 228
Other costs and expenses 5,650 4,460 1,733 1,595 3,947 2,893
Minority interest in net earnings of
consolidated affiliates 52 61 31 23 21 38
-------- -------- -------- -------- -------- --------
Total costs and expenses 18,766 16,231 10,663 9,800 8,179 6,506
-------- -------- -------- -------- -------- --------
Earnings before income taxes 3,231 2,835 2,891 2,567 1,138 951
Provision for income taxes (1,069) (927) (729) (659) (340) (268)
-------- -------- -------- -------- -------- --------
Net earnings $ 2,162 $ 1,908 $ 2,162 $ 1,908 $ 798 $ 683
======== ======== ======== ======== ======== ========
Net earnings per share <F1> $ 0.66 $ 0.58
Dividends declared per share <F1> $ 0.26 $ 0.23
<FN>
<F1> 1996 data have been adjusted to reflect the two-for-one stock split effective on April 28, 1997.
See notes to Condensed Consolidated Financial Statements. Consolidating data are shown for "GE" and "GECS." Transactions between
GE and GECS have been eliminated from the "consolidated" columns.
</TABLE>
<PAGE>
CONDENSED STATEMENT OF EARNINGS
GENERAL ELECTRIC COMPANY AND CONSOLIDATED AFFILIATES
<TABLE>
<CAPTION>
(DOLLARS, EXCEPT PER-SHARE AMOUNTS, IN MILLIONS) SIX MONTHS ENDED JUNE 30 (UNAUDITED)
--------------------------------------------------------------------
CONSOLIDATED GE GECS
-------------------- -------------------- --------------------
1997 1996 1997 1996 1997 1996
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Sales of goods $ 16,961 $ 15,792 $ 16,963 $ 15,801 $ -- $ --
Sales of services 6,108 5,402 6,179 5,461 -- --
Earnings of GECS -- -- 1,552 1,333 -- --
GECS revenues from operations 18,789 14,638 -- -- 18,861 14,702
Other income 296 332 294 330 -- --
-------- -------- -------- -------- -------- --------
Total revenues 42,154 36,164 24,988 22,925 18,861 14,702
-------- -------- -------- -------- -------- --------
Cost of goods sold 12,092 11,244 12,094 11,253 -- --
Cost of services sold 4,121 3,693 4,192 3,753 -- --
Interest and other financial charges 3,952 3,795 323 280 3,645 3,524
Insurance losses and policyholder and annuity benefits 4,256 3,160 -- -- 4,256 3,160
Provision for losses on financing receivables 649 441 -- -- 649 441
Other costs and expenses 11,187 8,557 3,200 3,038 8,041 5,571
Minority interest in net earnings of consolidated
affiliates 107 121 56 39 51 82
-------- -------- -------- -------- -------- --------
Total costs and expenses 36,364 31,011 19,865 18,363 16,642 12,778
-------- -------- -------- -------- -------- --------
Earnings before income taxes 5,790 5,153 5,123 4,562 2,219 1,924
Provision for income taxes (1,951) (1,728) (1,284) (1,137) (667) (591)
-------- -------- -------- -------- -------- --------
Net earnings $ 3,839 $ 3,425 $ 3,839 $ 3,425 $ 1,552 $ 1,333
======== ======== ======== ======== ======== ========
Net earnings per share <F1> $ 1.17 $ 1.03
Dividends declared per share <F1> $ 0.52 $ 0.46
<FN>
<F1> 1996 data have been adjusted to reflect the two-for-one stock split effective on April 28, 1997.
See notes to Condensed Consolidated Financial Statements. Consolidating data are shown for "GE" and "GECS." Transactions between
GE and GECS have been eliminated from the "consolidated" columns.
