SECTIONS
Business 2
Properties 12
Legal Proceedings 12
Submission of Matters to a Vote of Security Holders 15
Market for Stock 15
Selected Financial Data 15
Management's Discussion 15
Market Risk 16
Financial Statements 16
Disagreements 16
Directors and Executive Officers 17
Executive Compensation 18
Security Ownership 18
Certain Relationships 18
Exhibits, Financial Statement Schedules 19
Signatures 24
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1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[x] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended DECEMBER 31, 1997 Commission file number 1-35
------------------------------------------- ---------------------------
or
[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ______to ______
GENERAL ELECTRIC COMPANY
(Exact name of registrant as specified in charter)
NEW YORK 14-0689340
-------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3135 EASTON TURNPIKE, FAIRFIELD, CT 06431-0001 203/373-2211
- ----------------------------------- ---------- ------------
(Address of principal executive offices) (Zip Code) (Telephone No.)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
Common stock, New York Stock Exchange
par value $0.16 per share Boston Stock Exchange
There were 3,260,410,586 shares of voting common stock with a par
value of $0.16 outstanding at March 1, 1998. These shares, which constitute all
of the outstanding common equity of the registrant, had an aggregate market
value on March 2, 1998, of $251.6 billion. Affiliates of the Company
beneficially own, in the aggregate, less than one-tenth of one percent of such
shares.
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 __
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. X
DOCUMENTS INCORPORATED BY REFERENCE
The definitive proxy statement relating to the registrant's Annual
Meeting of Share Owners, to be held April 22, 1998, is incorporated by reference
in Part III to the extent described therein.
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2
PART I
ITEM 1. BUSINESS
GENERAL
Unless otherwise indicated by the context, the terms "GE," "GECS"
and "GE Capital Services" are used on the basis of consolidation described in
note 1 to the consolidated financial statements on page 47 of the 1997 Annual
Report to Share Owners of General Electric Company. The financial section of
such Annual Report to Share Owners (pages 25 through 66 of that document) is set
forth in Part IV Item 14(a)(1) of this 10-K Report and is an integral part
hereof. References in Parts I and II of this 10-K Report are to the page numbers
of the 1997 Annual Report to Share Owners included in Part IV of this 10-K
Report. Also, unless otherwise indicated by the context, "General Electric"
means the parent company, General Electric Company.
General Electric's address is 1 River Road, Schenectady, NY
12345-6999; the Company also maintains executive offices at 3135 Easton
Turnpike, Fairfield, CT 06431-0001.
The "Company" (General Electric Company and consolidated affiliates)
is one of the largest and most diversified industrial corporations in the world.
From the time of General Electric's incorporation in 1892, the Company has
engaged in developing, manufacturing and marketing a wide variety of products
for the generation, transmission, distribution, control and utilization of
electricity. Over the years, development and application of related and new
technologies have broadened considerably the scope of activities of the Company
and its affiliates. The Company's products include, but are not limited to,
lamps and other lighting products; major appliances for the home; industrial
automation products and components; motors; electrical distribution and control
equipment; locomotives; power generation and delivery products; nuclear
reactors, nuclear power support services and fuel assemblies; commercial and
military aircraft jet engines; materials, including plastics, silicones and
superabrasive industrial diamonds; and a wide variety of high-technology
products, including products used in medical diagnostic applications.
The Company also offers a wide variety of services, including
product services; electrical product supply houses; electrical apparatus
installation, engineering, repair and rebuilding services; and computer-related
information services. The National Broadcasting Company, Inc. (NBC), a
wholly-owned affiliate, is engaged principally in furnishing network television
services, in operating television stations, and in providing cable programming
and distribution services in the United States, Europe and Asia. Through another
wholly-owned affiliate, General Electric Capital Services, Inc. (GECS), and its
two principal subsidiaries, the Company offers a broad array of financial
services including consumer financing, commercial and industrial financing, real
estate financing, asset management and leasing, mortgage services, consumer
savings and insurance services, specialty insurance and reinsurance. Other
services offered by GECS include satellite communications furnished by its
affiliate, GE Americom, Inc. The Company also licenses patents and provides
technical services related to products it has developed, but such activities are
not material.
Aggressive and able competition is encountered worldwide in
virtually all of the Company's business activities. In many instances, the
competitive climate is characterized by changing technology that requires
continuing research and development commitments, and by capital-intensive needs
to meet customer requirements. With respect to manufacturing operations,
management believes that, in general, GE has a leadership position (i.e., number
one or number two) in most major markets served. The NBC Television Network is
one of four major U.S. commercial broadcast television networks. It also
competes with two relatively new commercial broadcast networks, syndicated
broadcast television programming and cable and satellite television programming
activities. The businesses in which GE Capital Services engages are subject to
competition from various types of financial institutions, including commercial
banks, thrifts, investment banks, broker-dealers, credit unions, leasing
companies, consumer loan companies, independent finance companies, finance
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3
companies associated with manufacturers, and insurance and reinsurance
companies.
GE has substantial export sales from the United States. In addition,
the Company has majority, minority or other joint venture interests in a number
of non-U.S. companies engaged primarily in manufacturing and distributing
products and providing nonfinancial services similar to those sold within the
United States. GECS financial services operations outside the United States have
expanded considerably over the past several years.
INDUSTRY SEGMENTS
The Company's operations are highly decentralized. The basic
organization of the Company's operations consists of 12 key businesses, which
contain management units of differing sizes. For industry segment reporting
purposes, the businesses are aggregated by the principal industries in which the
Company participates. This aggregation is on a worldwide basis, which means that
the operations of multi-industry non-U.S. affiliates are classified by
appropriate industry segment.
Financial information on consolidated industry segments is presented
on page 35 of the 1997 Annual Report to Share Owners in two parts: one for GE
that includes GECS in the All Other segment on a one-line basis in accordance
with the equity method of accounting, and one for GECS as a separate entity. For
GE, five of the 12 key businesses (Aircraft Engines, Appliances, Power Systems,
Plastics and NBC) represent individual segments (namely, Aircraft Engines,
Appliances, Power Generation, Materials and Broadcasting, respectively). Except
for "All Other," the remaining businesses are aggregated by the two industry
segments in which they participate (Industrial Products and Systems, and
Technical Products and Services). The All Other segment consists primarily of
GECS earnings, discussed above, and revenues derived from licensing use of GE
technology to others. For GECS, revenues and operating profit are presented
separately by the two industry segments in which it conducts its business
(Financing and Specialty Insurance). There is appropriate elimination of the net
earnings of GECS and the immaterial effect of transactions between GE and GECS
segments to arrive at total consolidated data.
Additional financial data and commentary on recent operating results
for industry segments are reported on pages 34-38 of the 1997 Annual Report to
Share Owners. Further details can be found in note 28 (pages 62 and 63 of that
Report) to the consolidated financial statements. These data and comments are
for General Electric Company's operations, except as otherwise indicated, and
should be referred to in conjunction with the summary description of each of the
industry segments which follows.
AIRCRAFT ENGINES
Aircraft Engines (8.6%, 8.0% and 8.7% of consolidated revenues in
1997, 1996 and 1995, respectively) produces, sells and services jet engines,
turboprop and turboshaft engines, and related replacement parts for use in
military and commercial aircraft. GE's military engines are used in a wide
variety of aircraft that includes fighters, bombers, tankers, helicopters and
surveillance aircraft. The CFM56, produced by CFMI, a company jointly owned by
GE and Snecma of France, and GE's CF6 engines power aircraft in all categories
of large commercial aircraft: short/medium, intermediate and long-range.
Applications for the CFM56 engine include: Boeing's 737-300/-400/-500 series,
the next generation 737-600X/-700/-800/-900 series, and the 737 business jet;
Airbus Industrie's A319, A320, A321 and A340 series; and military aircraft such
as the KC-135R, E/KE-3 and E-6. The CF6 family of engines powers intermediate
and long-range aircraft such as Boeing's 747 and 767 series, Airbus Industrie's
A300, A310 and A330 series, and McDonnell Douglas' DC-10 and MD-11 series. The
GE90 engine is used to power Boeing's 777 series twin-engine aircraft. The
business also produces jet engines for executive aircraft and regional commuter
aircraft, and aircraft engine derivatives used for marine propulsion, mechanical
drives and industrial power generation sources. Maintenance, overhaul and
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4
component repair services are provided for many models of engines, including
engines manufactured by competitors. The business further expanded its product
services operations through the acquisition of Greenwich Air Services/UNC in
1997 and Celma, an engine overhaul operation in Brazil, in 1996.
The worldwide competition in aircraft jet engines is intense. Both
U.S. and export markets are important. Product development cycles are long and
product quality and efficiency are critical to success. Research and development
expenditures, both customer-financed and internally funded, are also important
in this segment. Potential sales for any engine are limited by, among other
things, its technological lifetime, which may vary considerably depending upon
the rate of advance in the state of the art, by the small number of potential
customers and by the limited number of applicable airframe applications. Sales
of product services (replacement parts and services) are an important part of
the business. Aircraft engine orders tend to follow military and airline
procurement cycles, although cycles for military and commercial engine
procurement are different. Procurements of military jet engines are affected by
changes in global political and economic factors.
In line with industry practice, sales of commercial jet aircraft
engines often involve long-term financing commitments to customers. In making
such commitments, it is GE's general practice to require that it have or be able
to establish a secured position in the aircraft being financed. Under such
airline financing programs, GE had issued loans and guarantees (principally
guarantees) amounting to $1.6 billion at year-end 1997, and had entered into
commitments totaling $1.8 billion to provide financial assistance on future
aircraft engine sales. Estimated fair values of the aircraft securing these
receivables and associated guarantees exceeded the related account balances and
guaranteed amounts at December 31, 1997.
For current information about Aircraft Engines orders and backlog,
see page 34 of the 1997 Annual Report to Share Owners.
APPLIANCES
Appliances (7.4%, 8.1% and 8.5% of consolidated revenues in 1997,
1996 and 1995, respectively) manufactures and/or markets a single class of
product - major appliances - that includes refrigerators, electric and gas
ranges, microwave ovens, freezers, dishwashers, clothes washers and dryers,
water-softening and filtering products, and room air conditioning equipment.
These are sold under GE, Hotpoint, RCA, Monogram, Profile and Profile
Performance brands as well as under private brands for retailers and others. GE
microwave ovens, room air conditioners, water softening and filtering products,
and freezers are sourced from suppliers while investment in Company-owned U.S.
facilities is focused on refrigerators, dishwashers, ranges (primarily electric,
but some gas) and home laundry equipment. A large portion of appliance sales is
for replacement of installed units. Such sales are through a variety of retail
outlets. The other principal channel consists of residential building
contractors who install appliances in new dwellings. GE has an extensive U.S.
product services network that provides repair services, expanded service plans,
warranty administration and risk management services.
Appliances continues to increase its operating presence in the
global business arena and participates in numerous manufacturing and
distribution joint ventures around the world. In 1996, Appliances acquired a 73%
interest in DAKO S.A., Brazil's leading gas range manufacturer.
Demand for appliances is influenced by economic trends such as
increases or decreases in consumer disposable income, availability of credit and
housing construction. Competition is very active in all products and comes from
a number of principal manufacturers and suppliers. An important factor is cost;
considerable competitive emphasis is placed on minimizing manufacturing and
distribution costs and on reducing cycle time from order to product delivery.
Other significant factors include brand recognition, quality, features offered,
innovation, customer responsiveness and appliance service capability. A number
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5
of processes, such as Quick Response, New Product Introduction and Quick Market
Intelligence, have been implemented to improve GE's competitiveness in these
areas. For example, the Six Sigma quality initiative will enable the business to
improve the quality of products, reduce waste and provide better product
services. In 1997, the business added GE SmartWater(TM) filtration and water
softening systems to its product line, launched a new line of dishwashers,
introduced the Profile Performance brand in the high-end market segment, and
completed a joint venture with National Tech Team to further broaden its product
services offerings.
BROADCASTING
Broadcasting (5.7%, 6.6% and 5.6% of consolidated revenues in
1997, 1996 and 1995, respectively) consists primarily of the National
Broadcasting Company (NBC). NBC's principal businesses are the furnishing within
the United States of network television services to affiliated television
stations, the production of live and recorded television programs, the
operation, under licenses from the Federal Communications Commission (FCC), of
television broadcasting stations, the operation of four cable/satellite networks
around the world, and investment and programming activities in multimedia and
cable television. The NBC Television Network is one of four major U.S.
commercial broadcast television networks and serves more than 200 affiliated
stations within the United States. At December 31, 1997, NBC owned and operated
12 VHF and UHF television stations located in Birmingham, Ala.; Chicago, Ill.;
Columbus, Ohio; Hartford, Conn.; Los Angeles, Calif.; Miami, Fla.; New York,
N.Y.; Philadelphia, Pa.; Providence, R.I.; Raleigh-Durham, N.C.; San Diego,
Calif.; and Washington, D.C. Broadcasting operations, including the NBC
Television Network and owned stations, are subject to FCC regulation. NBC's
operations include investment and programming activities in cable television,
principally through its ownership of CNBC, NBC Super Channel, and CNBC Asia, as
well as equity investments in Arts and Entertainment, Court TV, American Movie
Classics, Bravo, Prime Network and regional Sports Channels across the United
States. In 1997, the business entered into a strategic alliance with Dow Jones
that will merge the European and Asian business news services of Dow Jones with
those of CNBC and use Dow Jones editorial resources in the United States. The
business also entered into long-term arrangements with the National Basketball
Association (NBA) and the United States Golf Association (USGA) that give NBC
exclusive national over-the-air broadcast rights to NBA games through the 2002
season and to the USGA's major golf championships through the year 2003. 1998
marked the end of a 33 year affiliation with the National Football League. In
1996, NBC and Microsoft Corporation entered into a joint venture that provides
information to users through two separate but related sources: MSNBC Cable, a
24-hour news and information cable channel; and MSNBC Interactive, a
comprehensive interactive on-line news and information service. NBC contributed
the assets of America's Talking and NBC Desktop to the joint ventures. In 1995,
NBC launched CNBC Asia, the first 24-hour business news channel to be broadcast
live from three continents, and secured United States television rights to the
2000, 2002, 2004, 2006 and 2008 Olympics.
INDUSTRIAL PRODUCTS AND SYSTEMS
Industrial Products and Systems (12.1%, 13.1% and 14.6% of
consolidated revenues in 1997, 1996 and 1995, respectively) encompasses the
following businesses: Lighting, Electrical Distribution and Control,
Transportation Systems, Industrial Control Systems, and GE Supply. No "similar"
class of products or services within the segment approached 10% of any year's
consolidated revenues during the three years ended December 31, 1997. Customers
for many of these products and services include electrical distributors,
original equipment manufacturers and industrial end users.
Lighting includes a wide variety of lamps - incandescent, fluorescent, high
intensity discharge, halogen and specialty - as well as outdoor lighting
fixtures, wiring devices and quartz products. Markets and customers are global.
In 1997, the business acquired certain assets of Flame Electrical Ltd., a
lighting products distributor in South Africa, and entered into an agreement
with MagneTek, Inc. that provides GE exclusive sales responsibility for
electronic ballasts in North America. In 1996, the business acquired the
remaining interest in GE Apar Lighting Private Ltd. in India, increased its
ownership interest in GE Jiabao Lighting Co., Inc., a joint venture in China,
and acquired PT Sinar Baru Electric in Indonesia. Previously in 1995, the
Lighting business had acquired from its partner the remaining interest in
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6
P.T. GE Angkasa Lighting. Customers for lighting products are extremely diverse,
ranging from household consumers to commercial and industrial end users and
original equipment manufacturers.
Electrical Distribution and Control includes power delivery and
control products such as circuit breakers, transformers, electricity meters,
relays, capacitors and arresters sold for installation in commercial, industrial
and residential facilities. In 1995, to bolster European sales and global
competitiveness, Electrical Distribution and Control (ED&C) acquired the low
voltage business of AEG, a European manufacturer. Also in 1995, GE acquired the
remaining interest in the GE Power Controls joint venture in Europe and
Multilin, a leading manufacturer of electronics in Canada.
Transportation Systems includes locomotives, transit propulsion and
control equipment, motorized wheels for off-highway vehicles such as those used
in mining operations, motors for drilling devices and parts and product services
for the foregoing. Locomotives are sold worldwide, principally to railroads,
while customers for other products include state and urban transit authorities
and industrial users. An increasingly important product line is the alternating
current (AC) locomotive, which was first introduced in 1994. More than 1,400 of
the 4,400 horsepower AC units are now in service on three railroads. A new 6,000
horsepower AC unit has been developed and will enter full-scale production in
1998. In 1995, the business formed a joint venture with Harris Corporation,
GE-Harris Railway Electronics, L.L.C., that expanded its service offerings to
include communications and logistics systems for locomotive, train and fleet
control. Further information about Transportation Systems orders and backlog is
provided on page 34 of the 1997 Annual Report to Share Owners.
Industrial Control Systems includes electric motors and related
products, and engineering services for the appliance, commercial, industrial,
heating, air conditioning, automotive and utility markets. Electrical and
electronic industrial automation products, including drive systems, are
customized controls and drives for metal and paper processing, mining, utilities
and marine applications. Engineering services include management and technical
expertise for power plants and other large projects; maintenance, inspection,
repair and rebuilding of electrical apparatus produced by GE and others; and
on-site engineering and upgrading of already installed products sold by GE and
others. Other product services include the integration of software with hardware
(principally motors, drives and programmable controls) into customized systems
solutions for customers in the semiconductor, water treatment, pulp and paper,
and petroleum industries. In 1997, the business expanded its presence in this
emerging market segment through several small acquisitions. Motor products are
used within GE and also are sold externally. In 1995, GE formed a joint venture
with Fuji Electric of Japan to jointly pursue global sales of standard drives.
Industrial automation products cover a broad range of electrical and electronic
products with emphasis on manufacturing and advanced engineering automation
applications. Through a 50-50 joint venture (GE Fanuc Automation Corporation)
which has two operating subsidiaries (one in North America and the other in
Europe), GE offers a wide range of high-technology industrial automation systems
and equipment, including computer numerical controls and programmable logic
controls.
GE Supply operates a U.S. network of electrical supply houses and
through its affiliate, GE Supply Mexico, operates three supply houses in Mexico.
GE Supply offers products of General Electric and other manufacturers to
electrical contractors and to industrial, commercial and utility customers.
Markets for industrial products generally lag overall economic
slowdowns as well as subsequent recoveries. U.S. industrial markets are
undergoing significant structural changes reflecting, among other factors,
international competition and pressures to modernize productive capacity.
Additional information about certain of GE's industrial businesses follows.
Competition for lighting products comes from a number of global
firms as well as from smaller regional competitors and is based principally on
brand awareness, price, distribution and product innovation.
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7
The nature of lighting products and market diversity make the lighting business
somewhat less sensitive to economic cycles than other businesses in this
segment.
Electrical Distribution and Control sells to distributors,
electrical contractors, utilities, large industrial users and original equipment
manufacturers. Demand is affected principally by levels of (and cycles in)
residential and non-residential construction as well as domestic industrial
plant and equipment expenditures. Competitors include other large manufacturers,
with international competition increasing.
In Transportation Systems, demand is historically cyclical. There is
strong worldwide competition from major firms engaged in the sale of
transportation equipment.
Industrial Control Systems sells principally to manufacturers of
original equipment, distributors and industrial users. Competition includes
other motor and component producers, integrated manufacturers and customers' own
in-house capability. Demand for these products is price competitive, putting
emphasis on economies of scale and manufacturing technology. Other market
factors include energy-driven technological changes and the cyclical nature of
consumer demand. Competition in industrial automation is intense and comes from
a number of U.S. and international sources.
MATERIALS
Materials (7.4%, 8.2% and 9.5% of consolidated revenues in 1997,
1996 and 1995, respectively) includes high-performance plastics used by
compounders, molders and major original equipment manufacturers for use in a
variety of applications, including fabrication of automotive parts, computer
enclosures, major appliance parts and construction materials. Products also
include ABS resins, silicones, superabrasive industrial diamonds and laminates.
Market opportunities for many of these products are created by substituting
resins for other materials, which provides customers with productivity through
improved material performance at lower cost. These materials are sold to a
diverse worldwide customer base, mainly manufacturers. The business has a
significant operating presence around the world and participates in numerous
manufacturing and distribution joint ventures. In 1996, the business completed
the first stage of its new polycarbonate manufacturing facility in Spain. The
plant, which is scheduled to be completed in early 1999, will add capacity of
130,000 tons per year.
The materials business environment is characterized by technological
innovation and heavy capital investment. Being competitive requires emphasis on
efficient manufacturing process implementation and significant resources devoted
to market and application development. Competitors include large,
technology-driven suppliers of the same, as well as other functionally
equivalent, materials. The business is cyclical and is subject to variations in
price and in the availability of raw materials, such as cumene, benzene and
methanol. Adequate capacity to satisfy growing demand and anticipation of new
product or material performance requirements are key factors affecting
competition.
POWER GENERATION
Power Generation (8.3%, 9.2% and 9.3% of consolidated revenues in
1997, 1996 and 1995, respectively) serves utility, industrial and governmental
customers worldwide with electricity generating products, services and energy
management systems. Worldwide competition continues to be intense. Gas turbines
are used principally in power plants for generation of electricity and for
industrial cogeneration and mechanical drive applications. In 1997, the business
announced the acquisition of the gas turbine division of Stewart and Stevenson
Services, Inc., which further expands its product and product services offerings
to the industrial power generation market. Centrifugal compressors are sold for
application in gas reinjection, pipeline services and such process applications
as refineries and ammonia plants. Steam turbine-generators are sold to the
electric utility industry and to private industrial customers for cogeneration
applications. Nuclear reactors, fuel and support services for both new and
installed boiling water reactors are also a part of this segment. There have
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8
been no nuclear power plant orders in the United States since the mid-1970s.
However, the business is currently participating in the construction of nuclear
power plants in Japan and Taiwan. The business continues to invest in advanced
technology development and to focus its resources on refueling and servicing its
installed boiling-water reactors.
Worldwide competition for power generation products and services
continues to be intense. Demand for most power generation products and services
is worldwide and as a result is sensitive to the economic and political
environment of each country in which the business participates. In the United
States, demand for power generation equipment is sensitive to the financial
condition of the electric utility industry as well as the electric power
conservation efforts by power users. Internationally, the influence of petroleum
and related prices has a large impact on demand. For information about orders
and backlog, see page 36 of the 1997 Annual Report to Share Owners.
TECHNICAL PRODUCTS AND SERVICES
Technical Products and Services (5.4%, 5.9% and 6.3% of consolidated
revenues in 1997, 1996 and 1995, respectively) consists of technology operations
providing products, systems and services to a variety of customers. Principal
businesses included in this segment are Medical Systems and Information
Services.
Medical Systems include magnetic resonance (MR) scanners, computed
tomography (CT) scanners, x-ray, nuclear imaging, ultrasound, and other
diagnostic and therapy equipment, and product services sold to hospitals and
medical facilities worldwide. GE Medical Systems has a significant operating
presence in Europe and Asia, including the operations of its affiliates, GE
Medical Systems S.A. (France), GE Yokogawa Medical Systems (Japan) and WIPRO GE
Medical Systems (India). Acquisitions and joint ventures continue to expand GE
Medical Systems global activities. In 1997, the business acquired Lockheed
Martin Medical Systems and a 20% stake in ALI, a leader in ultrasound image
archiving. In 1995, the business expanded its service offerings by entering into
an agreement with Columbia/HCA, the largest multi-hospital system in the United
States, to manage all of its diagnostic imaging equipment service. In 1996, the
range of services provided under the agreement was expanded to include
biomedical equipment service.
Business-to-business electronic commerce solutions are provided to
over 40,000 trading partners around the world by GE Information Services (GEIS).
Its global networked-based solutions include Electronic Data Interchange and
messaging services, internet, intranet and systems integration services, and a
line of applications that help customers to lower their costs, reduce cycle
times, and improve quality in purchasing, logistics, and supplier and
distribution channel management.
Serving a range of customers with special needs (which are rapidly
changing in areas such as medical and information systems), businesses in this
segment compete against a variety of both U.S. and non-U.S. manufacturers or
services operations. Technological competence and innovation, excellence in
design, high product performance, quality of services and competitive pricing
are among the key factors affecting competition for these products and services.
Throughout the world, demands on health care providers to control costs have
become much more important. Medical Systems is responding with cost-effective
technologies that improve operating efficiency and clinical productivity. See
page 36 of the 1997 Annual Report to Share Owners for information about orders
and backlog of GE Medical Systems.
ALL OTHER GE
All Other GE consists mostly of earnings of and investment in GECS,
a wholly-owned consolidated affiliate, which is accounted for on a one-line
basis in accordance with the equity method of accounting. Other ongoing
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9
operations (0.3% of consolidated revenues in 1997, and 0.4% of consolidated
revenues in 1996 and 1995) mainly involve licensing the use of GE technology and
patents to others. A separate discussion of segments within GECS appears below.
GECS SEGMENTS
GECS consists of the ownership of two principal affiliates that,
together with their affiliates and other investments, constitute General
Electric Company's principal financial services activities. GECS owns all of the
common stock of General Electric Capital Corporation (GE Capital or GECC) and GE
Global Insurance Holding Corporation (GE Global Insurance or GIH), the principal
affiliate of which is Employers Reinsurance Corporation (ERC). GE Capital is an
equity investor in Montgomery Ward Holding Corp. (MWHC), a retail organization,
and certain other service and financial services organizations. As discussed on
page 38 of the 1997 Annual Report to Share Owners, MWHC filed a bankruptcy
petition for reorganization in 1997.
For industry segment purposes, Financing (34.3%, 31.0% and 27.8% of
consolidated revenues in 1997, 1996 and 1995, respectively) includes the
financing and consumer savings and insurance operations of GE Capital; Specialty
Insurance (9.7%, 10.3% and 10.1% of consolidated revenues in 1997, 1996 and
1995, respectively) consists of the activities of GIH as well as the activities
of other insurance entities discussed on page 63 of the 1997 Annual Report to
Share Owners; and All Other represents GECS corporate activities not
identifiable with specific industry segments.
Additional information follows.
Financing activities of GE Capital are summarized below. Very little
of the financing provided by GE Capital involves products that are manufactured
by GE.
O CONSUMER SERVICES -- private-label and bank credit card loans,
personal loans, time sales and revolving credit and inventory financing for
retail merchants, auto leasing and inventory financing, mortgage servicing, and
consumer savings and insurance services. Insurance services, previously included
within the Specialty Insurance segment, has been combined with the consumer
savings and insurance operations in this segment. Prior-year information has
been reclassified to reflect this change.
O SPECIALIZED FINANCING -- loans and financing leases for major
capital assets, including industrial facilities and equipment, and
energy-related facilities; commercial and residential real estate loans and
investments; and loans to and investments in management buyouts, including those
with high leverage, and corporate recapitalizations.
O EQUIPMENT MANAGEMENT -- leases, loans, sales and asset management
services for portfolios of commercial and transportation equipment, including
aircraft, trailers, auto fleets, modular space units, railroad rolling stock,
data processing equipment, containers used on ocean-going vessels, and
satellites.
o MID-MARKET FINANCING -- loans and financing and operating leases
for middle-market customers, including manufacturers, distributors and end
users, for a variety of equipment that includes data processing equipment,
medical and diagnostic equipment, and equipment used in construction,
manufacturing, office applications and telecommunications activities.
GE Capital continues to experience broad growth from both internal
sources and through acquisitions. Following is a discussion of certain larger
financing acquisitions over the past three years. In 1997, the Consumer Services
operation acquired Woodchester, an automobile and equipment lessor based in
Ireland; Colonial Penn, a direct marketer of personal lines of automobile
insurance; and Bank Aufina, a Swiss bank that provides consumer lending products
and auto financing leases. In 1996, GE Capital's Equipment Management operations
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10
acquired Ameridata Technologies Inc., an international provider of distributed
computer products and services as well as business and technology consulting
services; and CompuNet Computer AG, a provider of distributed computing and
communications technologies based in Germany. Also in 1996, GE Capital's
Consumer Services operations acquired the Life Insurance Company of Virginia,
First Colony Corporation and Union Fidelity Life Insurance Company, further
expanding and enhancing its offerings of life and health insurance and annuity
products. In 1995, Consumer Services operations acquired SOVAC SA and Credit de
l'Est (France), the Australian Retail Financial Network (Australia), the Pallas
Group (United Kingdom), and the purchase of the remaining interest in United
Merchants Finance Ltd. (Hong Kong).
GE Capital's activities are subject to a variety of federal and
state regulations including, at the federal level, the Consumer Credit
Protection Act, the Equal Credit Opportunity Act and certain regulations issued
by the Federal Trade Commission. A majority of states have ceilings on rates
chargeable to customers in retail time sales transactions, installment loans and
revolving credit financing. Common carrier services of GE Americom are subject
to regulation by the Federal Communications Commission. Certain GECS
consolidated affiliates are restricted from remitting funds to GECS in the form
of dividends or loans by a variety of regulations, the purpose of which is to
protect affected insurance policyholders, depositors or investors. GECS'
international operations are also subject to regulation in their respective
jurisdictions. To date, compliance with such regulations has not had a material
adverse effect on GE Capital's financial position or results of operations.
On March 28, 1991, GE entered into an agreement to make payments to
GE Capital, constituting additions to pre-tax income, to the extent necessary to
cause the ratio of earnings to fixed charges of GE Capital and consolidated
affiliates (determined on a consolidated basis) to be not less than 1.10 for the
period, as a single aggregation, of each GE Capital fiscal year commencing with
fiscal year 1991. The agreement can only be terminated by written notice and
termination is not effective until the third anniversary of the date of such
notice. GE Capital's ratios of earnings to fixed charges for the years 1997,
1996 and 1995, respectively, were 1.48, 1.53 and 1.51, substantially above the
level at which payments would be required. Under a separate agreement, GE has
committed to make a capital contribution to GE Capital in the event certain GE
Capital preferred stock is redeemed and such redemption were to cause the GE
Capital debt-to-equity ratio, excluding from equity all net unrealized gains and
losses on investment securities, to exceed 8 to 1.
Specialty Insurance includes both GIH which, together with its
affiliates, writes substantially all lines of reinsurance, as well as other
insurance activities of GE Capital. ERC, GIH's principal affiliate, together
with its subsidiaries, reinsures property and casualty risks written by more
than 1,000 insurers around the world, and also writes certain specialty lines of
insurance on a direct basis, principally excess workers' compensation for
self-insurers, errors and omissions coverage for insurance and real estate
agents and brokers, excess indemnity for self-insurers of medical benefits, and
libel and allied torts. Other property and casualty affiliates write excess and
surplus lines insurance, and provide reinsurance brokerage services. GIH also is
engaged in the reinsurance of life insurance and investment products, including
term, whole and universal life, annuities, group long-term health products and
the provision of financial reinsurance to life insurers. In 1995, GIH, through
its ERC affiliate, acquired a majority of two German reinsurance businesses,
Frankona Reinsurance Group and Aachen Reinsurance Group, both located in
Germany. These businesses together with other ERC affiliates located in Denmark
and the United Kingdom write property and casualty and life reinsurance,
principally in Europe and elsewhere throughout the world. GIH and certain
affiliates are licensed in all states of the United States, the District of
Columbia, certain provinces of Canada and in other jurisdictions - such business
is written on both a direct basis and through brokers. The other insurance
activities of GECS consist of GE Capital affiliates that provide various forms
of insurance. Financial Guaranty Insurance Company (FGIC) provides financial
guaranty insurance, principally on municipal bonds and structured finance
issues. In 1997, FGIC acquired Coregis Group Inc., a property and casualty
insurer. GE Capital's mortgage insurance operations are engaged in providing
<PAGE>
11
primary and, on a limited basis, pooled private mortgage insurance. Other
affiliates provide payment protection insurance for international borrowers.
Businesses in the Specialty Insurance segment are generally subject to
regulation by various insurance regulatory agencies.
GEOGRAPHIC SEGMENTS, EXPORTS FROM THE U.S. AND TOTAL INTERNATIONAL OPERATIONS
Financial data for geographic segments (based on the location of the
Company operation supplying goods or services and including exports from the
U.S. to unaffiliated customers) are reported in note 29 to consolidated
financial statements on page 64 of the 1997 Annual Report to Share Owners.
Additional financial data about GE's exports from the U.S. and total
international operations are on page 39 of the 1997 Annual Report to Share
Owners.
ORDERS BACKLOG
See pages 34, 36 and 44 of the 1997 Annual Report to Share Owners
for information about GE's backlog of unfilled orders.
RESEARCH AND DEVELOPMENT
Total expenditures for research and development were $1,891 million
in 1997. Total expenditures had been $1,886 million in 1996 and $1,892 million
in 1995. Of these amounts, $1,480 million in 1997 was GE-funded ($1,421 million
in 1996 and $1,299 million in 1995); and $411 million in 1997 was funded by
customers ($465 million in 1996 and $593 million in 1995), principally the U.S.
government. Aircraft Engines accounts for the largest share of GE's research and
development expenditures from both Company and customer funds. Other significant
expenditures of Company and customer research and development funds were made by
Medical Systems, Power Systems, and Plastics.
Approximately 8,000 person-years of scientist and engineering effort
were devoted to research and development activities in 1997, with about 84% of
the time involved primarily in GE-funded activities.
ENVIRONMENTAL MATTERS
See pages 44 and 58 of GE's 1997 Annual Report to Share Owners for
a discussion of environmental matters.
EMPLOYEE RELATIONS
At year-end 1997, General Electric Company and consolidated
affiliates employed 276,000 persons, of whom approximately 165,000 were in the
United States. For further information about employees, see page 45 of the 1997
Annual Report to Share Owners.
Approximately 40,000 GE manufacturing, engineering and service
employees in the United States are represented for collective bargaining
purposes by a total of approximately 170 different local collective bargaining
groups. A majority of such employees are represented by union locals that are
affiliated with, and bargain in conjunction with, the International Union of
Electronic, Electrical, Salaried, Machine and Furniture Workers (IUE-AFL-CIO).
During 1997, General Electric Company negotiated three-year contracts with
unions representing a substantial majority of those United States employees who
are represented by unions. Most of these contracts will terminate in June 2000.
NBC is party to approximately 100 labor agreements covering about 2,000 staff
employees (and a large number of freelance employees) in the United States.
These agreements are with various labor unions, expire at various dates and are
generally for a term ranging from three to five years.
<PAGE>
12
EXECUTIVE OFFICERS
See Part III, Item 10 of this 10-K Report for information about
Executive Officers of the Registrant.
OTHER
Because of the diversity of the Company's products and services, as
well as the wide geographic dispersion of its production facilities, the Company
uses numerous sources for the wide variety of raw materials needed for its
operations. The Company has not been adversely affected by inability to obtain
raw materials.
The Company owns, or holds licenses to use, numerous patents. New
patents are continuously being obtained through the Company's research and
development activities as existing patents expire. Patented inventions are used
both within the Company and licensed to others, but no industry segment is
substantially dependent on any single patent or group of related patents.
Agencies of the U.S. Government constitute GE's largest single
customer. An analysis of sales of goods and services as a percentage of revenues
follows:
<TABLE>
<CAPTION>
% OF CONSOLIDATED REVENUES % OF GE REVENUES
-------------------------- ----------------
1997 1996 1995 1997 1996 1995
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Total sales to U.S. Government Agencies 2% 3% 3% 3% 4% 4%
Aircraft Engines defense-related sales 2 2 2 3 3 3
</TABLE>
ITEM 2. PROPERTIES
Manufacturing operations are carried out at approximately 130
manufacturing plants located in 30 states in the United States and Puerto Rico
and at some 139 manufacturing plants located in 25 other countries.
