SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____ to ____
Commission file number 1-35
GENERAL ELECTRIC COMPANY
(Exact name of registrant as specified in its charter)
NEW YORK 14-0689340
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3135 EASTON TURNPIKE, FAIRFIELD, CT 06431-0001
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (203) 373-2211
-------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes x No
There were 3,277,653,000 shares with a par value of $0.16 per share
outstanding at September 30, 1999.
<PAGE>
GENERAL ELECTRIC COMPANY
Page
----
Part I - Financial Information
Item 1. Financial Statements
Statements of Income:
Third Quarter Ended September 30, 1999 ................. 3
Nine Months Ended September 30, 1999 ................... 4
Balance Sheet ............................................... 5
Statement of Cash Flows ..................................... 6
Summary of Operating Segments ............................... 7
Notes to Financial Statements ............................... 8
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition ........................... 10
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K ............................. 15
Signature ............................................................ 16
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED STATEMENT OF EARNINGS
GENERAL ELECTRIC COMPANY AND CONSOLIDATED AFFILIATES
<TABLE>
<CAPTION>
THIRD QUARTER ENDED SEPTEMBER 30 (UNAUDITED)
--------------------------------------------------------------------
(DOLLARS, EXCEPT PER-SHARE AMOUNTS, IN MILLIONS) CONSOLIDATED GE GECS
-------------------- -------------------- --------------------
1999 1998 1999 1998 1999 1998
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Sales of goods $ 11,846 $ 10,330 $ 9,495 $ 8,524 $ 2,352 $ 1,806
Sales of services 3,669 3,484 3,733 3,551 -- --
Earnings of GECS -- -- 1,262 1,082 -- --
GECS revenues from services 11,597 10,164 -- -- 11,650 10,210
Other income 88 158 95 169 -- --
-------- -------- -------- -------- -------- --------
Total revenues 27,200 24,136 14,585 13,326 14,002 12,016
-------- -------- -------- -------- -------- --------
Cost of goods sold 8,536 7,587 6,412 5,906 2,124 1,681
Cost of services sold 2,661 2,472 2,725 2,539 -- --
Interest and other financial charges 2,455 2,361 191 199 2,291 2,188
Insurance losses and policyholder and annuity benefits 2,764 2,239 -- -- 2,764 2,239
Provision for losses on financing receivables 227 306 -- -- 227 306
Other costs and expenses 6,647 5,704 1,879 1,755 4,802 3,980
Minority interest in net earnings of
consolidated affiliates 92 68 43 30 49 38
-------- -------- -------- -------- -------- --------
Total costs and expenses 23,382 20,737 11,250 10,429 12,257 10,432
-------- -------- -------- -------- -------- --------
Earnings before income taxes 3,818 3,399 3,335 2,897 1,745 1,584
Provision for income taxes (1,165) (1,115) (682) (613) (483) (502)
-------- -------- -------- -------- -------- --------
Net earnings $ 2,653 $ 2,284 $ 2,653 $ 2,284 $ 1,262 $ 1,082
======== ======== ======== ======== ======== ========
Net earnings per share
Diluted $ 0.80 $ 0.69
Basic $ 0.81 $ 0.70
Dividends declared per share $ 0.35 $ 0.30
<FN>
See notes to condensed consolidated financial statements. Consolidating data are
shown for "GE" and "GECS." Transactions between GE and GECS have been eliminated
from the "consolidated" columns.