</TABLE>
<PAGE>
CONDENSED STATEMENT OF FINANCIAL POSITION
GENERAL ELECTRIC COMPANY AND CONSOLIDATED AFFILIATES
<TABLE>
<CAPTION>
(DOLLARS IN MILLIONS) CONSOLIDATED GE GECS
---------------------- ---------------------- ---------------------
6/30/97 12/31/96 6/30/97 12/31/96 6/30/97 12/31/96
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Cash and equivalents $ 3,806 $ 4,191 $ 795 $ 957 $ 3,011 $ 3,234
Investment securities 64,146 59,889 6 17 64,140 59,872
Current receivables 8,509 8,704 8,587 8,826 -- --
Inventories 5,376 4,473 5,376 4,473 -- --
GECS financing receivables - net 97,998 99,714 -- -- 97,998 99,714
Other GECS receivables 16,068 15,418 -- -- 16,756 15,962
Property, plant and equipment (including equipment
leased to others) - net 29,872 28,795 10,727 10,832 19,145 17,963
Investment in GECS -- -- 15,486 14,276 -- --
Intangible assets 15,987 16,007 7,470 7,367 8,517 8,640
Other assets 37,135 35,211 14,017 13,177 23,124 22,034
--------- --------- --------- --------- --------- ---------
Total assets $ 278,897 $ 272,402 $ 62,464 $ 59,925 $ 232,691 $ 227,419
========= ========= ========= ========= ========= =========
Short-term borrowings $ 84,136 $ 80,200 $ 3,072 $ 2,339 $ 81,133 $ 77,945
Accounts payable 9,673 10,205 4,318 4,195 6,201 6,787
Other GE current liabilities 10,890 10,102 10,736 9,886 -- --
Long-term borrowings 46,792 49,246 1,750 1,710 45,164 47,676
Insurance liabilities and annuity benefits 63,795 61,327 -- -- 63,795 61,327
Other liabilities 19,679 18,917 9,678 9,660 9,890 9,138
Deferred income taxes 9,176 8,273 750 533 8,426 7,740
--------- --------- --------- --------- --------- ---------
Total liabilities 244,141 238,270 30,304 28,323 214,609 210,613
--------- --------- --------- --------- --------- ---------
Minority interest in equity of consolidated
affiliates 3,134 3,007 538 477 2,596 2,530
--------- --------- --------- --------- --------- ---------
Common stock (3,714,026,000 shares issued) <F1> 594 594 594 594 1 1
Unrealized gains on investment securities 1,030 671 1,030 671 1,025 668
Other capital 2,993 2,498 2,993 2,498 2,174 2,253
Retained earnings 40,805 38,670 40,805 38,670 12,286 11,354
Less common stock held in treasury (13,800) (11,308) (13,800) (11,308) -- --
--------- --------- --------- --------- --------- ---------
Total share owners' equity 31,622 31,125 31,622 31,125 15,486 14,276
--------- --------- --------- --------- --------- ---------
Total liabilities and equity $ 278,897 $ 272,402 $ 62,464 $ 59,925 $ 232,691 $ 227,419
========= ========= ========= ========= ========= =========
<FN>
<F1> Reflects the two-for-one stock split effective on April 28, 1997.
See notes to Condensed Consolidated Financial Statements. Consolidating data are shown for "GE" and "GECS." June data are
unaudited. Transactions between GE and GECS have been eliminated from the "consolidated" columns.
</TABLE>
<PAGE>
CONDENSED STATEMENT OF CASH FLOWS
GENERAL ELECTRIC COMPANY AND CONSOLIDATED AFFILIATES
<TABLE>
<CAPTION>
(DOLLARS IN MILLIONS) SIX MONTHS ENDED JUNE 30 (UNAUDITED)
--------------------------------------------------------------------
CONSOLIDATED GE GECS
-------------------- -------------------- --------------------
1997 1996 1997 1996 1997 1996
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 3,839 $ 3,425 $ 3,839 $ 3,425 $ 1,552 $ 1,333
Adjustments to reconcile net earnings to cash
provided from (used for) operating activities
Depreciation and amortization 1,931 1,824 794 804 1,137 1,020
Earnings retained by GECS -- -- (932) (869) -- --
Deferred income taxes 418 261 204 64 214 197
Decrease in GE current receivables 272 448 310 520 -- --
Increase in GE inventories (813) (724) (813) (724) -- --
Increase (decrease) in accounts payable 116 (637) 85 (320) (19) (452)
Increase in insurance reserves 1,596 1,714 -- -- 1,596 1,714
Provision for losses on financing receivables 649 441 -- -- 649 441
All other operating activities (552) (935) (2) 553 (373) (1,366)
-------- -------- -------- -------- -------- --------
Cash from operating activities 7,456 5,817 3,485 3,453 4,756 2,887
-------- -------- -------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Property, plant and equipment (including
equipment leased to others) - additions (3,807) (3,599) (878) (941) (2,929) (2,658)
Net decrease (increase) in GECS financing receivables 489 (9) -- -- 489 (9)
Payments for principal businesses purchased (684) (2,117) (103) (409) (581) (1,708)
All other investing activities (2,393) (1,496) 134 118 (2,659) (1,673)
-------- -------- -------- -------- -------- --------
Cash used for investing activities (6,395) (7,221) (847) (1,232) (5,680) (6,048)
-------- -------- -------- -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in borrowings (maturities 90 days or less) 7,468 4,937 1,232 1,556 6,203 3,381
Newly issued debt (maturities more than 90 days) 9,378 13,457 243 75 9,135 13,382
Repayments and other reductions (maturities
more than 90 days) (14,914) (12,949) (779) (876) (14,135) (12,073)
Net purchase of GE shares for treasury (1,786) (1,447) (1,786) (1,447) -- --
Dividends paid to share owners (1,710) (1,532) (1,710) (1,532) (620) (464)
All other financing activities 118 (614) -- -- 118 (614)
-------- -------- -------- -------- -------- --------
Cash from (used for) financing activities (1,446) 1,852 (2,800) (2,224) 701 3,612
-------- -------- -------- -------- -------- --------
Increase (decrease) in cash and equivalents (385) 448 (162) (3) (223) 451
Cash and equivalents at beginning of year 4,191 2,823 957 874 3,234 1,949
-------- -------- -------- -------- -------- --------
Cash and equivalents at June 30 $ 3,806 $ 3,271 $ 795 $ 871 $ 3,011 $ 2,400
======== ======== ======== ======== ======== ========
<FN>
See notes to Condensed Consolidated Financial Statements. Consolidating data are shown for "GE" and "GECS." Transactions between
GE and GECS have been eliminated from the "consolidated" columns.
</TABLE>
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. The accompanying condensed quarterly financial statements represent
the consolidation of General Electric Company and all companies which it
directly or indirectly controls, either through majority ownership or otherwise.