ITEM 3. LEGAL PROCEEDINGS
GENERAL
As previously reported, on March 12, 1993, a complaint was filed in
United States District Court for the District of Connecticut by ten employees of
the Company's former Aerospace business, purportedly on behalf of all GE
Aerospace employees whose GE employment status is or was affected by the then
planned transfer of GE Aerospace to a new company controlled by the stockholders
of Martin Marietta Corporation. The complaint sought to clarify and enforce the
plaintiffs' claimed rights to pension benefits in accordance with, and rights to
assets then held in, the GE Pension Plan (the "Plan"). The complaint names the
Company, the trustees of the GE Pension Trust ("Trust"), and Martin Marietta
Corporation and one of its former plan administrators as defendants. The
complaint alleged primarily that the Company's planned transfer of certain
assets of the Trust to a Martin Marietta pension trust, in connection with the
transfer of the Aerospace business, violated the rights of the plaintiffs under
the Plan and applicable provisions of the Employee Retirement Income Security
Act of 1974 and the Internal Revenue Code. The complaint sought equitable and
declaratory relief, including an injunction against transfer of the Plan assets
except under circumstances and protections, if any, approved by the court, an
order that the Company disgorge all profits allegedly received by it as a result
of any such transfer and the making of restitution to the Trust for alleged
investment losses resulting from the Company's treatment of Plan assets in
connection with the transaction or alternatively the transfer of additional
assets from the Trust to a new Martin Marietta pension trust, and an order
requiring Martin Marietta to continue to offer transferred employees all accrued
pension-related benefits for which they were eligible under the Plan as of the
<PAGE>
13
closing date of the transfer of the GE Aerospace business to Martin Marietta. On
March 23, 1993, the Company and Martin Marietta Corporation filed motions to
dismiss the complaint on the basis that the complaint does not state any claim
upon which relief can be granted as a matter of law. On April 2, 1993, the
transfer of the Aerospace business occurred, and on June 7, 1993, the court
issued an order denying plaintiffs' request for injunctive relief. On September
26, 1996, the District Court granted defendants' motion to dismiss those claims
which were based on allegations that the transfer of plan assets was unlawful,
and ordered discovery on the remaining claims.
As previously reported, the directors (other than Messrs. Calloway,
Cash, Gonzalez, Murphy, Nunn, Opie, Penske and Warner) and certain officers are
defendants in a civil suit purportedly brought on behalf of the Company as a
shareholder derivative action by Leslie McNeil, Harold Sachs, Arun Shingala and
Paul and Harriet Luts (the McNeil action) in New York State Supreme Court on
November 19, 1991. The suit alleges the Company was negligent and engaged in
fraud in connection with the design and construction of containment systems for
nuclear power plants and contends that, as a result, GE has incurred significant
financial liabilities and is potentially exposed to additional liabilities from
claims brought by the Company's customers. The suit alleges breach of fiduciary
duty by the defendants and seeks unspecified compensatory damages and other
relief. On March 31, 1992, the defendants filed motions to dismiss the suit. On
September 28, 1992, the court denied the motions as premature but ruled that
they may be renewed after the completion of limited discovery. Defendants moved
for reconsideration of that order, and on April 3, 1993, the court granted
defendants' motion for reconsideration and directed that discovery be stayed
pending the filing of an amended complaint. Plaintiffs filed an amended
complaint on March 18, 1994, alleging breach of fiduciary duty, waste and
indemnification claims. The defendants' time for responding to the amended
complaint has been extended until 30 days following the completion of discovery.
The defendants believe the plaintiffs' claims are without merit.
As previously reported, following the Company's announcement on
April 17, 1994, of a $210 million charge to net earnings based upon its
discovery of false trading profits at its indirect subsidiary, Kidder, Peabody &
Co., Incorporated ("Kidder"), the United States Securities and Exchange
Commission ("SEC"), the United States Attorney for the Southern District of New
York, and the New York Stock Exchange initiated investigations relating to the
false trading profits. On January 9, 1996, the SEC initiated administrative
enforcement proceedings against the former head of Kidder's government
securities trading desk, Joseph Jett, alleging that he engaged in securities
fraud and other violations and against two of his former supervisors for failure
to supervise. Also, two civil suits purportedly brought on behalf of the Company
as shareholder derivative actions were filed in New York State Supreme Court in
New York County. Both suits claimed that the Company's directors breached their
fiduciary duties to the Company by failing to adequately supervise and control
the Kidder employee responsible for the irregular trading. One suit, claiming
damages of over $350 million, was filed on May 10, 1994, by the Teachers'
Retirement System of Louisiana against the Company, its directors (other than
Messrs. Cash, Dammerman, Murphy, Nunn, Opie and Penske), Kidder, its parent,
Kidder, Peabody Group Inc., and certain of Kidder's former officers and
directors. The other suit was filed on June 3, 1994, by William Schrank and
others against the Company's directors claiming unspecified damages and other
relief. Both suits were consolidated in an amended complaint filed on March 6,
1995. On May 19, 1995, the Company and the director defendants moved to dismiss
the amended consolidated complaint for failure to make a pre-litigation demand,
among other reasons. On April 16, 1996, the court dismissed the amended
consolidated complaint for failure to make a pre-litigation demand. On November
18, 1997, a four-judge panel of the New York Supreme Court, Appellate Division,
First Department, unanimously affirmed the dismissal of the suits, and, on
January 27, 1998, denied plaintiff's motion for leave to appeal to the New York
Court of Appeals. In addition, various shareholders of the Company have filed
two purported class action suits claiming that the Company and Kidder, and
certain of Kidder's former officers and employees, allegedly violated federal
securities laws by issuing statements concerning the Company's financial
condition that included the false trading profits at Kidder, and seeking
compensatory damages for shareholders who purchased the Company's stock
beginning as early as January 1993. The defendants filed motions to dismiss
these purported class action suits. On October 4, 1995, the court dismissed the
complaint against the Company, but denied the motion to dismiss the complaint
<PAGE>
14
against Kidder. On November 3, 1995, the plaintiffs in the case against the
Company appealed the trial court's dismissal of their complaint to the Second
Circuit Court of Appeals, which affirmed the lower court decision.
The directors, other than Messrs. Cash, Murphy and Nunn, were
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 was 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, 6,000 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
6,000 shares of GE stock from the Company at the market price of GE stock on the
date of grant. The suit claimed 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 claimed 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 sought
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 granted the
Company's motion to dismiss the suit for failure to state a cause of action, and
on January 27, 1998, a four-judge panel of the New York Supreme Court, Appellate
Division, First Department, unanimously affirmed the dismissal of the suit. On
February 27, 1998, plaintiff filed a motion with that court for reargument and
for leave to appeal to the New York Court of Appeals.
ENVIRONMENTAL
As previously reported, in February 1997, the New York State
Department of Environmental Conservation provided a draft complaint to the
Company seeking $254,000 in penalties and alleging violations of the state's
hazardous waste, clean water and spill acts at the Company's Waterford, New York
facility. In January 1998, the matter was settled for $234,000.
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 seeking $226,000 in
penalties. The matter has been tentatively settled for a $92,000 penalty and
$113,000 worth of donations to local emergency response organizations.
As previously reported, in August of 1996 the Florida Department of
Environmental Protection informed Greenwich Air Services that it was seeking
penalties of $278,555 for violations of the state's hazardous waste law at its
Miami facility (the facility was subsequently acquired as a portion of GE's
purchase of Greenwich which was consummated in September 1997). The matter has
been tentatively settled for $36,270 plus a supplemental wastewater treatment
project.
For further information regarding environmental matters, see pages
44 and 58 of GE's 1997 Annual Report to Share Owners.
It is the view of management that none of the above described
proceedings will have a material effect on the Company's consolidated earnings,
liquidity or competitive position.
<PAGE>
15
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
With respect to "Stock Exchange Information", in the United States,
GE common stock is listed on the New York Stock Exchange (its principal market)
and on the Boston Stock Exchange. GE common stock also is listed on The Stock
Exchange, London. Trading, as reported on the New York Stock Exchange, Inc.,
Composite Transactions Tape, and dividend information follows:
- ---------------------------------------------------------------------------
Common stock market price
---------------------------------
Dividends
(In dollars) High Low declared
- ---------------------------------------------------------------------------
1997
Fourth quarter $76 9/16 $59 $.30
Third quarter 74 5/8 61 5/16 .26
Second quarter 68 1/4 48 9/16 .26
First quarter (a) 54 3/16 47 15/16 .26
1996
Fourth quarter (a) $53 1/16 $45 1/4 $.26
Third quarter (a) 46 38 15/16 .23
Second quarter (a) 44 1/16 37 1/16 .23
First quarter (a) 40 1/4 34 3/4 .23
- ---------------------------------------------------------------------------
(a) Per share amounts have been adjusted to reflect the 2-for-1 stock
split effective on April 28, 1997.
As of December 31, 1997, there were about 527,000 share owner
accounts of record.
ITEM 6. SELECTED FINANCIAL DATA
Reported as data for revenues; earnings from continuing operations;
earnings from continuing operations per share; earnings (loss) from discontinued
operations; effect of accounting change; net earnings; net earnings per share
(basic and diluted); dividends declared; dividends declared per share; long-term
borrowings; and total assets of continuing operations appearing on page 45 of
the 1997 Annual Report to Share Owners.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Reported on pages 32-34 and 36-44 (and graphs on pages 25, 32, 33,
36, 37, 39, 40, 41, 42 and 44) of the Annual Report to Share Owners for the
fiscal year ended December 31, 1997.
<PAGE>
16
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Reported on page 42 of the Annual Report to Share Owners for the
fiscal year ended December 31, 1997.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See index under item 14.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
<PAGE>
17
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
Executive Officers of the Registrant (As of March 27, 1998)
<TABLE>
<CAPTION>
Date assumed
Executive Officer
Name Position Age position
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
John F. Welch, Jr. Chairman of the Board and Chief
Executive Officer 62 April 1981
Philip D. Ameen Vice President and Comptroller 50 April 1994
James R. Bunt Vice President and Treasurer 56 January 1993
David L. Calhoun Senior Vice President, GE Lighting 40 June 1995
William J. Conaty Senior Vice President, Human Resources 52 October 1993
David M. Cote Senior Vice President, GE Appliances 45 June 1996
Dennis D. Dammerman Senior Vice President, Finance, and
Chief Financial Officer 52 March 1984
Lewis S. Edelheit Senior Vice President, Research and
Development 55 November 1992
Paolo Fresco Vice Chairman of the Board and Executive
Officer 64 October 1987
Benjamin W. Heineman, Jr. Senior Vice President, General Counsel
and Secretary 54 September 1987
Jeffrey R. Immelt Senior Vice President, GE Medical Systems 42 January 1997
William J. Lansing Vice President, Business Development 39 October 1996
Goran S. Malm Senior Vice President, GE Asia-Pacific 51 October 1997
W. James McNerney, Jr. Senior Vice President, GE Aircraft Engines 48 January 1992
Eugene F. Murphy Vice Chairman of the Board and Executive
Officer 62 October 1986
Robert L. Nardelli Senior Vice President, GE Power Systems 49 February 1992
Robert W. Nelson Vice President, Financial Planning
and Analysis 57 September 1991
John D. Opie Vice Chairman of the Board and Executive
Officer 60 August 1986
Gary M. Reiner Senior Vice President, Chief Information
Officer 43 January 1991
John G. Rice Vice President, GE Transportation 41 September 1997
Gary L. Rogers Senior Vice President, GE Plastics 53 December 1989
James W. Rogers Senior Vice President, GE Industrial Control
Systems 47 May 1991
Lloyd G. Trotter Vice President, GE Electrical Distribution
and Control 52 November 1992
</TABLE>
All Executive Officers are elected by the Board of Directors for an
initial term which continues until the first Board meeting following the next
annual statutory meeting of share owners and thereafter are elected for one-year
terms or until their successors have been elected.
All Executive Officers have been executives of GE for the last five
years except William J. Lansing. Mr. Lansing joined GE from Prodigy, Inc., where
he was Chief Operating Officer. Prior to joining Prodigy in January of 1996, he
<PAGE>
18
had been with McKinsey & Company for nine years, most recently as a partner in
the Stamford, Conn., office where his experience encompassed a variety of
industries with a particular concentration in communications and technology. He
also has practiced securities law at Davis Polk & Wardwell.
The remaining information called for by this item is incorporated by
reference to "Election of Directors" in the definitive proxy statement relating
to the registrant's Annual Meeting of Share Owners to be held April 22, 1998.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference to "Board of Directors and Committees,"
"Summary Compensation Table," "Stock Options and Stock Appreciation Rights" and
"Retirement Benefits" in the definitive proxy statement relating to the
registrant's Annual Meeting of Share Owners to be held April 22, 1998.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated by reference to "Information relating to Directors,
Nominees and Executive Officers" in the registrant's definitive proxy statement
relating to its Annual Meeting of Share Owners to be held April 22, 1998.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated by reference to "Certain Transactions" in the
registrant's definitive proxy statement relating to its Annual Meeting of Share
Owners to be held April 22, 1998.
<PAGE>
19
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)1. Financial statements applicable to General Electric Company and
consolidated affiliates are contained on the page(s) indicated
in the GE Annual Report to Share Owners for the fiscal year
ended December 31, 1997.
Annual 10-K
Report Report
PAGE(S) PAGE(S)
Statement of earnings for the years
ended December 31, 1997, 1996 and 1995 26 F-2
Statement of financial position at
December 31, 1997 and 1996 28 F-4
Statement of cash flows for the years
ended December 31, 1997, 1996 and 1995 30 F-6
Independent Auditors' Report 46 F-22
Other financial information:
Notes to consolidated financial
statements 47-66 F-23 to F-42
Industry segment information 34-36 F-10 to F-12
62-63 F-38 to F-39
Geographic segment information 64 F-40
Operations by quarter (unaudited) 66 F-42
(a)2. Financial Statement Schedule for General Electric Company and
consolidated affiliates.
SCHEDULE PAGE
II Valuation and Qualifying Accounts F-43
The schedules listed in Reg. 210.5-04, except those listed above,
have been omitted because they are not applicable or the required information is
shown in the consolidated financial statements or notes thereto.
(a)3. Exhibit Index
(3) Restated Certificate of Incorporation, as amended, and
By-laws, as amended, of General Electric Company.
(Incorporated by reference to Exhibit of the same number
to General Electric Form 8-K (Commission file number 1-35)
filed with the Commission April 28, 1997.)
(4) Agreement to furnish to the Securities and Exchange
Commission upon request a copy of instruments defining the
rights of holders of certain long-term debt of the
registrant and consolidated subsidiaries.*
<PAGE>
20
(10) All of the following exhibits consist of Executive
Compensation Plans or Arrangements:
(a) General Electric Incentive Compensation Plan, as
amended effective July 1, 1991. (Incorporated by
reference to Exhibit of the same number to General
Electric Annual Report on Form 10-K (Commission
file number 1-35) for the fiscal year ended
December 31, 1991.)
(b) General Electric Supplementary Pension Plan, as
amended effective July 1, 1991. (Incorporated by
reference to Exhibit 10(e) to General Electric
Annual Report on Form 10-K (Commission file number
1-35) for the fiscal year ended December 31,
1991.)
(c) Amendment to General Electric Supplementary
Pension Plan dated May 22, 1992. (Incorporated by
reference to Exhibit 10(d) to General Electric
Annual Report on Form 10-K (Commission file number
1-35) for the fiscal year ended December 31,
1992.)
(d) Amendment to General Electric Supplementary
Pension Plan, dated September 10, 1993.
(Incorporated by reference to Exhibit 10(e) to
General Electric Annual Report on Form 10-K
(Commission file number 1-35) for the fiscal year
ended December 31, 1993.)
(e) Amendment to General Electric Supplementary
Pension Plan, dated July 1, 1994. (Incorporated by
reference to Exhibit 10(f) to General Electric
Annual Report on Form 10-K (Commission file number
1-35) for the fiscal year ended December 31,
1994.)
(f) General Electric Insurance Plan for Directors.
(Incorporated by reference to Exhibit 10(i) to
General Electric Annual Report on Form 10-K
(Commission file number 1-35) for the fiscal year
ended December 31, 1980.)
(g) General Electric Financial Planning Program, as
amended through September 1993. (Incorporated by
reference to Exhibit 10(h) to General Electric
Annual Report on Form 10-K (Commission file number
1-35) for the fiscal year ended December 31,
1993.)
(h) General Electric Supplemental Life Insurance
Program, as amended February 8, 1991.
(Incorporated by reference to Exhibit 10(i) to
General Electric Annual Report on Form 10-K
(Commission file number 1-35) for the fiscal year
ended December 31, 1990.)
(i) General Electric Directors' Retirement and
Optional Life Insurance Plan. (Incorporated by
reference to Exhibit 10(l) to General Electric
Annual Report on Form 10-K (Commission file number
1-35) for the fiscal year ended December 31,
1986.)
(j) General Electric 1987 Executive Deferred Salary
Plan. (Incorporated by reference to Exhibit 10(k)
to General Electric Annual Report on Form 10-K
(Commission file number 1-35) for the fiscal year
ended December 31, 1987.)
<PAGE>
21
(k) General Electric 1991 Executive Deferred Salary
Plan. (Incorporated by reference to Exhibit 10(n)
to General Electric Annual Report on Form 10-K
(Commission file number 1-35) for the fiscal year
ended December 31, 1990.)
(l) General Electric 1994 Executive Deferred Salary
Plan. (Incorporated by reference to Exhibit 10(o)
to General Electric Annual Report on Form 10-K
(Commission file number 1-35) for the fiscal year
ended December 31, 1993.)
(m) General Electric Directors' Charitable Gift Plan,
as amended through May 1993. (Incorporated by
reference to Exhibit 10(p) to General Electric
Annual Report on Form 10-K (Commission file number
1-35) for the fiscal year ended December 31,
1993.)
(n) Restated Employment Agreement, dated January 2,
1992, and Restated U.K. Employment Agreement,
dated January 3, 1992, in each case between the
registrant and P. Fresco, an Executive Officer and
Director of the registrant. (Incorporated by
reference to Exhibit 10(o) to General Electric
Annual Report on Form 10-K (Commission file number
1-35) for the fiscal year ended December 31,
1992.)
(o) General Electric Leadership Life Insurance
Program, effective January 1, 1994. (Incorporated
by reference to Exhibit 10(r) to General Electric
Annual Report on Form 10-K (Commission file number
1-35) for the fiscal year ended December 31,
1993.)
(p) General Electric 1996 Stock Option Plan for
Non-Employee Directors. (Incorporated by reference
to Exhibit A to the General Electric Proxy
Statement for its Annual Meeting of Share Owners
held on April 24, 1996.)
(q) General Electric 1995 Executive Deferred Salary
Plan. (Incorporated by reference to Exhibit 10(t)
to General Electric Annual Report on Form 10-K
(Commission file number 1-35) for the fiscal year
ended December 31, 1995.)
(r) General Electric 1996 Executive Deferred Salary
Plan. (Incorporated by reference to Exhibit 10(v)
to General Electric Annual Report on Form 10-K
(Commission file number 1-35) for the fiscal year
ended December 31, 1996.)
(s) Employment and Post-Retirement Consulting
Agreement Between General Electric Company and
John F. Welch, Jr. (Incorporated by reference to
Exhibit 10(w) to General Electric Annual Report on
Form 10-K (Commission file number 1-35) for the
fiscal year ended December 31, 1996.)
(t) General Electric 1997 Executive Deferred Salary
Plan.*
(u) General Electric 1990 Long Term Incentive Plan as
restated and amended effective August 1, 1997.*
(v) General Electric Deferred Compensation Plan for
Directors, as amended December 19, 1997.*
(11) Statement re Computation of Per Share Earnings.**
<PAGE>
22
(12) Computation of Ratio of Earnings to Fixed Charges.*
(21) Subsidiaries of Registrant.*
(23) Consent of independent auditors incorporated by reference
in each Prospectus constituting part of the Registration
Statements on Form S-3 (Registration Nos. 33-29024,
33-3908, 33-44593, 33-39596, 33-39596-01, 33-47085,
33-50639, 33-61029, 33-61029-01), on Form S-4
(Registration No. 333-01947) and on Form S-8 (Registration
Nos. 2-84145, 33-35922, 33-49053, 333-01953, 333-23767 and
333-42695).*
(24) Power of Attorney.*
(27)(a) Financial Data Schedule, 12/31/97.*
(27)(b) Restated Financial Data Schedule, 9/30/97.*
(27)(c) Restated Financial Data Schedule, 6/30/97.*
(27)(d) Restated Financial Data Schedule, 3/31/97.*
(27)(e) Restated Financial Data Schedule, 12/31/96.*
(27)(f) Restated Financial Data Schedule, 9/30/96.*
(27)(g) Restated Financial Data Schedule, 6/30/96.*
(27)(h) Restated Financial Data Schedule, 3/31/96.*
(27)(i) Restated Financial Data Schedule, 12/31/95.*
(99)(a) Income Maintenance Agreement, dated March 28, 1991,
between the registrant and General Electric Capital
Corporation. (Incorporated by reference to Exhibit 28(a)
to General Electric Annual Report on Form 10-K (Commission
file number 1-35) for the fiscal year ended December 31,
1990.)
(99)(b) Undertaking for Inclusion in Registration Statements on
Form S-8 of General Electric Company. (Incorporated by
reference to Exhibit 99(b) to General Electric Annual
Report on Form 10-K (Commission file number 1-35) for the
fiscal year ended December 31, 1992.)
(99)(c) Letter, dated June 29, 1995, from Dennis D. Dammerman of
General Electric Company to Gary C. Wendt of General
Electric Capital Corporation pursuant to which General
Electric Company agrees to provide additional equity to
General Electric Capital Corporation in conjunction with
certain redemptions by General Electric Capital
Corporation of shares of its Variable Cumulative Preferred
Stock. (Incorporated by reference to Exhibit 99(g) to
General Electric Capital Corporation's Registration
Statement on Form S-3, File No. 33-61257.)
* Filed electronically herewith.
** Information required to be presented in Exhibit 11 is now
provided in note 9 to the 1997 Annual Report to Share Owners
in accordance with the provisions of FASB Statement of
Financial Accounting Standards (SFAS) No. 128, Earnings per
Share.
<PAGE>
23
(b) Reports on Form 8-K during the quarter ended December 31, 1997.
Report on Form 8-K (Items 5 and 7) filed on November 6, 1997,
regarding announcement of a definitive agreement under which
Lockheed Martin Corporation exchanged the stock of a newly
formed subsidiary containing operating businesses, an equity
interest and cash to the extent necessary to equalize the value
of the exchange for all of the Lockheed Martin Series A
preferred stock held by GE and its subsidiaries.
<PAGE>
24
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities and
Exchange Act of 1934, the registrant has duly caused this annual report on Form
10-K for the fiscal year ended December 31, 1997, to be signed on its behalf by
the undersigned, and in the capacities indicated, thereunto duly authorized in
the Town of Fairfield and State of Connecticut on the 27th day of March 1998.
General Electric Company
(Registrant)
By Dennis D. Dammerman
Senior Vice President, Finance, and
Chief Financial Officer
(Principal Financial Officer)
<PAGE>
25
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
SIGNER TITLE DATE
Dennis D. Dammerman
Senior Vice President, Finance, and Principal Financial
Chief Financial Officer Officer March 27, 1998
Philip D. Ameen
Vice President and Comptroller Principal Accounting March 27, 1998
Officer
John F. Welch, Jr.* Chairman of the Board of Directors
(Principal Executive Officer)
James I. Cash, Jr.* Director
Silas S. Cathcart* Director
Dennis D. Dammerman* Director
Paolo Fresco* Director
Claudio X. Gonzalez* Director
Gertrude G. Michelson* Director
Eugene F. Murphy* Director
Sam Nunn* Director
John D. Opie* Director
Roger S. Penske* Director
Barbara Scott Preiskel* Director
Frank H.T. Rhodes* Director
Andrew C. Sigler* Director
Douglas A. Warner III* Director
A majority of the Board of Directors
*By Benjamin W. Heineman, Jr.
Attorney-in-fact
March 27, 1998
<PAGE>
F-1
ANNUAL REPORT PAGE 25
FINANCIAL SECTION
CONTENTS
46 INDEPENDENT AUDITORS' REPORT
AUDITED FINANCIAL STATEMENTS
26 Earnings
28 Financial Position
30 Cash Flows
47 Notes to Consolidated Financial Statements
MANAGEMENT'S DISCUSSION
32 Operations
32 Consolidated Operations
33 GE Operations
34 Industry Segments
36 GECS Operations
39 International Operations
40 Financial Resources and Liquidity
44 Selected Financial Data
46 Financial Responsibility
[CHART HERE]
CONSOLIDATED REVENUES
- -----------------------------------------------------------------------------
(IN BILLIONS) 1993 1994 1995 1996 1997
- -----------------------------------------------------------------------------
$55.701 $60.109 $70.028 $79.179 $90.840
- -----------------------------------------------------------------------------
[CHART HERE]
EARNINGS PER SHARE FROM CONTINUING OPERATIONS BEFORE ACCOUNTING CHANGE
- -----------------------------------------------------------------------------
(IN DOLLARS) 1993 1994 1995 1996 1997
- -----------------------------------------------------------------------------
BASIC $1.220 $1.730 $1.950 $2.200 $2.500
DILUTED 1.210 1.710 1.930 2.160 2.460
- -----------------------------------------------------------------------------
[CHART HERE]
DIVIDENDS PER SHARE
- -----------------------------------------------------------------------------
(IN DOLLARS) 1993 1994 1995 1996 1997
- -----------------------------------------------------------------------------
$0.6525 $0.745 $0.845 $0.950 $1.080
- -----------------------------------------------------------------------------
<PAGE>
F-2
ANNUAL REPORT PAGE 26
STATEMENT OF EARNINGS
<TABLE>
<CAPTION>
General Electric Company
and consolidated affiliates
---------------------------------
For the years ended December 31 (In millions) 1997 1996 1995
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES
Sales of goods $ 40,675 $ 36,106 $ 33,624
Sales of services 12,729 11,791 9,733
Other income (note 2) 2,300 638 752
Earnings of GECS -- -- --
GECS revenues from services (note 3) 35,136 30,644 25,919
---------------------------------
Total revenues 90,840 79,179 70,028
---------------------------------
COSTS AND EXPENSES (note 4)
Cost of goods sold 30,889 26,298 24,703
Cost of services sold 9,199 8,293 6,682
Interest and other financial charges 8,384 7,904 7,286
Insurance losses and policyholder and annuity benefits 8,278 6,678 5,285
Provision for losses on financing receivables (note 7) 1,421 1,033 1,117
Other costs and expenses 21,250 17,898 15,014
Minority interest in net earnings of consolidated affiliates 240 269 204
---------------------------------
Total costs and expenses 79,661 68,373 60,291
---------------------------------
EARNINGS BEFORE INCOME TAXES 11,179 10,806 9,737
Provision for income taxes (note 8) (2,976) (3,526) (3,164)
---------------------------------
NET EARNINGS $ 8,203 $ 7,280 $ 6,573
===================================================================================================
PER-SHARE AMOUNTS (in dollars)
Basic earnings per share (note 9) $ 2.50 $ 2.20 $ 1.95
Diluted earnings per share (note 9) $ 2.46 $ 2.16 $ 1.93
===================================================================================================
DIVIDENDS DECLARED PER SHARE (in dollars) $ 1.08 $ 0.95 $ 0.845
===================================================================================================
<FN>
The notes to consolidated financial statements on pages 47-66 are an integral part of this
statement. Per-share amounts have been adjusted for the 2-for-1 stock split effective on April 28,
1997.
</FN>
</TABLE>
<PAGE>
F-3
ANNUAL REPORT PAGE 27
STATEMENT OF EARNINGS (Continued)
<TABLE>
<CAPTION>
GE GECS
------------------------------ -------------------------------
For the years ended December 31 (In millions) 1997 1996 1995 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Sales of goods $ 36,059 $ 34,196 $ 33,177 $ 4,622 $ 1,926 $ 467
Sales of services 12,893 11,923 9,836 -- -- --
Other income (note 2) 2,307 629 753 -- -- --
Earnings of GECS 3,256 2,817 2,415 -- -- --
GECS revenues from services (note 3) -- -- -- 35,309 30,787 26,025
------------------------------ -------------------------------
Total revenues 54,515 49,565 46,181 39,931 32,713 26,492
------------------------------ -------------------------------
COSTS AND EXPENSES (note 4) --
Cost of goods sold 26,747 24,594 24,308 4,147 1,720 415
Cost of services sold 9,363 8,425 6,785 -- -- --
Interest and other financial charges 797 595 649 7,649 7,326 6,661
Insurance losses and policyholder and annuity benefits -- -- -- 8,278 6,678 5,285
Provision for losses on financing receivables (note 7) -- -- -- 1,421 1,033 1,117
Other costs and expenses 7,476 6,274 5,743 13,893 11,741 9,354
Minority interest in net earnings of consolidated affiliates 119 102 64 121 167 140
------------------------------ -------------------------------
Total costs and expenses 44,502 39,990 37,549 35,509 28,665 22,972
------------------------------ -------------------------------
EARNINGS BEFORE INCOME TAXES --
10,013 9,575 8,632 4,422 4,048 3,520
Provision for income taxes (note 8) (1,810) (2,295) (2,059) (1,166) (1,231) (1,105)
------------------------------ -------------------------------
NET EARNINGS $ 8,203 $ 7,280 $ 6,573 $ 3,256 $ 2,817 $ 2,415
==================================================================================================================================
<FN>
In the consolidating data on this page, "GE" means the basis of consolidation as described in note 1 to the consolidated financial
statements; "GECS" means General Electric Capital Services, Inc. and all of its affiliates and associated companies. Transactions
between GE and GECS have been eliminated from the "General Electric Company and consolidated affiliates" columns on page 26.
1997 restructuring and other special charges are included in the following GE captions: "Cost of goods sold" -- $1,364 million;
"Cost of services sold" -- $250 million; and "Other costs and expenses" -- $708 million.
</FN>
</TABLE>
<PAGE>
F-4
ANNUAL REPORT PAGE 28
STATEMENT OF FINANCIAL POSITION
<TABLE>
<CAPTION>
General Electric Company
and consolidated affiliates
----------------------------
At December 31 (In millions) 1997 1996
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and equivalents $ 5,861 $ 4,191
Investment securities (note 10) 70,621 59,889
Current receivables (note 11) 8,924 8,704
Inventories (note 12) 5,895 4,849
Financing receivables (investments in time sales, loans and
financing leases) -- net (notes 7 and 13) 103,799 99,714
Other GECS receivables (note 14) 17,655 15,418
Property, plant and equipment (including equipment leased
to others) -- net (note 15) 32,316 28,795
Investment in GECS -- --
Intangible assets (note 16) 19,121 16,007
All other assets (note 17) 39,820 34,835
-----------------------
TOTAL ASSETS $ 304,012 $ 272,402
=============================================================================================
LIABILITIES AND EQUITY
Short-term borrowings (note 19) $ 98,075 $ 80,200
Accounts payable, principally trade accounts 10,407 10,205
Progress collections and price adjustments accrued 2,316 2,161
Dividends payable 979 855
All other GE current costs and expenses accrued (note 18) 8,891 7,086
Long-term borrowings (note 19) 46,603 49,246
Insurance liabilities, reserves and annuity benefits (note 20) 67,270 61,327
All other liabilities (note 21) 22,700 18,917
Deferred income taxes (note 22) 8,651 8,273
-----------------------
Total liabilities 265,892 238,270
-----------------------
Minority interest in equity of consolidated affiliates (note 23) 3,682 3,007
-----------------------
Common stock (3,714,026,000 shares issued) 594 594
Unrealized gains on investment securities -- net 2,138 671
Other capital 3,636 2,498
Retained earnings 43,338 38,670
Less common stock held in treasury (15,268) (11,308)
-----------------------
Total share owners' equity (notes 25 and 26) 34,438 31,125
-----------------------
TOTAL LIABILITIES AND EQUITY $ 304,012 $ 272,402
=============================================================================================
<FN>
The notes to consolidated financial statements on pages 47-66 are an integral part of this
statement. Share data have been adjusted for the 2-for-1 stock split effective on April 28,
1997.
</FN>
</TABLE>
<PAGE>
F-5
ANNUAL REPORT PAGE 29
STATEMENT OF FINANCIAL POSITION (Continued)
<TABLE>
<CAPTION>
GE GECS
---------------------- ----------------------
At December 31 (In millions) 1997 1996 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Cash and equivalents $ 1,157 $ 957 $ 4,904 $ 3,234
Investment securities (note 10) 265 17 70,356 59,872
Current receivables (note 11) 9,054 8,826 -- --
Inventories (note 12) 5,109 4,473 786 376
Financing receivables (investments in time sales, loans and
financing leases) -- net (notes 7 and 13) -- -- 103,799 99,714
Other GECS receivables (note 14) -- -- 18,332 15,962
Property, plant and equipment (including equipment leased
to others) -- net (note 15) 11,118 10,832 21,198 17,963
Investment in GECS 17,239 14,276 -- --
Intangible assets (note 16) 8,755 7,367 10,366 8,640
All other assets (note 17) 14,729 13,177 25,667 21,658
---------------------- ----------------------
TOTAL ASSETS $ 67,426 $ 59,925 $255,408 $227,419
---------------------- ----------------------
LIABILITIES AND EQUITY
Short-term borrowings (note 19) $ 3,629 $ 2,339 $ 95,274 $ 77,945
Accounts payable, principally trade accounts 4,779 4,195 6,490 6,787
Progress collections and price adjustments accrued 2,316 2,161 -- --
Dividends payable 979 855 -- --
All other GE current costs and expenses accrued (note 18) 8,763 6,870 -- --
Long-term borrowings (note 19) 729 1,710 45,989 47,676
Insurance liabilities, reserves and annuity benefits (note 20) -- -- 67,270 61,327
All other liabilities (note 21) 11,539 9,660 11,067 9,138
Deferred income taxes (note 22) (315) 533 8,966 7,740
---------------------- ----------------------
Total liabilities 32,419 28,323 235,056 210,613
---------------------- ----------------------
Minority interest in equity of consolidated affiliates (note 23) 569 477 3,113 2,530
---------------------- ----------------------
Common stock (3,714,026,000 shares issued) 594 594 1 1
Unrealized gains on investment securities -- net 2,138 671 2,135 668
Other capital 3,636 2,498 2,152 2,253
Retained earnings 43,338 38,670 12,951 11,354
Less common stock held in treasury (15,268) (11,308) -- --
---------------------- ----------------------
Total share owners' equity (notes 25 and 26) 34,438 31,125 17,239 14,276
---------------------- ----------------------
TOTAL LIABILITIES AND EQUITY $ 67,426 $ 59,925 $255,408 $227,419
===========================================================================================================================
<FN>
In the consolidating data on this page, "GE" means the basis of consolidation as described in note 1 to the consolidated
financial statements; "GECS" means General Electric Capital Services, Inc. and all of its affiliates and associated
companies. Transactions between GE and GECS have been eliminated from the "General Electric Company and consolidated
affiliates" columns on page 28.