</FN>
</TABLE>
<PAGE>
CONDENSED STATEMENT OF EARNINGS
GENERAL ELECTRIC COMPANY AND CONSOLIDATED AFFILIATES
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30 (UNAUDITED)
--------------------------------------------------------------------
(DOLLARS, EXCEPT PER-SHARE AMOUNTS, IN MILLIONS) CONSOLIDATED GE GECS
--------------------- -------------------- --------------------
1999 1998 1999 1998 1999 1998
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Sales of goods $ 33,335 $ 30,968 $ 27,382 $ 25,644 $ 5,953 $ 5,325
Sales of services 11,400 10,886 11,608 11,056 -- --
Earnings of GECS -- -- 3,386 2,896 -- --
GECS revenues from services 33,644 29,511 -- -- 33,810 29,643
Other income 396 467 438 497 -- --
-------- -------- -------- -------- -------- --------
Total revenues 78,775 71,832 42,814 40,093 39,763 34,968
-------- -------- -------- -------- -------- --------
Cost of goods sold 23,916 22,569 18,474 17,679 5,441 4,891
Cost of services sold 8,005 7,639 8,213 7,809 -- --
Interest and other financial charges 7,122 6,939 595 610 6,641 6,400
Insurance losses and policyholder and annuity benefits 8,088 6,852 -- -- 8,088 6,852
Provision for losses on financing receivables 1,048 1,047 -- -- 1,048 1,047
Other costs and expenses 19,180 16,753 5,468 5,225 13,807 11,619
Minority interest in net earnings of
consolidated affiliates 254 185 122 81 132 104
-------- -------- -------- -------- -------- --------
Total costs and expenses 67,613 61,984 32,872 31,404 35,157 30,913
-------- -------- -------- -------- -------- --------
Earnings before income taxes 11,162 9,848 9,942 8,689 4,606 4,055
Provision for income taxes (3,534) (3,223) (2,314) (2,064) (1,220) (1,159)
-------- -------- -------- -------- -------- --------
Net earnings $ 7,628 $ 6,625 $ 7,628 $ 6,625 $ 3,386 $ 2,896
======== ======== ======== ======== ======== ========
Net earnings per share
Diluted $ 2.29 $ 1.99
Basic $ 2.33 $ 2.03
Dividends declared per share $ 1.05 $ 0.90
<FN>
See notes to condensed consolidated financial statements. Consolidating data are
shown for "GE" and "GECS." Transactions between GE and GECS have been eliminated
from the "consolidated" columns.
</FN>
</TABLE>
<PAGE>
CONDENSED STATEMENT OF FINANCIAL POSITION
GENERAL ELECTRIC COMPANY AND CONSOLIDATED AFFILIATES
<TABLE>
<CAPTION>
(DOLLARS IN MILLIONS) CONSOLIDATED GE GECS
---------------------- -------------------- ----------------------
9/30/99 12/31/98 9/30/99 12/31/98 9/30/99 12/31/98
--------- --------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Cash and equivalents $ 6,112 $ 4,317 $ 1,379 $ 1,175 $ 5,109 $ 3,342
Investment securities 78,107 78,717 280 259 77,827 78,458
Current receivables 8,133 8,224 8,290 8,483 -- --
Inventories 7,293 6,049 5,917 5,305 1,376 744
Financing receivables - net 127,356 121,566 -- -- 127,356 121,566
Other GECS receivables 29,290 24,789 -- -- 30,268 25,973
Property, plant and equipment (including equipment
leased to others) - net 37,622 35,730 11,237 11,694 26,385 24,036
Investment in GECS -- -- 19,527 19,727 -- --
Intangible assets - net 25,567 23,635 11,191 9,996 14,376 13,639
All other assets 60,744 52,908 20,026 18,031 41,110 35,539
--------- --------- -------- -------- --------- ---------
Total assets $ 380,224 $ 355,935 $ 77,847 $ 74,670 $ 323,807 $ 303,297
========= ========= ======== ======== ========= =========
Short-term borrowings $ 120,010 $ 115,378 $ 2,642 $ 3,466 $ 118,394 $ 113,162
Accounts payable, principally trade accounts 12,570 12,502 4,859 4,845 9,922 8,815
Other GE current liabilities 17,095 13,699 15,886 13,619 -- --
Long-term borrowings 66,338 59,663 709 681 65,614 59,038
Insurance liabilities, reserves and annuity benefits 83,898 77,259 -- -- 83,898 77,259
All other liabilities 27,331 24,939 12,766 12,613 14,455 12,247
Deferred income taxes 7,820 9,340 181 (250) 7,639 9,590
--------- --------- -------- -------- --------- ---------
Total liabilities 335,062 312,780 37,043 34,974 299,922 280,111
--------- --------- -------- -------- --------- ---------
Minority interest in equity of consolidated
affiliates 5,189 4,275 831 816 4,358 3,459
--------- --------- -------- -------- --------- ---------
Accumulated unrealized gains (losses) on
investment securities - net <F1> 82 2,402 82 2,402 (66) 2,376
Accumulated currency translation adjustments <F1> (1,218) (738) (1,218) (738) (283) (215)
Common stock (3,277,653,000 and 3,271,296,000
shares outstanding at September 30, 1999 and
December 31, 1998, respectively) 594 594 594 594 1 1
Other capital 8,944 6,808 8,944 6,808 2,682 2,490
Retained earnings 52,742 48,553 52,742 48,553 17,193 15,075
Less common stock held in treasury (21,171) (18,739) (21,171) (18,739) -- --
--------- --------- -------- -------- --------- ---------
Total share owners' equity 39,973 38,880 39,973 38,880 19,527 19,727
--------- --------- -------- -------- --------- ---------
Total liabilities and equity $ 380,224 $ 355,935 $ 77,847 $ 74,670 $ 323,807 $ 303,297
========= ========= ======== ======== ========= =========
<FN>
See notes to condensed consolidated financial statements. Consolidating data are
shown for "GE" and"GECS." September data is unaudited. Transactions between GE
and GECS have been eliminated from the "consolidated" columns.