Reference is made to note 1 to the consolidated financial statements included in
the Company's Annual Report on Form 10-K for the year ended December 31, 1996.
That note discusses consolidation and financial statement presentation. As used
in this Report and in the Report on Form 10-K, "GE" represents the adding
together of all affiliated companies except General Electric Capital Services,
Inc. ("GECS"), which is presented on a one-line basis; GECS consists of General
Electric Capital Services, Inc. and all of its affiliates; and "consolidated"
represents the adding together of GE and GECS with the effects of transactions
between the two eliminated.
2. The condensed consolidated quarterly financial statements are
unaudited. These statements include all adjustments (consisting of normal
recurring accruals) considered necessary by management to present a fair
statement of the results of operations, financial position and cash flows. The
results reported in these condensed consolidated financial statements should not
be regarded as necessarily indicative of results that may be expected for the
entire year.
3. GE's inventories consisted of the following:
At
-----------------------
(DOLLARS IN MILLIONS) 6/30/97 12/31/96
------- --------
Raw materials and work in process $ 3,249 $ 3,028
Finished goods 3,073 2,404
Unbilled shipments 268 258
Revaluation to LIFO (1,214) (1,217)
------- -------
Total inventories $ 5,376 $ 4,473
======= =======
4. Property, plant and equipment (including equipment leased to
others) consisted of the following:
At
-----------------------
(DOLLARS IN MILLIONS) 6/30/97 12/31/96
------- --------
ORIGINAL COST
- - GE $26,350 $25,950
- - GECS 25,918 24,834
------- -------
Total 52,268 50,784
------- -------
ACCUMULATED DEPRECIATION AND AMORTIZATION
- - GE 15,623 15,118
- - GECS 6,773 6,871
------- -------
Total 22,396 21,989
------- -------
PROPERTY, PLANT AND EQUIPMENT -- NET
- - GE 10,727 10,832
- - GECS 19,145 17,963
------- -------
Total $29,872 $28,795
======= =======
5. GE's authorized common stock consisted of 4,400,000,000 shares
having a par value of $0.16 each. Average shares outstanding for the second
quarter of 1997 and 1996 were 3,273,527,451 and 3,311,010,126, respectively.
Average shares outstanding for the first six months of 1997 and 1996 were
3,278,713,140 and 3,318,348,038, respectively.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
A. RESULTS OF OPERATIONS -- SECOND QUARTER OF 1997 COMPARED WITH SECOND
QUARTER OF 1996
General Electric Company's earnings for the second quarter of 1997 were
$2.162 billion, the highest for any quarter in the Company's history, an
increase of 13% over the same period in 1996. Earnings per share increased 14%
to $0.66, up from last year's $0.58. Earnings per share grew faster than
earnings, reflecting the impact of shares repurchased under a four-year, $13
billion share repurchase program initiated in December 1994.
Revenues, including acquisitions, rose 15% to a record $22.0 billion
for the quarter. Increased global activities and higher sales of spare parts and
services by GE's equipment businesses were key contributors to the increase.
Operating margin for the second quarter increased to a record 17.1% of
sales, up from last year's 16.3%. The second-quarter increase was the sixteenth
consecutive quarterly increase in GE's operating margin rate and reflected GE's
ongoing emphasis on productivity and benefits from its Six Sigma quality
initiative.
Ten of GE's twelve businesses reported higher operating profit for the
second quarter, with nine -- led by GE Capital Services, NBC and Aircraft
Engines -- achieving double-digit increases.
GE Capital Services' earnings were $798 million, 17% more than last
year's $683 million, benefiting from the globalization and diversity of GECS' 27
businesses. The record results were led by strong double-digit increases in its
Specialty Insurance, Equipment Management and Mid-Market Financing activities.
Cash generated from GE's operating activities during the first half was
$3.5 billion, equaling last year's record level. As part of the $13 billion
share repurchase program, GE purchased $862 million of its stock during the
second quarter to reach $8.1 billion -- 218 million shares -- purchased since
December 1994.
SEGMENT ANALYSIS:
The comments that follow compare revenues and operating profit by
industry segment for the second quarters of 1997 and 1996.
o AIRCRAFT ENGINES revenues increased substantially over last year's
second quarter reflecting strong volume growth in both commercial engines and
services, including the results of an acquired services business. Operating
profit was also much higher, as the volume increase more than offset
higher costs.
o APPLIANCES reported somewhat higher revenues in the second quarter
compared with a year ago, primarily as a result of acquisition-related
international volume. Operating profit was considerably higher for the quarter,
reflecting productivity which more than offset the effects of lower selling
prices.
o BROADCASTING operating profit rose sharply on a good increase in
revenues compared with last year's second quarter. The improvement in operating
profit was attributable to improved price performance at both network and
owned-and-operated stations, reflecting NBC's strong position in the advertising
market, as well as strong double-digit growth in NBC's cable programming
services, the combination of which more than offset higher license fees for
certain prime-time programs that were renewed.