</FN>
</TABLE>
<PAGE>
F-6
ANNUAL REPORT PAGE 30
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
General Electric Company
and consolidated affiliates
-----------------------------------------
For the years ended December 31 (In millions) 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 8,203 $ 7,280 $ 6,573
Adjustments to reconcile net earnings to cash provided
from operating activities
Depreciation and amortization 4,082 3,785 3,594
Earnings retained by GECS -- -- --
Deferred income taxes 284 1,145 1,047
Decrease (increase) in GE current receivables 250 118 (632)
Decrease (increase) in inventories (386) (134) 40
Increase (decrease) in accounts payable 200 641 244
Increase in insurance liabilities, reserves and annuity benefits 1,669 1,491 2,490
Provision for losses on financing receivables 1,421 1,033 1,117
All other operating activities (1,483) 2,492 473
------------------------------------------
CASH FROM OPERATING ACTIVITIES 14,240 17,851 14,946
------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (8,388) (7,760) (6,447)
Dispositions of property, plant and equipment 2,251 1,363 1,542
Net increase in GECS financing receivables (1,898) (2,278) (11,309)
Payments for principal businesses purchased (5,245) (5,516) (5,641)
All other investing activities (4,995) (6,021) (3,362)
------------------------------------------
CASH USED FOR INVESTING ACTIVITIES (18,275) (20,212) (25,217)
------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in borrowings (maturities of 90 days or less) 13,684 11,827 (3,487)
Newly issued debt (maturities longer than 90 days) 21,249 23,153 37,604
Repayments and other reductions (maturities longer than 90 days) (23,787) (25,906) (18,580)
Net purchase of GE shares for treasury (2,815) (2,323) (2,523)
Dividends paid to share owners (3,411) (3,050) (2,770)
All other financing activities 785 28 259
------------------------------------------
CASH FROM (USED FOR) FINANCING ACTIVITIES 5,705 3,729 10,503
------------------------------------------
INCREASE (DECREASE) IN CASH AND EQUIVALENTS DURING YEAR 1,670 1,368 232
Cash and equivalents at beginning of year 4,191 2,823 2,591
------------------------------------------
Cash and equivalents at end of year $ 5,861 $ 4,191 $ 2,823
====================================================================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION
Cash paid during the year for interest $ (8,264) $ (7,874) $ (6,645)
Cash recovered (paid) during the year for income taxes (1,937) (1,392) (1,483)
====================================================================================================================================
<FN>
The notes to consolidated financial statements on pages 47-66 are an integral part of this statement.
</FN>
</TABLE>
<PAGE>
F-7
ANNUAL REPORT PAGE 31
STATEMENT OF CASH FLOWS (Continued)
<TABLE>
<CAPTION>
GE GECS
-------------------------------- ---------------------------------
For the years ended December 31 (In millions) 1997 1996 1995 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 8,203 $ 7,280 $ 6,573 $ 3,256 $ 2,817 $ 2,415
Adjustments to reconcile net earnings to cash provided
from operating activities
Depreciation and amortization 1,622 1,635 1,581 2,460 2,150 2,013
Earnings retained by GECS (1,597) (1,836) (1,324) -- -- --
Deferred income taxes (514) 68 369 798 1,077 678
Decrease (increase) in GE current receivables 215 152 (739) -- -- --
Decrease (increase) in inventories (145) (76) 55 (244) (58) (15)
Increase (decrease) in accounts payable 237 197 462 (64) 318 418
Increase in insurance liabilities, reserves -- -- -- 1,669 1,491 2,490
and annuity benefits
Provision for losses on financing receivables -- -- -- 1,421 1,033 1,117
All other operating activities 1,296 1,647 (912) (3,071) 939 961
-------------------------------- ---------------------------------
CASH FROM OPERATING ACTIVITIES 9,317 9,067 6,065 6,225 9,767 10,077
-------------------------------- ---------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (2,191) (2,389) (1,831) (6,197) (5,371) (4,616)
Dispositions of property, plant and equipment 39 30 38 2,212 1,333 1,504
Net increase in GECS financing receivables -- -- -- (1,898) (2,278) (11,309)
Payments for principal businesses purchased (1,425) (1,122) (238) (3,820) (4,394) (5,403)
All other investing activities 483 (106) 408 (5,646) (6,090) (3,913)
-------------------------------- ---------------------------------
CASH USED FOR INVESTING ACTIVITIES (3,094) (3,587) (1,623) (15,349) (16,800) (23,737)
-------------------------------- ---------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in borrowings (maturities of 90 days or less) 809 974 1,061 13,594 11,026 (4,510)
Newly issued debt (maturities longer than 90 days) 424 252 826 20,825 22,901 36,778
Repayments and other reductions (maturities longer
than 90 days) (1,030) (1,250) (1,535) (22,757) (24,656) (17,045)
Net purchase of GE shares for treasury (2,815) (2,323) (2,523) -- -- --
Dividends paid to share owners (3,411) (3,050) (2,770) (1,653) (981) (1,091)
All other financing activities -- -- -- 785 28 259
-------------------------------- ---------------------------------
CASH FROM (USED FOR) FINANCING ACTIVITIES (6,023) (5,397) (4,941) 10,794 8,318 14,391
-------------------------------- ---------------------------------
INCREASE (DECREASE) IN CASH AND EQUIVALENTS DURING YEAR 200 83 (499) 1,670 1,285 731
Cash and equivalents at beginning of year 957 874 1,373 3,234 1,949 1,218
-------------------------------- ---------------------------------
Cash and equivalents at end of year $ 1,157 $ 957 $ 874 $ 4,904 $ 3,234 $ 1,949
================================================================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION
Cash paid during the year for interest $ (467) $ (411) $ (468) $ (7,797) $ (7,463) $ (6,177)
Cash recovered (paid) during the year for income taxes (1,596) (1,286) (1,651) (341) (106) 168
================================================================================================================================
<FN>
In the consolidating data on this page, "GE" means the basis of consolidation as described in note 1 to the consolidated
financial statements; "GECS" means General Electric Capital Services, Inc. and all of its affiliates and associated companies.
Transactions between GE and GECS have been eliminated from the "General Electric Company and consolidated affiliates" columns on
page 30.
</FN>
</TABLE>
<PAGE>
F-8
ANNUAL REPORT PAGE 32
MANAGEMENT'S DISCUSSION OF OPERATIONS
OVERVIEW
General Electric Company's consolidated financial statements represent the
combination of the Company's manufacturing and nonfinancial services businesses
("GE") and the accounts of General Electric Capital Services, Inc. ("GECS"). See
note 1 to the consolidated financial statements, which explains how the various
financial data are presented.
Management's Discussion of Operations is presented in four parts:
Consolidated Operations; GE Operations, including Industry Segments; GECS
Operations; and International Operations.
CONSOLIDATED OPERATIONS
GE achieved record revenues, earnings and cash generation in 1997. This year's
performance again demonstrated the ability of GE's diverse mix of leading global
businesses to deliver top-line growth and increased margins.
Revenues, including acquisitions, rose to a record $90.8 billion in 1997, up
15% from 1996. This increase was primarily attributable to increased global
activities, particularly at GECS, stronger aircraft engine shipments, and higher
sales of spare parts and services by GE's equipment businesses. Revenues
increased at ten of GE's twelve businesses, led by double-digit growth at GE
Capital Services, Aircraft Engines and Transportation Systems. Revenues in 1996
were $79.2 billion, a 13% increase attributable primarily to increased
international activities. In 1996, nine of GE's twelve businesses increased
revenues, with GE Capital Services, NBC and Power Systems reporting double-digit
increases.
Basic earnings per share increased to $2.50 during 1997, up 14% from the
prior year's $2.20. On a diluted basis, earnings per share also increased 14%,
to $2.46 from $2.16. Earnings increased 13% to a record $8.203 billion. In 1996,
basic earnings per share increased 13% from $1.95 per share in 1995 (12% from
$1.93 on a diluted basis). For 1996, earnings of $7.280 billion were up 11% from
$6.573 billion in 1995. Growth rates in earnings per share exceeded growth rates
in earnings as a result of the ongoing repurchase of shares under the five-year,
$17 billion share repurchase plan initiated in December 1994.
In 1997, GE realized an after-tax gain of $1,538 million from exchanging
preferred stock in Lockheed Martin Corporation (Lockheed Martin) for the stock
of a newly formed subsidiary as described in note 2.
Also in 1997, GE recorded restructuring and other special charges amounting
to $2,322 million, which are included in costs and expenses in the following
captions: "Cost of goods sold" -- $1,364 million; "Cost of services sold" --
$250 million; and "Other costs and expenses" -- $708 million. These charges are
discussed below and, as relevant, in Industry Segments beginning on page 34.
Aggregate restructuring charges of $1,243 million cover certain costs of plans
that will enhance GE's global competitiveness through rationalization of certain
production, service and administration activities of its worldwide industrial
businesses; among these charges is $577 million of special early retirement
pension, health and life benefit costs, including a fourth-quarter, one-time
voluntary early retirement program that was provided to the U.S. work force in
the 1997 labor contracts. Also included in restructuring charges are other
severance costs as well as certain costs of exiting affected properties,
including site demolitions, asset write-offs and expected losses on subleases.
Future cash outlays, including capital expenditures, amounting to approximately
$555 million will be incurred in order to execute these restructuring programs.
Other special charges amounting to $1,079 million were also recorded in 1997,
principally associated with strategic decisions to enhance the long-term
competitiveness of certain industrial businesses and fourth-quarter developments
arising from past activities at several current and former manufacturing sites
not associated with any current business segments. The largest such special
charge related to contracts on existing orders for an aircraft engine program
and is discussed on page 34.
NEW ACCOUNTING STANDARDS issued in 1997 are described below. Neither of these
standards will have any effect on the financial position or results of
operations of GE or GECS.
The Financial Accounting Standards Board issued two Statements of Financial
Accounting Standards (SFAS) that will affect presentation in GE's 1998 Annual
Report to Share Owners. SFAS No. 130, REPORTING COMPREHENSIVE INCOME, will
require display of certain information about adjustments to equity -- most
notably, adjustments arising from market value changes in marketable securities.
SFAS No. 131, DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED
INFORMATION, will require additional information about industry segments.
================================================================================
[CHART HERE]
GE/S&P CUMULATIVE DIVIDEND GROWTH SINCE 1992
- --------------------------------------------------------------------------------
1993 1994 1995 1996 1997
- --------------------------------------------------------------------------------
GE 12.27% 28.08% 41.91% 57.44% 77.66%
S&P 500 1.62 6.46 11.39 20.36 25.12
================================================================================
<PAGE>
F-9
ANNUAL REPORT PAGE 33
DIVIDENDS DECLARED IN 1997 AMOUNTED TO $3.535 BILLION. Per-share dividends of
$1.08 were up 14% from 1996, following a 12% increase from the preceding year.
GE has rewarded its share owners with 22 consecutive years of dividend growth.
The chart on the previous page illustrates that GE's dividend growth for the
past five years has significantly outpaced dividend growth of companies in the
Standard & Poor's 500 stock index.
RETURN ON AVERAGE SHARE OWNERS' EQUITY
reached 25.0% in 1997, up from 24.0% and 23.5% in 1996 and 1995, respectively.
GE OPERATIONS
GE total revenues were $54.5 billion in 1997, compared with $49.6 billion in
1996 and $46.2 billion in 1995.
o GE sales of goods and services were $49.0 billion in 1997, an increase of
6% from 1996, which in turn was 7% higher than in 1995. The improvement in
1997 was led by Aircraft Engines, Transportation Systems and Power Systems.
Volume was about 9% higher in 1997, reflecting growth in most businesses
during the year. While overall selling prices were down slightly in 1997,
the effects of selling prices on sales in various businesses differed
markedly. Revenues were also negatively affected by exchange rates for
sales denominated in other than U.S. dollars. Volume in 1996 was about 9%
higher than in 1995, with selling price and currency effects both slightly
negative.
For purposes of the required financial statement display of GE sales
and costs of sales on pages 26 and 27, "goods" refers to tangible products,
and "services" refers to all other sales, including broadcasting and
information services activities. An increasingly important element of GE
sales relates to product services, including both spare parts (goods) as
well as repair services. Such product services sales amounted to $9.7
billion in 1997 and were up 16% from 1996, which was 11% higher than 1995.
o GE other income, earned from a wide variety of sources, was $2.3 billion in
1997, $0.6 billion in 1996 and $0.8 billion in 1995. The increase in other
income in 1997 was primarily attributable to the Lockheed Martin
transaction described in note 2, which also provides details of GE other
income.
o Earnings of GECS were up 16% in 1997, following a 17% increase the year
before. See page 36 for an analysis of these earnings.
PRINCIPAL COSTS AND EXPENSES FOR GE are those classified as costs of goods and
services sold, and selling, general and administrative expenses.
OPERATING MARGIN is sales of goods and services less the costs of goods and
services sold, and selling, general and administrative expenses. GE reported
================================================================================
[CHART HERE]
GE OPERATING MARGIN AS A PERCENTAGE OF SALES
- --------------------------------------------------------------------------------
1993 1994 1995 1996 1997
- --------------------------------------------------------------------------------
AS REPORTED 9.9% 13.6% 14.4% 14.8% 11.0%
RESTRUCTURING AND
OTHER SPECIAL
CHARGES 2.6 - - - 4.7
================================================================================
operating margin as 11.0% of sales in 1997, after the effects of restructuring
and other special charges. GE ongoing operating margin (before such charges)
reached a record 15.7% of sales, up from 14.8% in 1996 and 14.4% in 1995. The
improvement in operating margin in 1997 -- with ten businesses, led by Power
Systems, Aircraft Engines, Medical Systems and NBC, reporting higher operating
margins -- showed the increasing benefits from GE's product services and Six
Sigma quality initiatives.
TOTAL COST PRODUCTIVITY (sales in relation to costs, both on a constant dollar
basis) has paralleled recent significant improvement in GE's ongoing operating
margin and accelerated over the period. Productivity in 1997 was 4.2%,
reflecting sharp improvements associated with variable costs, largely
attributable to the Six Sigma quality program, as well as base costs, associated
largely with higher volume. Four businesses -- Power Systems, NBC, Plastics and
Information Services -- achieved productivity in excess of 5%. Total
productivity was 2.9% in 1996, principally on the positive effects of higher
volume. In 1996, three businesses -- Power Systems, NBC and Aircraft Engines --
reported productivity in excess of 5%. The total contribution of productivity in
the last two years offset not only the negative effects of cost inflation, but
also the effects of selling price decreases.
GE INTEREST AND OTHER FINANCIAL CHARGES in 1997 amounted to $797 million,
compared with $595 million in 1996 and $649 million in 1995, as interest rates
trended lower over the period. Lower rates in 1997 were more than offset by
higher levels of average borrowings and other interest-bearing obligations.
INCOME TAXES on a consolidated basis were 26.6% of pretax earnings in 1997,
compared with 32.6% in 1996 and 32.5% in 1995. The 1997 decrease in effective
tax rate was primarily attributable to the realized gain on the tax-free
<PAGE>
F-10
ANNUAL REPORT PAGE 34
exchange of Lockheed Martin preferred stock. That gain accounted for 4.8% of the
difference between the expected and actual tax rates shown in note 8. A more
detailed analysis of the differences between the U.S. federal statutory rate and
the consolidated rate, as well as other information about income tax provisions,
is also provided in note 8.
GE INDUSTRY SEGMENT REVENUES AND OPERATING PROFIT for the past five years are
shown in the table on page 35. For additional information, including a
description of the products and services included in each segment, see note 28.
AIRCRAFT ENGINES achieved a 24% increase in revenues in 1997, following a 3%
increase in 1996, on higher volume in commercial engines and product services.
Operating profit decreased 14% in 1997, primarily as a result of $342 million of
charges. The largest charge followed Boeing Co.'s fourth-quarter announcement
that development of longer-range derivatives of the 777 jetliner would be
slowed. It was concluded at that time that development of a higher-thrust
derivative of the GE90 engine was not justified, resulting in charges of $275
million to reflect higher estimated manufacturing costs to fill firm customer
orders. An additional charge of $67 million was recorded for restructuring,
covering costs associated with closing certain redundant manufacturing and
warehousing facilities. Excluding these charges, operating profit increased 14%,
reflecting the effects of volume increases in commercial engines and product
services and improved product services pricing, the combination of which more
than offset cost increases. Operating profit increased by 4% in 1996 as a result
of improvements in the product services business and productivity, offset
somewhat by reduced selling prices and cost inflation.
In 1997, $1.5 billion of revenues were from sales to the U.S. government,
down $0.3 billion from 1996, which was $0.1 billion higher than in 1995.
Aircraft Engines received orders of $8.9 billion in 1997, up $1.8 billion
from 1996. The backlog at year-end 1997 was $9.8 billion ($9.0 billion at the
end of 1996). Of the total, $7.5 billion related to products, about 50% of which
was scheduled for delivery in 1998, and the remainder related to 1998 product
services.
APPLIANCES revenues were 6% higher than a year ago, reflecting primarily
acquisition-related volume. Operating profit decreased 39%, primarily as a
result of restructuring and other special charges of $330 million, principally
for severance costs related to work force reductions and facility closing costs.
Excluding such charges, operating profit increased 5%, reflecting productivity
and improved volume, partially offset by lower selling prices. Revenues in 1996
were 7% higher than in 1995, reflecting industry growth and U.S. market share
gains across core product lines. Operating profit increased 8% in 1996,
primarily as a result of productivity and higher volume, partially offset by
lower selling prices.
BROADCASTING revenues decreased 2% in 1997 as a strong advertising marketplace
was more than offset by the absence of a current-year counterpart to NBC's
broadcast of the 1996 Summer Olympic Games. Operating profit increased 5% in
1997, despite restructuring charges of $161 million associated with certain
broadcast properties, primarily international properties, and including asset
write-offs, expected losses on subleases from excess capacity, and severance
costs. Excluding the effects of such charges, operating profit increased 22%,
reflecting improved prime-time pricing, strong growth in both owned-and-operated
stations and cable programming services, and increased international
distribution of programming, the combination of which more than offset the
absence of a current-year counterpart to the Olympics broadcast and higher
license fees for certain prime-time programs that were renewed. Revenues
increased 34% in 1996, reflecting a strong advertising market, excellent
ratings, strong growth in the owned-and-operated stations and the Olympics
broadcast. Operating profit increased 29% in 1996 as the combination of
excellent ratings, sharply higher results in owned-and-operated stations and
profitable Olympics coverage more than offset higher license fees for certain
prime-time programs that were renewed.
INDUSTRIAL PRODUCTS AND SYSTEMS revenues rose 5% in 1997, with improved volume
more than offsetting weaker pricing across all businesses in the segment.
Operating profit declined 8%, reflecting $352 million of charges, essentially
all of which were related to restructuring -- mostly for severance costs related
to work force reductions and for facility closing costs. Excluding these
charges, operating profit increased 14% in 1997, the result of Six Sigma-based
productivity and volume improvements across the segment, which more than offset
the effects of lower selling prices. Revenues increased 2% in 1996, reflecting
volume increases in Lighting, Electrical Distribution and Control, and
Industrial Control Systems. Operating profit increased 6% as productivity
improvements across the segment more than offset the effects of cost inflation
and lower selling prices for certain products.
Transportation Systems received orders of $2.4 billion in 1997, an increase
of 20% from 1996. The backlog at year-end 1997 was $2.0 billion, an increase of
$0.5 billion from 1996. Of the total, $1.8 billion related to products, about
82% of which was scheduled for shipment in 1998, and the remainder related to
1998 product services.
<PAGE>
F-11
ANNUAL REPORT PAGE 35
SUMMARY OF INDUSTRY SEGMENTS
<TABLE>
<CAPTION>
General Electric Company and consolidated affiliates
--------------------------------------------------------
For the years ended December 31 (In millions) 1997 1996 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
REVENUES
GE
Aircraft Engines $ 7,799 $ 6,302 $ 6,098 $ 5,714 $ 6,580
Appliances 6,745 6,375 5,933 5,965 5,555
Broadcasting 5,153 5,232 3,919 3,361 3,102
Industrial Products and Systems 10,954 10,412 10,194 9,406 8,575
Materials 6,695 6,509 6,647 5,681 5,042
Power Generation 7,495 7,257 6,545 5,933 5,530
Technical Products and Services 4,917 4,692 4,424 4,285 4,174
All Other 3,564 3,108 2,707 2,348 1,803
Corporate items and eliminations 1,193 (322) (286) (195) (242)
---------------------------------------------------------
Total GE 54,515 49,565 46,181 42,498 40,119
---------------------------------------------------------
GECS
Financing 31,165 24,554 19,446 15,064 12,454
Specialty Insurance 8,844 8,155 7,042 4,794 4,807
All Other (78) 4 4 17 15
---------------------------------------------------------
Total GECS 39,931 32,713 26,492 19,875 17,276
---------------------------------------------------------
Eliminations (3,606) (3,099) (2,645) (2,264) (1,694)
---------------------------------------------------------
CONSOLIDATED REVENUES $ 90,840 $ 79,179 $ 70,028 $ 60,109 $ 55,701
=============================================================================================================
OPERATING PROFIT <F1>
GE
Aircraft Engines $ 1,051 $ 1,225 $ 1,176 $ 935 $ 798
Appliances 458 750 697 683 372
Broadcasting 1,002 953 738 500 264
Industrial Products and Systems 1,490 1,617 1,519 1,328 901
Materials 1,476 1,466 1,465 967 834
Power Generation 758 1,068 769 1,238 1,024
Technical Products and Services 828 849 801 787 706
All Other 3,558 3,088 2,683 2,309 1,725
---------------------------------------------------------
Total GE 10,621 11,016 9,848 8,747 6,624
---------------------------------------------------------
GECS
Financing 3,736 3,460 3,062 2,671 1,733
Specialty Insurance 1,293 1,238 1,002 580 764
All Other (607) (650) (544) (302) (288)
---------------------------------------------------------
Total GECS 4,422 4,048 3,520 2,949 2,209
--------------------------------------------------------
Eliminations (3,209) (2,795) (2,396) (2,072) (1,554)
---------------------------------------------------------
CONSOLIDATED OPERATING PROFIT 11,834 12,269 10,972 9,624 7,279
GE interest and other financial charges--
net of eliminations (782) (600) (644) (417) (529)
GE items not traceable to segments 127 (863) (591) (546) (614)
---------------------------------------------------------
EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME
TAXES AND ACCOUNTING CHANGE $ 11,179 $ 10,806 $ 9,737 $ 8,661 $ 6,136
=============================================================================================================
<FN>
<F1> Operating profit for 1997 and 1993 included significant restructuring and other special charges. The 1997
effects for individual segments are discussed on pages 34 and 36.
The notes to consolidated financial statements on pages 47-66 are an integral part of this statement. "GE"
means the basis of consolidation as described in note 1 to the consolidated financial statements; "GECS" means
General Electric Capital Services, Inc. and all of its affiliates and associated companies. Operating profit
of GE segments excludes "Interest and other financial charges"; operating profit of GECS includes "Interest
and other financial charges," which is one of the largest elements of GECS' operating costs. The 1993
accounting change represents adoption of Statement of Financial Accounting Standards (SFAS) No. 112,
EMPLOYERS' ACCOUNTING FOR POSTEMPLOYMENT BENEFITS.
</FN>
</TABLE>
<PAGE>
F-12
ANNUAL REPORT PAGE 36
MATERIALS revenues grew 3% in 1997, reflecting an increase in volume that was
largely offset by lower selling prices and adverse currency exchange rates.
Operating profit increased by 1%, including restructuring charges amounting to
$63 million for severance costs related to work force reductions and
outsourcing. Excluding such charges, operating profit increased 5%, as Six
Sigma-based productivity and higher volume more than offset lower selling
prices. Materials revenues decreased 2% in 1996 and operating profit was about
the same as the previous year, primarily as a result of lower selling prices.
The adverse effects of lower selling prices on operating profit were offset in
part by reductions in material costs, volume improvements and productivity.
POWER GENERATION revenues were 3% higher than in 1996, reflecting higher volume
in gas turbines and in product services. Operating profit decreased 29% in 1997,
reflecting aggregate charges of $437 million, including $261 million that was
principally a combination of gas turbine warranty costs and costs arising from
renegotiation and resolution of certain disputes. Additionally, $176 million was
recognized for restructuring, covering costs of exiting certain facilities,
including severance benefits, site demolitions and associated write-offs. Absent
such charges, operating profit increased by 12%, the result of strong Six
Sigma-based productivity and higher volume, which more than offset lower selling
prices. Revenues increased 11% in 1996, reflecting primarily strong growth at
Nuovo Pignone and higher product services volume. Operating profit increased 39%
in 1996 as productivity more than offset cost inflation and lower selling
prices.
Power Generation orders were $6.6 billion for 1997, compared with $8.0
billion in 1996. The backlog of unfilled orders at year-end 1997 was $9.8
billion ($10.9 billion at the end of 1996). Of the total, $8.9 billion related
to products, about 41% of which was scheduled for delivery in 1998, and the
remainder related to 1998 product services.
TECHNICAL PRODUCTS AND SERVICES revenues rose 5% in 1997, following a 6%
increase in 1996. Medical Systems reported higher revenues in both years,
reflecting higher equipment volume and continued growth in product services,
partially offset by lower selling prices. Information Services revenues were up
slightly in 1997 and were essentially flat in 1996, as declines in selling
prices offset increased volume in electronic commerce. Operating profit for the
segment decreased 2% in 1997, reflecting aggregate charges of $157 million
principally for severance costs related to work force reductions and facility
closing costs. Excluding such costs, segment operating profit increased 16% as
productivity and higher volume more than offset the effects of lower selling
================================================================================
[CHART HERE]
GECS REVENUES
- --------------------------------------------------------------------------------
(IN BILLIONS) 1993 1994 1995 1996 1997
- --------------------------------------------------------------------------------
$17.276 $19.875 $26.492 $32.713 $39.931
================================================================================
prices. Operating profit for the segment increased 6% in 1996 as productivity,
growth in services at Medical Systems and volume improvements more than offset
selling price decreases.
Orders received by Medical Systems in 1997 were $4.3 billion, up $0.4 billion
from 1996. The backlog of unfilled orders at year-end 1997 was $2.4 billion,
about the same as at the end of 1996. Of the total, $1.3 billion related to
products, about 91% of which was scheduled for delivery in 1998, and the
remainder related to 1998 product services.
ALL OTHER consists primarily of GECS earnings, which are discussed in the next
section. Also included are revenues derived from licensing the use of GE
technology to others.
GECS OPERATIONS
GECS conducts its operations in two segments -- Financing and Specialty
Insurance. The Financing segment includes the financing and consumer savings and
insurance operations of General Electric Capital Corporation (GE Capital). The
consumer savings and insurance operations, conducted primarily by GE Financial
Assurance Holdings, Inc., provide consumers financial security solutions through
a wide variety of insurance, investment and retirement products, primarily in
the United States. The Specialty Insurance segment includes operations of GE
Global Insurance Holding Corporation (GE Global Insurance), the principal
subsidiary of which is Employers Reinsurance Corporation, and the other
insurance businesses described on page 63.
o GECS total revenues from operations were $39.9 billion in 1997, up 22% from
1996, which was up 23% from 1995. The 1997 increase reflected primarily the
contribution of businesses acquired in 1997 and 1996.
o GECS earnings were $3.3 billion in 1997, up 16% from 1996, which was up 17%
from 1995. The improved operating results for 1997 and 1996 were
attributable to continued asset growth, with business and portfolio
<PAGE>
F-13
ANNUAL REPORT PAGE 37
acquisitions throughout the period and higher origination volume in 1997.
Earnings in 1997 were affected by higher losses associated with the
investment in Montgomery Ward Holding Corp., discussed on page 38, as well
as by increased automobile residual losses. These matters were more than
offset by asset gains, the largest of which was $284 million (net of tax)
from a transaction that included the reduction of the GECS investment in
the common stock of Paine Webber Group Inc. Increased investment income was
the result of ongoing growth in the investment portfolios and a higher
level of gains on investment securities.
o GECS cost of goods sold was associated with the computer equipment
distribution businesses. This cost amounted to $4.1 billion in 1997,
compared with $1.7 billion in 1996 and $0.4 billion in 1995, the result of
acquisition-related growth in 1997 and 1996.
o GECS interest on borrowings in 1997 was $7.6 billion, 4% higher than in
1996, which was 10% higher than in 1995. The increases in 1997 and 1996
were caused by higher average borrowings used to finance asset growth,
partially offset by the effects of lower average interest rates. The
composite interest rate on GECS borrowings was 6.07% in 1997, compared with
6.24% in 1996 and 6.76% in 1995. See page 42 for an analysis of interest
rate sensitivities.
o GECS insurance losses and policyholder and annuity benefits increased to
$8.3 billion during 1997, compared with $6.7 billion in 1996 and $5.3
billion in 1995, primarily because of business acquisitions and growth in
originations throughout the period.
o GECS other costs and expenses increased to $13.9 billion in 1997 from $11.7
billion in 1996 and $9.4 billion in 1995 on increased costs associated with
acquired businesses and portfolios as well as higher investment levels.
GECS INDUSTRY SEGMENT revenues and operating profit for the past five years are
shown in the table on page 35. Revenues from services are detailed in note 3.
FINANCING SEGMENT revenues from operations increased 27% to $31.2 billion in
1997, following a 26% increase in 1996. Significant portions of the revenue
increase arose from the computer equipment distribution businesses acquired
during 1997 and 1996 and from the consumer savings and insurance businesses
acquired during 1996 and 1995. Asset growth contributed to increased revenues in
both years, but was partially offset by lower yields. Financing segment revenues
were negatively affected by higher losses associated with the investment in
Montgomery Ward Holding Corp. That effect was more than offset by gains on asset
transactions, including securitizations.
================================================================================
[CHART HERE]
GECS EARNINGS FROM CONTINUING OPERATIONS
- --------------------------------------------------------------------------------
(IN BILLIONS) 1993 1994 1995 1996 1997
- --------------------------------------------------------------------------------
$1.567 $2.085 $2.415 $2.817 $3.256
================================================================================
Operating profit was $3.7 billion in 1997, 8% higher than in 1996. As
previously noted, 1997 operating profit included higher losses associated with
the investment in Montgomery Ward Holding Corp. as well as increased automobile
residual losses. These items were more than offset by acquisition and core
growth as well as gains on asset transactions, including securitizations.
Operating profit increased 13% in 1996, primarily because of asset growth.
Financing spreads (the excess of yields over interest rates on borrowings) were
essentially flat in 1997 and 1996 as the reduction in yields was offset by
decreases in borrowing rates. Cost of goods sold associated with the computer
equipment distribution businesses increased significantly in both years,
primarily because of acquisitions. The provision for losses on financing
receivables increased in 1997 on higher average receivable balances as well as
increased delinquencies, consistent with industry experience, in the consumer
portfolio. Higher portfolio growth from originations resulted in higher
provisions in 1995 than in 1996. Insurance losses and policyholder and annuity
benefits associated with the consumer savings and insurance operations increased
during 1997 and 1996 as a result of acquisitions. Other costs and expenses
increased in both years, the result of costs associated with acquired businesses
and portfolios and higher levels of investment.
Financing receivables are the Financing segment's largest asset and its
primary source of revenues. The portfolio of financing receivables, before
allowance for losses, increased to $106.6 billion at the end of 1997 from $102.4
billion at the end of 1996, principally reflecting acquisition growth and
origination volume that were partially offset by securitizations of receivables.
The related allowance for losses at the end of 1997 amounted to $2.8 billion
(2.63% of receivables -- the same as 1996 and 1995) and, in management's
judgment, is appropriate given the risk profile of the portfolio.
<PAGE>
F-14
ANNUAL REPORT PAGE 38
A discussion of the quality of certain elements of the Financing segment
portfolio follows. "Nonearning" receivables are those that are 90 days or more
delinquent (or for which collection has otherwise become doubtful) and
"reduced-earning" receivables are commercial receivables whose terms have been
restructured to a below-market yield. The following discussion of the nonearning
and reduced-earning receivable balances and write-off amounts excludes amounts
related to Montgomery Ward Holding Corp. and affiliates, which are separately
discussed below.
Consumer financing receivables at year-end 1997 and 1996 are shown in the
following table:
----------------------------
(In millions) 1997 1996
- --------------------------------------------------------------------------------
Credit card and personal loans $25,773 $27,127
Auto loans 8,973 5,915
Auto financing leases 13,346 13,113
-----------------------
Total consumer financing receivables $48,092 $46,155
=======================
Nonearning $ 1,049 $ 926
-- As percentage of total 2.2% 2.0%
Receivable write-offs for the year $ 1,298 $ 870
================================================================================
The decrease in credit card and personal loan portfolios primarily resulted
from securitization of receivables, partially offset by portfolio acquisitions
and origination volume. Both the auto loan and financing lease portfolios
increased as a result of acquisition growth; however, the increase in auto
financing leases was partially offset by a shift in U.S. lease volume from
financing leases to operating leases. Nonearning receivables did not change
significantly during 1997. A substantial amount of the nonearning consumer
receivables were U.S. private-label credit card loans that were subject to
various loss-sharing agreements that provide full or partial recourse to the
originating retailer. Increased write-offs of consumer receivables were
primarily attributable to the impact of higher delinquencies and personal
bankruptcies on the credit card loan portfolios in the United States, consistent
with overall industry experience, as well as higher average receivable balances
worldwide.
Other financing receivables, totaling $58.5 billion at December 31, 1997,
consisted of a diverse commercial, industrial and equipment loan and lease
portfolio. This portfolio increased $2.3 billion during 1997, primarily because
of increased origination volume, partially offset by sales of receivables.
Related nonearning and reduced-earning receivables were $353 million at year-end
1997, compared with $471 million at year-end 1996.
As discussed in note 13, Montgomery Ward Holding Corp. (MWHC) filed a
bankruptcy petition for reorganization in 1997. GECS' share of the losses of
MWHC and affiliates in 1997 was $380 million (after tax). The GECS investment in
MWHC and affiliates at December 31, 1997, was $795 million ($617 million
classified as financing receivables). Income recognition had been suspended on
these pre-bankruptcy investments. Subsequent to the petition, GECS committed to
provide MWHC up to $1.0 billion in debtor-in-possession financing, subject to
certain conditions, in order to fund working capital requirements and general
corporate expenses. A majority of this facility has been syndicated; total
borrowings under this facility at December 31, 1997, were insignificant.
GECS loans and leases to commercial airlines amounted to $9.0 billion at the
end of 1997, up from $8.2 billion at the end of 1996. GECS commercial aircraft
positions also included financial guarantees, funding commitments and aircraft
orders as discussed in note 17.
SPECIALTY INSURANCE SEGMENT revenues from operations were $8.8 billion in 1997,
an increase of 8% from 1996, which increased 16% over 1995. The increase in 1997
resulted from increased premium and investment income associated with
origination volume, acquisitions and continued growth in the investment
portfolios, as well as a higher level of gains on investment securities. GE
Global Insurance net premiums earned on U.S. business increased in 1997 -- the
result of strong growth in the life reinsurance business -- while net premiums
earned on European business declined, reflecting the effects of currency
translation and market conditions. The increase in 1996 resulted primarily from
inclusion of a full year's results for the European property and casualty
reinsurance businesses acquired in 1995. GE Global Insurance net premiums earned
on U.S. business declined in 1996 on lower industry-wide pricing and the exit of
certain unprofitable reinsurance contracts. Revenues from the other insurance
businesses of GECS increased during 1997 and 1996 as a result of both
origination volume and acquisitions.
Specialty Insurance operating profit increased 4% to $1.3 billion in 1997
from $1.2 billion in 1996. The increase in 1997 primarily reflected higher
investment income, the result of continued growth in investment portfolios and
higher gains on investment securities, as well as improved earnings in the
mortgage insurance business, the result of improved market conditions. Higher
insurance losses, reserves and other costs and expenses partially offset these
increases. Operating profit increased 24% in 1996 as the year included a full
year's results of the European reinsurance acquisitions: higher premium and
investment income, partially offset by increases in insurance losses and other
costs and expenses.
<PAGE>
F-15
ANNUAL REPORT PAGE 39
INTERNATIONAL OPERATIONS
Estimated results of international operations include all exports from the
United States, plus the results of GE and GECS operations located outside the
United States. Certain GECS operations that cannot meaningfully be associated
with specific geographic areas were classified as "other international" for this
purpose.
International revenues in 1997 were $38.5 billion (42% of consolidated
revenues), compared with $33.3 billion in 1996 and $28.2 billion in 1995. In
1997, about 48% of GE's revenues were international, which was about 2% higher
than in 1996 and 1995. The chart below left depicts the growth in international
revenues in relation to total revenues over the past five years.
International operating profit was $4.8 billion (41% of consolidated
operating profit) in 1997, compared with $4.0 billion in 1996 and $3.2 billion
in 1995.