<F1> The sum of accumulated unrealized gains (losses) on investment securities
and accumulated currency translation adjustments constitutes "Accumulated
nonowner changes other than earnings," and was ($1,136) million and $1,664
million at September 30, 1999 and December 31, 1998, respectively.
</FN>
</TABLE>
<PAGE>
CONDENSED STATEMENT OF CASH FLOWS
GENERAL ELECTRIC COMPANY AND CONSOLIDATED AFFILIATES
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30 (UNAUDITED)
------------------------------------------------------------------------
(DOLLARS IN MILLIONS) CONSOLIDATED GE GECS
---------------------- -------------------- ----------------------
1999 1998 1999 1998 1999 1998
--------- --------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 7,628 $ 6,625 $ 7,628 $ 6,625 $ 3,386 $ 2,896
Adjustments to reconcile net earnings to cash
provided from (used for) operating activities
Depreciation and amortization of property,
plant and equipment 3,602 3,235 1,302 1,306 2,300 1,929
Amortization of goodwill and other intangibles 1,255 1,058 408 379 847 679
Earnings retained by GECS -- -- (2,118) (1,584) -- --
Deferred income taxes 96 672 538 347 (442) 325
Decrease in GE current receivables 301 560 403 566 -- --
Decrease (increase) in inventories (355) (13) (518) (109) 163 96
Increase (decrease) in accounts payable (500) (291) (49) (81) 602 64
Increase in insurance liabilities, reserves
and annuity benefits 2,830 3,008 -- -- 2,830 3,008
Provision for losses on financing receivables 1,048 1,047 -- -- 1,048 1,047
All other operating activities 225 (3,628) (170) (1,571) (188) (2,046)
--------- --------- -------- -------- --------- ---------
Cash from operating activities 16,130 12,273 7,424 5,878 10,546 7,998
--------- --------- -------- -------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment
(including equipment leased to others) (8,629) (5,335) (1,070) (1,285) (7,559) (4,050)
Net increase in GECS financing receivables (6,751) (3,110) -- -- (6,751) (3,110)
Payments for principal businesses purchased (7,845) (9,670) (1,171) (1,226) (6,674) (8,444)
All other investing activities 996 (5,930) 106 242 789 (6,363)
--------- --------- -------- -------- --------- ---------
Cash used for investing activities (22,229) (24,045) (2,135) (2,269) (20,195) (21,967)
--------- --------- -------- -------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in borrowings (maturities 90 days or less) (5,889) 9,109 (774) 1,788 (5,339) 7,050
Newly issued debt (maturities longer than 90 days) 27,677 31,752 459 467 27,147 31,256
Repayments and other reductions (maturities
longer than 90 days) (10,343) (24,262) (588) (1,639) (9,755) (22,623)
Net purchase of GE shares for treasury (742) (1,717) (742) (1,717) -- --
Dividends paid to share owners (3,440) (2,933) (3,440) (2,933) (1,268) (1,312)
All other financing activities 631 (271) -- -- 631 (271)
--------- --------- -------- -------- --------- ---------
Cash from (used for) financing activities 7,894 11,678 (5,085) (4,034) 11,416 14,100
--------- --------- -------- -------- --------- ---------
Increase (decrease) in cash and equivalents 1,795 (94) 204 (425) 1,767 131
Cash and equivalents at beginning of year 4,317 5,861 1,175 1,157 3,342 4,904
--------- --------- -------- -------- --------- ---------
Cash and equivalents at September 30 $ 6,112 $ 5,767 $ 1,379 $ 732 $ 5,109 $ 5,035
========= ========= ======== ======== ========= =========
<FN>
See notes to condensed consolidated financial statements. Consolidating data are
shown for "GE" and "GECS." Transactions between GE and GECS have been eliminated
from the "consolidated" columns.