o GECS' earnings were $798 million in the second quarter, a 17%
improvement over last year's $683 million, benefiting from the globalization and
diversity of GECS businesses. The record results were led by strong double-digit
increases in its Specialty Insurance, Equipment Management and Mid-Market
Financing activities. Overall, the increase in net earnings for the lending,
leasing, and equipment management businesses of GECS was attributable to a
higher average level of invested assets as well as increased financing spreads,
reflecting lower borrowing rates which more than offset a slight decrease in
yields. The growth in earnings from specialty insurance activities reflected
increased premium and investment income, from both origination volume and
investment portfolio growth as well as a higher level of net realized gains on
investment sales, partially offset by increases in reserves for insurance
losses, primarily related to the new volume.
o INDUSTRIAL PRODUCTS AND SYSTEMS reported a strong increase in
operating profit on somewhat higher revenues. The revenue increase reflected
good volume increases across all businesses in the segment, led by
Transportation and Lighting. The improvement in operating profit was primarily
attributable to productivity across the segment, growth in services and higher
volume, which more than offset lower selling prices.
o MATERIALS second quarter revenues were slightly higher than a year
ago reflecting good volume growth partially offset by lower selling prices.
Operating profit was somewhat higher, primarily as a result of productivity and
higher volume which more than offset lower selling prices.
o POWER GENERATION revenues were much higher compared with the second
quarter of 1996, primarily as a result of strong volume growth in gas turbines
and at Nuovo Pignone. Operating profit was considerably higher, reflecting
productivity, favorable product mix and higher volume, which more than offset
lower selling prices.
o TECHNICAL PRODUCTS & SERVICES revenues were slightly lower than in
the second quarter of 1996, reflecting selling price declines across the segment
which more than offset volume growth. Operating profit at Medical Systems was
slightly lower, primarily as a result of a provision for patent litigation
involving the Company's MRI product line, and the effects of lower selling
prices, the combination of which more than offset productivity. Operating profit
at Information Services was about the same as a year ago, as productivity gains
were largely offset by selling price declines.
o ALL OTHER operating profit decreased somewhat on much lower
revenues, reflecting lower levels of licensing income compared with the second
quarter of 1996.
B. RESULTS OF OPERATIONS -- FIRST HALF OF 1997 COMPARED WITH FIRST HALF OF 1996
Earnings for the six months ended June 30, 1997, were $3.839 billion,
up 12% from $3.425 billion in 1996's first half. Earnings per share increased
14% to $1.17 from $1.03. Earnings per share grew faster than earnings,
reflecting the impact of shares repurchased under a four-year, $13 billion share
repurchase program initiated in December 1994.
Consolidated revenues for the first six months of 1997 aggregated $42.2
billion, up 17% from the comparable $36.2 billion in 1996's first half. GE's
sales of goods and services were 9% higher, with improvements led by Aircraft
Engines, Power Systems and NBC.
Eleven of GE's twelve businesses reported higher operating profit for
the first half, with eight -- led by GE Capital Services, NBC and Aircraft
Engines -- achieving double-digit increases.
Operating margin in the first half of 1997 was 15.8% of sales, with the
improvement over last year's 15.1% led by NBC, Medical Systems and Power
Systems.
SEGMENT ANALYSIS:
The following comments compare revenues and operating profit by
industry segment for the first half of 1997 with the same period of 1996.
o AIRCRAFT ENGINES had considerably higher operating profit on strong
revenue growth from the first half of 1996. The revenue and operating profit
increases both resulted from sharply higher volume in commercial engines as well
as in services, including results from an acquired services business, which more
than offset cost increases.
o APPLIANCES reported a good increase in operating profit on revenues
that were somewhat higher than a year ago, primarily as a result of
acquisition-related international volume. The improvement in operating profit
was primarily attributable to productivity which more than offset the effects of
lower selling prices.
o BROADCASTING revenues were somewhat higher than last year's first
half, as NBC's strong position in the advertising market more than offset the
absence of a current-year counterpart to NBC's broadcast of the January 1996
Superbowl. Operating profit was substantially higher than a year ago, reflecting
stronger prime-time pricing, increased international distribution of programming
and growth in NBC's cable programming services, which more than offset higher
license fees for certain prime-time programs that were renewed.
o GE CAPITAL SERVICES net earnings increased by 16% to $1,552 million,
led by increases in Specialty Insurance, Equipment Management and Specialized
Financing activities. Overall, the increase in net earnings for the lending,
leasing, and equipment management businesses of GECS was attributable to a
higher average level of invested assets as well as increased financing spreads,
reflecting both higher yields and lower borrowing rates. The growth in earnings
from specialty insurance activities reflected increased premium and investment
income, from both origination volume and investment portfolio growth as well as
a higher level of net realized gains on investment sales, partially offset by
increases in reserves for insurance losses, primarily related to the new volume.
o INDUSTRIAL PRODUCTS AND SYSTEMS reported much higher operating profit
on somewhat higher revenues. The revenue increase reflected good volume
increases across all businesses in the segment. The improvement in operating
profit was attributable to the combination of productivity, particularly at
Lighting and Electrical Distribution and Control, and higher volume which more
than offset the effects of lower selling prices.
o MATERIALS operating profit was about the same for the first six
months of 1997 on flat revenues. The operating profit performance reflected
productivity and higher volume, the combination of which were partially offset
by the effects of lower selling prices.
o POWER GENERATION reported revenues that were much higher than in last
year's first half, reflecting continued strong volume growth at Nuovo Pignone
and in gas turbines. Operating profit increased substantially, primarily as a
result of strong productivity and the higher volume which more than offset the
effects of lower selling prices.
o TECHNICAL PRODUCTS & SERVICES revenues were somewhat higher than in
the first half of 1996, reflecting volume growth in both Medical Systems and
Information Services, partially offset by the effects of lower selling prices.