GE international revenues were $24.8 billion in 1997, an increase of 14% from
1996, reflecting sales growth in operations based outside the United States and
in U.S. exports. European revenues were 10% higher in 1997, reflecting increases
in both local operations and in exports to the region, with particularly strong
growth at Aircraft Engines. Pacific Basin revenues increased by 2% in 1997,
reflecting primarily increased revenues from local operations, led by Plastics
and Lighting. Revenues from the Americas increased 37%, primarily as a result of
strong growth in local operations, particularly at Appliances and Aircraft
Engines, and increased exports.
GECS international revenues were $13.7 billion in 1997, an increase of 18%
from $11.6 billion in 1996, while international assets grew 21% from $65.3
billion at December 31, 1996, to $79.2 billion at the end of 1997. This revenue
and asset growth occurred primarily in Europe and, to a lesser extent, in Canada
and the Pacific Basin. These increases were attributable to continued expansion
of GECS as a global provider of a wide range of services.
Financial results reported in U.S. dollars are affected by currency exchange.
A number of techniques are used to manage the effects of currency exchange,
including selective borrowings in local currencies and selective hedging of
significant cross-currency transactions. International activity is diverse, as
shown in the international revenues chart at the bottom right of this page.
Principal currencies include major European currencies as well as the Japanese
yen and the Canadian dollar.
GE's total exports from the United States follow.
- --------------------------------------------------------------------------------
GE'S TOTAL EXPORTS FROM THE UNITED STATES
----------------------------------
(In millions) 1997 1996 1995
- --------------------------------------------------------------------------------
Pacific Basin $ 3,176 $ 3,180 $ 3,397
Europe 2,423 2,060 1,701
Americas 1,553 1,257 1,023
Other 1,641 1,025 964
----------------------------------
Exports to external customers 8,793 7,522 7,085
Exports to affiliates 2,471 2,292 2,123
----------------------------------
Total exports $11,264 $ 9,814 $ 9,208
================================================================================
GE made a positive 1997 contribution of approximately $6.3 billion to the
U.S. balance of trade. Total exports in 1997 were $11.3 billion, direct imports
from external suppliers were $3.0 billion and imports from GE affiliates were
$2.0 billion.
================================================================================
[CHART HERE]
CONSOLIDATED REVENUES
- --------------------------------------------------------------------------------
(IN BILLIONS) 1993 1994 1995 1996 1997
- --------------------------------------------------------------------------------
UNITED STATES $36.447 $39.149 $41.780 45.886 $52.313
INTERNATIONAL 19.254 20.960 28.248 33.293 38.527
================================================================================
[CHART HERE]
CONSOLIDATED INTERNATIONAL REVENUES
- --------------------------------------------------------------------------------
(IN BILLIONS) 1993 1994 1995 1996 1997
- --------------------------------------------------------------------------------
EUROPE $9.037 $8.994 $13.993 $18.024 $20.589
PACIFIC BASIN 4.474 5.922 7.122 7.523 7.918
AMERICAS 3.073 3.437 4.105 4.700 6.185
OTHER 2.670 2.607 3.028 3.046 3.835
================================================================================
<PAGE>
F-16
ANNUAL REPORT PAGE 40
MANAGEMENT'S DISCUSSION OF FINANCIAL RESOURCES AND LIQUIDITY
OVERVIEW
This discussion of financial resources and liquidity focuses on the Statement of
Financial Position (page 28) and the Statement of Cash Flows (page 30).
Throughout the discussion, it is important to understand the differences
between the businesses of GE and GECS. Although manufacturing and services
activities involve a variety of GE businesses, their underlying characteristics
are development, preparation for market and delivery of tangible goods and
services. Risks and rewards are directly related to the ability to manage and
finance those activities.
The principal businesses of GECS provide financing, asset management,
consumer savings and insurance, and other insurance and services to third
parties. The underlying characteristics of most of these businesses involve the
management of financial risk. Risks and rewards stem from the abilities of its
businesses to continue to design and provide a wide range of services in a
competitive marketplace and to receive adequate compensation for such services.
GECS is not a "captive finance company" or a vehicle for "off-balance-sheet
financing" for GE; a small portion of GECS business is directly related to other
GE operations.
Despite the different business profiles of GE and GECS, the global commercial
airline industry is one significant example of an important source of business
for both. GE assumes financing positions primarily in support of engine sales,
whereas GECS is a significant source of lease and loan financing for the
industry (see details in note 17). Management believes that these financing
positions are reasonably protected by collateral values and by its ability to
control assets, either by ownership or security interests.
The fundamental differences between GE and GECS are reflected in the
measurements commonly used by investors, rating agencies and financial analysts.
These differences will become clearer in the discussion that follows with
respect to the more significant items in the financial statements.
YEAR 2000 compliance programs and information systems modifications have been
initiated in an attempt to ensure that these systems and key processes will
remain functional. This objective is expected to be achieved either by modifying
present systems using existing internal and external programming resources or by
installing new systems, including enterprise systems, and by monitoring supplier
and other third-party interfaces. While there can be no assurance that all such
modifications will be successful, management does not expect that either costs
of modifications or consequences of any unsuccessful modifications should have a
material adverse effect on the financial position, results of operations or
liquidity of GE or GECS.
================================================================================
[CHART HERE]
GE ANNUAL INTERNAL WORKING CAPITAL TURNOVER
- --------------------------------------------------------------------------------
1993 1994 1995 1996 1997
- --------------------------------------------------------------------------------
5.070 5.750 5.560 6.300 7.420
================================================================================
STATEMENT OF FINANCIAL POSITION
INVESTMENT SECURITIES for each of the past two years comprised mainly
investment-grade debt securities held by the specialty insurance and annuity and
investment businesses of GECS in support of obligations to policyholders and
annuitants. GE investment securities were $265 million at year-end 1997, up $248
million over 1996. The increase in 1997 primarily reflected an equity security
acquired as part of the Lockheed Martin transaction discussed previously. The
increase of $10.5 billion at GECS during 1997 was principally related to
acquisitions and increases in fair value as well as investment of premiums
received. A breakdown of the investment securities portfolio is provided in note
10.
GE CURRENT RECEIVABLES were $9.1 billion at the end of 1997, an increase of
$0.2 billion from year-end 1996, and included $6.1 billion due from customers at
the end of 1997, which was $0.5 billion lower than the amount due at the end of
1996. As a measure of asset management, customer receivables turnover was 7.7 in
1997, compared with 6.8 in 1996. Other current receivables are primarily amounts
that did not originate from sales of GE goods or services, such as advances to
suppliers in connection with large contracts.
GE INVENTORIEs were $5.1 billion at December 31, 1997, up $0.6 billion from the
end of 1996. Inventory turnover improved to 7.8 in 1997, compared with 7.6 in
1996, reflecting continuing improvements in inventory management. Last-in,
first-out (LIFO) revaluations decreased $119 million in 1997, compared with
decreases of $128 million in 1996 and $87 million in 1995. Included in these
changes were decreases of $59 million, $58 million and $88 million in 1997, 1996
and 1995, respectively, that resulted from lower LIFO inventory levels. There
were net cost decreases in 1997 and 1996, and no cost change in 1995.
<PAGE>
F-17
ANNUAL REPORT PAGE 41
Customer receivables and inventories (at FIFO) are two key components of GE's
internal working capital measurement. Internal working capital turnover
increased as shown in the chart on the facing page: from 5.6 turns in 1995 to
6.3 and 7.4 turns in 1996 and 1997, respectively. Internal working capital also
includes trade accounts payable and progress collections.
GECS INVENTORIES were $786 million and $376 million at December 31, 1997 and
1996, respectively. The increase in 1997 primarily reflected acquisitions in the
computer equipment distribution businesses.
GECS FINANCING RECEIVABLES were $103.8 billion at year-end 1997, net of
allowance for doubtful accounts, up $4.1 billion over 1996. These receivables
are discussed on pages 37 and 38 and in notes 7 and 13.
GECS OTHER RECEIVABLES were $18.3 billion and $16.0 billion at December 31, 1997
and 1996, respectively. Of the 1997 increase, $1.2 billion was attributable to
acquisitions and the remainder resulted from core growth.
PROPERTY, PLANT AND EQUIPMENT (including equipment leased to others) was $32.3
billion at December 31, 1997, up $3.5 billion from 1996. GE property, plant and
equipment consists of investments for its own productive use, whereas the
largest element for GECS is in equipment provided to third parties on operating
leases. Details by category of investment can be found in note 15.
GE total expenditures for new plant and equipment during 1997 totaled $2.2
billion, down $0.2 billion from 1996. Total expenditures for the past five years
were $9.7 billion, of which 38% was investment for growth through new capacity
and product development; 33% was investment in productivity through new
equipment and process improvements; and 29% was investment for such other
purposes as improvement of research and development facilities and safety and
environmental protection.
GECS additions to equipment leased to others, including business
acquisitions, were $6.8 billion during 1997 ($5.3 billion during 1996),
principally reflecting a shift in auto lease volume from financing leases to
operating leases and increased acquisitions of new aircraft.
INTANGIBLE ASSETS were $19.1 billion at year-end 1997, up from $16.0 billion at
year-end 1996. GE intangibles increased to $8.8 billion from $7.4 billion at the
end of 1996, principally as a result of goodwill related to the purchase of
Greenwich Air Services/UNC and a number of smaller acquisitions. The $1.7
billion increase in GECS intangibles also related primarily to goodwill from
acquisitions.
ALL OTHER ASSETS totaled $39.8 billion at year-end 1997, an increase of $5.0
billion from the end of 1996. GE other assets increased $1.6 billion,
principally reflecting consideration received in exchange for GE's investment in
Lockheed Martin preferred stock and an increase in the prepaid pension asset. In
connection with the exchange transaction, a portion of such consideration was
subsequently loaned to Lockheed Martin. The increase in GECS other assets of
$4.0 billion related principally to increases in assets acquired for resale,
primarily residential mortgages, and increased "separate accounts," which are
investments controlled by policyholders and are associated with identical
amounts reported as insurance liabilities.
INSURANCE LIABILITIES, RESERVES AND ANNUITY BENEFITS were $67.3 billion, $5.9
billion higher than in 1996. The increase was primarily attributable to
acquisitions in 1997 and the increase in separate accounts. For additional
information on these liabilities, see note 20.
CONSOLIDATED BORROWINGS aggregated $144.7 billion at December 31, 1997, compared
with $129.4 billion at the end of 1996. The major debt-rating agencies evaluate
the financial condition of GE and of GE Capital (the major public borrowing
entity of GECS) differently because of their distinct business characteristics.
Using criteria appropriate to each and considering their combined strength,
those major rating agencies continue to give the highest ratings to debt of both
GE and GE Capital.
GE has committed to contribute capital to GE Capital in the event of either a
decrease below a specified level in the ratio of GE Capital's earnings to fixed
charges, or a failure to maintain a specified debt-to-equity ratio in the event
certain GE Capital preferred stock is redeemed. GE also has guaranteed
subordinated debt of GECS with a face amount of $1.0 billion at December 31,
1997 and 1996. Management believes the likelihood that GE will be required to
contribute capital under either the commitments or the guarantees is remote.
================================================================================
[CHART HERE]
GE CASH FLOWS FROM OPERATING ACTIVITIES
- --------------------------------------------------------------------------------
(IN BILLIONS) 1993 1994 1995 1996 1997
- --------------------------------------------------------------------------------
$5.201 $6.071 $6.065 $9.067 $9.317
================================================================================
<PAGE>
F-18
ANNUAL REPORT PAGE 42
GE total borrowings were $4.4 billion at year-end 1997 ($3.6 billion
short-term, $0.8 billion long-term), an increase of about $0.3 billion from
year-end 1996. GE total debt at the end of 1997 equaled 11.1% of total capital,
down from 11.4% at the end of 1996.
GECS total borrowings were $141.3 billion at December 31, 1997, of which
$95.3 billion is due in 1998 and $46.0 billion is due in subsequent years.
Comparable amounts at the end of 1996 were $125.6 billion total, $77.9 billion
due within one year and $47.7 billion due thereafter. A large portion of GECS
borrowings ($71.2 billion and $54.2 billion at the end of 1997 and 1996,
respectively) was issued in active commercial paper markets that management
believes will continue to be a reliable source of short-term financing. Most of
this commercial paper was issued by GE Capital. The average remaining terms and
interest rates of GE Capital commercial paper were 44 days and 5.83% at the end
of 1997, compared with 42 days and 5.58% at the end of 1996. GE Capital leverage
(ratio of debt to equity, excluding from equity net unrealized gains on
investment securities) was 7.94 to 1 at the end of 1997 and 7.92 to 1 at the end
of 1996. By comparison, including in equity net unrealized gains on investment
securities, the GE Capital ratio of debt to equity was 7.45 to 1 at the end of
1997 and 7.84 to 1 at the end of 1996.
INTEREST RATE AND CURRENCY RISK MANAGEMENT
In normal operations, both GE and GECS must deal with effects of changes in
interest rates and currency exchange rates. The following discussion presents an
overview of how such changes are managed, a view of their potential effects,
and, finally, what considerations arise from recent developments in Asia.
GE and GECS use various financial instruments, particularly interest rate and
currency swaps, but also futures, options and currency forwards, to manage their
respective interest rate and currency risks. GE and GECS are exclusively end
users of these instruments, which are commonly referred to as derivatives;
neither GE nor GECS engages in trading, market-making or other speculative
activities in the derivatives markets. Established practices require that
derivative financial instruments relate to specific asset, liability or equity
transactions or to currency exposures. More detailed information about these
financial instruments, as well as the strategies and policies for their use, is
provided in notes 1, 19 and 30.
The Securities and Exchange Commission requires that registrants include
information about potential effects of changes in interest rates and currency
exchange in their financial statements. Although the rules offer alternatives
================================================================================
[CHART HERE]
GE CUMULATIVE CASH FLOWS
- --------------------------------------------------------------------------------
(IN BILLIONS) 1993 1994 1995 1996 1997
- --------------------------------------------------------------------------------
CASH FLOWS FROM
OPERATING
ACTIVITIES $5.201 $11.272 $17.337 $26.404 $35.721
DIVIDENDS PAID 2.153 4.615 7.385 10.435 13.846
SHARES REPURCHASED 0.707 1.780 4.882 8.148 11.640
================================================================================
for presenting this information, none of the alternatives is without
limitations. The following discussion is based on so-called "shock tests," which
model effects of interest rate and currency shifts on the reporting company.
Shock tests, while probably the most meaningful analysis permitted, are
constrained by several factors, including the necessity to conduct the analysis
based on a single point in time and by their inability to include the
extraordinarily complex market reactions that normally would arise from the
market shifts modeled. While the following results of shock tests for interest
rates and currencies may have some limited use as benchmarks, they should not be
viewed as forecasts.
o One means of assessing exposure to interest rate changes is a
duration-based analysis that measures the potential loss in net earnings
resulting from a hypothetical increase in interest rates of 100 basis
points across all maturities (sometimes referred to as a "parallel shift in
the yield curve"). Under this model, it is estimated that, all else
constant, such an increase, including repricing effects in the securities
portfolio, would reduce the 1998 net earnings of GECS based on year-end
1997 positions by approximately $112 million; the pro forma effect for GE
was insignificant.
o One means of assessing exposure to changes in currency exchange rates is to
model effects on reported earnings using a sensitivity analysis. Year-end
1997 consolidated currency exposures, including financial instruments
designated and effective as hedges, were analyzed to identify GE and GECS
assets and liabilities denominated in other than their relevant functional
currency. Net unhedged exposures in each currency were then remeasured
assuming a 10% decrease (substantially greater decreases for
hyperinflationary currencies) in currency exchange rates compared with the
U.S. dollar. Under this model, it is estimated that, all else constant,
such a decrease would reduce the 1998 net earnings of GE based on year-end
1997 positions by approximately $10 million; the pro forma effect for GECS
was insignificant.
<PAGE>
F-19
ANNUAL REPORT PAGE 43
Recent economic developments in parts of Asia have altered somewhat the risks
and opportunities of the GE and GECS activities in affected economies. These
activities encompass primarily manufacturing for local and export markets,
import and sale of products produced outside the area, leasing of aircraft,
sourcing for GE plants domiciled in other global regions and providing certain
financial services within those Asian economies. As such, exposure exists to,
among other things, increased receivables delinquencies and potential bad debts,
delays in sales and orders principally related to power and aircraft-related
equipment, and a slowdown in financial services activities. Conversely, costs of
sourced goods may decline and new sourcing opportunities may arise, sales of
products such as plastics to now more-competitive Asian manufacturers of
products destined for export should remain strong and liberalization of
financial regulations opens new opportunities to penetrate Asian financial
services markets. Taken as a whole, while this situation bears close monitoring
and increased management attention, the current situation is not expected to
have a material adverse effect on the financial position, results of operations
or liquidity of GE or GECS in 1998.
STATEMENT OF CASH FLOWS
Because cash management activities of GE and GECS are separate and distinct, it
is more useful to review their cash flows separately.
GE
GE cash and equivalents aggregated $1.2 billion at the end of 1997, an increase
of $0.2 billion from 1996. During 1997, GE generated a record $9.3 billion in
cash from operating activities, an increase of $0.2 billion over 1996,
principally as a result of improvements in earnings, working capital and higher
dividends from GECS. The 1997 cash generation provided most of the resources
needed to repurchase $3.5 billion of GE common stock under the share repurchase
program, to pay $3.4 billion in dividends to share owners, to invest $2.2
billion in new plant and equipment and to make $1.4 billion in acquisitions.
Operating activities are the principal source of GE's cash flows. Over the
past three years, operating activities have provided more than $24 billion of
cash. The principal application of this cash was distributions of more than $19
billion to share owners, both through payment of dividends ($9.2 billion) and
through the share repurchase program ($9.9 billion) described below. Other
applications included investment in new plant and equipment ($6.4 billion) and
acquisitions ($2.8 billion).
In December 1997, the GE Board of Directors increased the authorization to
repurchase common stock to $17 billion and authorized the program to continue
through 1999. Funds used for the share repurchase are expected to be generated
largely from free cash flow.
Based on past performance and current expectations, in combination with the
financial flexibility that comes with a strong balance sheet and the highest
credit ratings, management believes that GE is in a sound position to complete
the share repurchase program, to grow dividends in line with earnings, and to
continue making selective investments for long-term growth. Expenditures for new
plant and equipment are expected to be about $2.0 billion in 1998, principally
for productivity and growth. The expected level of expenditures was moderated by
the Six Sigma quality program's success in freeing capacity.
GECS
One of the primary sources of cash for GECS is financing activities involving
the continued rollover of short-term borrowings and appropriate addition of
borrowings with a reasonable balance of maturities. Over the past three years,
GECS borrowings with maturities of 90 days or less have increased by $20.1
billion. New borrowings of $80.5 billion having maturities longer than 90 days
were added during those years, while $64.5 billion of such longer-term
borrowings were retired. GECS also generated $26.1 billion from continuing
operating activities.
The principal use of cash by GECS has been investing in assets to grow its
businesses. Of the $55.9 billion that GECS invested over the past three years,
$15.5 billion was used for additions to financing receivables; $16.2 billion was
used to invest in new equipment, principally for lease to others; and $13.6
billion was used for acquisitions of new businesses.
With the financial flexibility that comes with excellent credit ratings,
management believes that GECS should be well positioned to meet the global needs
of its customers for capital and to continue providing GE share owners with good
returns.
<PAGE>
F-20
ANNUAL REPORT PAGE 44
MANAGEMENT'S DISCUSSION OF SELECTED FINANCIAL DATA
SELECTED FINANCIAL DATA summarizes on the opposite page some data frequently
requested about General Electric Company. The data are divided into three
sections: upper portion -- consolidated data; middle portion -- GE data that
reflect various conventional measurements for industrial enterprises; and lower
portion -- GECS data that reflect key information pertinent to financial
services businesses.
GE'S TOTAL RESEARCH AND DEVELOPMENT expenditures were $1,891 million in 1997,
about the same as in 1996 and 1995. In 1997, expenditures from GE's own funds
were $1,480 million, an increase of 4% over 1996, reflecting continuing research
and development work related to new product, service and process technologies.
Product technology efforts in 1997 included continuing development work on the
next generation of gas turbines, further advances in state-of-the-art diagnostic
imaging technologies, and development of more fuel-efficient, cost-effective
aircraft engine designs. New services technologies include advances in
diagnostic applications, including remote diagnostic capabilities related to
repair and maintenance of medical equipment, aircraft engines, power generation
equipment and locomotives. New process technologies -- vital to Six Sigma
quality programs -- provided improved product quality and performance and
increased capacity for manufacturing engineered materials. Expenditures from
funds provided by customers (mainly the U.S. government) were $411 million in
1997, down $54 million from 1996, primarily reflecting transition of the F414
program at Aircraft Engines from development to production.
GE'S TOTAL BACKLOG of firm unfilled orders at the end of 1997 was $26.4 billion,
compared with $26.2 billion at the end of 1996. Of the total, $22.0 billion
related to products, about 55% of which was scheduled for delivery in 1998.
Services orders are included in backlog for only the succeeding 12 months; such
backlog at the end of 1997 was $4.4 billion. Orders constituting this backlog
may be canceled or deferred by customers, subject in certain cases to
cancellation penalties. See Industry Segments beginning on page 34 for further
discussion on unfilled orders of relatively long-cycle manufacturing businesses.
REGARDING ENVIRONMENTAL MATTERS, GE's operations, like operations of other
companies engaged in similar businesses, involve the use, disposal and cleanup
of substances regulated under environmental protection laws.
In 1997, GE expended about $80 million for capital projects related to the
environment. The comparable amount in 1996 was $87 million. These amounts
exclude expenditures for remediation actions, which are principally expensed and
are discussed below. Capital expenditures for environmental purposes have
included pollution control devices -- such as wastewater treatment plants,
groundwater monitoring devices, air strippers or separators, and incinerators --
at new and existing facilities constructed or upgraded in the normal course of
business. Consistent with policies stressing environmental responsibility,
average annual capital expenditures other than for remediation projects are
presently expected to be about $85 million over the next two years. This level
is in line with existing levels for new or expanded programs to build facilities
or modify manufacturing processes to minimize waste and reduce emissions.
GE also is involved in a sizable number of remediation actions to clean up
hazardous wastes as required by federal and state laws. Such statutes require
that responsible parties fund remediation actions regardless of fault, legality
of original disposal or ownership of a disposal site. Expenditures for site
remediation actions amounted to approximately $84 million in 1997, compared with
$76 million in 1996. It is presently expected that remediation actions will
require average annual expenditures in the range of $80 million to $140 million
over the next two years.
================================================================================
[CHART HERE]
YEAR-END MARKET CAPITALIZATION
- --------------------------------------------------------------------------------
(IN BILLIONS) 1993 1994 1995 1996 1997
- --------------------------------------------------------------------------------
$89.527 $87.004 $119.989 $162.604 $239.539
================================================================================
[CHART HERE]
GE SHARE PRICE ACTIVITY
- --------------------------------------------------------------------------------
(IN DOLLARS) 1993 1994 1995 1996 1997
- --------------------------------------------------------------------------------
HIGH $26.7500 $27.4375 $36.5625 $53.0625 76.5625
LOW 20.1875 22.5000 24.9375 34.7500 47.9375
CLOSE 26.2500 25.5000 36.0000 49.4375 73.3750
================================================================================
<PAGE>
F-21
ANNUAL REPORT PAGE 45
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
(Dollar amounts in millions; ---------------------------------------------------------------------------
per-share amounts in dollars) 1997 1996 1995 1994 1993
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
GENERAL ELECTRIC COMPANY AND CONSOLIDATED AFFILIATES
Revenues $ 90,840 $ 79,179 $ 70,028 $ 60,109 $ 55,701
Earnings from continuing operations 8,203 7,280 6,573 5,915 4,184
Earnings (loss) from discontinued operations -- -- -- (1,189) 993
Effect of accounting change -- -- -- -- (862)
Net earnings 8,203 7,280 6,573 4,726 4,315
Dividends declared 3,535 3,138 2,838 2,546 2,229
Earned on average share owners' equity 25.0% 24.0% 23.5% 18.1% 17.5%
Per share
Earnings from continuing operations -- basic $ 2.50 $ 2.20 $ 1.95 $ 1.73 $ 1.22
Earnings (loss) from discontinued operations -- -- -- (0.35) 0.29
Effect of accounting change -- -- -- -- (0.25)
Net earnings -- basic 2.50 2.20 1.95 1.38 1.26
Net earnings -- diluted 2.46 2.16 1.93 1.37 1.25
Dividends declared 1.08 0.95 0.845 0.745 0.6525
Stock price range 76 9/16- 53 1/16- 36 9/16- 27 7/16- 26 3/4-
47 15/16 34 3/4 24 15/16 22 1/2 20 3/16
Total assets of continuing operations 304,012 272,402 228,035 185,871 166,413
Long-term borrowings 46,603 49,246 51,027 36,979 28,194
Shares outstanding-- average (in thousands) 3,274,692 3,307,394 3,367,624 3,417,476 3,415,958
Share owner accounts-- average 509,000 486,000 460,000 458,000 464,000
Employees at year end
United States 165,000 155,000 150,000 156,000 157,000
Other countries 111,000 84,000 72,000 60,000 59,000
Discontinued operations (primarily U.S.) -- -- -- 5,000 6,000
---------------------------------------------------------------------------
Total employees 276,000 239,000 222,000 221,000 222,000
==================================================================================================================================
GE DATA
Short-term borrowings $ 3,629 $ 2,339 $ 1,666 $ 906 $ 2,391
Long-term borrowings 729 1,710 2,277 2,699 2,413
Minority interest 569 477 434 382 355
Share owners' equity 34,438 31,125 29,609 26,387 25,824
---------------------------------------------------------------------------
Total capital invested $ 39,365 $ 35,651 $ 33,986 $ 30,374 $ 30,983
===========================================================================
Return on average total capital invested 23.6% 22.2% 21.3% 15.9% 15.2%
Borrowings as a percentage of total capital
invested 11.1% 11.4% 11.6% 11.9% 15.5%
Working capital $ (4,881) $ (2,147) $ 204 $ 544 $ (419)
Additions to property, plant and equipment 2,191 2,389 1,831 1,743 1,588
==================================================================================================================================
GECS DATA
Revenues $ 39,931 $ 32,713 $ 26,492 $ 19,875 $ 17,276
Earnings from continuing operations 3,256 2,817 2,415 2,085 1,567
Earnings (loss) from discontinued operations -- -- -- (1,189) 240
Net earnings 3,256 2,817 2,415 896 1,807
Share owner's equity 17,239 14,276 12,774 9,380 10,809
Minority interest 3,113 2,530 2,522 1,465 1,301
Borrowings from others 141,263 125,621 111,598 91,399 81,052
Ratio of debt to equity at GE Capital <F1> 7.94:1 7.92:1 7.89:1 7.94:1 7.96:1
Total assets of GE Capital $ 228,777 $ 200,816 $ 160,825 $ 130,904 $ 117,939
Reserve coverage on financing receivables 2.63% 2.63% 2.63% 2.63% 2.63%
Insurance premiums written $ 9,396 $ 8,185 $ 6,158 $ 3,962 $ 3,956
==================================================================================================================================
<FN>
<F1> Equity excludes net unrealized gains/losses on investment securities.
Discontinued operations reflect the results of Kidder, Peabody, the discontinued
GECS securities broker-dealer, in 1994 and 1993, and the results of discontinued
GE Aerospace businesses in 1993. The 1993 accounting change represents the
adoption of SFAS No. 112, EMPLOYERS' ACCOUNTING FOR POSTEMPLOYMENT BENEFITS.
"GE" means the basis of consolidation as described in note 1 to the consolidated
financial statements; "GECS" means General Electric Capital Services, Inc. and
all of its affiliates and associated companies. Transactions between GE and GECS
have been eliminated from the consolidated information. Share data and per-share
amounts have been adjusted to reflect the 2-for-1 stock split effective on April
28, 1997.
</FN>
</TABLE>
<PAGE>
F-22
ANNUAL REPORT PAGE 46
MANAGEMENT'S DISCUSSION OF FINANCIAL RESPONSIBILITY
The financial data in this report, including the audited financial statements,
have been prepared by management using the best available information and
applying judgment. Accounting principles used in preparing the financial
statements are those that are generally accepted in the United States.
Management believes that a sound, dynamic system of internal financial
controls that balances benefits and costs provides a vital ingredient for the
Company's Six Sigma quality program as well as the best safeguard for Company
assets. Professional financial managers are responsible for implementing and
overseeing the financial control system, reporting on management's stewardship
of the assets entrusted to it by share owners and maintaining accurate records.
GE is dedicated to the highest standards of integrity, ethics and social
responsibility. This dedication is reflected in written policy statements
covering, among other subjects, environmental protection, potentially
conflicting outside interests of employees, compliance with antitrust laws,
proper business practices, and adherence to the highest standards of conduct and
practices in transactions with the U.S. government. Management continually
emphasizes to all employees that even the appearance of impropriety can erode
public confidence in the Company. Ongoing education and communication programs
and review activities, such as those conducted by the Company's Policy
Compliance Review Board, are designed to create a strong compliance culture --
one that encourages employees to raise their policy questions and concerns and
that prohibits retribution for doing so.
KPMG Peat Marwick LLP provide an objective, independent review of
management's discharge of its obligations relating to the fairness of reporting
operating results and financial condition. Their report for 1997 appears below.
The Audit Committee of the Board (consisting solely of Directors from outside
GE) maintains an ongoing appraisal -- on behalf of share owners -- of the
activities and independence of the Company's independent auditors, the
activities of its internal audit staff, financial reporting process, internal
financial controls and compliance with key Company policies.
John F. Welch, Jr. Dennis D. Dammerman
Chairman of the Board and Senior Vice President, Finance, and
Chief Executive Officer Chief Financial Officer
February 13, 1998
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
TO SHARE OWNERS AND BOARD OF DIRECTORS OF
GENERAL ELECTRIC COMPANY
We have audited the financial statements of General Electric Company and
consolidated affiliates as listed in Item 14 (a)1 on page 19. In connection with
our audits of the consolidated financial statements, we also have audited the
financial statement schedule as listed in Item 14 (a)2 on page 19. These
consolidated financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and financial statement
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the aforementioned financial statements present fairly, in
all material respects, the financial position of General Electric Company and
consolidated affiliates at December 31, 1997 and 1996, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1997, in conformity with generally accepted accounting
principles. Also in our opinion, the related financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information set forth
therein.
KPMG Peat Marwick LLP
Stamford, Connecticut
February 13, 1998
<PAGE>
F-23
ANNUAL REPORT PAGE 47
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION. The consolidated financial statements represent the adding
together of all affiliates -- companies that General Electric directly or
indirectly controls. Results of associated companies -- generally companies that
are 20% to 50% owned and over which GE, directly or indirectly, has significant
influence -- are included in the financial statements on a "one-line" basis.
FINANCIAL STATEMENT PRESENTATION. Financial data and related measurements are
presented in the following categories.
o GE. This represents the adding together of all affiliates other than
General Electric Capital Services, Inc. (GECS), whose operations are
presented on a one-line basis.
o GECS. This affiliate owns all of the common stock of General Electric
Capital Corporation (GE Capital) and GE Global Insurance Holding
Corporation (GE Global Insurance). GE Capital, GE Global Insurance and
their respective affiliates are consolidated in the GECS columns and
constitute its business.
o Consolidated. These data represent the adding together of GE and GECS.
The effects of transactions among related companies within and between each of
the above-mentioned groups are eliminated. Transactions between GE and GECS are
not material.
Certain prior-year amounts have been reclassified to conform to the 1997
presentation.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect reported amounts and related disclosures. Actual results could differ
from those estimates.
SALES OF GOODS AND SERVICES. A sale is recorded when title passes to the
customer or when services are performed in accordance with contracts.
GECS REVENUES FROM SERVICES (EARNED INCOME). Income on all loans is recognized
on the interest method. Accrual of interest income is suspended at the earlier
of the time at which collection of an account becomes doubtful or the account
becomes 90 days delinquent. Interest income on impaired loans is recognized
either as cash is collected or on a cost-recovery basis as conditions warrant.
Financing lease income is recorded on the interest method so as to produce a
level yield on funds not yet recovered. Estimated unguaranteed residual values
of leased assets are based primarily on periodic independent appraisals of the
values of leased assets remaining at expiration of the lease terms.
Operating lease income is recognized on a straight-line basis over the terms
of underlying leases.
Origination, commitment and other nonrefundable fees related to fundings are
deferred and recorded in earned income on the interest method. Commitment fees
related to loans not expected to be funded and line-of-credit fees are deferred
and recorded in earned income on a straight-line basis over the period to which
the fees relate. Syndication fees are recorded in earned income at the time
related services are performed unless significant contingencies exist.
Premium income from insurance activities is discussed under GECS insurance
accounting policies on page 48.
DEPRECIATION AND AMORTIZATION. The cost of most of GE's manufacturing plant and
equipment is depreciated using an accelerated method based primarily on a
sum-of-the-years digits formula.
The cost of GECS equipment leased to others on operating leases is amortized,
principally on a straight-line basis, to estimated net salvage value over the
lease term or over the estimated economic life of the equipment. Depreciation of
property and equipment used by GECS is recorded on either a sum-of-the-years
digits formula or a straight-line basis over the lives of the assets.
RECOGNITION OF LOSSES ON FINANCING RECEIVABLES AND INVESTMENTS. GECS maintains
an allowance for losses on financing receivables at an amount that it believes
is sufficient to provide adequate protection against future losses in the
portfolio.
When collateral is repossessed in satisfaction of a loan, the receivable is
written down against the allowance for losses to estimated fair value less costs
to sell, transferred to other assets and subsequently carried at the lower of
cost or estimated fair value less costs to sell. This accounting method has been
employed principally for specialized financing transactions.
CASH AND EQUIVALENTS. Marketable securities with original maturities of three
months or less are included in cash equivalents unless designated as available
for sale and classified as investment securities.
INVESTMENT SECURITIES. Investments in debt and marketable equity securities are
reported at fair value. Substantially all investment securities are designated
as available for sale, with unrealized gains and losses included in equity, net
of applicable taxes and other adjustments. Unrealized losses that are other than
temporary are recognized in earnings. Realized gains and losses are accounted
for on the specific identification method.
<PAGE>
F-24
ANNUAL REPORT PAGE 48
INVENTORIES. All inventories are stated at the lower of cost or realizable
values. Cost for virtually all of GE's U.S. inventories is determined on a
last-in, first-out (LIFO) basis. Cost of other GE inventories is primarily
determined on a first-in, first-out (FIFO) basis.
GECS inventories consist primarily of finished products held for sale. Cost
is primarily determined on a FIFO basis.
INTANGIBLE ASSETS. Goodwill is amortized over its estimated period of benefit on
a straight-line basis; other intangible assets are amortized on appropriate
bases over their estimated lives. No amortization period exceeds 40 years.
Goodwill in excess of associated expected operating cash flows is considered to
be impaired and is written down to fair value, which is determined based on
either discounted future cash flows or appraised values, depending on the nature
of the asset.
INTEREST RATE AND CURRENCY RISK MANAGEMENT. As a matter of policy, neither GE
nor GECS engages in derivatives trading, market-making or other speculative
activities.
GE and GECS use swaps primarily to optimize funding costs. To a lesser
degree, and in combination with options and limit contracts, GECS uses swaps to
stabilize cash flows from mortgage-related assets.
Interest rate and currency swaps that modify borrowings or designated assets,
including swaps associated with forecasted commercial paper renewals, are
accounted for on an accrual basis. Both GE and GECS require all other swaps, as
well as futures, options and currency forwards, to be designated and accounted
for as hedges of specific assets, liabilities or committed transactions;
resulting payments and receipts are recognized contemporaneously with effects of
hedged transactions. A payment or receipt arising from early termination of an
effective hedge is accounted for as an adjustment to the basis of the hedged
transaction.