Operating profit at Medical Systems was slightly lower, primarily as a result of
a provision for patent litigation involving the Company's MRI product line, and
the effects of lower selling prices, the combination of which more than offset
productivity and the volume increase. Operating profit at Information Services
was slightly higher, principally as a result of productivity which offset the
effects of lower selling prices.
o ALL OTHER operating profit, principally related to the licensing of
GE technology to others, was slightly lower on somewhat lower revenues.
C. FINANCIAL CONDITION
With respect to the Condensed Statement of Financial Position,
consolidated assets of $278.9 billion at June 30, 1997, were $6.5 billion higher
than the $272.4 billion at December 31, 1996.
GE assets were $62.5 billion at June 30, 1997, an increase of $2.5
billion from December 31, 1996. The increase was principally attributable to
seasonal increases in inventories ($0.9 billion), increases in investment in
GECS ($1.2 billion), and numerous changes in the other assets category, none of
which exceeded $0.5 billion.
GECS assets increased by $5.3 billion from the end of 1996, principally
as a result of higher levels of investment in investment securities as well as
increases in all other assets, both of which are described below. GECS
investment securities increased by $4.3 billion, reflecting the addition of
securities held by insurance companies acquired and new investments by various
GECS businesses, as well as increases in fair value of investment securities
during the period. Other assets increased $1.1 billion, principally as a result
of growth in investor-directed fund accounts and deferred insurance acquisition
costs at GECS insurance businesses. GE Capital financing receivables, which
aggregated $98.0 billion, net of reserves, at the end of the second quarter,
were $1.7 billion lower than at year-end 1996, principally as a result of the
sale of receivables. Management believes that GE Capital's reserves of $2.6
billion (2.63% of the receivables balance at June 30, 1997 -- the same as
year-end 1996) are appropriate given the strength and diversity of the portfolio
and current economic circumstances. Property, plant and equipment, principally
equipment leased to others, increased by $1.2 billion primarily as a result of
higher auto lease volume and, to lesser extent, new aircraft volume.
Consolidated liabilities of $244.1 billion at June 30, 1997, were $5.8
billion higher than the year-end 1996 balance of $238.3 billion. GE liabilities
were up $2.0 billion; GECS liabilities increased $4.0 billion.
GE total borrowings were $4.8 billion ($3.1 billion short-term and $1.7
billion long-term) at June 30, 1997, an increase of $0.8 billion from December
31, 1996. GE's ratio of debt to total capital at the end of June 1997 was 13.0%
compared with 11.4% at the end of last year and 13.8% at June 30, 1996.
GECS liabilities increased to $214.6 billion, compared with $210.6
billion at the end of 1996. The increase was principally attributable to a $2.5
billion increase in insurance liabilities, reserves and annuity benefits,
reflecting the acquisition of Coregis Life Insurance Company as well as new
volume. Short-term borrowings increased by $3.2 billion to $81.1 billion and
long-term borrowings decreased by $2.5 billion to $45.2 billion.
With respect to cash flows, consolidated cash and equivalents were $3.8
billion at June 30, 1997, a decrease of $0.4 billion during the first half. Cash
and equivalents were $3.3 billion at June 30, 1996, an increase of $0.4 billion
during last year's first half.
GE's cash and equivalents were $0.8 billion at June 30, 1997, compared
with $1.0 billion at December 31, 1996. During the first six months of 1997,
cash provided from operating activities was $3.5 billion, equaling last year's
record level. The first half performance reflected continued improvements in
earnings, partially offset by lower cash flows from working capital, which were
more than attributable to the absence of current year counterparts to certain
1996 receipts, primarily substantial progress collections related to power
generation contracts and collection of a large sundry receivable. Cash used for
investing activities ($0.8 billion) represented principally investments in new
plant and equipment for a wide variety of projects to reduce costs and improve
efficiencies. Cash used for financing activities ($2.8 billion) included $1.7
billion for repurchases of the Company's common stock under the share repurchase
program and $1.7 billion for dividends paid to share owners, a 13% increase in
the per-share dividend rate compared with the first half of last year. The
effects of dividends and share repurchases on cash used for financing activities
were partially offset by cash provided from higher borrowings ($0.7 billion).
GE's cash and equivalents were $0.9 billion at June 30, 1996, and at
December 31, 1995. During the first half of 1996, cash provided from operating
activities increased to $3.5 billion, up from $1.5 billion during the first six
months of 1995. The increase resulted from improvements in earnings, working
capital -- principally in trade receivables and progress collections related to
large power generation contracts -- and collection of a large sundry receivable.
Cash used for investing activities ($1.2 billion) represented principally
investments in new plant and equipment for a wide variety of projects to reduce
costs and improve efficiencies. Cash used for financing activities ($2.2
billion) included $1.7 billion for repurchases of the Company's common stock
under the share repurchase program and $1.5 billion for dividends paid to share
owners, a 12% increase in the per-share dividend rate compared with the first
half of 1995. The dividends and share repurchases were partially offset by funds
provided from higher borrowings ($0.8 billion).
GECS cash and equivalents decreased $0.2 billion during the first half
of 1997. Cash was used primarily to fund additions to property, plant and
equipment ($2.9 billion), principally equipment that is provided to third
parties on operating leases, and for acquisitions of businesses ($0.6 billion).
Cash provided from operating activities totaled $4.8 billion. Cash provided from
financing activities resulted primarily from increased borrowings ($1.2 billion)
during the first six months of 1997.
GECS cash and equivalents increased $0.5 billion during the first half
of 1996. Cash was used primarily to fund additions to property, plant and
equipment ($2.7 billion), principally equipment that is provided to third
parties on operating leases, for acquisitions of businesses ($1.7 billion), the
largest of which were Life Insurance Company of Virginia and Union Fidelity Life
Insurance Company, and increased investments in nonconsolidated affiliates ($1.4
billion). Cash provided from operating activities totaled $2.9 billion. Cash
provided from financing activities resulted primarily from increased borrowings
($4.7 billion) during the first six months of 1996.
D. SUBSEQUENT EVENT
GECS has a noncontrolling investment in the common stock of Montgomery Ward
Holding Corp. ("MWHC"). MWHC and its wholly-owned subsidiary, Montgomery Ward &
Co., Incorporated ("MWC"), are engaged in retail merchandising and direct
response marketing (conducted primarily through Signature Financial/Marketing,
Inc., "Signature", which markets consumer club and insurance products). At the
end of the second quarter, MWHC and certain of its affiliates were in
negotiations with lenders to restructure debt and to obtain additional
financing. On July 7, 1997, MWHC, MWC and certain of their affiliates filed for
reorganization under Chapter 11 of the U.S. Bankruptcy Code. Signature is not
included in the Chapter 11 bankruptcy filing and the possibility of sale of
Signature will continue to be evaluated.
MWHC reported losses from operations during the first half of 1997, and
GECS investment was reduced for its share of such losses. GECS also wrote off
its remaining investment in MWHC common stock during the second quarter. In
addition to MWHC common stock, GECS holds investments in inventory financing and
preferred stock from MWHC and its affiliates, which amounted to approximately
$1,060 million at the end of the second quarter. No impairment write-down was
considered necessary for these investments; however, GECS has suspended income
recognition on these investments and will continue to carefully monitor them for
recoverability. Subsequent to the MWHC bankruptcy filing, GECS announced a $1.0
billion Debtor-In-Possession financing commitment, subject to certain
conditions, to MWHC for the purchase of inventory and other costs.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
GENERAL
The directors, other than Mr. Nunn, are defendants in a civil suit
purportedly brought on behalf of the Company as a share owner derivative and
class action (the Cohen action) in New York State Supreme Court, New York
County, on September 18, 1996. The suit is based upon the Company's
solicitation, in the 1996 proxy statement, of share owner approval of the 1996
Non-Employee Director Stock Option Plan. Under the Plan, which the share owners
approved, 3,000 stock options will be granted annually to each of the Company's
non-employee directors through 2003. Each annual grant entitles the director,
for a period of 10 years from the date of the grant, to purchase 3,000 shares of
GE stock from the Company at the market price of GE stock on the date of grant.
The suit claims that the options would have an estimated value to the directors
on the annual date of grant which should have been disclosed. The suit also
claims that the directors breached their fiduciary duties because the 1996 proxy
statement did not state that the options would have such an alleged, estimated
value to the directors when granted. The suit seeks compensatory damages and
invalidation of the Plan and all options granted under the Plan. The Company
believes that the options have no value to the directors on the date of grant,
that the options will have no value to the directors unless the GE stock price
increases above the grant price, and that the 1996 proxy statement contained
full and adequate disclosure because, among other things, any reasonable share
owner would understand that the value of the options to the non-employee
directors would only occur when and if the stock price rises above the grant
price. On May 14, 1997, the court dismissed the complaint and plaintiff
subsequently filed a notice of appeal.
ENVIRONMENTAL
As previously reported, in April 1997, the United States Environmental
Protection Agency informed the company that it was considering issuing a
complaint against the company seeking $241,000 in penalties and alleging
violations of the Emergency Planning and Community Right-to-Know Act for failure
to report chemical use and releases from the company's Waterford, New York
facility. The Complaint was issued in April 1997, and seeks $226,000 in
penalties. The company is negotiating with the Agency.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The annual meeting of Share Owners of General Electric Company
was held on April 23, 1997.
(b) All director nominees were elected.