Instruments used as hedges must be effective at reducing the risk associated
with the exposure being hedged and must be designated as a hedge at the
inception of the contract. Accordingly, changes in market values of hedge
instruments must be highly correlated with changes in market values of
underlying hedged items both at inception of the hedge and over the life of the
hedge contract. Any instrument designated but ineffective as a hedge is marked
to market and recognized in operations immediately.
GECS INSURANCE ACCOUNTING POLICIES. Accounting policies for GECS insurance
businesses follow.
PREMIUM INCOME. Insurance premiums are reported as earned income as follows:
o For short-duration insurance contracts (including property and casualty,
accident and health, and financial guaranty insurance), premiums are
reported as earned income, generally on a pro rata basis, over the terms of
the related agreements. For retrospectively rated reinsurance contracts,
premium adjustments are recorded based on estimated losses and loss
expenses, taking into consideration both case and incurred-but-not-reported
reserves.
o For traditional long-duration insurance contracts (including term and whole
life contracts and annuities payable for the life of the annuitant),
premiums are reported as earned income when due.
o For investment contracts and universal life contracts, premiums received
are reported as liabilities, not as revenues. Universal life contracts are
long-duration insurance contracts with terms that are not fixed and
guaranteed; for these contracts, revenues are recognized for assessments
against the policyholder's account, mostly for mortality, contract
initiation, administration and surrender. Investment contracts are
contracts that have neither significant mortality nor significant morbidity
risk, including annuities payable for a determined period; for these
contracts, revenues are recognized on the associated investments and
amounts credited to policyholder accounts are charged to expense.
DEFERRED POLICY ACQUISITION COSTS. Costs that vary with and are primarily
related to the acquisition of new and renewal insurance and investment contracts
are deferred and amortized over the respective policy terms.
o For short-duration insurance contracts, these costs are amortized pro rata
over the contract periods in which the related premiums are earned.
o For traditional long-duration insurance contracts, these costs are
amortized over the respective contract periods in proportion to either
anticipated premium income or, in the case of limited-payment contracts,
estimated benefit payments.
o For investment contracts and universal life contracts, these costs are
amortized on the basis of anticipated gross profits.
Periodically, deferred policy acquisition costs are reviewed for recoverability;
anticipated investment income is considered in making recoverability
evaluations.
PRESENT VALUE OF FUTURE PROFITS. The actuarially determined present value of
anticipated net cash flows to be realized from insurance, annuity and investment
contracts in force at the date of acquisition of life insurance enterprises is
recorded as the present value of future profits (PVFP). PVFP is amortized over
the respective policy terms in a manner similar to deferred policy acquisition
costs; unamortized balances are adjusted to reflect experience and impairment,
if any.
<PAGE>
F-25
ANNUAL REPORT PAGE 49
2 GE OTHER INCOME
-------------------------------
(In millions) 1997 1996 1995
- --------------------------------------------------------------------------------
Royalty and technical agreements $ 405 $ 391 $ 453
Associated companies 50 50 111
Marketable securities and
bank deposits 78 72 70
Customer financing 26 29 26
Other investments
Dividends 62 79 62
Interest 1 18 18
Other items 1,685 (10) 13
-------------------------------
$2,307 $ 629 $ 753
================================================================================
Included in the "Other items" caption is a gain of $1,538 million related to
a tax-free exchange between GE and Lockheed Martin Corporation (Lockheed Martin)
in the fourth quarter of 1997. In exchange for its investment in Lockheed Martin
Series A preferred stock, GE acquired a Lockheed Martin subsidiary containing
two businesses, an equity interest and cash to the extent necessary to equalize
the value of the exchange, a portion of which was subsequently loaned to
Lockheed Martin.
3 GECS REVENUES FROM SERVICES
---------------------------------
(In millions) 1997 1996 1995
- --------------------------------------------------------------------------------
Time sales, loan and
other income $12,211 $11,310 $ 9,995
Operating lease rentals 4,819 4,341 4,080
Financing leases 3,499 3,485 3,176
Investment income 5,512 3,506 2,542
Premium and commission
income of insurance affiliates 9,268 8,145 6,232
---------------------------------
$35,309 $30,787 $26,025
================================================================================
4 SUPPLEMENTAL COST DETAILS
Total expenditures for research and development were $1,891 million, $1,886
million and $1,892 million in 1997, 1996 and 1995, respectively. The
Company-funded portion aggregated $1,480 million in 1997, $1,421 million in 1996
and $1,299 million in 1995.
Rental expense under operating leases is shown below.
----------------------------------
(In millions) 1997 1996 1995
- --------------------------------------------------------------------------------
GE $536 $512 $523
GECS 734 547 524
- --------------------------------------------------------------------------------
At December 31, 1997, minimum rental commitments under noncancelable
operating leases aggregated $2,368 million and $5,097 million for GE and GECS,
respectively. Amounts payable over the next five years are shown below.
------------------------------------------------
(In millions) 1998 1999 2000 2001 2002
- --------------------------------------------------------------------------------
GE $433 $360 $260 $213 $166
GECS 652 574 512 487 452
- --------------------------------------------------------------------------------
GE's selling, general and administrative expense totaled $7,476 million in
1997, $6,274 million in 1996 and $5,743 million in 1995. Insignificant amounts
of interest were capitalized by GE and GECS in 1997, 1996 and 1995.
5 PENSION BENEFITS
GE and its affiliates sponsor a number of pension plans. Principal pension plans
are discussed below; other pension plans are not significant individually or in
the aggregate.
PRINCIPAL PENSION PLANS are the GE Pension Plan and the GE Supplementary Pension
Plan.
The GE Pension Plan covers substantially all GE employees in the United
States as well as approximately two-thirds of such GECS employees. Generally,
benefits are based on the greater of a formula recognizing career earnings or a
formula recognizing length of service and final average earnings. Benefit
provisions are subject to collective bargaining. At the end of 1997, the GE
Pension Plan covered approximately 466,000 participants, including 132,000
employees, 148,000 former employees with vested rights to future benefits, and
186,000 retirees and beneficiaries receiving benefits.
The GE Supplementary Pension Plan is an unfunded plan providing supplementary
retirement benefits primarily to higher-level, longer-service U.S. employees.
Details of income for principal pension plans follow.
- --------------------------------------------------------------------------------
PENSION PLAN INCOME
--------------------------------
(In millions) 1997 1996 1995
- --------------------------------------------------------------------------------
Actual return on plan assets $ 6,587 $ 4,916 $ 5,439
Unrecognized portion of return (3,866) (2,329) (3,087)
Service cost for benefits earned (a) (596) (550) (469)
Interest cost on benefit obligation (1,686) (1,593) (1,580)
Amortization 304 265 394
Special early retirement cost (412) -- --
--------------------------------
Total pension plan income $ 331 $ 709 $ 697
================================================================================
(a) Net of employee contributions.
- --------------------------------------------------------------------------------
Actual return on trust assets in 1997 was 19.8%, compared with the 9.5%
assumed return on such assets. The effect of this higher return will be
recognized in future years.
<PAGE>
F-26
ANNUAL REPORT PAGE 50
FUNDING POLICY for the GE Pension Plan is to contribute amounts sufficient to
meet minimum funding requirements as set forth in employee benefit and tax laws
plus such additional amounts as GE may determine to be appropriate. GE has not
made contributions since 1987 because the fully funded status of the GE Pension
Plan precludes current tax deduction and because any Company contribution would
require payment of annual excise taxes.
- --------------------------------------------------------------------------------
FUNDED STATUS OF PENSION PLANS
-----------------------
December 31 (In millions) 1997 1996
- --------------------------------------------------------------------------------
Market-related value of assets $32,638 $29,402
Projected benefit obligation 25,874 23,251
- --------------------------------------------------------------------------------
The market-related value of pension assets recognizes market appreciation or
depreciation in the portfolio over five years, a method that reduces the
short-term impact of market fluctuations.
Plan assets are held in trust and consist mainly of common stock and
fixed-income investments. GE common stock represented about 6% and 5% of trust
assets at year-end 1997 and 1996, respectively.
An analysis of amounts shown in the Statement of Financial Position is
presented below.
- --------------------------------------------------------------------------------
PREPAID PENSION ASSET
-------------------------
December 31 (In millions) 1997 1996
- --------------------------------------------------------------------------------
Current value of trust assets $ 38,742 $ 33,686
Add (deduct) unamortized balances
SFAS No. 87 transition gain (462) (615)
Experience gains (7,538) (5,357)
Plan amendments 1,003 1,012
Projected benefit obligation (25,874) (23,251)
Pension liability 703 637
-------------------------
PREPAID PENSION ASSET $ 6,574 $ 6,112
================================================================================
The accumulated benefit obligation was $24,675 million and $22,176 million at
year-end 1997 and 1996, respectively; the vested benefit obligation was
approximately equal to the accumulated benefit obligation at the end of both
years.
ACTUARIAL ASSUMPTIONS AND TECHNIQUES used to determine costs and benefit
obligations for principal pension plans follow.
- --------------------------------------------------------------------------------
ACTUARIAL ASSUMPTIONS
---------------------
December 31 1997 1996
- --------------------------------------------------------------------------------
Discount rate 7.0% 7.5%
Compensation increases 4.5 4.5
Return on assets for the year 9.5 9.5
- --------------------------------------------------------------------------------
Experience gains and losses, as well as the effects of changes in actuarial
assumptions and plan provisions, are amortized over employees' average future
service period.
6 RETIREE HEALTH AND LIFE BENEFITS
GE and its affiliates sponsor a number of retiree health and life insurance
benefit plans. Principal retiree benefit plans are discussed below; other such
plans are not significant individually or in the aggregate.
PRINCIPAL RETIREE BENEFIT PLANS generally provide health and life insurance
benefits to employees who retire under the GE Pension Plan with 10 or more years
of service. Retirees share in the cost of their health care benefits. Benefit
provisions are subject to collective bargaining. At the end of 1997, these plans
covered approximately 250,000 retirees and dependents.
Details of cost for principal retiree benefit plans follow.
- --------------------------------------------------------------------------------
COST OF RETIREE BENEFIT PLANS
------------------------------
(In millions) 1997 1996 1995
- --------------------------------------------------------------------------------
RETIREE HEALTH PLANS
Service cost for benefits earned $ 90 $ 77 $ 73
Interest cost on benefit obligation 183 166 189
Amortization 13 -- (12)
Special early retirement cost 152 -- --
------------------------------
Retiree health plan cost 438 243 250
------------------------------
RETIREE LIFE PLANS
Service cost for benefits earned 17 16 13
Interest cost on benefit obligation 116 106 108
Actual return on plan assets (343) (225) (329)
Unrecognized portion of return 206 93 206
Amortization 8 12 1
Special early retirement cost 13 -- --
------------------------------
Retiree life plan cost (income) 17 2 (1)
------------------------------
TOTAL COST $ 455 $ 245 $ 249
================================================================================
FUNDING POLICY for retiree health benefits is generally to pay covered expenses
as they are incurred. GE funds retiree life insurance benefits at its discretion
and within limits imposed by tax laws.
- --------------------------------------------------------------------------------
FUNDED STATUS OF RETIREE BENEFIT PLANS
---------------------
December 31 (In millions) 1997 1996
- --------------------------------------------------------------------------------
Market-related value of assets $1,621 $1,487
Accumulated postretirement
benefit obligation 4,775 3,954
- --------------------------------------------------------------------------------
The market-related value of assets of retiree life plans recognizes market
appreciation or depreciation in the portfolio over five years, a method that
reduces the short-term impact of market fluctuations.
Plan assets are held in trust and consist mainly of common stock and
fixed-income investments. GE common stock represented about 4% and 3% of trust
assets at year-end 1997 and 1996, respectively.
<PAGE>
F-27
ANNUAL REPORT PAGE 51
An analysis of amounts shown in the Statement of Financial Position is
presented below.
- --------------------------------------------------------------------------------
RETIREE BENEFIT LIABILITY/ASSET Health plans Life plans
-------------------- ---------------------
December 31 (In millions) 1997 1996 1997 1996
- --------------------------------------------------------------------------------
Accumulated
postretirement
benefit obligation
Retirees and
dependents $ 2,445 $ 1,889 $ 1,417 $ 1,305
Employees
eligible to retire 104 86 45 45
Other employees 549 440 215 189
-------------------- ---------------------
3,098 2,415 1,677 1,539
Add (deduct)
unamortized
balances
Experience
(losses) gains (423) (195) 127 (41)
Plan amendments (171) 157 55 109
Current value of
trust assets -- -- (1,917) (1,682)
-------------------- ---------------------
RETIREE BENEFIT LIABILITY
(PREPAID ASSET) $ 2,504 $ 2,377 $ (58) $ (75)
================================================================================
ACTUARIAL ASSUMPTIONS AND TECHNIQUES used to determine costs and benefit
obligations for principal retiree benefit plans are shown below.
- --------------------------------------------------------------------------------
ACTUARIAL ASSUMPTIONS
---------------------
December 31 1997 1996
- --------------------------------------------------------------------------------
Discount rate 7.0% 7.5%
Compensation increases 4.5 4.5
Health care cost trend (a) 7.8 8.0
Return on assets for the year 9.5 9.5
- --------------------------------------------------------------------------------
(a) Gradually declining to 5.0% after 2002.
- --------------------------------------------------------------------------------
Increasing the health care cost trend rates by one percentage point would not
have had a material effect on the December 31, 1997, accumulated postretirement
benefit obligation or the annual cost of retiree health plans.
Experience gains and losses, as well as the effects of changes in actuarial
assumptions and plan provisions, are amortized over employees' average future
service period.
7 GECS ALLOWANCE FOR LOSSES ON FINANCING RECEIVABLES
The allowance for losses on small-balance receivables is determined principally
on the basis of actual experience during the preceding three years. Further
allowances are provided to reflect management's judgment of additional loss
potential. For other receivables, principally the larger loans and leases, the
allowance for losses is determined primarily on the basis of management's
judgment of net loss potential, including specific allowances for known troubled
accounts. The table below shows the activity in the allowance for losses on
financing receivables during each of the past three years.
----------------------------------
(In millions) 1997 1996 1995
- --------------------------------------------------------------------------------
Balance at January 1 $ 2,693 $ 2,519 $ 2,062
Provisions charged to operations 1,421 1,033 1,117
Net transfers primarily related to
companies acquired or sold 127 139 217
Amounts written off-- net (1,439) (998) (877)
----------------------------------
Balance at December 31 $ 2,802 $ 2,693 $ 2,519
================================================================================
All accounts or portions thereof deemed to be uncollectible or to require an
excessive collection cost are written off to the allowance for losses.
Small-balance accounts generally are written off when 6 to 12 months delinquent,
although any balance judged to be uncollectible, such as an account in
bankruptcy, is written down immediately to estimated realizable value.
Large-balance accounts are reviewed at least quarterly, and those accounts with
amounts that are judged to be uncollectible are written down to estimated
realizable value.
8 PROVISION FOR INCOME TAXES
----------------------------------
(In millions) 1997 1996 1995
- --------------------------------------------------------------------------------
GE
Estimated amounts payable $ 2,332 $ 2,235 $ 1,696
Deferred tax expense (benefit)
from temporary differences (522) 60 363
----------------------------------
1,810 2,295 2,059
----------------------------------
GECS
Estimated amounts payable 368 164 434
Deferred tax expense from
temporary differences 798 1,067 671
----------------------------------
1,166 1,231 1,105
----------------------------------
CONSOLIDATED
Estimated amounts payable 2,700 2,399 2,130
Deferred tax expense from
temporary differences 276 1,127 1,034
----------------------------------
$ 2,976 $ 3,526 $ 3,164
================================================================================
GE includes GECS in filing a consolidated U.S. federal income tax return. The
GECS provision for estimated taxes payable includes its effect on the
consolidated return.
<PAGE>
F-28
ANNUAL REPORT PAGE 52
Estimated consolidated amounts payable includes amounts applicable to
non-U.S. jurisdictions of $1,298 million, $1,204 million and $721 million in
1997, 1996 and 1995, respectively.
Deferred income tax balances reflect the impact of temporary differences
between the carrying amounts of assets and liabilities and their tax bases and
are stated at enacted tax rates expected to be in effect when taxes are actually
paid or recovered. See note 22 for details.
Except for certain earnings that GE intends to reinvest indefinitely,
provision has been made for the estimated U.S. federal income tax liabilities
applicable to undistributed earnings of affiliates and associated companies.
Consolidated U.S. income before taxes was $8.2 billion in 1997, $8.0 billion
in 1996 and $7.6 billion in 1995. The corresponding amounts for non-U.S.-based
operations were $3.0 billion in 1997, $2.8 billion in 1996 and $2.1 billion in
1995.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
RECONCILIATION OF U.S. FEDERAL Consolidated GE GECS
STATUTORY TAX RATE TO ACTUAL RATE ------------------------ ------------------------ -------------------------
1997 1996 1995 1997 1996 1995 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Statutory U.S. federal income
tax rate 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0%
------------------------ ------------------------- -------------------------
Increase (reduction) in rate
resulting from:
Inclusion of after-tax earnings
of GECS in before-tax
earnings of GE -- -- -- (11.4) (10.3) (9.8) -- -- --
Lockheed Martin exchange (note 2) (4.8) -- -- (5.4) -- -- -- -- --
Amortization of goodwill 1.1 1.1 1.1 0.8 0.8 0.8 1.1 1.2 1.1
Tax-exempt income (1.9) (2.0) (2.1) -- -- -- (4.9) (5.4) (5.8)
Foreign Sales Corporation
tax benefits (1.0) (0.7) (0.9) (0.9) (0.6) (1.1) (0.5) (0.3) --
Dividends received, not fully
taxable (0.5) (0.6) (0.5) (0.2) (0.2) (0.2) (0.9) (1.1) (0.8)
All other -- net (1.3) (0.2) (0.1) 0.2 (0.7) (0.8) (3.4) 1.0 1.9
------------------------ ------------------------- -------------------------
(8.4) (2.4) (2.5) (16.9) (11.0) (11.1) (8.6) (4.6) (3.6)
------------------------ ------------------------- -------------------------
Actual income tax rate 26.6% 32.6% 32.5% 18.1% 24.0% 23.9% 26.4% 30.4% 31.4%
===============================================================================================================================
</TABLE>
9 EARNINGS PER SHARE INFORMATION
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
1997 1996 1995
(Dollar amounts and shares in millions; --------------- ---------------- ----------------
per-share amounts in dollars) Basic Diluted Basic Diluted Basic Diluted
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED OPERATIONS
Net earnings available to common share owners $8,203 $8,203 $7,280 $7,280 $6,573 $6,573
Dividend equivalents -- net of tax -- 10 -- 9 -- 9
--------------- ---------------- ----------------
Net earnings available for per-share calculation $8,203 $8,213 $7,280 $7,289 $6,573 $6,582
--------------- ---------------- ----------------
AVERAGE EQUIVALENT SHARES
Shares of GE common stock outstanding 3,275 3,275 3,307 3,307 3,368 3,368
Employee compensation-related shares,
including stock options -- 70 -- 64 -- 46
--------------- ---------------- ----------------
Total average equivalent shares 3,275 3,345 3,307 3,371 3,368 3,414
--------------- ---------------- ----------------
Net earnings per share $ 2.50 $ 2.46 $ 2.20 $ 2.16 $ 1.95 $ 1.93
=======================================================================================================
<FN>
Share data and per-share amounts have been adjusted for the 2-for-1 stock split effective on
April 28, 1997.
- -------------------------------------------------------------------------------------------------------
</FN>
</TABLE>
10 INVESTMENT SECURITIES
GE held equity securities with an estimated fair value of $265 million
(amortized cost of $257 million) and $17 million (amortized cost of $17 million)
at December 31, 1997 and 1996, respectively. Gross unrealized gains and losses
at December 31, 1997 were $13 million and $5 million, respectively. There were
no unrealized gains or losses at December 31, 1996.
An analysis of GECS investment securities follows on the next page.
<PAGE>
F-29
ANNUAL REPORT PAGE 53
- --------------------------------------------------------------------------------
GECS INVESTMENT SECURITIES
Gross Gross
Amortized unrealized unrealized Estimated
(In millions) cost gains losses fair value
- --------------------------------------------------------------------------------
DECEMBER 31, 1997
Debt securities
U.S. corporate $ 24,580 $ 1,028 $ (53) $ 25,555
State and municipal 10,780 636 (2) 11,414
Mortgage-backed 12,074 341 (30) 12,385
Corporate --
non-U.S 7,683 310 (12) 7,981
Government --
non-U.S 3,714 150 (3) 3,861
U.S. government and
federal agency 2,413 103 (4) 2,512
Equity securities 5,414 1,336 (102) 6,648
------------------------------------------------
$ 66,658 $ 3,904 $ (206) $ 70,356
================================================================================
DECEMBER 31, 1996
Debt securities
U.S. corporate $ 22,080 $ 308 $ (641) $ 21,747
State and municipal 10,232 399 (34) 10,597
Mortgage-backed 11,072 297 (108) 11,261
Corporate --
non-U.S 5,587 142 (13) 5,716
Government --
non-U.S 3,347 99 (2) 3,444
U.S. government and
federal agency 2,340 34 (7) 2,367
Equity securities 4,117 677 (54) 4,740
------------------------------------------------
$ 58,775 $ 1,956 $ (859) $ 59,872
================================================================================
The majority of mortgage-backed securities shown in the table above are
collateralized by U.S. residential mortgages.
At December 31, 1997, contractual maturities of debt securities, other than
mortgage-backed securities, were as follows:
- --------------------------------------------------------------------------------
GECS CONTRACTUAL MATURITIES OF DEBT SECURITIES
(EXCLUDING MORTGAGE-BACKED SECURITIES)
-----------------------------
Amortized Estimated
(In millions) cost fair value
- --------------------------------------------------------------------------------
Due in
1998 $ 2,570 $ 2,583
1999-2002 13,329 13,653
2003-2007 12,881 13,406
2008 and later 20,390 21,681
- --------------------------------------------------------------------------------
It is expected that actual maturities will differ from contractual maturities
because borrowers have the right to call or prepay certain obligations,
sometimes without call or prepayment penalties. Proceeds from sales of
investment securities in 1997 were $14,728 million ($11,868 million in 1996 and
$11,017 million in 1995). Gross realized gains were $1,018 million in 1997 ($638
million in 1996 and $503 million in 1995). Gross realized losses were $173
million in 1997 ($190 million in 1996 and $157 million in 1995).
11 GE CURRENT RECEIVABLES
-------------------------
December 31 (In millions) 1997 1996
- --------------------------------------------------------------------------------
Aircraft Engines $ 2,118 $ 1,389
Appliances 479 713
Broadcasting 362 698
Industrial Products and Systems 1,638 1,574
Materials 1,037 1,068
Power Generation 2,206 2,463
Technical Products and Services 787 698
All Other 131 86
Corporate 534 377
-------------------------
9,292 9,066
Less allowance for losses (238) (240)
-------------------------
$ 9,054 $ 8,826
================================================================================
Receivables balances at December 31, 1997 and 1996, before allowance for
losses, included $6,125 million and $6,629 million, respectively, from sales of
goods and services to customers, and $285 million and $290 million,
respectively, from transactions with associated companies.
Current receivables of $303 million at year-end 1997 and $326 million at
year-end 1996 arose from sales, principally of aircraft engine goods and
services, on open account to various agencies of the U.S. government, which is
GE's largest single customer. About 4% of GE's sales of goods and services were
to the U.S. government in 1997 (about 5% in 1996 and 1995).
12 INVENTORIES
------------------------
December 31 (In millions) 1997 1996
- --------------------------------------------------------------------------------
GE
Raw materials and work in process $ 3,070 $ 3,028
Finished goods 2,895 2,404
Unbilled shipments 242 258
------------------------
6,207 5,690
Less revaluation to LIFO (1,098) (1,217)
------------------------
5,109 4,473
------------------------
GECS
Finished goods 786 376
------------------------
$ 5,895 $ 4,849
================================================================================
LIFO revaluations decreased $119 million in 1997, compared with decreases of
$128 million in 1996 and $87 million in 1995. Included in these changes were
decreases of $59 million, $58 million and $88 million in 1997, 1996 and 1995,
respectively, that resulted from lower LIFO inventory levels. There were net
cost decreases in 1997 and 1996, and no cost change in 1995. As of December 31,
1997, GE is obligated to acquire certain raw materials at market prices through
the year 2003 under various take-or-pay or similar arrangements. Annual minimum
commitments under these arrangements are insignificant.
<PAGE>
F-30
ANNUAL REPORT PAGE 54
13 GECS FINANCING RECEIVABLES (INVESTMENTS IN TIME SALES, LOANS AND FINANCING
LEASES)
---------------------------
December 31 (In millions) 1997 1996
- --------------------------------------------------------------------------------
TIME SALES AND LOANS
Consumer services $ 42,270 $ 40,479
Specialized financing 13,974 14,832
Mid-market financing 11,401 9,978
Equipment management 469 448
Specialty insurance 202 339
---------------------------
68,316 66,076
Deferred income (3,484) (3,244)
---------------------------
Time sales and loans-- net 64,832 62,832
---------------------------
INVESTMENT IN FINANCING LEASES
Direct financing leases 38,616 36,576
Leveraged leases 3,153 2,999
---------------------------
Investment in financing leases 41,769 39,575
---------------------------
106,601 102,407
Less allowance for losses (2,802) (2,693)
---------------------------
$ 103,799 $ 99,714
================================================================================
Time sales and loans represents transactions in a variety of forms, including
time sales, revolving charge and credit, mortgages, installment loans,
intermediate-term loans and revolving loans secured by business assets. The
portfolio includes time sales and loans carried at the principal amount on which
finance charges are billed periodically, and time sales and loans carried at
gross book value, which includes finance charges. At year-end 1997 and 1996,
specialized financing and consumer services loans included $10,503 million and
$12,075 million, respectively, for commercial real estate loans. Note 17
contains information on airline loans and leases.
At December 31, 1997, contractual maturities for time sales and loans were
$28,983 million in 1998; $12,792 million in 1999; $7,967 million in 2000; $5,156
million in 2001; $3,985 million in 2002; and $9,433 million thereafter --
aggregating $68,316 million. Experience has shown that a substantial portion of
receivables will be paid prior to contractual maturity. Accordingly, the
maturities of time sales and loans are not to be regarded as forecasts of future
cash collections.
Investment in financing leases consists of direct financing and leveraged
leases of aircraft, railroad rolling stock, autos, other transportation
equipment, data processing equipment and medical equipment, as well as other
manufacturing, power generation, mining and commercial equipment and facilities.
As the sole owner of assets under direct financing leases and as the equity
participant in leveraged leases, GECS is taxed on total lease payments received
and is entitled to tax deductions based on the cost of leased assets and tax
deductions for interest paid to third-party participants. GECS generally is
entitled to any residual value of leased assets.
Investment in direct financing and leveraged leases represents unpaid rentals
and estimated unguaranteed residual values of leased equipment, less related
deferred income. GECS has no general obligation for principal and interest on
notes and other instruments representing third-party participation related to
leveraged leases; such notes and other instruments have not been included in
liabilities but have been offset against the related rentals receivable. GECS'
share of rentals receivable on leveraged leases is subordinate to the share of
other participants who also have security interests in the leased equipment.
At December 31, 1997, contractual maturities for net rentals receivable under
financing leases were $12,820 million in 1998; $10,616 million in 1999; $8,395
million in 2000; $3,871 million in 2001; $2,371 million in 2002; and $8,373
million thereafter -- aggregating $46,446 million. As with time sales and loans,
experience has shown that a portion of these receivables will be paid prior to
contractual maturity, and these amounts should not be regarded as forecasts of
future cash flows.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT IN FINANCING LEASES
Total financing leases Direct financing leases Leveraged leases
---------------------- ----------------------- ----------------
December 31 (In millions) 1997 1996 1997 1996 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total minimum lease payments receivable $ 58,543 $ 54,009 $ 42,901 $ 40,555 $ 15,642 $ 13,454
Less principal and interest on third-party nonrecourse debt (12,097) (10,213) -- -- (12,097) (10,213)
-------------------- -------------------- --------------------
Net rentals receivable 46,446 43,796 42,901 40,555 3,545 3,241
Estimated unguaranteed residual value of leased assets 5,591 6,248 4,244 4,906 1,347 1,342
Less deferred income (10,268) (10,469) (8,529) (8,885) (1,739) (1,584)
-------------------- -------------------- --------------------
INVESTMENT IN FINANCING LEASES (as shown above) 41,769 39,575 38,616 36,576 3,153 2,999
Less amounts to arrive at net investment
Allowance for losses (656) (720) (575) (641) (81) (79)
Deferred taxes arising from financing leases (7,909) (7,488) (4,671) (4,077) (3,238) (3,411)
-------------------- -------------------- --------------------
NET INVESTMENT IN FINANCING LEASES $ 33,204 $ 31,367 $ 33,370 $ 31,858 $ (166) $ (491)
====================================================================================================================================
</TABLE>
<PAGE>
F-31
ANNUAL REPORT PAGE 55
GECS has a noncontrolling investment in the common stock of Montgomery Ward
Holding Corp. (MWHC), which together with its wholly owned subsidiary,
Montgomery Ward & Co., Incorporated (MWC), is engaged in retail merchandising
and direct response marketing, the latter conducted primarily through Signature
Financial/Marketing Inc. (Signature), which markets consumer club and insurance
products. On July 7, 1997, MWHC, MWC and certain of their affiliates (excluding
Signature) filed for reorganization under Chapter 11 of the U.S. Bankruptcy
Code. As a result, inventory financing loans to MWHC and affiliates became
"impaired" loans (as defined below) because, due to the automatic stay in
bankruptcy, GECS is not receiving current interest payment on its loans and, in
management's judgment, it is therefore probable that GECS will be unable to
collect all amounts due according to original contractual terms of the loan
agreements. The total amount of such loans was $617 million at December 31,
1997. The nonearning and reduced-earning receivable balances and the impaired
loan balances discussed below exclude amounts related to MWHC and affiliates.
Nonearning consumer receivables were $1,049 million and $926 million at
December 31, 1997 and 1996, respectively, a substantial amount of which were
U.S. private-label credit card loans subject to various loss-sharing agreements
that provide full or partial recourse to the originating retailer. Nonearning
and reduced-earning receivables other than consumer receivables were $353
million and $471 million at year-end 1997 and 1996, respectively.
"Impaired" loans are defined by generally accepted accounting principles as
loans for which it is probable that the lender will be unable to collect all
amounts due according to original contractual terms of the loan agreement. That
definition excludes, among other things, leases or large groups of
smaller-balance homogenous loans and therefore applies principally to GECS
commercial loans.
Under these principles, GECS has two types of "impaired" loans as of December
31, 1997 and 1996: loans requiring allowances for losses ($339 million and $583
million, respectively); and loans expected to be fully recoverable because the
carrying amount has been reduced previously through charge-offs or deferral of
income recognition ($167 million and $187 million, respectively) -- allowances
for losses on these loans were $170 million and $222 million, respectively.
Average investment in these loans during 1997 and 1996 was $647 million and $842
million, respectively, before allowance for losses; interest income earned,
principally on the cash basis, while they were considered impaired was $32
million and $30 million in 1997 and 1996, respectively.
14 OTHER GECS RECEIVABLES
This account includes reinsurance recoverables of $5,027 million and $4,403
million and insurance-related receivables of $4,932 million and $4,833 million
at year-end 1997 and 1996, respectively. Premium receivables, funds on deposit
with reinsurers and policy loans are included in insurance-related receivables.
Also in "Other GECS receivables" are trade receivables, accrued investment
income, operating lease receivables and a variety of sundry items.
15 PROPERTY, PLANT AND EQUIPMENT (INCLUDING EQUIPMENT LEASED TO OTHERS)
----------------------
December 31 (In millions) 1997 1996
- --------------------------------------------------------------------------------
ORIGINAL COST
GE
Land and improvements $ 459 $ 476
Buildings, structures and related equipment 6,375 6,315
Machinery and equipment 18,376 17,824
Leasehold costs and manufacturing
plant under construction 1,621 1,308
Other 24 27
----------------------
26,855 25,950
----------------------
GECS
Buildings and equipment 3,987 3,075
Equipment leased to others
Vehicles 9,144 6,789
Aircraft 7,686 6,647
Marine shipping containers 2,774 3,053
Railroad rolling stock 2,367 2,093
Other 2,844 3,177
----------------------
28,802 24,834
----------------------
$55,657 $50,784
======================
ACCUMULATED DEPRECIATION AND AMORTIZATION
GE $15,737 $15,118
GECS
Buildings and equipment 1,478 1,246
Equipment leased to others 6,126 5,625
----------------------
$23,341 $21,989
================================================================================
Amortization of GECS equipment leased to others was $2,102 million, $1,848
million and $1,702 million in 1997, 1996 and 1995, respectively. Noncancelable
future rentals due from customers for equipment on operating leases at year-end
1997 totaled $10,438 million and are due as follows: $3,247 million in 1998;
$2,243 million in 1999; $1,473 million in 2000; $935 million in 2001; $628
million in 2002; and $1,912 million thereafter.
<PAGE>
F-32
ANNUAL REPORT PAGE 56
16 INTANGIBLE ASSETS
---------------------
December 31 (In millions) 1997 1996
- --------------------------------------------------------------------------------
GE
Goodwill $ 8,046 $ 6,676
Other intangibles 709 691
---------------------
8,755 7,367
---------------------
GECS
Goodwill 8,090 5,847
Present value of future profits (PVFP) 1,824 2,438
Other intangibles 452 355
---------------------
10,366 8,640
---------------------
$19,121 $16,007
================================================================================
GE intangible assets are shown net of accumulated amortization of $2,976
million in 1997 and $2,637 million in 1996. GECS intangible assets are net of
accumulated amortization of $2,615 million in 1997 and $1,988 million in 1996.
PVFP amortization, which is on an accelerated basis and net of interest, is
projected to range from 13% to 8% of the year-end 1997 unamortized balance for
each of the next five years.
17 ALL OTHER ASSETS
------------------------
December 31 (In millions) 1997 1996
- --------------------------------------------------------------------------------
GE
Investments
Associated companies (a) $ 1,288 $ 1,526
Other 1,139 1,591
------------------------
2,427 3,117
Prepaid pension asset 6,574 6,112
Notes receivable 1,412 26
Other 4,316 3,922
------------------------
14,729 13,177
------------------------
GECS
Investments
Assets acquired for resale 4,403 2,993
Associated companies (a) 4,695 4,916
Real estate ventures 2,326 2,469
Other 2,452 2,095
------------------------
13,876 12,473
Separate accounts 4,926 3,516
Servicing assets 1,713 1,663
Deferred insurance acquisition costs 2,521 1,720
Other 2,631 2,286
------------------------
25,667 21,658
------------------------
ELIMINATIONS (576) --
------------------------
$ 39,820 $ 34,835
================================================================================
(a) Includes advances.
- --------------------------------------------------------------------------------
In line with industry practice, sales of commercial jet aircraft engines
often involve long-term customer financing commitments. In making such
commitments, it is GE's general practice to require that it have or be able to
establish a secured position in the aircraft being financed. Under such airline
financing programs, GE had issued loans and guarantees (principally guarantees)
amounting to $1,590 million at year-end 1997 and $1,514 million at year-end
1996; and it had entered into commitments totaling $1,794 million and $1,554
million at year-end 1997 and 1996, respectively, to provide financial assistance
on future aircraft engine sales. Estimated fair values of the aircraft securing
these receivables and associated guarantees exceeded the related account
balances and guaranteed amounts at December 31, 1997. GECS acts as a lender and
lessor to the commercial airline industry. At December 31, 1997 and 1996, the
balance of such GECS loans, leases and equipment leased to others was $8,980
million and $8,240 million, respectively. In addition, at December 31, 1997,
GECS had issued financial guarantees and funding commitments of $123 million
($221 million at year-end 1996) and had placed multiyear orders for various
Boeing and Airbus aircraft with list prices of approximately $6.2 billion ($6.5
billion at year-end 1996).
At year-end 1997, the National Broadcasting Company had $9,388 million of
commitments to acquire broadcast material and the rights to broadcast television
programs, including U.S. television rights to future Olympic games, and
commitments under long-term television station affiliation agreements that
require payments through the year 2008.
In connection with numerous projects, primarily power generation bids and
contracts, GE had issued various bid and performance bonds and guarantees
totaling $2,895 million at year-end 1997 and $3,250 million at year-end 1996.
Separate accounts represent investments controlled by policyholders and are
associated with identical amounts reported as insurance liabilities in note 20.
18 GE ALL OTHER CURRENT COSTS AND EXPENSES ACCRUED
At year-end 1997 and 1996, this account included taxes accrued of $2,866 million
and $2,487 million, respectively, and compensation and benefit accruals of
$1,321 million and $1,315 million, respectively. Also included are amounts for
product warranties, estimated costs on shipments billed to customers and a
variety of sundry items.
<PAGE>
F-33
ANNUAL REPORT PAGE 57
19 BORROWINGS
- --------------------------------------------------------------------------------
SHORT-TERM BORROWINGS
----------------------------------------------------
1997 1996
----------------------- -------------------------
Average Average
December 31 (In millions) Amount rate Amount rate
- --------------------------------------------------------------------------------
GE
Commercial paper (U.S) $ 1,835 5.88% $ 914 5.41%
Payable to banks 348 8.38 204 8.58
Current portion of
long-term debt 1,099 5.85(a) 551 6.39(a)
Other 347 670
-----------------------------------------------------
3,629 2,339
-----------------------------------------------------
GECS
Commercial paper
U.S 67,355 5.93 50,435 5.68
Non-U.S 3,879 4.18 3,737 4.30
Current portion of
long-term debt 15,101 6.30(a) 16,471 6.17(a)
Other 8,939 7,302
-----------------------------------------------------
95,274 77,945
-----------------------------------------------------
ELIMINATIONS (828) (84)
-----------------------------------------------------
$98,075 $80,200
================================================================================
- --------------------------------------------------------------------------------
LONG-TERM BORROWINGS
------------------------------------------------
Average
December 31 (In millions) rate (a) Maturities 1997 1996
- --------------------------------------------------------------------------------
GE
Industrial development/
pollution control
bonds 3.82% 1999-2021 $ 270 $ 244
Payable to banks 7.60 1999-2005 195 312
Senior notes -- 500
Other (b) 264 654
--------------------
729 1,710
--------------------
GECS
Senior notes 6.59 1999-2055 44,993 46,680
Subordinated notes (c) 7.88 2006-2035 996 996
--------------------
45,989 47,676
--------------------
Eliminations (115) (140)
--------------------
$ 46,603 $ 49,246
================================================================================
(a) Includes the effects of associated interest rate and currency swaps.
(b) Includes a variety of obligations having various interest rates and
maturities, including certain borrowings by parent operating components and
affiliates.
(c) Guaranteed by GE.
- --------------------------------------------------------------------------------
Borrowings of GE and GECS are addressed below from two perspectives --
liquidity and interest rate management. Additional information about borrowings
and associated swaps can be found in note 30.
LIQUIDITY requirements of GE and GECS are principally met through the credit
markets. Maturities of long-term borrowings during the next five years follow.
---------------------------------------------------
(In millions) 1998 1999 2000 2001 2002
- --------------------------------------------------------------------------------
GE $ 1,099 $ 97 $ 69 $ 57 $ 38
GECS 15,101 9,801 6,927 5,763 4,816
- --------------------------------------------------------------------------------
Confirmed credit lines of $3.9 billion had been extended to GE by 22 banks at
year-end 1997. Substantially all of GE's credit lines are available to GECS and
its affiliates in addition to their own credit lines.
At year-end 1997, GECS and its affiliates held committed lines of credit
aggregating $20.9 billion, including $11.8 billion of revolving credit
agreements pursuant to which it has the right to borrow funds for periods
exceeding one year. A total of $1.4 billion of GE Capital credit lines is
available for use by GE.
During 1997, neither GE nor GECS borrowed under any of these credit lines.
Both GE and GECS compensate certain banks for credit facilities in the form of
fees, which were insignificant in each of the past three years.
INTEREST RATES ARE MANAGED by GECS in light of the anticipated behavior,
including prepayment behavior, of assets in which debt proceeds are invested. A
variety of instruments, including interest rate and currency swaps and currency
forwards, are employed to achieve management's interest rate objectives.
Effective interest rates are lower under these "synthetic" positions than could
have been achieved by issuing debt directly.
The following table shows GECS borrowing positions considering the effects of
swaps.
- --------------------------------------------------------------------------------
EFFECTIVE BORROWINGS (INCLUDING SWAPS)
---------------------
December 31 (In millions) 1997 1996
- --------------------------------------------------------------------------------
Short-term $56,961 $46,450
=====================
Long-term (including current portion)
Fixed rate (a) $59,329 $56,190
Floating rate 24,973 22,981
---------------------
Total long-term $84,302 $79,171
================================================================================
(a) Includes the notional amount of long-term interest rate swaps that
effectively convert the floating-rate nature of short-term borrowings to
fixed rates of interest.
- --------------------------------------------------------------------------------
At December 31, 1997, interest rate swap maturities ranged from 1998 to 2029,
and average interest rates for "synthetic" fixed-rate borrowings were 6.32%
(6.45% at year-end 1996).
<PAGE>
F-34
ANNUAL REPORT PAGE 58
20 GECS INSURANCE LIABILITIES, RESERVES AND ANNUITY BENEFITS
----------------------
December 31 (In millions) 1997 1996
- --------------------------------------------------------------------------------
Investment contracts and universal
life benefits $28,266 $26,140
Life insurance benefits and other (a) 14,356 13,854
Unpaid claims and claims adjustment
expenses 14,654 13,184
Unearned premiums 5,068 4,633
Separate accounts (see note 17) 4,926 3,516
----------------------
$67,270 $61,327
================================================================================
(a) Life insurance benefits are accounted for mainly by a net-level-premium
method using estimated yields generally ranging from 5% to 9% in both 1997
and 1996.
- --------------------------------------------------------------------------------
The liability for unpaid claims and claims adjustment expenses, principally
property and casualty reserves, consists of both case and incurred-but-not-
reported reserves. Where experience is not sufficient to determine reserves,
industry averages are used. Estimated amounts of salvage and subrogation
recoverable on paid and unpaid losses are deducted from outstanding losses. A
summary of activity for this liability follows.
-------------------------------------
(In millions) 1997 1996 1995
- --------------------------------------------------------------------------------
Balance at January 1-- gross $ 13,184 $ 12,662 $ 7,032
Less reinsurance recoverables (1,822) (1,853) (1,084)
-------------------------------------
Balance at January 1-- net 11,362 10,809 5,948
Claims and expenses incurred
Current year 4,494 4,087 3,268
Prior years 146 104 492
Claims and expenses paid
Current year (1,780) (1,357) (706)
Prior years (2,816) (2,373) (1,908)
Claim reserves related to
acquired companies 1,360 309 3,696
Other (358) (217) 19
-------------------------------------
Balance at December 31-- net 12,408 11,362 10,809
Add reinsurance recoverables 2,246 1,822 1,853
-------------------------------------
Balance at December 31-- gross $ 14,654 $ 13,184 $ 12,662
================================================================================
Prior-year claims and expenses incurred in the above table resulted
principally from settling claims established in earlier accident years for
amounts that differed from expectations.
Financial guarantees and credit life risk of insurance affiliates are
summarized below.
--------------------------
December 31 (In millions) 1997 1996
- --------------------------------------------------------------------------------
Guarantees, principally on municipal
bonds and structured finance issues $ 144,647 $ 140,575
Mortgage insurance risk in force 46,245 36,279
Credit life insurance risk in force 26,593 25,961
Less reinsurance (33,528) (32,413)
--------------------------
$ 183,957 $ 170,402
================================================================================
Insurance risk is ceded on both a pro rata and an excess basis. When GECS
cedes insurance to third parties, it is not relieved of its primary obligation
to policyholders. Losses on ceded risks give rise to claims for recovery;
allowances are established for such receivables from reinsurers.
The effects of reinsurance on premiums written and premiums and commissions
earned were as follows:
------------------------------------
(In millions) 1997 1996 1995
- --------------------------------------------------------------------------------
PREMIUMS WRITTEN
Direct $ 5,206 $ 3,926 $ 2,984
Assumed 5,501 5,455 3,978
Ceded (1,311) (1,196) (804)
------------------------------------
$ 9,396 $ 8,185 $ 6,158
====================================
PREMIUMS AND COMMISSIONS EARNED
Direct $ 5,138 $ 3,850 $ 2,604
Assumed 5,386 5,353 4,414
Ceded (1,256) (1,058) (786)
------------------------------------
$ 9,268 $ 8,145 $ 6,232
================================================================================
Reinsurance recoveries recognized as a reduction of insurance losses and
policyholder and annuity benefits amounted to $903 million, $937 million and
$459 million for the years ended December 31, 1997, 1996 and 1995, respectively.
21 GE ALL OTHER LIABILITIES
This account includes noncurrent compensation and benefit accruals at year-end
1997 and 1996 of $5,484 million and $5,177 million, respectively. Also included
are amounts for deferred incentive compensation, deferred income, product
warranties and a variety of sundry items.
GE is involved in numerous remediation actions to clean up hazardous wastes
as required by federal and state laws. Liabilities for remediation costs at each
site are based on management's best estimate of undiscounted future costs,
excluding possible insurance recoveries. When there appears to be a range of
possible costs with equal likelihood, liabilities are based on the lower end of
such range. Uncertainties about the status of laws, regulations, technology and
information related to individual sites make it difficult to develop a
meaningful estimate of the reasonably possible aggregate environmental
remediation exposure. However, even in the unlikely event that remediation costs
amounted to the high end of the range of costs for each site, the resulting
additional liability would not be material to GE's financial position, results
of operations or liquidity.
<PAGE>
F-35
ANNUAL REPORT PAGE 59
22 DEFERRED INCOME TAXES
Aggregate deferred tax amounts are summarized below.
------------------------
December 31 (In millions) 1997 1996
- --------------------------------------------------------------------------------
ASSETS
GE $ 4,891 $ 4,097
GECS 4,320 3,310
------------------------
9,211 7,407
------------------------
LIABILITIES
GE 4,576 4,630
GECS 13,286 11,050
------------------------
17,862 15,680
------------------------
NET DEFERRED TAX LIABILITY $ 8,651 $ 8,273
================================================================================
Principal components of the net deferred tax balances for GE and GECS are as
follows:
-------------------------
December 31 (In millions) 1997 1996
- --------------------------------------------------------------------------------
GE
Provisions for expenses $(3,367) $(2,740)
Retiree insurance plans (856) (806)
Prepaid pension asset 2,301 2,139
Depreciation 955 836
Other -- net 652 1,104
-------------------------
(315) 533
-------------------------
GECS
Financing leases 7,909 7,488
Operating leases 2,156 1,833
Net unrealized gains
on securities 1,264 404
Allowance for losses (1,372) (1,184)
Insurance reserves (1,000) (787)
AMT credit carryforwards (354) (561)
Other -- net 363 547
-------------------------
8,966 7,740
-------------------------
NET DEFERRED TAX LIABILITY $ 8,651 $ 8,273
================================================================================
The GE provisions for expenses category represents the tax effects of
temporary differences related to expense accruals for a wide variety of items,
such as employee compensation and benefits, interest on tax deficiencies,
product warranties and other provisions for sundry losses and expenses that are
not currently deductible.
23 GECS MINORITY INTEREST IN EQUITY OF CONSOLIDATED AFFILIATES
Minority interest in equity of consolidated GECS affiliates includes preferred
stock issued by GE Capital and by an affiliate of GE Capital. The preferred
stock pays cumulative dividends at variable rates. The liquidation preference of
the preferred shares is summarized below.
-----------------------
December 31 (In millions) 1997 1996
- --------------------------------------------------------------------------------
GE Capital $2,230 $1,800
GE Capital affiliate 660 485
- --------------------------------------------------------------------------------
Dividend rates on the preferred stock ranged from 3.8% to 5.2% during 1997
and 1996, and from 4.2% to 5.2% during 1995.
24 RESTRICTED NET ASSETS OF GECS AFFILIATES
Certain GECS consolidated affiliates are restricted from remitting funds to GECS
in the form of dividends or loans by a variety of regulations, the purpose of
which is to protect affected insurance policyholders, depositors or investors.
At year-end 1997, net assets of regulated GECS affiliates amounted to $22.9
billion, of which $19.4 billion was restricted.
At December 31, 1997 and 1996, the aggregate statutory capital and surplus of
the insurance businesses totaled $12.4 billion and $10.2 billion, respectively.
In preparing statutory statements, no significant permitted accounting practices
are used that differ from prescribed accounting practices.
25 SHARE OWNERS' EQUITY
--------------------------------------
(In millions) 1997 1996 1995
- --------------------------------------------------------------------------------
COMMON STOCK ISSUED $ 594 $ 594 $ 594
======================================
UNREALIZED GAINS ON
INVESTMENT SECURITIES-- NET $ 2,138 $ 671 $ 1,000
======================================
OTHER CAPITAL
Balance at January 1 $ 2,498 $ 1,663 $ 1,122
Currency translation adjustments (742) (117) 127
Gains on treasury stock
dispositions 1,880 952 414
--------------------------------------
Balance at December 31 $ 3,636 $ 2,498 $ 1,663
======================================
RETAINED EARNINGS
Balance at January 1 $ 38,670 $ 34,528 $ 30,793
Net earnings 8,203 7,280 6,573
Dividends declared (3,535) (3,138) (2,838)
--------------------------------------
Balance at December 31 $ 43,338 $ 38,670 $ 34,528
======================================
COMMON STOCK HELD IN TREASURY
Balance at January 1 $ 11,308 $ 8,176 $ 5,312
Purchases 6,392 4,842 4,016
Dispositions (2,432) (1,710) (1,152)
--------------------------------------
Balance at December 31 $ 15,268 $ 11,308 $ 8,176
================================================================================
In December 1997, GE's Board of Directors increased the authorization to
repurchase Company common stock to $17 billion and authorized the program to
continue through 1999. Funds used for the share repurchase will be generated
largely from free cash flow. Through year-end 1997, a total of 244 million
shares having an aggregate cost of $9.9 billion had been repurchased under this
program and placed into treasury.
In April 1997, share owners authorized (a) an increase in the number of
authorized shares of common stock from 2,200,000,000 shares each with a par
value of $0.32 to 4,400,000,000 shares each with a par value of $0.16 and (b)
the split of each unissued and issued common share, including shares held in
treasury, into two shares of common stock each with a par value of $0.16. All
share data and per-share amounts have been adjusted to reflect this change.
<PAGE>
F-36
ANNUAL REPORT PAGE 60
Common shares issued and outstanding are summarized in the following table.
- --------------------------------------------------------------------------------
SHARES OF GE COMMON STOCK
-------------------------------------------
December 31 (In thousands) 1997 1996 1995
- --------------------------------------------------------------------------------
Issued 3,714,026 3,714,026 3,714,026
In treasury (449,434) (424,942) (381,002)
-------------------------------------------
Outstanding 3,264,592 3,289,084 3,333,024
================================================================================
GE has 50 million authorized shares of preferred stock ($1.00 par value), but
no such shares have been issued.
The effects of translating to U.S. dollars the financial statements of
non-U.S. affiliates whose functional currency is the local currency are included
in other capital. Asset and liability accounts are translated at year-end
exchange rates, while revenues and expenses are translated at average rates for
the period. Cumulative currency translation adjustments represented reductions
of other capital of $798 million and $56 million in 1997 and 1996, respectively,
and an addition to other capital of $61 million in 1995.
26 OTHER STOCK-RELATED INFORMATION
- --------------------------------------------------------------------------------
STOCK OPTION ACTIVITY
Average per share
Shares --------------------
subject Exercise Market
(Shares in thousands) to option price price
- --------------------------------------------------------------------------------
Balance at December 31, 1994 138,996 $19.91 $25.50
Options granted 24,179 27.94 27.94
Replacement options 1,506 20.91 20.91
Options exercised (15,568) 15.72 29.61
Options terminated (4,239) 23.67 --
-----------------------------------
Balance at December 31, 1995 144,874 21.60 36.00
Options granted 19,034 42.39 42.39
Replacement options 8,622 26.34 26.34
Options exercised (18,278) 17.70 43.25
Options terminated (4,707) 26.18 --
-----------------------------------
Balance at December 31, 1996 149,545 24.86 49.44
Options granted (a) 13,795 68.07 68.07
Replacement options 30 24.16 24.16
Options exercised (21,746) 18.47 61.22
Options terminated (2,721) 31.10 --
-----------------------------------
Balance at December 31, 1997 138,903 30.03 73.38
================================================================================
(a) Without adjusting for the effect of the 2-for-1 stock split in April 1997,
the number of options granted during 1997 would have been 13,476.
- --------------------------------------------------------------------------------
Stock option plans, stock appreciation rights (SARs), restricted stock and
restricted stock units are described in GE's current Proxy Statement. With
certain restrictions, requirements for stock option shares can be met from
either unissued or treasury shares.
The replacement options replaced canceled SARs and have identical terms
thereto. At year-end 1997, there were 3.2 million SARs outstanding at an average
exercise price of $21.02. There were 9.6 million restricted stock shares and
restricted stock units outstanding at year-end 1997.
There were 92.8 million and 62.1 million additional shares available for
grants of options, SARs, restricted stock and restricted stock units at December
31, 1997 and 1996, respectively. Under the 1990 Long-Term Incentive Plan, 0.95%
of the Company's issued common stock (including treasury shares) as of the first
day of each calendar year during which the Plan is in effect becomes available
for granting awards in such year. Any unused portion, in addition to shares
allocated to awards that are canceled or forfeited, is available for later
years.
Outstanding options and SARs expire on various dates through December 19,
2007. Restricted stock grants vest on various dates up to normal retirement of
grantees.
The following table summarizes information about stock options outstanding at
December 31, 1997.
- --------------------------------------------------------------------------------
STOCK OPTIONS OUTSTANDING
(Shares in thousands)
Outstanding Exercisable
-------------------------------- -----------------
Average Average
Exercise Average exercise exercise
price range Shares life (a) price Shares price
- --------------------------------------------------------------------------------
$10 13/16 - 21 9/16 34,059 3.6 $17.45 34,059 $17.45
$21 5/8 - 31 15/16 72,754 6.4 25.61 37,441 24.31
$36 3/16 - 51 1/2 18,867 8.5 42.59 205 47.20
$51 3/4 - 73 13,223 9.8 68.80 -- --
----------------------------------------------------
Total 138,903 6.3 30.03 71,705 21.11
================================================================================
(a) Average contractual life remaining in years.
At year-end 1996, options with an average exercise price of $19.58 were
exercisable on 81 million shares; at year-end 1995, options with an average
exercise price of $17.61 were exercisable on 74 million shares.
- --------------------------------------------------------------------------------
Stock options expire 10 years from the date they are granted; options vest
over service periods that range from one to five years.
Disclosures required by SFAS No. 123, ACCOUNTING FOR STOCK-BASED
COMPENSATION, are as follows:
----------------------------------
December 31 1997 1996 1995
- --------------------------------------------------------------------------------
Weighted average fair value
per option (a) $17.81 $ 9.34 $ 5.98
Valuation assumptions
Expected option term (years) 6.3 6.2 5.5
Expected volatility 20.0% 20.1% 20.0%
Expected dividend yield 1.5% 2.3% 3.1%
Risk-free interest rate 6.1% 6.6% 7.0%
PRO FORMA EFFECTS (b)(c)
Net earnings $8,129 $7,235 $6,557
Earnings per share-- basic 2.48 2.19 1.95
-- diluted 2.43 2.15 1.92
- --------------------------------------------------------------------------------
(a) Estimated using Black-Scholes option pricing model.
(b) Valuations only of grants made after January 1, 1995; thus, the pro forma
effect increased over the periods presented.
(c) Net earnings in millions; per-share amounts in dollars.
- --------------------------------------------------------------------------------
<PAGE>
F-37
ANNUAL REPORT PAGE 61
27 SUPPLEMENTAL CASH FLOWS INFORMATION
Changes in operating assets and liabilities are net of acquisitions and
dispositions of businesses.
"Payments for principal businesses purchased" in the Statement of Cash Flows
is net of cash acquired and includes debt assumed and immediately repaid in
acquisitions.
"All other operating activities" in the Statement of Cash Flows consists
principally of adjustments to current and noncurrent accruals and deferrals of
costs and expenses, increases and decreases in progress collections, adjustments
for gains and losses on assets, increases and decreases in assets held for sale,
and adjustments to assets such as amortization of goodwill and intangibles.
The Statement of Cash Flows excludes certain noncash transactions that,
except for the exchange transaction described in note 2, had no significant
effects on the investing or financing activities of GE or GECS.
Certain supplemental information related to GE and GECS cash flows is shown
below.
<TABLE>
<CAPTION>
---------------------------------------
For the years ended December 31 (In millions) 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
GE
NET PURCHASE OF GE SHARES FOR TREASURY
Open market purchases under share repurchase program $ (3,492) $ (3,266) $ (3,101)
Other purchases (2,900) (1,576) (915)
Dispositions (mainly to employee and dividend reinvestment plans) 3,577 2,519 1,493
---------------------------------------
$ (2,815) $ (2,323) $ (2,523)
=======================================
GECS
FINANCING RECEIVABLES
Increase in loans to customers $(55,689) $(49,890) $(46,154)
Principal collections from customers -- loans 50,679 49,923 44,840
Investment in equipment for financing leases (16,420) (14,427) (17,182)
Principal collections from customers -- financing leases 13,796 11,158 8,821
Net change in credit card receivables (4,186) (3,068) (3,773)
Sales of financing receivables 9,922 4,026 2,139
---------------------------------------
$ (1,898) $ (2,278) $(11,309)
=======================================
ALL OTHER INVESTING ACTIVITIES
Purchases of securities by insurance and annuity businesses $(19,274) $(15,925) $(14,452)
Dispositions and maturities of securities by insurance and annuity businesses 17,280 14,018 12,460
Proceeds from principal business dispositions 241 -- 575
Other (3,893) (4,183) (2,496)
---------------------------------------
$ (5,646) $ (6,090) $ (3,913)
=======================================
NEWLY ISSUED DEBT HAVING MATURITIES LONGER THAN 90 DAYS
Short-term (91 to 365 days) $ 3,502 $ 5,061 $ 2,545
Long-term (longer than one year) 15,566 17,245 32,507
Long-term subordinated -- -- 298
Proceeds -- nonrecourse, leveraged lease debt 1,757 595 1,428
---------------------------------------
$ 20,825 $ 22,901 $ 36,778
=======================================
REPAYMENTS AND OTHER REDUCTIONS OF DEBT HAVING MATURITIES LONGER THAN 90 DAYS
Short-term (91 to 365 days) $(21,320) $(23,355) $(16,075)
Long-term (longer than one year) (1,150) (1,025) (678)
Principal payments - nonrecourse, leveraged lease debt (287) (276) (292)
---------------------------------------
$(22,757) $(24,656) $(17,045)
=======================================
ALL OTHER FINANCING ACTIVITIES
Proceeds from sales of investment and annuity contracts $ 4,717 $ 2,561 $ 1,754
Preferred stock issued by GECS affiliates 605 155 1,045
Redemption of investment and annuity contracts (4,537) (2,688) (2,540)
---------------------------------------
$ 785 $ 28 $ 259
====================================================================================================================================
</TABLE>
<PAGE>
F-38
ANNUAL REPORT PAGE 62
28 INDUSTRY SEGMENTS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
REVENUES
For the years ended December 31
Total revenues Intersegment revenues External revenues
---------------------------- -------------------------- ----------------------------
(In millions) 1997 1996 1995 1997 1996 1995 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GE
Aircraft Engines $ 7,799 $ 6,302 $ 6,098 $ 101 $ 86 $ 115 $ 7,698 $ 6,216 $ 5,983
Appliances 6,745 6,375 5,933 12 5 4 6,733 6,370 5,929
Broadcasting 5,153 5,232 3,919 -- -- -- 5,153 5,232 3,919
Industrial Products and Systems 10,954 10,412 10,194 490 455 436 10,464 9,957 9,758
Materials 6,695 6,509 6,647 24 22 19 6,671 6,487 6,628
Power Generation 7,495 7,257 6,545 81 65 57 7,414 7,192 6,488
Technical Products and Services 4,917 4,692 4,424 18 23 19 4,899 4,669 4,405
All Other 3,564 3,108 2,707 -- -- -- 3,564 3,108 2,707
Corporate items and eliminations 1,193 (322) (286) (726) (656) (650) 1,919 334 364
---------------------------- -------------------------- ----------------------------
Total GE 54,515 49,565 46,181 -- -- -- 54,515 49,565 46,181
---------------------------- -------------------------- ----------------------------
GECS
Financing 31,165 24,554 19,446 -- -- -- 31,165 24,554 19,446
Specialty Insurance 8,844 8,155 7,042 -- -- -- 8,844 8,155 7,042
All Other (78) 4 4 -- -- -- (78) 4 4
---------------------------- -------------------------- ----------------------------
Total GECS 39,931 32,713 26,492 -- -- -- 39,931 32,713 26,492
---------------------------- -------------------------- ----------------------------
Eliminations (3,606) (3,099) (2,645) -- -- -- (3,606) (3,099) (2,645)
---------------------------- -------------------------- ----------------------------
CONSOLIDATED REVENUES $90,840 $ 79,179 $ 70,028 $ -- $ -- $ -- $90,840 $79,179 $70,028
====================================================================================================================================
<FN>
GE revenues include income from sales of goods and services to customers and other income. Sales from one Company component to
another generally are priced at equivalent commercial selling prices. "All Other" GE revenues consists primarily of GECS earnings.
- ------------------------------------------------------------------------------------------------------------------------------------
</FN>
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS PROPERTY, PLANT AND EQUIPMENT
(INCLUDING EQUIPMENT LEASED TO OTHERS)
At December 31 For the years ended December 31
Additions Depreciation and amortization
---------------------------- -------------------------- -----------------------------
(In millions) 1997 1996 1995 1997 1996 1995 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GE
Aircraft Engines $ 8,895 $ 5,423 $ 4,890 $ 729 $ 551 $ 266 $ 255 $ 260 $ 273
Appliances 2,533 2,569 2,304 83 168 143 112 104 93
Broadcasting 4,877 4,899 3,915 116 176 97 96 86 64
Industrial Products and Systems 6,658 6,580 6,117 487 450 446 368 340 308
Materials 8,890 9,130 9,095 618 748 521 427 475 478
Power Generation 5,605 5,741 5,679 176 185 155 161 165 166
Technical Products and Services 2,438 2,246 2,200 189 154 110 115 113 109
All Other 17,496 14,556 13,113 -- -- 1 2 2 1
Corporate items and eliminations 10,034 8,781 8,403 168 114 113 86 90 89
---------------------------- -------------------------- ---------------------------
Total GE 67,426 59,925 55,716 2,566 2,546 1,852 1,622 1,635 1,581
---------------------------- -------------------------- ---------------------------
GECS
Financing 211,139 188,472 151,952 7,188 5,663 5,143 2,411 2,111 1,963
Specialty Insurance 44,048 38,575 33,714 65 35 133 35 29 23
All Other 221 372 63 67 64 36 14 10 27
---------------------------- -------------------------- ---------------------------
Total GECS 255,408 227,419 185,729 7,320 5,762 5,312 2,460 2,150 2,013
---------------------------- -------------------------- ---------------------------
Eliminations (18,822) (14,942) (13,410) -- -- -- -- -- --
---------------------------- -------------------------- ---------------------------
CONSOLIDATED TOTALS $304,012 $272,402 $228,035 $9,886 $8,308 $7,164 $ 4,082 $ 3,785 $ 3,594
====================================================================================================================================
<FN>
"All Other" GE assets consists primarily of investment in GECS. Additions to property, plant and equipment include amounts
relating to principal businesses purchased.
- ------------------------------------------------------------------------------------------------------------------------------------
</FN>
</TABLE>
<PAGE>
F-39
ANNUAL REPORT PAGE 63
Details of operating profit by industry segment can be found on page 35 of this
report. A description of industry segments for General Electric Company and
consolidated affiliates follows.
AIRCRAFT ENGINES. Jet engines and replacement parts and repair and maintenance
services for all categories of commercial aircraft (short/medium, intermediate
and long-range); for a wide variety of military aircraft, including fighters,
bombers, tankers and helicopters; and for executive and commuter aircraft. Sold
worldwide to airframe manufacturers, airlines and government agencies. Also,
aircraft engine derivatives used as marine propulsion and industrial power
sources.
APPLIANCES. Major appliances and related services for products such as
refrigerators, freezers, electric and gas ranges, dishwashers, clothes washers
and dryers, microwave ovens and room air conditioning equipment. Sold in North
America and in global markets under various GE and private-label brands.
Distributed to retail outlets, mainly for the replacement market, and to
building contractors and distributors for new installations.
BROADCASTING. Primarily NBC. Principal businesses are the furnishing of U.S.
network television services to more than 200 affiliated stations, production of
television programs, operation of 12 VHF and UHF television broadcasting
stations, operation of four cable/satellite networks around the world, and
investment and programming activities in multimedia and cable television.
INDUSTRIAL PRODUCTS AND SYSTEMS. Lighting products (including a wide variety of
lamps, lighting fixtures, wiring devices and quartz products); electrical
distribution and control equipment (including power delivery and control
products such as transformers, meters, relays, capacitors and arresters);
transportation systems products (including diesel-electric locomotives, transit
propulsion equipment and motorized wheels for off-highway vehicles); electric
motors and related products; a broad range of electrical and electronic
industrial automation products (including drive systems); installation,
engineering and repair services, which includes management and technical
expertise for large projects such as process control systems; and GE Supply, a
network of electrical supply houses. Markets are extremely diverse. Products are
sold to commercial and industrial end users, including utilities, to original
equipment manufacturers, to electrical distributors, to retail outlets, to
railways and to transit authorities. Increasingly, products are developed for
and sold in global markets.
MATERIALS. High-performance engineered plastics used in applications such as
automobiles and housings for computers and other business equipment; ABS resins;
silicones; superabrasive industrial diamonds; and laminates. Sold worldwide to a
diverse customer base consisting mainly of manufacturers.
POWER GENERATION. Power plant products and services, including design,
installation, operation and maintenance services. Markets and competition are
global. Gas turbines are sold principally as part of packaged power plants for
electric utilities and for industrial cogeneration and mechanical drive
applications. Steam turbine-generators are sold to electric utilities, to the
U.S. Navy and, for cogeneration, to industrial and other power customers. Power
Generation also includes nuclear reactors and fuel and support services for GE's
new and installed boiling water reactors.
TECHNICAL PRODUCTS AND SERVICES. Medical systems such as magnetic resonance (MR)
and computed tomography (CT) scanners, x-ray, nuclear imaging, ultrasound, other
diagnostic equipment and related services sold worldwide to hospitals and
medical facilities. Also includes a full range of computer-based information and
data interchange services for internal use and external commercial and
industrial customers.
GECS FINANCING. Operations of GE Capital, as follows:
CONSUMER SERVICES -- private-label and bank credit card loans, personal
loans, time sales and revolving credit and inventory financing for retail
merchants, auto leasing and inventory financing, mortgage servicing, and
consumer savings and insurance services. Insurance services, previously included
within the Specialty Insurance segment, has been combined with the consumer
savings and insurance operations in this segment. Prior-year information has
been reclassified to reflect this change.
SPECIALIZED FINANCING -- loans and financing leases for major capital assets,
including industrial facilities and equipment, and energy-related facilities;
commercial and residential real estate loans and investments; and loans to and
investments in management buyouts, including those with high leverage, and
corporate recapitalizations.
EQUIPMENT MANAGEMENT -- leases, loans, sales and asset management services
for portfolios of commercial and transportation equipment, including aircraft,
trailers, auto fleets, modular space units, railroad rolling stock, data
processing equipment, containers used on ocean-going vessels, and satellites.
MID-MARKET FINANCING -- loans and financing and operating leases for
middle-market customers, including manufacturers, distributors and end users,
for a variety of equipment that includes data processing equipment, medical and
diagnostic equipment, and equipment used in construction, manufacturing, office
applications and telecommunications activities.
Very few of the products financed by GE Capital are manufactured by GE.
GECS SPECIALTY INSURANCE. U.S. and international multiple-line property and
casualty reinsurance; certain directly written specialty insurance and life
reinsurance; financial guaranty insurance, principally on municipal bonds and
structured finance issues; private mortgage insurance; and creditor insurance
covering international customer loan repayments.
<PAGE>
F-40
ANNUAL REPORT PAGE 64
29 GEOGRAPHIC SEGMENT INFORMATION (CONSOLIDATED)
Revenues and operating profit shown below are classified according to their
country of origin (including exports from such areas). Revenues and operating
profit classified under the caption "United States" include royalty and
licensing income from non-U.S. sources. U.S. exports to international customers
by major areas of the world are shown on page 39.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
REVENUES
For the years ended December 31
Total revenues Intersegment revenues External revenues
---------------------------- ------------------------------- -----------------------------
(In millions) 1997 1996 1995 1997 1996 1995 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
United States $66,330 $58,110 $52,935 $ 2,471 $ 2,292 $ 2,123 $63,859 $55,818 $50,812
Europe 18,166 15,964 12,293 787 714 656 17,379 15,250 11,637
Pacific Basin 4,742 4,343 3,725 880 796 457 3,862 3,547 3,268
Other <F1> 6,420 5,140 4,750 680 576 439 5,740 4,564 4,311
Intercompany eliminations (4,818) (4,378) (3,675) (4,818) (4,378) (3,675) -- -- --
---------------------------- ------------------------------- -----------------------------
Total $90,840 $79,179 $70,028 $ -- $ -- $ -- $90,840 $79,179 $70,028
============================================================================================================================
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
OPERATING PROFIT <F2> ASSETS NON-U.S. NET ASSETS
For the years ended December 31 At December 31 At December 31
---------------------------- -------------------------------- ------------------------------
(In millions) 1997 1996 1995 1997 1996 1995 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
United States $ 8,825 $ 9,693 $ 9,002 $206,655 $189,593 $158,884 $ <F3> $ <F3> $ <F3>
Europe 2,024 1,724 1,043 66,740 55,196 44,107 31,076 23,021 20,059
Pacific Basin 302 269 375 8,881 8,125 6,442 6,237 5,082 3,740
Other <F1> 706 576 543 21,926 19,655 18,776 12,233 11,439 11,472
Intercompany eliminations (23) 7 9 (190) (167) (174) (72) (62) (51)
---------------------------- -------------------------------- ------------------------------
Total $11,834 $12,269 $10,972 $304,012 $272,402 $228,035 $49,474 $39,480 $35,220
===============================================================================================================================
<FN>
<F1> Principally the Americas other than the United States, but also includes operations that cannot meaningfully be associated
with specific geographic areas (for example, shipping containers used on ocean-going vessels).
<F2> Net of 1997 restructuring and other special charges.
<F3> Not applicable.
- -------------------------------------------------------------------------------------------------------------------------------
</FN>
</TABLE>
30 ADDITIONAL INFORMATION ABOUT FINANCIAL INSTRUMENTS
This note contains estimated fair values of certain financial instruments to
which GE and GECS are parties. Apart from borrowings by GE and GECS and certain
marketable securities, relatively few of these instruments are actively traded.