(c) Certain matters voted upon at the meeting and the votes cast
with respect to such matters are as follows:
PROPOSALS AND VOTE TABULATIONS
<TABLE>
<CAPTION>
VOTES CAST
------------------------ BROKER
FOR AGAINST ABSTAIN NON-VOTES
--- ------- ------- ---------
<S> <C> <C> <C> <C>
MANAGEMENT PROPOSALS
Approval of the appointment
of independent
auditors for 1997 1,372,906,914 3,638,698 5,290,054 0
Approval of the 2-for-1 stock split
and increase in number of
authorized shares 1,370,451,830 3,515,563 7,868,273 0
Approval of proposed executive
officer performance goals 1,321,169,505 42,166,834 18,499,327 0
Approval to amend and extend the GE
1990 Long-Term Incentive Plan 1,064,028,696 88,675,508 20,807,355 208,324,107
SHARE OWNER PROPOSALS
(1) Relating to term limit for
outside directors 53,144,387 1,094,189,948 26,177,224 208,324,107
(2) Relating to GE's nuclear power business 40,862,682 1,055,113,281 77,535,596 208,324,107
(3) Relating to environmental report 63,955,420 1,051,601,750 57,954,389 208,324,107
(4) Relating to Maquiladoras 69,475,521 996,047,057 107,988,981 208,324,107
(5) Relating to executive compensation
limits 92,311,293 1,051,505,736 29,694,530 208,324,107
(6) Relating to military contracts standards 56,552,986 1,031,931,436 85,027,137 208,324,107
</TABLE>
<TABLE>
<CAPTION>
ELECTION OF DIRECTORS
DIRECTOR VOTES RECEIVED VOTES WITHHELD
- --------------------- ------------- -------------
<S> <C> <C>
D. Wayne Calloway 1,370,850,022 10,985,644
Silas S. Cathcart 1,369,619,983 12,215,683
Dennis D. Dammerman 1,370,414,752 11,420,914
Paolo Fresco 1,370,209,964 11,625,702
Claudio X. Gonzalez 1,371,261,185 10,574,481
Gertrude G. Michelson 1,370,905,720 10,929,946
Sam Nunn 1,358,423,608 23,412,058
John D. Opie 1,370,271,755 11,563,911
Roger S. Penske 1,369,048,403 12,787,263
Barbara Scott Preiskel 1,370,612,187 11,223,479
Frank H. T. Rhodes 1,369,851,946 11,983,720
Andrew C. Sigler 1,370,464,019 11,371,647
Douglas A. Warner III 1,361,078,865 20,756,801
John F. Welch, Jr 1,369,790,937 12,044,729
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
Exhibit 11. Computation of Per Share Earnings.
Exhibit 12. Computation of Ratio of Earnings to Fixed Charges.
Exhibit 27. Financial Data Schedule
b. Reports on Form 8-K during the quarter ended June 30, 1997.
Report on Form 8-K (Items 5 and 7) filed on April 28, 1997,
regarding amendment of the Company's Restated Certificate of
Incorporation to change and increase the Company's authorized
common stock from 2,200,000,000 shares, par value $0.32 per
share, to 4,400,000,000 shares, par value $0.16 per share, and
in so doing split the common stock (including outstanding and
treasury shares) on a 2-for-1 basis.
<PAGE>
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 thereunto duly authorized.
General Electric Company
(Registrant)
July 30, 1997 Philip D. Ameen
- ------------- ------------------------------
Date Vice President and Comptroller
Duly Authorized Officer and
Principal Accounting Officer
<PAGE>
1 of 2
EXHIBIT 11
GENERAL ELECTRIC COMPANY
COMPUTATION OF PER SHARE EARNINGS <F1>
<TABLE>
<CAPTION>
(SHARES IN THOUSANDS; DOLLAR AMOUNTS, EXCEPT
EARNINGS PER SHARE, IN MILLIONS)
BASIC FULLY
EARNINGS PRIMARY DILUTED
PER COMMON EARNINGS EARNINGS
SHARE PER SHARE PER SHARE
---------- ---------- ----------
<S> <C> <C> <C>
SECOND QUARTER ENDED JUNE 30, 1997
Net earnings applicable to common stock $ 2,162 $ 2,162 $ 2,162
Dividend equivalents (net of tax) applicable
to deferred incentive compensation shares -- 2 2
---------- ---------- ----------
Earnings for per-share calculations $ 2,162 $ 2,164 $ 2,164
---------- ---------- ----------
Average number of shares outstanding 3,273,527 3,273,527 3,273,527
Average number of deferred incentive
compensation shares -- 15,063 15,063
Average stock option shares -- 50,929 55,219
Average number of restricted stock units -- 4,724 4,994
---------- ---------- ----------
Shares for earnings calculation 3,273,527 3,344,243 3,348,803
---------- ---------- ----------
EARNINGS PER SHARE $ 0.66 $ 0.65 $ 0.65
========== ========== ==========
SECOND QUARTER ENDED JUNE 30, 1996
Net earnings applicable to common stock $ 1,908 $ 1,908 $ 1,908
Dividend equivalents (net of tax) applicable
to deferred incentive compensation shares -- -- --
---------- ---------- ----------
Earnings for per-share calculations $ 1,908 $ 1,908 $ 1,908
---------- ---------- ----------
Average number of shares outstanding 3,311,010 3,311,010 3,311,010
Average number of deferred incentive
compensation shares -- 15,728 15,728
Average stock option shares -- 42,888 46,074
Average number of restricted stock units -- 3,992 4,180
---------- ---------- ----------
Shares for earnings calculation 3,311,010 3,373,618 3,376,992
---------- ---------- ----------
EARNINGS PER SHARE $ 0.58 $ 0.57 $ 0.56
========== ========== ==========
<FN>
<F1> Adjusted for the two-for-one stock split on April 28, 1997.