Thus, fair values must often be determined by using one or more models that
indicate value based on estimates of quantifiable characteristics as of a
particular date. Because this undertaking is, by its nature, difficult and
highly judgmental, for a limited number of instruments, alternative valuation
techniques may have produced disclosed values different from those that could
have been realized at December 31, 1997 or 1996. Moreover, the disclosed values
are representative of fair values only as of the dates indicated. Assets and
liabilities that, as a matter of accounting policy, are reflected in the
accompanying financial statements at fair value are not included in the
following disclosures; such items include cash and equivalents, investment
securities and separate accounts.
Values are estimated as follows:
BORROWINGS. Based on quoted market prices or market comparables. Fair values of
interest rate and currency swaps on borrowings are based on quoted market prices
and include the effects of counterparty creditworthiness.
TIME SALES AND LOANS. Based on quoted market prices, recent transactions and/or
discounted future cash flows, using rates at which similar loans would have been
made to similar borrowers.
INVESTMENT CONTRACT BENEFITS. Based on expected future cash flows, discounted at
currently offered discount rates for immediate annuity contracts or cash
surrender values for single premium deferred annuities.
FINANCIAL GUARANTEES AND CREDIT LIFE. Based on future cash flows, considering
expected renewal premiums, claims, refunds and servicing costs, discounted at a
market rate.
ALL OTHER INSTRUMENTS. Based on comparable transactions, market comparables,
discounted future cash flows, quoted market prices, and/or estimates of the cost
to terminate or otherwise settle obligations to counterparties.
<PAGE>
F-41
ANNUAL REPORT PAGE 65
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL INSTRUMENTS
1997 1996
---------------------------------------- ----------------------------------------
Assets (liabilities) Assets (liabilities)
----------------------------- -----------------------------
Carrying Estimated fair value Carrying Estimated fair value
Notional amount -------------------- Notional amount --------------------
December 31 (In millions) amount (net) High Low amount (net) High Low
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
GE
Investment related
Investments and notes receivable $ <F1> $ 1,909 $ 1,915 $ 1,908 $ <F1> $ 1,675 $ 3,127 $ 3,127
Cancelable interest rate swap 1,421 25 19 19 -- -- -- --
Borrowings and related instruments
Borrowings<F2><F3> <F1> (4,358) (4,377) (4,377) <F1> (4,049) (4,058) (4,058)
Interest rate swaps 531 -- (12) (12) 536 -- (11) (11)
Currency swaps -- -- -- -- 180 -- 25 25
Recourse obligations for receivables sold 427 (23) (23) (23) 424 -- -- --
Financial guarantees 2,141 -- -- -- 1,805 -- -- --
Other firm commitments
Currency forwards and options 6,656 82 270 270 5,476 70 150 150
Financing commitments 1,794 -- -- -- 1,554 -- -- --
GECS
Assets
Time sales and loans <F1> 62,712 63,105 61,171 <F1> 60,859 61,632 60,544
Integrated interest rate swaps 12,323 19 (125) (125) 4,376 -- 91 91
Purchased options 1,617 31 31 31 1,938 11 12 12
Mortgage-related positions
Mortgage purchase commitments 2,082 -- 11 11 1,193 -- 2 2
Mortgage sale commitments 2,540 -- (9) (9) 1,417 -- 3 3
Mortgages held for sale <F1> 2,378 2,379 2,379 <F1> 1,112 1,165 1,165
Options, including "floors" 30,347 51 141 141 27,422 78 81 81
Interest rate swaps and futures 3,681 -- 23 23 1,731 -- (29) (29)
Other cash financial instruments <F1> 2,242 2,592 2,349 <F1> 2,240 2,735 2,487
Liabilities
Borrowings and related instruments
Borrowings<F2><F3> <F1> (141,263) (141,828) (141,828) <F1> (125,621) (125,648) (125,648)
Interest rate swaps 42,531 -- (250) (250) 34,491 -- (575) (575)
Currency swaps 23,382 -- (1,249) (1,249) 24,588 -- 368 368
Currency forwards 15,550 -- 371 371 6,165 -- 72 72
Purchased options 375 33 8 8 1,882 10 1 1
Investment contract benefits <F1> (23,045) (22,885) (22,885) <F1> (20,210) (19,953) (19,953)
Insurance-- financial guarantees
and credit life 183,957 (2,897) (2,992) (3,127) 170,402 (3,801) (3,614) (4,025)
Credit and liquidity support --
securitizations 13,634 (46) (46) (46) 6,842 (73) (9) (9)
Performance guarantees -- principally
letters of credit 2,699 (34) -- (67) 3,470 (55) (132) (133)
Other 3,147 (1,134) (1,282) (1,303) 2,901 (1,560) (1,175) (1,176)
Other firm commitments
Currency forwards 1,744 -- 11 11 1,823 -- 3 2
Currency swaps 1,073 192 192 192 1,134 -- (38) (38)
Ordinary course of business
lending commitments 7,891 -- (62) (62) 4,950 -- (27) (27)
Unused revolving credit lines
Commercial 4,850 -- -- -- 3,375 -- -- --
Consumer-- principally credit cards 134,123 -- -- -- 116,878 -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
<F1> Not applicable.
<F2> Includes effects of interest rate and currency swaps, which also are listed separately.
<F3> See note 19.
- ------------------------------------------------------------------------------------------------------------------------------------
</FN>
</TABLE>
Additional information about certain financial instruments in the table above
follows.
CURRENCY FORWARDS AND OPTIONS are employed by GE and GECS to manage exposures to
changes in currency exchange rates associated with commercial purchase and sale
transactions and by GECS to optimize borrowing costs as discussed in note 19.
These financial instruments generally are used to fix the local currency cost of
purchased goods or services or selling prices denominated in currencies other
than the functional currency. Currency exposures that result from net
investments in affiliates are managed principally by funding assets denominated
<PAGE>
F-42
ANNUAL REPORT PAGE 66
in local currency with debt denominated in those same currencies. In certain
circumstances, net investment exposures are managed using currency forwards and
currency swaps.
OPTIONS AND INSTRUMENTS CONTAINING OPTION FEATURES that behave based on limits
("caps," "floors" or "collars") on interest rate movement are used primarily to
hedge prepayment risk in certain GECS business activities, such as the mortgage
servicing and annuities businesses.
SWAPS OF INTEREST RATES AND CURRENCIES are used by GE and GECS to optimize
borrowing costs for a particular funding strategy (see note 19). A cancelable
interest rate swap was used by GE to hedge an investment position. Interest rate
and currency swaps, along with purchased options and futures, are used by GECS
to establish specific hedges of mortgage-related assets and to manage net
investment exposures. Credit risk of these positions is evaluated by management
under the credit criteria discussed below. As part of its ongoing customer
activities, GECS also enters into swaps that are integrated into investments in
or loans to particular customers and do not involve assumption of third-party
credit risk. Such integrated swaps are evaluated and monitored like their
associated investments or loans and are not therefore subject to the same credit
criteria that would apply to a stand-alone position.
COUNTERPARTY CREDIT RISK -- risk that counterparties will be financially unable
to make payments according to the terms of the agreements -- is the principal
risk associated with swaps, purchased options and forwards. Gross market value
of probable future receipts is one way to measure this risk, but is meaningful
only in the context of net credit exposure to individual counterparties. At
December 31, 1997 and 1996, this gross market risk amounted to $2.0 billion and
$0.9 billion, respectively. Aggregate fair values that represent associated
probable future obligations, normally associated with a right of offset against
probable future receipts, amounted to $2.9 billion and $0.7 billion at December
31, 1997 and 1996, respectively.
Except as noted above for positions that are integrated into financings, all
swaps, purchased options and forwards are carried out within the following
credit policy constraints.
o Once a counterparty exceeds credit exposure limits (see table below), no
additional transactions are permitted until the exposure with that
counterparty is reduced to an amount that is within the established limit.
Open contracts remain in force.
- --------------------------------------------------------------------------------
COUNTERPARTY CREDIT CRITERIA
------------------------------------
Credit rating
------------------------------------
Moody's Standard & Poor's
- --------------------------------------------------------------------------------
Term of transaction
Between one and five years Aa3 AA-
Greater than five years Aaa AAA
Credit exposure limits
Up to $50 million Aa3 AA-
Up to $75 million Aaa AAA
- --------------------------------------------------------------------------------
o All swaps are executed under master swap agreements containing mutual
credit downgrade provisions that provide the ability to require assignment
or termination in the event either party is downgraded below A3 or A-.
More credit latitude is permitted for transactions having original maturities
shorter than one year because of their lower risk.
31 QUARTERLY INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
First quarter Second quarter Third quarter Fourth quarter
(Dollar amounts in millions; ----------------- ----------------- ----------------- ------------------
per-share amounts in dollars) 1997 1996 1997 1996 1997 1996 1997 1996
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED OPERATIONS
Net earnings $ 1,677 $ 1,517 $ 2,162 $ 1,908 $ 2,014 $ 1,788 $ 2,350 $ 2,067
Earnings per share -- basic 0.51 0.46 0.66 0.58 0.62 0.54 0.72 0.63
-- diluted 0.50 0.45 0.65 0.57 0.60 0.53 0.70 0.62
SELECTED DATA
GE
Sales of goods and services 10,522 9,742 12,620 11,520 11,698 11,478 14,112 13,379
Gross profit from sales 2,970 2,781 3,886 3,475 3,368 3,060 2,618 3,784
GECS
Total revenues 9,544 7,245 9,317 7,457 10,182 8,449 10,888 9,562
Operating profit 1,081 973 1,138 951 1,229 1,179 974 945
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
For GE, gross profit from sales is sales of goods and services less costs of
goods and services sold. For GECS, operating profit is "Earnings before income
taxes."
Fourth-quarter gross profit from sales in 1997 was reduced by restructuring
and other special charges. Such charges, including amounts shown in "Other costs
and expenses," were $2,322 million before tax. Also in the fourth quarter of
1997, GE completed an exchange transaction with Lockheed Martin as described in
note 2.
Earnings-per-share amounts for each quarter are required to be computed
independently and, as a result, their sum does not equal the total year
earnings-per-share amounts for 1997 and 1996. Per-share amounts have been
adjusted for the 2-for-1 stock split effective on April 28, 1997.
<PAGE>
F-43
GENERAL ELECTRIC COMPANY AND CONSOLIDATED AFFILIATES
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(Amounts in millions)
GE ALLOWANCE FOR LOSSES
DEDUCTED FROM ASSETS
----------------------------------
ACCOUNTS
AND NOTES RECEIVABLE INVESTMENTS
-------------------- -----------
Balance, January 1, 1995 $ 243 $ 64
Provisions charged to operations 57 27
Write-offs (39) (3)
------ -----
Balance, December 31, 1995 $ 261 (a) $ 88
Provisions charged to Operations 99 3
Write-offs (92) (16)
------ -----
Balance, December 31, 1996 $ 268 (a) $ 75
Provisions charged to Operations 68 3
Write-offs (59) (17)
------ -----
Balance, December 31, 1997 $ 277 (a) $ 61
====== =====
- -------------------------------------
(a) The year-end balance is segregated on the Statement of Financial Position
as follows:
1997 1996 1995
---- ---- ----
Current receivables $ 238 $ 240 $ 231
All other assets (long-term receivables,
customer financing, etc.) 39 28 30
------ ----- -----
$ 277 $ 268 $ 261
====== ===== =====
Reference is made to note 7 to Consolidated Financial Statements appearing in
the 1997 Annual Report to Share Owners, which contains information with respect
to GECS allowance for losses on financing receivables for 1997, 1996 and 1995.
EXHIBIT 4
March 27, 1998
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
SUBJECT: GENERAL ELECTRIC COMPANY ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
ENDED DECEMBER 31, 1997 - FILE NO. 1-35
Dear Sirs:
Neither General Electric Company (the "Company") nor any of its
consolidated subsidiaries has outstanding any instrument with respect to its
long-term debt under which the total amount of securities authorized exceeds 10%
of the total assets of the registrant and its subsidiaries on a consolidated
basis. In accordance with paragraph (b)(4)(iii) of Item 601 of Regulation S-K
(17 CFR Sec. 229.601), the Company hereby agrees to furnish to the Securities
and Exchange Commission, upon request, a copy of each instrument which defines
the rights of holders of such long-term debt.
Very truly yours,
GENERAL ELECTRIC COMPANY
By: JAMES R. BUNT
Vice President and Treasurer
EXHIBIT 10(t)
GENERAL ELECTRIC COMPANY
1997 EXECUTIVE DEFERRED SALARY PLAN
I. ELIGIBILITY
Each employee of General Electric Company or a participating affiliate
("Company") who, as of December 31, 1996, is in an Executive Band or higher
position, or, in the discretion of affiliate management, an equivalent position
in such affiliate, and who is subject to U.S. tax laws, shall be eligible to
participate in this Plan.
II. DEFERRAL OF SALARY
1. Each employee eligible to participate in this Plan
("Participant") shall be given an opportunity to irrevocably
elect (subject to any conditions set out in the election form)
prior to any deferral hereunder:
(a) the portion of the Participant's annual base salary rate
as of November 1, 1996 to be deferred. The minimum portion
deferred shall be 10% and the maximum shall be 50%, provided,
however, that with respect to any individual designated by the
Chairman of the Board of Directors of General Electric Company
(the "Chairman") as an employee who is expected to be a
"covered employee" for 1997 within the meaning of Section
162(m) of the Internal Revenue Code, the maximum portion
deferred shall be 100%, and
(b) the form of payout alternative as set forth in Section V.
2. Commencing with base salary for January 1997, the
Participant's total base salary elected to be deferred under
this Plan will be deferred in ratable installments through the
month of December 1997, and will be credited to the
Participant's deferred salary cash account ("Deferred
Account") as of the end of the month of deferral ("Deferral
Date").
III. SPECIAL ONE-TIME MATCHING CREDIT
As of December 31, 1997, a special one-time credit shall be made to the
Deferred Account of each Participant who is actively employed by the Company on
such date. The amount of such credit shall equal 3.5% of the total base salary
deferred under this Plan by the Participant (excluding interest). Such credit
shall not be provided for any Participant who has terminated employment with the
Company for any reason prior to December 31, 1997, or is not actively employed
on such date.
<PAGE>
IV. MANNER OF ACCOUNTING
1. Each Deferred Account shall be unfunded, unsecured and
nonassignable, and shall not be a trust for the benefit of any
Participant.
2. Except as may be otherwise provided in Section V or VIII, the
Participant's Deferred Account will be credited with (a) the
amount of base salary deferred on each Deferral Date as set
forth in Section II, (b) the special one-time matching credit
as set forth in Section III, and (c) interest at the annual
rate of 12% compounded annually on each December 31.
V. PAYMENT OF DEFERRED ACCOUNT
1. Payment of a Participant's Deferred Account will be made only
after termination of employment of the Participant.
2. If no manner of payment election is made, the Deferred Account
will be paid in 10 annual installments commencing on March 1
(or as soon thereafter as practical) following the year of
termination of employment.
3. At the time of election to defer base salary, a Participant
may irrevocably elect: (a) the number of annual payout
installments (minimum of 10, maximum of 20) of the Deferred
Account commencing on March 1 (or as soon thereafter as
practical) following the year of termination of employment,
unless (b) a lump sum payment of the Deferred Account is
elected in which case the lump sum payment will be made on
March 1 (or as soon thereafter as practical) following the
year of termination of employment.
4. Participants who terminate their employment on or after
December 31, 1997 because of retirement, death, disability,
layoff, plant closing or transfer to a successor employer
which is not controlled by the Company, or Participants who
terminate their employment on or after December 31, 2001 for
any reason, will receive payouts based on Deferred Account
accumulations at the 12% interest rate. Payments will be made
pursuant to Section V.2 or V.3 above beginning on March 1 (or
as soon thereafter as practical) following the year of
termination of employment.
<PAGE>
5. Unless waived by the Chairman, if the Participant terminates
employment prior to December 31, 1997 for any reason, or prior
to December 31, 2001 for any reason other than retirement,
death, disability, layoff, plant closing or transfer to a
successor employer which is not controlled by the Company, the
Participant's Deferred Account will be paid in a lump sum as
soon as practical following the date of termination, along
with simple interest credited at an annual rate of 3% rather
than the rate specified in Section IV.
VI. DEATH BENEFITS
In the event of a Participant's death prior to receiving any or all
payments to which the Participant is entitled, the remaining Deferred Account
shall be paid at the time and in the manner provided in Section V to the
beneficiary or beneficiaries designated by the Participant on a beneficiary
designation form properly filed by the Participant with the Company in
accordance with established administrative procedures. If no such designated
beneficiary survives the Participant, such remaining benefits shall be paid as
set forth above to the Participant's estate.
VII. ADMINISTRATION AND INTERPRETATION
This Plan shall be administered by a "Committee" consisting of not less
than two persons appointed from time to time by the Chairman. The Committee
shall have full power and authority on behalf of the Company to administer and
interpret the Plan in its sole discretion. All Committee decisions with respect
to the administration and interpretation of the Plan shall be final and binding
upon all persons.
VIII. AMENDMENT OF THE PLAN
This Plan may be amended, suspended or terminated at any time by the
Management Development and Compensation Committee of the Board of Directors
("MDCC"). In addition, the MDCC may alter or amend the payout schedule of any or
all of the accrued benefits of a Participant at any time.
IX. EFFECTIVE DATE
The effective date of this Plan shall be January 1, 1997.
<PAGE>
1997 EXECUTIVE DEFERRED SALARY PLAN
As provided pursuant to the terms of the above-mentioned Plan, Messrs. Norman C.
LaFlamme and Jerry Wald are hereby appointed to serve on the administrative
committee for said Plan.
-------------------------------------
Approved: J. F. Welch
Date:
-------------------------------
EXHIBIT 10(u)
GE 1990 LONG-TERM INCENTIVE PLAN,
AS AMENDED AND RESTATED AS OF AUGUST 1, 1997
SECTION 1. PURPOSE
The purposes of this GE 1990 Long-Term Incentive Plan (the "Plan") are to
encourage selected salaried employees of General Electric Company (together with
any successor thereto, the "Company") and its Affiliates (as defined below) to
acquire a proprietary interest in the growth and performance of the Company, to
generate an increased incentive to contribute to the Company's future success
and prosperity, thus enhancing the value of the Company for the benefit of its
share owners, and to enhance the ability of the Company and its Affiliates to
attract and retain exceptionally qualified individuals upon whom, in large
measure, the sustained progress, growth and profitability of the Company depend.
SECTION 2. DEFINITIONS
As used in the Plan, the following terms shall have the meanings set forth
below:
(a) "Affiliate" shall mean (i) any entity that, directly or through one or
more intermediaries, is controlled by the Company and (ii) any entity in
which the Company has a significant equity interest, as determined by
the Committee.
(b) "Award" shall mean any Option, Stock Appreciation Right, Restricted
Stock, Restricted Stock Unit, Performance Award, Dividend Equivalent, or
Other Stock-Based Award granted under the Plan.
(c) "Award Agreement" shall mean any written agreement, contract, or other
instrument or document evidencing any Award granted under the Plan.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
(e) "Committee" shall mean a committee of the Board of Directors of the
Company, acting in accordance with the provisions of Section 3,
designated by the Board to administer the Plan and composed of not less
than three directors, each of whom is not an employee of the Company or
an Affiliate.
(f) "Dividend Equivalent" shall mean any right granted under Section 6(e) of
the Plan.
(g) "Fair Market Value" shall mean, with respect to any property (including,
without limitation, any Shares or other securities), the fair market
value of such property determined by such methods or procedures as shall
be established from time to time by the Committee.
(h) "Incentive Stock Option" shall mean an option granted under Section 6(a)
of the Plan that is intended to meet the requirements of Section 422 of
the Code, or any successor provision thereto.
(i) "1983 Plan" shall mean the Company's 1983 Stock Option-Performance Unit
Plan.
(j) "Non-Qualified Stock Option" shall mean an option granted under Section
6(a) of the Plan that is not intended to be an Incentive Stock Option.
(k) "Option" shall mean an Incentive Stock Option or a Non-Qualified Stock
Option.
(l) "Other Stock-Based Award" shall mean any right granted under Section
6(f) of the Plan.
(m) "Participant" shall mean a Salaried Employee designated to be granted an
Award under the Plan.
(n) "Performance Award" shall mean any right granted under Section 6(d) of
the Plan.
(o) "Person" shall mean any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated organization, or
government or political subdivision thereof.
(p) "Released Securities" shall mean securities that were Restricted
Securities with respect to which all applicable restrictions have
expired, lapsed, or been waived.
(q) "Restricted Securities" shall mean Awards of Restricted Stock or other
Awards under which issued and outstanding Shares are held subject to
certain restrictions.
(r) "Restricted Stock" shall mean any Share granted under Section 6(c) of
the Plan.
(s) "Restricted Stock Unit" shall mean any right granted under Section 6(c)
of the Plan that is denominated in Shares.
(t) "Salaried Employee" shall mean any salaried employee of the Company or
of any Affiliate.
(u) "Shares" shall mean the common shares of the Company, $0.16 par value,
and such other securities or property as may become the subject of
Awards, or become subject to Awards, pursuant to an adjustment made
under Section 4(b) of the Plan.
(v) "Stock Appreciation Right" shall mean any right granted under Section
6(b) of the Plan.
SECTION 3. ADMINISTRATION
Except as otherwise provided herein, the Plan shall be administered by the
Committee. Subject to the terms of the Plan and applicable law, the Committee
shall have full power and authority to: (i) designate Participants; (ii)
determine the type or types of Awards to be granted to each Participant under
the Plan; (iii) determine the number of Shares to be covered by (or with respect
to which payments, rights, or other matters are to be calculated in connection
with) Awards; (iv) determine the terms and conditions of any Award; (v)
determine whether, to what extent, and under what circumstances Awards may be
settled or exercised in cash, Shares, other securities, other Awards, or other
property, or canceled, forfeited, or suspended, and the method or methods by
which Awards may be settled, exercised, canceled, forfeited, or suspended; (vi)
determine whether, to what extent, and under what circumstances cash, Shares,
other securities, other Awards, other property, and other amounts payable with
respect to an Award under the Plan shall be deferred either automatically or at
the election of the holder thereof or of the committee; (vii) interpret and
administer the Plan and any instrument or agreement relating to, or Award made
under, the Plan; (viii) establish, amend, suspend, or waive such rules and
regulations and appoint such agents as it shall deem appropriate for the proper
administration of the Plan; and (ix) make any other determination and take any
other action that the Committee deems necessary or desirable for the
administration of the Plan. Unless otherwise expressly provided in the Plan, all
designations, determinations, interpretations, and other decisions under or with
respect to the Plan or any Award shall be within the sole discretion of the
Committee, may be made at any time, and shall be final, conclusive, and binding
upon all Persons, including the Company, any Affiliate, any Participant, any
holder or beneficiary of any Award, any share owner, and any employee of the
Company or of any Affiliate. Actions of the Committee may be taken either (i) by
a subcommittee, designated by the Committee, composed of three or more members,
or (ii) by the Committee but with one or more members abstaining or recusing
himself or herself from acting on the matter, so long as two or more members
remain to act on the matter. Such action, authorized by such a subcommittee or
by the Committee upon the abstention or recusal of such members, shall be the
action of the Committee for purposes of the Plan.
SECTION 4. SHARES AVAILABLE FOR AWARDS
(a) SHARES AVAILABLE. Subject to adjustment as provided in Section 4(b):
(i) CALCULATION OF NUMBER OF SHARES AVAILABLE. The number of Shares
available for granting Awards under the Plan in each calendar
year or, in the case of the years 1990 and 2007, part thereof
shall be ninety-five one-hundredths of one percent (0.95%) of
the issued Shares (including, without limitation, treasury
Shares) as of the first day of such year; provided, however,
that the number of Shares available for granting Awards in any
calendar year shall be increased in any such year by the number
of Shares available under the Plan in previous years but not
covered by Awards granted under the Plan in such years. Further,
if, after the effective date of the Plan, any Shares covered by
an Award granted under the Plan or by an award granted under the
1983 Plan, or to which such an Award or award relates, are
forfeited, or if an Award or award otherwise terminates without
the delivery of Shares or of other consideration, then the
Shares covered by such Award or award, or to which such Award or
award relates, or the number of Shares otherwise counted against
the aggregate number of Shares available under the Plan with
respect to such Award or award, to the extent of any such
forfeiture or termination, shall again be, or shall become,
available for granting Awards under the Plan. Notwithstanding
the foregoing but subject to adjustment as provided in Section
4(b), no more than one hundred million (100,000,000) Shares
shall be cumulatively available for delivery pursuant to the
exercise of Incentive Stock Options.
(ii) ACCOUNTING FOR AWARDS. For purposes of this Section 4,
(A) if an Award (other than a Dividend Equivalent) is
denominated in Shares, the number of Shares covered by
such Award, or to which such Award relates, shall be
counted on the date of grant of such Award against the
aggregate number of Shares available for granting Awards
under the Plan; and
(B) Dividend Equivalents and Awards not denominated in
Shares shall be counted against the aggregate number of
Shares available for granting Awards under the Plan in
such amount and at such time as the Committee shall
determine under procedures adopted by the committee
consistent with the purposes of the Plan;
PROVIDED, HOWEVER, that Awards that operate in tandem with
(whether granted simultaneously with or at a different time
from), or that are substituted for, other Awards or awards
granted under the 1983 Plan may be counted or not counted under
procedures adopted by the Committee in order to avoid double
counting. Any Shares that are delivered by the Company, and any
Awards that are granted by, or become obligations of, the
Company through the assumption by the Company or an Affiliate
of, or in substitution for, outstanding awards previously
granted by an acquired company, shall not be counted against the
Shares available for granting Awards under the Plan.
(iii) SOURCES OF SHARES DELIVERABLE UNDER AWARDS. Any Shares delivered
pursuant to an Award may consist, in whole or in part, of
authorized and unissued Shares or of treasury Shares.
(b) ADJUSTMENTS. In the event that the Committee shall determine that any
dividend or other distribution (whether in the form of cash, Shares,
other securities, or other property), recapitalization, stock split,
reverse stock split, reorganization, merger, consolidation, split-up,
spin-off, combination, repurchase, or exchange of Shares or other
securities of the Company, issuance of warrants or other rights to
purchase Shares or other securities of the Company, or other similar
corporate transaction or event affects the Shares such that an
adjustment is determined by the Committee to be appropriate in order to
prevent dilution or enlargement of the benefits or potential benefits
intended to be made available under the Plan, then the Committee shall,
in such manner as it may deem equitable, adjust any or all of (i) the
number and type of Shares (or other securities or property) which
thereafter may be made the subject of Awards, (ii) the number and type
of Shares (or other securities or property) subject to outstanding
Awards, (iii) the number and type of Shares (or other securities or
property) specified as the annual per-participant limitation under
Section 6(g)(vi), and (iv) the grant, purchase, or exercise price with
respect to any Award, or, if deemed appropriate, make provision for a
cash payment to the holder of an outstanding Award; provided, however,
in each case, that with respect to Awards of Incentive Stock Options no
such adjustment shall be authorized to the extent that such authority
would cause the Plan to violate Section 422(b)(1) of the Code or any
successor provision thereto; and PROVIDED FURTHER, HOWEVER, that the
number of Shares subject to any Award denominated in Shares shall always
be a whole number.
SECTION 5. ELIGIBILITY
Any Salaried Employee, including any officer or employee-director of the Company
or of any Affiliate, who is not a member of the Committee shall be eligible to
be designated a Participant.
SECTION 6. AWARDS
(a) OPTIONS. The Committee is hereby authorized to grant Options to
Participants with the following terms and conditions and with such
additional terms and conditions, in either case not inconsistent with the
provisions of the Plan, as the Committee shall determine:
(i) EXERCISE PRICE. The purchase price per Share purchasable under
an Option shall be determined by the Committee; provided,
however, that such purchase price shall not be less than the
Fair Market Value of a Share on the date of grant of such Option
(or, if the Committee so determines, in the case of any Option
retroactively granted in tandem with or in substitution for
another Award or any outstanding award granted under any other
plan of the Company, on the date of grant of such other Award or
award).
(ii) OPTION TERM. The term of each Option shall be fixed by the
Committee.
(iii) TIME AND METHOD OF EXERCISE. The Committee shall determine the
time or times at which an Option may be exercised in whole or in
part, and the method or methods by which, and the form or forms,
including, without limitation, cash, Shares, other Awards, or
other property, or any combination thereof, having a Fair Market
Value on the exercise date equal to the relevant exercise price,
in which, payment of the exercise price with respect thereto may
be made or deemed to have been made.
(iv) INCENTIVE STOCK OPTIONS. The terms of any Incentive Stock Option
granted under the Plan shall comply in all respects with the
provisions of Section 422 of the Code, or any successor
provision thereto, and any regulations promulgated thereunder.
(b) STOCK APPRECIATION RIGHTS. The Committee is hereby authorized to grant
Stock Appreciation Rights to Participants. Subject to the terms of the
Plan and any applicable Award Agreement, a Stock Appreciation Right
granted under the Plan shall confer on the holder thereof a right to
receive, upon exercise thereof, the excess of (i) the Fair Market Value
of one Share on the date of exercise or, if the Committee shall so
determine in the case of any such right other than one related to any
Incentive Stock Option, at any time during a specified period before or
after the date of exercise over (ii) the grant price of the right as
specified by the Committee, which shall not be less than the Fair Market
Value of one Share on the date of grant of the Stock Appreciation Right
(or, if the Committee so determines, in the case of any Stock
Appreciation Right retroactively granted in tandem with or in
substitution for another Award or any outstanding award granted under
any other plan of the Company, on the date of grant of such other Award
or award). Subject to the terms of the Plan and any applicable Award
Agreement, the grant price, term, methods of exercise, methods of
settlement, and any other terms and conditions of any Stock Appreciation
Right shall be as determined by the Committee. The Committee may impose
such conditions or restrictions on the exercise of any Stock
Appreciation Right as it may deem appropriate.
(c) RESTRICTED STOCK AND RESTRICTED STOCK UNITS.
(i) ISSUANCE. The Committee is hereby authorized to grant Awards of
Restricted Stock and Restricted Stock Units to Participants.
(ii) RESTRICTIONS. Shares of Restricted Stock and Restricted Stock
Units shall be subject to such restrictions as the Committee may
impose (including, without limitation, any limitation on the
right to vote a Share of Restricted Stock or the right to
receive any dividend or other right or property), which
restrictions may lapse separately or in combination at such time
or times, in such installments or otherwise, as the Committee
may deem appropriate.
(iii) REGISTRATION. Any Restricted Stock granted under the Plan may be
evidenced in such manner as the Committee may deem appropriate,
including, without limitation, book-entry registration or
issuance of a stock certificate or certificates. In the event
any stock certificate is issued in respect of Shares of
Restricted Stock granted under the Plan, such certificate shall
be registered in the name of the Participant and shall bear an
appropriate legend referring to the terms, conditions, and
restrictions applicable to such Restricted Stock.
(iv) FORFEITURE. Except as otherwise determined by the Committee,
upon termination of employment (as determined under criteria
established by the Committee) for any reason during the
applicable restriction period, all Shares of Restricted Stock
and all Restricted Stock Units still, in either case, subject to
restriction shall be forfeited and reacquired by the Company;
provided, however, that the Committee may, when it finds that a
waiver would be in the best interests of the Company, waive in
whole or in part any or all remaining restrictions with respect
to Shares of Restricted Stock or Restricted Stock Units.
Unrestricted Shares, evidenced in such manner as the Committee
shall deem appropriate, shall be delivered to the holder of
Restricted Stock promptly after such Restricted Stock shall
become Released Securities.
(d) PERFORMANCE AWARDS. The Committee is hereby authorized to grant
Performance Awards to Participants. Subject to the terms of the Plan and
any applicable Award Agreement, a Performance Award granted under the
Plan (i) may be denominated or payable in cash, Shares (including,
without limitation, Restricted Stock), other securities, other Awards,
or other property and (ii) shall confer on the holder thereof rights
valued as determined by the Committee and payable to, or exercisable by,
the holder of the Performance Award, in whole or in part, upon the
achievement of such performance goals during such performance periods as
the Committee shall establish. Subject to the terms of the Plan and any
applicable Awards Agreement, the performance goals to be achieved during
any performance period, the length of any performance period, the amount
of any Performance Award granted, and the amount of any payment or
transfer to be made pursuant to any Performance Award shall be
determined by the Committee.
(e) DIVIDEND EQUIVALENTS. The Committee is hereby authorized to grant to
Participants Awards under which the holders thereof shall be entitled to
receive payments equivalent to dividends or interest with respect to a
number of Shares determined by the Committee, and the Committee may
provide that such amounts (if any) shall be deemed to have been
reinvested in additional Shares or otherwise reinvested. Subject to the
terms of the Plan and any applicable Award Agreement, such Awards may
have such terms and conditions as the Committee shall determine.
(f) OTHER STOCK-BASED AWARDS. The Committee is hereby authorized to grant to
Participants such other Awards that are denominated or payable in,
valued in whole or in part by reference to, or otherwise based on or
related to, Shares (including, without limitation, securities
convertible into Shares), as are deemed by the Committee to be
consistent with the purposes of the Plan, provided, however, that such
grants must comply with applicable law. Subject to the terms of the Plan
and any applicable Award Agreement, the Committee shall determine the
terms and conditions of such Awards. Shares or other securities
delivered pursuant to a purchase right granted under this Section 6(f)
shall be purchased for such consideration, which may be paid by such
method or methods and in such form or forms, including, without
limitation, cash, Shares, other securities, other Awards, or other
property, or any combination thereof, as the Committee shall determine,
the value of which consideration, as established by the Committee, shall
not be less than the Fair Market Value of such Shares or other
securities as of the date such purchase right is granted (or, if the
Committee so determines, in the case of any such purchase right
retroactively granted in tandem with or in substitution for another
Award or any outstanding award granted under any other plan of the
Company, on the date of grant of such other Award or award).
(g) GENERAL.
(i) NO CASH CONSIDERATION FOR AWARDS. Awards shall be granted for no
cash consideration or for such minimal cash consideration as may
be required by applicable law.
(ii) AWARDS MAY BE GRANTED SEPARATELY OR TOGETHER. Awards may, in the
discretion of the Committee, be granted either alone or in
addition to, in tandem with, or in substitution for any other
Award or any award granted under any other plan of the Company
or any Affiliate. Awards granted in addition to or in tandem
with other Awards, or in addition to or in tandem with awards
granted under any other plan of the Company or any Affiliate,
may be granted either at the same time as or at a different time
from the grant of such other Awards or awards.
(iii) FORMS OF PAYMENT UNDER AWARDS. Subject to the terms of the Plan
and of any applicable Award Agreement, payments or transfers to
be made by the Company or an Affiliate upon the grant, exercise,
or payment of an Award may be made in such form or forms as the
Committee shall determine, including, without limitation, cash,
Shares, other securities, other Awards, or other property, or
any combination thereof, and may be made in a single payment or
transfer, in installments, or on a deferred basis, in each case
in accordance with rules and procedures established by the
Committee. Such rules and procedures may include, without
limitation, provisions for the payment or crediting of
reasonable interest on installment or deferred payments or the
grant or crediting of Dividend Equivalents in respect of
installment or deferred payments.
(iv) LIMITS ON TRANSFER OF AWARDS. No Award (other than Released
Securities), and no right under any such Award, shall be
assignable, alienable, saleable, or transferable by a
Participant otherwise than by will or by the laws of descent and
distribution (or, in the case of an Award of Restricted
Securities, to the Company); provided, however, that, if so
determined by the Committee, a Participant may, in the manner
established by the Committee, designate a beneficiary or
beneficiaries to exercise the rights of the Participant, and to
receive any property distributable, with respect to any Award
upon the death of the Participant. Each Award, and each right
under any Award, shall be exercisable, during the Participant's
lifetime, only by the Participant or, if permissible under
applicable law, by the Participant's guardian or legal
representative. No Award (other than Released Securities), and
no right under any such Award, may be pledged, alienated,
attached, or otherwise encumbered, and any purported pledge,
alienation, attachment, or encumbrance thereof shall be void and
unenforceable against the Company or any Affiliate.