</TABLE>
<PAGE>
2 of 2
EXHIBIT 11
GENERAL ELECTRIC COMPANY
COMPUTATION OF PER SHARE EARNINGS <F1>
<TABLE>
<CAPTION>
(SHARES IN THOUSANDS; DOLLAR AMOUNTS, EXCEPT
EARNINGS PER SHARE, IN MILLIONS)
BASIC FULLY
EARNINGS PRIMARY DILUTED
PER COMMON EARNINGS EARNINGS
SHARE PER SHARE PER SHARE
---------- ---------- ----------
<S> <C> <C> <C>
SIX MONTHS ENDED JUNE 30, 1997
Net earnings applicable to common stock $ 3,839 $ 3,839 $ 3,839
Dividend equivalents (net of tax) applicable
to deferred incentive compensation shares -- 5 5
---------- ---------- ----------
Earnings for per-share calculations $ 3,839 $ 3,844 $ 3,844
---------- ---------- ----------
Average number of shares outstanding 3,278,713 3,278,713 3,278,713
Average number of deferred incentive
compensation shares -- 15,016 15,016
Average stock option shares -- 50,292 57,089
Average number of restricted stock units -- 4,596 4,966
---------- ---------- ----------
Shares for earnings calculation 3,278,713 3,348,617 3,355,784
---------- ---------- ----------
EARNINGS PER SHARE $ 1.17 $ 1.15 $ 1.15
========== ========== ==========
SIX MONTHS ENDED JUNE 30, 1996
Net earnings applicable to common stock $ 3,425 $ 3,425 $ 3,425
Dividend equivalents (net of tax) applicable
to deferred incentive compensation shares -- 2 2
---------- ---------- ----------
Earnings for per-share calculations $ 3,425 $ 3,427 $ 3,427
---------- ---------- ----------
Average number of shares outstanding 3,318,348 3,318,348 3,318,348
Average number of deferred incentive
compensation shares -- 15,722 15,722
Average stock option shares -- 41,326 46,302
Average number of restricted stock units -- 3,744 4,038
---------- ---------- ----------
Shares for earnings calculation 3,318,348 3,379,140 3,384,410
---------- ---------- ----------
EARNINGS PER SHARE $ 1.03 $ 1.01 $ 1.01
========== ========== ==========
<FN>
<F1> Adjusted for the two-for-one stock split on April 28, 1997.
</TABLE>
<PAGE>
EXHIBIT 12
GENERAL ELECTRIC COMPANY
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
(DOLLARS IN MILLIONS) SIX MONTHS ENDED
JUNE 30, 1997
----------------
<S> <C>
GE EXCEPT GECS
Earnings <F1> $ 5,179
Less: Equity in undistributed earnings of General Electric
Capital Services, Inc. <F2> (932)
Plus: Interest and other financial
charges included in expense 323
One-third of rental expense <F3> 85
--------
Adjusted "earnings" $ 4,655
========
Fixed Charges:
Interest and other financial charges $ 323
Interest capitalized 13
One-third of rental expense <F3> 85
--------
Total fixed charges $ 421
========
Ratio of earnings to fixed charges 11.06
========
GENERAL ELECTRIC COMPANY AND CONSOLIDATED AFFILIATES
Earnings <F1> $ 5,897
Plus: Interest and other financial charges
included in expense 3,978
One-third of rental expense <F3> 197
--------
Adjusted "earnings" $ 10,072
========
Fixed Charges:
Interest and other financial charges $ 3,978
Interest capitalized 36
One-third of rental expense <F3> 197
--------
Total fixed charges $ 4,211
========
Ratio of earnings to fixed charges 2.39
========
<FN>
<F1> Earnings before income taxes and minority interest.
<F2> Earnings after income taxes, net of dividends.
<F3> Considered to be representative of interest factor in rental expense.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated financial statements for the period ended June 30, 1997, and
is qualified in its entirety by reference to such statements.
</LEGEND>
<CIK> 0000040545
<NAME> GENERAL ELECTRIC COMPANY
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 3,806
<SECURITIES> 64,146
<RECEIVABLES> 0<F1>
<ALLOWANCES> 0<F1>
<INVENTORY> 5,376
<CURRENT-ASSETS> 0<F2>
<PP&E> 52,268
<DEPRECIATION> 22,396
<TOTAL-ASSETS> 278,897
<CURRENT-LIABILITIES> 0<F2>
<BONDS> 46,792
0
0
<COMMON> 594
<OTHER-SE> 31,028
<TOTAL-LIABILITY-AND-EQUITY> 278,897
<SALES> 16,961
<TOTAL-REVENUES> 23,069<F3>
<CGS> 12,092
<TOTAL-COSTS> 16,213<F4>
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0<F1>
<INTEREST-EXPENSE> 3,952
<INCOME-PRETAX> 5,790
<INCOME-TAX> 1,951
<INCOME-CONTINUING> 3,839
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,839
<EPS-PRIMARY> 1.15
<EPS-DILUTED> 1.15
<FN>
<F1>Not disclosed in interim periods.
<F2>Not applicable to consolidated GE.
<F3>GE sales of goods ($16,961) and services ($6,108).
<F4>GE cost of goods ($12,092) and services ($4,121) sold.
</FN>
</TABLE>