Notwithstanding any contrary provisions in this paragraph or
elsewhere in the Plan, the Committee may permit a Participant to
transfer Awards, subject to such conditions as the Committee may
establish
(v) TERM OF AWARDS. The term of each Award shall be for such period
as may be determined by the Committee; PROVIDED, HOWEVER, that
in no event shall the term of any Incentive Stock Option exceed
a period of ten years from the date of its grant.
(vi) PER-PERSON LIMITATION ON OPTIONS AND SARs. The number of Shares
with respect to which Options and SARs may be granted under the
Plan to an individual Participant in any three-year period from
April 23, 1997 through the end of the term of the Plan shall not
exceed 3,000,000 Shares, subject to adjustment as provided in
Section 4(b).
(vii) AGGREGATE LIMITATION ON CERTAIN AWARDS. The number of Shares
with respect to which Restricted Stock, Restricted Stock Units,
Performance Awards and Other Stock-Based Awards may be granted
under the Plan to all Participants in any three-year period from
April 23, 1997 through the end of the term of the Plan shall not
in the aggregate exceed 20% of the total number of Shares
available for granting Awards during such three-year period.
(viii) SHARE CERTIFICATES. All certificates for Shares or other
securities delivered under the Plan pursuant to any Award or the
exercise thereof shall be subject to such stop transfer orders
and other restrictions as the Committee may deem advisable under
the Plan or the rules, regulations, and other requirements of
the Securities and Exchange Commission, any stock exchange upon
which such Shares or other securities are then listed, and any
applicable Federal or state securities laws, and the Committee
may cause a legend or legends to be put on any such certificates
to make appropriate reference to such restrictions.
SECTION 7. AMENDMENT AND TERMINATION
Except to the extent prohibited by applicable law and unless otherwise expressly
provided in an Award Agreement or in the Plan:
(a) AMENDMENTS TO THE PLAN. The Board of Directors of the Company may amend,
alter, suspend, discontinue, or terminate the Plan, including, without
limitation, any amendment, alteration, suspension, discontinuation, or
termination that would impair the rights of any Participant, or any
other holder or beneficiary of any Award theretofore granted, without
the consent of any share owner, Participant, other holder or beneficiary
of an Award, or other Person; PROVIDED, HOWEVER, that, notwithstanding
any other provision of the Plan or any Award Agreement, without the
approval of the share owners of the Company no such amendment,
alteration, suspension, discontinuation, or termination shall be made
that would:
(i) increase the total number of Shares available for Awards under
the Plan, except as provided in Section 4 hereof; or
(ii) permit Options, Stock Appreciation Rights, or other Stock-Based
Awards encompassing rights to purchase Shares to be granted with
per Share grant, purchase, or exercise prices of less than the
Fair Market Value of a Share on the date of grant thereof,
except to the extent permitted under Sections 6(a), 6(b), or
6(f) hereof.
(b) AMENDMENTS TO AWARDS. The Committee may waive any conditions or rights
under, amend any terms of, or amend, alter, suspend, discontinue, or
terminate, any Awards theretofore granted, prospectively or
retroactively, without the consent of any relevant Participant or holder
or beneficiary of an Award.
(c) ADJUSTMENTS OF AWARDS UPON CERTAIN ACQUISITIONS. In the event the
Company or any Affiliate shall assume outstanding employee awards or the
right or obligation to make future such awards in connection with the
acquisition of another business or another corporation or business
entity, the Committee may make such adjustments, not inconsistent with
the terms of the Plan, in the terms of Awards as it shall deem
appropriate in order to achieve reasonable comparability or other
equitable relationship between the assumed awards and the Awards granted
under the Plan as so adjusted.
(d) ADJUSTMENTS OF AWARDS UPON THE OCCURRENCE OF CERTAIN UNUSUAL OR
NONRECURRING EVENTS. The Committee shall be authorized to make
adjustments in the terms and conditions of, and the criteria included
in, Awards in recognition of unusual or nonrecurring events (including,
without limitation, the events described in Section 4 (b) hereof)
affecting the Company, any Affiliate, or the financial statements of the
Company or any Affiliate, or of changes in applicable laws, regulations,
or accounting principles, whenever the Committee determines that such
adjustments are appropriate in order to prevent dilution or enlargement
of the benefits or potential benefits to be made available under the
Plan.
(e) CORRECTION OF DEFECTS, OMISSIONS, AND INCONSISTENCIES. The Committee may
correct any defect, supply any omission, or reconcile any inconsistency
in the Plan or any Award in the manner and to the extent it shall deem
desirable to carry the Plan into effect.
SECTION 8. GENERAL PROVISIONS
(a) NO RIGHTS TO AWARDS. No Salaried Employee, Participant or other Person
shall have any claim to be granted any Award under the Plan, and there
is no obligation for uniformity of treatment of Salaried Employees,
Participants, or holders or beneficiaries of Awards under the Plan. The
terms and conditions of Awards need not be the same with respect to each
recipient.
(b) DELEGATION. The Committee may delegate to one or more officers or
managers of the Company or any Affiliate, or a committee of such
officers or managers, the authority, subject to such terms and
limitations as the Committee shall determine, to grant Awards to, or to
cancel, modify, waive rights with respect to, alter, discontinue,
suspend, or terminate Awards held by, Salaried Employees who are not
officers or directors of the Company for purposes of Section 16 of the
Securities Exchange Act of 1934, as amended.
(c) WITHHOLDING. The Company or any Affiliate shall be authorized to
withhold from any Award granted or any payment due or transfer made
under any Award or under the Plan the amount (in cash, Shares, other
securities, other Awards, or other property) of withholding taxes due in
respect of an Award, its exercise, or any payment or transfer under such
Award or under the Plan and to take such other action as may be
necessary in the opinion of the Company or Affiliate to satisfy all
obligations for the payment of such taxes.
(d) NO LIMIT ON OTHER COMPENSATION ARRANGEMENTS. Nothing contained in the
Plan shall prevent the Company or any Affiliate from adopting or
continuing in effect other or additional compensation arrangements, and
such arrangements may be either generally applicable or applicable only
in specific cases.
(e) NO RIGHT TO EMPLOYMENT. The grant of an Award shall not be construed as
giving a Participant the right to be retained in the employ of the
Company or any Affiliate. Further, the Company or an Affiliate may at
any time dismiss a Participant from employment, free from any liability,
or any claim under the Plan, unless otherwise expressly provided in the
Plan or in any Award Agreement.
(f) GOVERNING LAW. The validity, construction, and effect of the Plan and
any rules and regulations relating to the Plan shall be determined in
accordance with the laws of the State of New York and applicable Federal
law.
(g) SEVERABILITY. If any provision of the Plan or any Award is or becomes or
is deemed to be invalid, illegal, or unenforceable in any jurisdiction,
or as to any Person or Award, or would disqualify the Plan or any Award
under any law deemed applicable by the Committee, such provision shall
be construed or deemed amended to conform to applicable laws, or if it
cannot be so construed or deemed amended without, in the determination
of the Committee, materially altering the intent of the Plan or the
Award, such provision shall be stricken as to such jurisdiction, Person,
or Award, and the remainder of the Plan and any such Award shall remain
in full force and effect.
(h) NO TRUST OR FUND CREATED. Neither the Plan nor any Award shall create or
be construed to create a trust or separate fund of any kind or a
fiduciary relationship between the Company or any Affiliate and a
Participant or any other Person. To the extent that any Person acquires
a right to receive payments from the Company or any Affiliate pursuant
to an Award, such right shall be no greater than the right of any
unsecured general creditor of the Company or any Affiliate.
(i) NO FRACTIONAL SHARES. No fractional Shares shall be issued or delivered
pursuant to the Plan or any Award, and the Committee shall determine
whether cash, other securities, or other property shall be paid or
transferred in lieu of any fractional Shares, or whether such fractional
Shares or any rights thereto shall be canceled, terminated, or otherwise
eliminated.
(j) HEADINGS. Headings are given to the Sections and subsections of the Plan
solely as a convenience to facilitate reference. Such headings shall not
be deemed in any way material or relevant to the construction or
interpretation of the Plan or any provision thereof.
SECTION 9. EFFECTIVE DATE OF THE PLAN
The Plan shall be effective as of the date of its approval by the share owners
of the Company.
SECTION 10. TERM OF THE PLAN
No Award shall be granted under the Plan after May 1, 2007. However, unless
otherwise expressly provided in the plan or in an applicable Award Agreement,
any Award theretofore granted may extend beyond such date, and the authority of
the Committee to amend, alter, adjust, suspend, discontinue, or terminate any
such Award, or to waive any conditions or rights under any such Award, and the
authority of the Board of Directors of the Company to amend the Plan, shall
extend beyond such date.
EXHIBIT 10(v)
DEFERRED COMPENSATION PLAN FOR DIRECTORS
(As Amended through December 19, 1997)
A. INTRODUCTION
The Plan will permit Directors, on an individual election basis, to defer
all or part of the compensation received as a Director of the General
Electric Company until such time as service on the Board terminates.
B. PURPOSE
To provide Corporate Directors with maximum opportunity and flexibility in
the planning of their personal financial resources.
C. MANNER OF DEFERRAL OF COMPENSATION
o At, or prior to, the time of election to the Board, and prior to the
right to receive any Board compensation for the elected term, a
Director may elect to defer all or a specified portion of the annual
retainer and the meeting fees to be paid for attendance at Board and
assigned Committee meetings.
o An election to defer will be irrevocable for the Director's elected
term to the Board of Directors.
o The compensation deferred will be credited to the Director's deferred
compensation account as of the date it would otherwise have been
payable (the "Deferral Date").
o Deferral of compensation shall have no effect on any compensation-
related benefits received by a Director.
D. MANNER OF INVESTMENT
For each term of election to the Board of Directors for which a Director
elects to defer compensation, the Director must also irrevocably elect the
manner in which such deferred compensation shall be accounted for, as
described below, and all compensation deferred pursuant to such election
shall be accounted for in such manner until fully paid out.
<PAGE>
2
1. AS UNITS BASED ON GE STOCK VALUE
The Director's account will be credited with the hypothetical number
of stock units ("Units"), calculated to the nearest thousandths of a
Unit, determined by dividing the amount of compensation deferred on
the Deferral Date by the average of the closing market price of the
Company's common stock as reported on the Consolidated Tape of the
New York Stock Exchange listed shares for the 20 trading days
immediately preceding and including such date. The Director's account
will also be credited with the number of Units determined by
multiplying the number of Units in the Director's account by any cash
dividends declared by the Company on its common stock and dividing
the product by the closing market price of the Company's common stock
as reported on the Consolidated Tape of the New York Stock Exchange
listed shares on the related dividend record date, and also by
multiplying the number of Units in the Director's account by any
stock dividends declared by the Company on its common stock.
2. AS CASH UNITS WITH INTEREST
The Director's account (a) will be credited with the amount of
compensation deferred on the Deferral Date, and (b) will be credited
quarterly on the Company Dividend Record Date with interest
equivalents based upon the consecutive prior calendar quarter's
average quarterly yield for U.S. Treasury notes and bonds with
maturities of from ten to thirty years, as published by an official
agency to be determined by the Senior Vice President-Finance and
utilized on a consistent year-to-year basis.
E. RECAPITALIZATION
If, as a result of a recapitalization of the Company (including stock
splits), the Company's outstanding shares of common stock shall be changed
into a greater or smaller number of shares, the number of Units credited to
a Director's account shall be appropriately adjusted on the same basis.
F. PAYMENT OF DEFERRED COMPENSATION
Payment of a Director's deferred compensation account may only be made
after the Director's service on the Board has terminated and, except as
described below, will be made in ten (10) annual installments in cash,
beginning on the 15th of July (or as soon thereafter as practical)
following termination of Board service.
<PAGE>
3
1. TERMINATION OF SERVICE FOR REASONS OTHER THAN RETIREMENT OR
DISABILITY. Notwithstanding any prior elections, if a Director's
service on the Board terminates for reasons other than retirement or
disability, or terminates as a result of the Director's death before
the Director has attained the age and Board service needed to qualify
for retirement, the Director's total deferred compensation account
will be paid in a lump sum six months after the date of termination.
2. TERMINATION OF SERVICE FOR RETIREMENT OR DISABILITY.
a. DIRECTOR PAYOUT ELECTIONS.
(i). INITIAL ELECTIONS. At the time of each election to defer
Board compensation, a Director may elect to have: (a) the
deferred compensation account covered by the election paid in
less than ten (10) annual installments; and (b) the initial
installment be paid on the 15th of July (or as soon thereafter as
practical) which either immediately follows the Director's
termination of Board service, or which immediately follows the
Director's 73rd birthday.
(ii). SURVIVOR PAYOUT ELECTIONS. In the event of a Director's
death prior to receiving all entitled deferred payments, the
value of the Director's account on the date of the Director's
death shall be determined and paid to the beneficiary(s)
designated by the Director (or, failing such designation, to the
Director's estate) in accordance with the installment schedule
previously selected by the Director, unless the Director has
elected to have the remaining payments made in a single lump sum,
in which case a lump sum payment will be made to the designated
beneficiaries or the Director's estate as soon as practicable
after the Director's death.
(iii). REVISED ELECTIONS. At any time before the end of the
calendar year prior to termination of Board service, a Director
may revise and supersede any or all of his or her previous
elections with respect to any or all of the payout alternatives
set forth in this subsection a.
b. DETERMINATION OF AMOUNT OF INSTALLMENT PAYMENTS.
(i). The amount of the first installment payment shall be a
fraction of the Cash and/or Units in the Director's account on
the date of the initial installment payment, the numerator of
which is one and the denominator of which is the total number of
installments elected. Each subsequent installment shall be
calculated in the same manner as of each subsequent first of July
<PAGE>
4
except that the denominator shall be reduced by the number of
installments which have been previously paid.
(ii). Deferred compensation accounted for as Units based on stock
value will be paid, as described above, based on the product of
the number of Units in the Director's account on the payment date
by the average of the closing market price of the Company's
common stock as reported on the Consolidated Tape of New York
Stock Exchange listed shares for the 20 trading days immediately
preceding such date.
G. ASSIGNABILITY
No right to receive payment of deferred compensation shall be transferable
or assignable by a participant except by will or laws of descent and
distribution.
H. AMENDMENT OF THE PLAN
o This Plan may be amended, suspended or terminated at any time by the
Board of Directors of the General Electric Company,
o However, no amendment, suspension or termination of the Plan may,
without the consent of a participant, alter or impair any of the
rights previously granted under the plan.
I. EFFECTIVE DATE
o The effective date for implementation of this Plan shall be the first
of the month following its approval by the Board of Directors.
J. DEFINITIONS
o For purposes of the Plan, unless the context otherwise indicates, the
following definitions shall be applicable:
"Elected term" -- the period of time from election to the Board
to the next Statutory Meeting of the Shareowners.
"Retirement from the Board of Directors" -- a Director who
terminates Board service at age 65 or older with at least five
years of Board service.
EXHIBIT 12
GENERAL ELECTRIC COMPANY
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
(DOLLARS IN MILLIONS) Year ended December 31
---------------------------------------------------------
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
GE EXCEPT GECS
Earnings <F1> $ 5,511 $ 7,828 $ 8,696 $ 9,677 $ 10,132
Less: Equity in undistributed earnings of General Electric
Capital Services, Inc. <F2> (957) (1,181) (1,324) (1,836) (1,597)
Plus: Interest and other financial
charges included in expense 525 410 649 595 797
One-third of rental expense <F3> 212 171 174 171 179
-------- -------- -------- -------- --------
Adjusted "earnings" $ 5,291 $ 7,228 $ 8,195 $ 8,607 $ 9,511
======== ======== ======== ======== ========
Fixed Charges:
Interest and other financial charges $ 525 $ 410 $ 649 $ 595 $ 797
Interest capitalized 21 21 13 19 31
One-third of rental expense <F3> 212 171 174 171 179
-------- -------- -------- -------- --------
Total fixed charges $ 758 $ 602 $ 836 $ 785 $ 1,007
======== ======== ======== ======== ========
Ratio of earnings to fixed charges 6.98 12.01 9.80 10.96 9.44
======== ======== ======== ======== ========
GENERAL ELECTRIC COMPANY AND CONSOLIDATED AFFILIATES
Earnings <F1> $ 6,287 $ 8,831 $ 9,941 $ 11,075 $ 11,419
Plus: Interest and other financial charges
included in expense 4,096 4,994 7,336 7,939 8,445
One-third of rental expense <F3> 349 327 349 353 423
-------- -------- -------- -------- --------
Adjusted "earnings" $ 10,732 $ 14,152 $ 17,626 $ 19,367 $ 20,287
======== ======== ======== ======== ========
Fixed Charges:
Interest and other financial charges $ 4,096 $ 4,994 $ 7,336 $ 7,939 $ 8,445
Interest capitalized 26 30 34 60 83
One-third of rental expense <F3> 349 327 349 353 423
-------- -------- -------- -------- --------
Total fixed charges $ 4,471 $ 5,351 $ 7,719 $ 8,352 $ 8,951
======== ======== ======== ======== ========
Ratio of earnings to fixed charges 2.40 2.64 2.28 2.32 2.27
======== ======== ======== ======== ========
<FN>
<F1> Earnings before income taxes and minority interest. For 1993, earnings are
before cumulative effect of a change in accounting principle.
<F2> Earnings after income taxes, net of dividends.
<F3> Considered to be representative of interest factor in rental expense.
</FN>
</TABLE>
EXHIBIT 21
SUBSIDIARIES OF REGISTRANT
General Electric's principal affiliates as of December 31, 1997, are
listed below. All other affiliates, if considered in the aggregate as a single
affiliate, would not constitute a significant affiliate.
AFFILIATES OF REGISTRANT INCLUDED IN REGISTRANT'S FINANCIAL STATEMENTS.
<TABLE>
<CAPTION>
PERCENTAGE OF
VOTING SECURITIES STATE OR
DIRECTLY OR INDIRECTLY COUNTRY OF
OWNED BY INCORPORATION OR
REGISTRANT <F1> ORGANIZATION
--------------------- ----------------
<S> <C> <C>
Caribe General Electric Products, Inc. 100 Delaware
GE Aircraft Engines Maintenance Services, Ltd. Wales 100 United Kingdom
GE Appliances Parts LLC 100 Delaware
GE Engine Services Distribution, LLC 100 Delaware
GE Fanuc Automation North America Inc. 55 Delaware
GE Information Services, Inc. 100 Delaware
GE Lighting Tungsram RT 100 Hungary
GE Plastics Pacific Pte. Ltd. 100 Singapore
GE Power Systems Licensing Inc. 100 Delaware
GE Quartz Inc. 100 Delaware
GE Superabrasives Ireland 100 Bermuda
GE Yokogawa Medical Systems, Ltd. 75 Japan
General Electric Canadian Holdings Limited 100 Canada
General Electric Capital Services, Inc. 100 Delaware
General Electric Capital Corporation 100 New York
GE Global Insurance Holding Corporation 100 Missouri
General Electric International, Inc. 100 Delaware
General Electric Plastics B.V. 100 Netherlands
National Broadcasting Company, Inc. 100 Delaware
Nuovo Pignone SpA 81 Italy
RCA Thomson Licensing Corporation 96 Delaware
<FN>
Notes
<F1> With respect to certain companies, shares in names of nominees and qualifying shares in names of directors are included in
above percentages.
</FN>
</TABLE>
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
General Electric Company
We consent to the incorporation by reference in the registration statements Nos.
33-29024, 33-3908, 33-44593, 33-39596, 33-39596-01, 33-47085, 33-50639, 33-61029
and 33-61029-01 on Form S-3; No. 333-01947 on Form S-4; and Nos. 2-84145,
33-35922, 33-49053, 333-01953, 333-23767 and 333-42695 on Form S-8 of General
Electric Company of our report dated February 13, 1998, relating to the
consolidated financial position of General Electric Company and consolidated
affiliates as of December 31, 1997 and 1996, and the related consolidated
statements of earnings and cash flows for each of the years in the three-year
period ended December 31, 1997, and the related schedule, which report appears
in the December 31, 1997, annual report on Form 10-K of General Electric
Company.
KPMG Peat Marwick LLP
Stamford, Connecticut
March 27, 1998
<PAGE>
1 of 2
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned, being a
director or officer of General Electric Company, a New York corporation (the
"Company"), hereby constitutes and appoints John F. Welch, Jr., Benjamin W.
Heineman, Jr., Dennis D. Dammerman, and Philip D. Ameen and each of them, his or
her true and lawful attorney-in-fact and agent, with full power of substitution
and resubstitution, for him or her and in his or her name, place and stead in
any and all capacities, to sign one or more Annual Reports for the Company's
fiscal year ended December 31, 1997, on Form 10-K under the Securities Exchange
Act of 1934, as amended, or such other form as any such attorney-in-fact may
deem necessary or desirable, any amendments thereto, and all additional
amendments thereto, each in such form as they or any one of them may approve,
and to file the same with all exhibits thereto and other documents in connection
therewith with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done so
that such Annual Report shall comply with the Securities Exchange Act of 1934,
as amended, and the applicable Rules and Regulations adopted or issued pursuant
thereto, as fully and to all intents and purposes as he or she might or could do
in person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them or their substitute or resubstitute, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, each of the undersigned has hereunto set his or her
hand this 13th day of March, 1998.
John F. Welch, Jr. Dennis D. Dammerman
Chairman of the Board Senior Vice President -
(Principal Executive Finance (Principal
Officer and Director) Financial Officer and Director)
Philip D. Ameen
Comptroller
(Principal Accounting Officer)
<PAGE>
2 of 2
James I. Cash, Jr. Sam Nunn
Director Director
Silas S. Cathcart John D. Opie
Director Director
Paolo Fresco Roger S. Penske
Director Director
Claudio X. Gonzalez Barbara S. Preiskel
Director Director
Gertrude G. Michelson Frank H. T. Rhodes
Director Director
Eugene F. Murphy Andrew C. Sigler
Director Director
Douglas A. Warner III
Director
A MAJORITY OF THE BOARD OF DIRECTORS
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated financial statements for the period ended December 31, 1997,
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000040545
<NAME> GENERAL ELECTRIC COMPANY
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 5,861
<SECURITIES> 70,621
<RECEIVABLES> 6,125
<ALLOWANCES> 238
<INVENTORY> 5,895
<CURRENT-ASSETS> 0<F1>
<PP&E> 55,657
<DEPRECIATION> 23,341
<TOTAL-ASSETS> 304,012
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 46,603
0
0
<COMMON> 594
<OTHER-SE> 33,844
<TOTAL-LIABILITY-AND-EQUITY> 304,012
<SALES> 40,675
<TOTAL-REVENUES> 53,404<F2>
<CGS> 30,889
<TOTAL-COSTS> 40,088<F3>
<OTHER-EXPENSES> 21,250
<LOSS-PROVISION> 79
<INTEREST-EXPENSE> 8,384
<INCOME-PRETAX> 11,179
<INCOME-TAX> 2,976
<INCOME-CONTINUING> 8,203
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,203
<EPS-PRIMARY> 2.50<F4>
<EPS-DILUTED> 2.46<F5>
<FN>
<F1>Not applicable to consolidated GE.
<F2>Sales of goods ($40,675) and services($12,729).
<F3>Cost of goods ($30,889) and services ($9,199) sold.
<F4>Represents basic earnings per share in accordance with
SFAS No. 128, Earnings Per Share.
<F5>Represents diluted earnings per share in accordance with
SFAS No. 128, Earnings Per Share.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated financial statements for the period ended September 30, 1997, and
is qualified in its entirety by reference to such financial statements. Earnings
per share information has been restated to conform with the requirements of SFAS
No. 128, Earnings Per Share.
</LEGEND>
<RESTATED>
<CIK> 0000040545
<NAME> GENERAL ELECTRIC COMPANY
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 4,289
<SECURITIES> 66,705
<RECEIVABLES> 0<F1>
<ALLOWANCES> 0<F1>
<INVENTORY> 5,412
<CURRENT-ASSETS> 0<F2>
<PP&E> 54,107
<DEPRECIATION> 23,038
<TOTAL-ASSETS> 285,354
<CURRENT-LIABILITIES> 0<F2>
<BONDS> 47,501
0
0
<COMMON> 594
<OTHER-SE> 33,102
<TOTAL-LIABILITY-AND-EQUITY> 285,354
<SALES> 25,654
<TOTAL-REVENUES> 34,734<F3>
<CGS> 18,189
<TOTAL-COSTS> 24,510<F4>
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0<F1>
<INTEREST-EXPENSE> 6,072
<INCOME-PRETAX> 8,654
<INCOME-TAX> 2,801
<INCOME-CONTINUING> 5,853
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,853
<EPS-PRIMARY> 1.79<F5>
<EPS-DILUTED> 1.75<F6>
<FN>
<F1>Not disclosed in interim periods.
<F2>Not applicable to consolidated GE.
<F3>GE sales of goods ($25,654) and services ($9,080).
<F4>GE cost of goods ($18,189) and services ($6,321) sold.
<F5>Represents basic earnings per share in accordance with
SFAS No. 128, Earnings Per Share.
<F6>Represents diluted earnings per share in accordance with
SFAS No. 128, Earnings Per Share.
</FN>
</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 financial statements. Earnings
per share information has been restated to conform with the requirements of SFAS
No. 128, Earnings Per Share.
</LEGEND>
<RESTATED>
<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> 1.17<F5>
<EPS-DILUTED> 1.15<F6>
<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.
<F5>Represents basic earnings per share in accordance with
SFAS No. 128, Earnings Per Share.
<F6>Represents diluted earnings per share in accordance with
SFAS No. 128, Earnings Per Share.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated financial statements for the period ended March 31, 1997, and is
qualified in its entirety by reference to such financial statements. Earnings
per share information has been restated to conform with the requirements of SFAS
No. 128, Earnings Per Share.
</LEGEND>
<RESTATED>
<CIK> 0000040545
<NAME> GENERAL ELECTRIC COMPANY
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 3,621
<SECURITIES> 59,782
<RECEIVABLES> 0<F1>
<ALLOWANCES> 0<F1>
<INVENTORY> 5,226
<CURRENT-ASSETS> 0<F2>
<PP&E> 51,260
<DEPRECIATION> 21,982
<TOTAL-ASSETS> 270,068
<CURRENT-LIABILITIES> 0<F2>
<BONDS> 46,364
0
0
<COMMON> 594
<OTHER-SE> 29,870
<TOTAL-LIABILITY-AND-EQUITY> 270,068
<SALES> 7,704
<TOTAL-REVENUES> 10,489<F3>
<CGS> 5,534
<TOTAL-COSTS> 7,519<F4>
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0<F1>
<INTEREST-EXPENSE> 1,931
<INCOME-PRETAX> 2,559
<INCOME-TAX> 882
<INCOME-CONTINUING> 1,677
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,677
<EPS-PRIMARY> 0.51<F5>
<EPS-DILUTED> 0.50<F6>
<FN>
<F1>Not disclosed in interim periods.
<F2>Not applicable to consolidated GE.
<F3>GE sales of goods ($7,704) and services ($2,785).
<F4>GE cost of goods ($5,534) and services ($1,985) sold.
<F5>Represents basic earnings per share in accordance with
SFAS No. 128, Earnings Per Share.
<F6>Represents diluted earnings per share in accordance with
SFAS No. 128, Earnings Per Share.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated financial statements for the period ended December 31, 1996, and is
qualified in its entirety by reference to such financial statements. Earnings
per share information has been restated to conform with the requirements of SFAS
No. 128, Earnings Per Share.
</LEGEND>
<RESTATED>
<CIK> 0000040545
<NAME> GENERAL ELECTRIC COMPANY
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 4,191
<SECURITIES> 59,889
<RECEIVABLES> 6,629
<ALLOWANCES> 240
<INVENTORY> 4,473
<CURRENT-ASSETS> 0<F1>
<PP&E> 50,784
<DEPRECIATION> 21,989
<TOTAL-ASSETS> 272,402
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 49,246
0
0
<COMMON> 594
<OTHER-SE> 30,531
<TOTAL-LIABILITY-AND-EQUITY> 272,402
<SALES> 34,180
<TOTAL-REVENUES> 45,971<F2>
<CGS> 24,578
<TOTAL-COSTS> 32,871<F3>
<OTHER-EXPENSES> 19,618
<LOSS-PROVISION> 65
<INTEREST-EXPENSE> 7,904
<INCOME-PRETAX> 10,806
<INCOME-TAX> 3,526
<INCOME-CONTINUING> 7,280
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,280
<EPS-PRIMARY> 2.20<F4>
<EPS-DILUTED> 2.16<F5>
<FN>
<F1>Not applicable to consolidated GE.
<F2>GE sales of goods ($34,180) and services ($11,791).
<F3>GE cost of goods ($24,578) and services ($8,293) sold.
<F4>Represents basic earnings per share in accordance with
SFAS No. 128, Earnings Per Share.
<F5>Represents diluted earnings per share in accordance with
SFAS No. 128, Earnings Per Share.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated financial statements for the period ended September 30, 1996, and
is qualified in its entirety by reference to such financial statements. Earnings
per share information has been restated to conform with the requirements of SFAS
No. 128, Earnings Per Share.
</LEGEND>
<RESTATED>
<CIK> 0000040545
<NAME> GENERAL ELECTRIC COMPANY
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 4,672
<SECURITIES> 48,278
<RECEIVABLES> 0<F1>
<ALLOWANCES> 0<F1>
<INVENTORY> 5,061
<CURRENT-ASSETS> 0<F2>
<PP&E> 50,069
<DEPRECIATION> 21,857
<TOTAL-ASSETS> 249,182
<CURRENT-LIABILITIES> 0<F2>
<BONDS> 48,799
0
0
<COMMON> 594
<OTHER-SE> 29,405
<TOTAL-LIABILITY-AND-EQUITY> 249,182
<SALES> 24,299
<TOTAL-REVENUES> 32,640<F3>
<CGS> 17,432
<TOTAL-COSTS> 23,324<F4>
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0<F1>
<INTEREST-EXPENSE> 5,720
<INCOME-PRETAX> 7,851
<INCOME-TAX> 2,638
<INCOME-CONTINUING> 5,213
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,213
<EPS-PRIMARY> 1.57<F5>
<EPS-DILUTED> 1.55<F6>
<FN>
<F1>Not disclosed in interim periods.
<F2>Not applicable to consolidated GE.
<F3>GE sales of goods ($24,299) and services ($8,341).
<F4>GE cost of goods ($17,432) and services ($5,892) sold.
<F5>Represents basic earnings per share in accordance with
SFAS No. 128, Earnings Per Share.
<F6>Represents diluted earnings per share in accordance with
SFAS No. 128, Earnings Per Share.
</FN>
</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, 1996, and is
qualified in its entirety by reference to such financial statements. Earnings
per share information has been restated to conform with the requirements of SFAS
No. 128, Earnings Per Share.
</LEGEND>
<RESTATED>
<CIK> 0000040545
<NAME> GENERAL ELECTRIC COMPANY
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 3,271
<SECURITIES> 46,687
<RECEIVABLES> 0<F1>
<ALLOWANCES> 0<F1>
<INVENTORY> 5,051
<CURRENT-ASSETS> 0<F2>
<PP&E> 48,195
<DEPRECIATION> 21,167
<TOTAL-ASSETS> 242,081
<CURRENT-LIABILITIES> 0<F2>
<BONDS> 49,775
0
0
<COMMON> 594
<OTHER-SE> 28,702
<TOTAL-LIABILITY-AND-EQUITY> 242,081
<SALES> 15,792
<TOTAL-REVENUES> 21,194<F3>
<CGS> 11,244
<TOTAL-COSTS> 14,937<F4>
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0<F1>
<INTEREST-EXPENSE> 3,795
<INCOME-PRETAX> 5,153
<INCOME-TAX> 1,728
<INCOME-CONTINUING> 3,425
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,425
<EPS-PRIMARY> 1.03<F5>
<EPS-DILUTED> 1.01<F6>
<FN>
<F1>Not disclosed in interim periods.
<F2>Not applicable to consolidated GE.
<F3>GE sales of goods ($15,792) and services ($5,402).
<F4>GE cost of goods ($11,244) and services ($3,693) sold.
<F5>Represents basic earnings per share in accordance with
SFAS No. 128, Earnings Per Share.
<F6>Represents diluted earnings per share in accordance with
SFAS No. 128, Earnings Per Share.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated financial statements for the period ended March 31, 1996, and is
qualified in its entirety by reference to such financial statements. Earnings
per share information has been restated to conform with the requirements of SFAS
No. 128, Earnings Per Share.
</LEGEND>
<RESTATED>
<CIK> 0000040545
<NAME> GENERAL ELECTRIC COMPANY
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 3,170
<SECURITIES> 40,753
<RECEIVABLES> 0<F1>
<ALLOWANCES> 0<F1>
<INVENTORY> 4,894
<CURRENT-ASSETS> 0<F2>
<PP&E> 47,063
<DEPRECIATION> 20,815
<TOTAL-ASSETS> 230,213
<CURRENT-LIABILITIES> 0<F2>
<BONDS> 52,306
0
0
<COMMON> 594
<OTHER-SE> 28,677
<TOTAL-LIABILITY-AND-EQUITY> 230,213
<SALES> 7,241
<TOTAL-REVENUES> 9,714<F3>
<CGS> 5,210
<TOTAL-COSTS> 6,933<F4>
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0<F1>
<INTEREST-EXPENSE> 1,875
<INCOME-PRETAX> 2,318
<INCOME-TAX> 801
<INCOME-CONTINUING> 1,517
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,517
<EPS-PRIMARY> 0.46<F5>
<EPS-DILUTED> 0.45<F6>
<FN>
<F1>Not disclosed in interim periods.
<F2>Not applicable to consolidated GE.
<F3>GE sales of goods ($7,241) and services ($2,473).
<F4>GE cost of goods ($5,210) and services ($1,723) sold.
<F5>Represents basic earnings per share in accordance with
SFAS No. 128, Earnings Per Share.
<F6>Represents diluted earnings per share in accordance with
SFAS No. 128, Earnings Per Share.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated financial statements for the period ended December 31, 1995, and is
qualified in its entirety by reference to such financial statements. Earnings
per share information has been restated to conform with the requirements of SFAS
No. 128, Earnings Per Share.
</LEGEND>
<RESTATED>
<CIK> 0000040545
<NAME> GENERAL ELECTRIC COMPANY
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 2,823
<SECURITIES> 41,067
<RECEIVABLES> 6,582
<ALLOWANCES> 231
<INVENTORY> 4,395
<CURRENT-ASSETS> 0<F1>
<PP&E> 45,946
<DEPRECIATION> 20,267
<TOTAL-ASSETS> 228,035
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 51,027
0
0
<COMMON> 594
<OTHER-SE> 29,015
<TOTAL-LIABILITY-AND-EQUITY> 228,035
<SALES> 33,157
<TOTAL-REVENUES> 42,890<F2>
<CGS> 24,288
<TOTAL-COSTS> 30,970<F3>
<OTHER-EXPENSES> 15,429
<LOSS-PROVISION> 57
<INTEREST-EXPENSE> 7,286
<INCOME-PRETAX> 9,737
<INCOME-TAX> 3,164
<INCOME-CONTINUING> 6,573
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,573
<EPS-PRIMARY> 1.95<F4>
<EPS-DILUTED> 1.93<F5>
<FN>
<F1>Not applicable to consolidated GE.
<F2>GE sales of goods ($33,157) and services ($9,733).
<F3>GE costs of goods ($24,288) and services ($6,682) sold.
<F4>Represents basic earnings per share in accordance with
SFAS No. 128, Earnings Per Share.
<F5>Represents diluted earnings per share in accordance with
SFAS No. 128, Earnings Per Share.
</FN>
</TABLE>