</FN>
</TABLE>
<PAGE>
SUMMARY OF OPERATING SEGMENTS
GENERAL ELECTRIC COMPANY AND CONSOLIDATED AFFILIATES
<TABLE>
<CAPTION>
THIRD QUARTER NINE MONTHS
ENDED SEPTEMBER 30 ENDED SEPTEMBER 30
(UNAUDITED) (UNAUDITED)
-------------------- --------------------
(Dollars in millions) 1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUES
GE
Aircraft Engines $ 2,610 $ 2,525 $ 7,605 $ 7,395
Appliances 1,449 1,469 4,126 4,133
Industrial Products and Systems 2,802 2,571 8,226 7,934
NBC 1,076 1,039 4,038 3,928
Plastics 1,690 1,612 5,046 4,898
Power Systems 2,451 1,913 6,468 5,677
Technical Products and Services 1,601 1,227 4,721 3,581
Eliminations (415) (286) (1,087) (863)
-------- -------- -------- --------
Total GE segment revenues 13,264 12,070 39,143 36,683
Corporate items 59 174 285 514
GECS net earnings 1,262 1,082 3,386 2,896
-------- -------- -------- --------
Total GE revenues 14,585 13,326 42,814 40,093
GECS segment revenues 14,002 12,016 39,763 34,968
Eliminations <F1> (1,387) (1,206) (3,802) (3,229)
-------- -------- -------- --------
CONSOLIDATED REVENUES $ 27,200 $ 24,136 $ 78,775 $ 71,832
======== ======== ======== ========
SEGMENT PROFIT
GE
Aircraft Engines $ 535 $ 417 $ 1,528 $ 1,263
Appliances 137 189 475 553
Industrial Products and Systems 491 393 1,424 1,261
NBC 265 202 1,143 976
Plastics 390 412 1,255 1,238
Power Systems 383 254 1,064 769
Technical Products and Services 316 249 912 745
-------- -------- -------- --------
Total GE operating profit 2,517 2,116 7,801 6,805
GECS net earnings 1,262 1,082 3,386 2,896
-------- -------- -------- --------
Total segment profit 3,779 3,198 11,187 9,701
GE interest and other financial charges (191) (199) (595) (610)
GE provision for income taxes (682) (613) (2,314) (2,064)
Corporate items and eliminations (253) (102) (650) (402)
-------- -------- -------- --------
CONSOLIDATED NET EARNINGS $ 2,653 $ 2,284 $ 7,628 $ 6,625
======== ======== ======== ========
<FN>
<F1> Principally the elimination of GECS net earnings.
</FN>
</TABLE>
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. The accompanying condensed quarterly financial statements represent
the consolidation of General Electric Company and all companies which it
directly or indirectly controls, either through majority ownership or otherwise.
Reference is made to note 1 to the consolidated financial statements included in
the Company's Annual Report on Form 10-K for the year ended December 31, 1998.
That note discusses consolidation and financial statement presentation. As used
in this Report and in the Report on Form 10-K, "GE" represents the adding
together of all affiliated companies except General Electric Capital Services,
Inc. ("GECS"), which is presented on a one-line basis; GECS consists of General
Electric Capital Services, Inc. and all of its affiliates; and "consolidated"
represents the adding together of GE and GECS with the effects of transactions
between the two eliminated. Certain prior-year amounts have been reclassified to
conform with the 1999 presentation.
2. The condensed consolidated quarterly financial statements are
unaudited. These statements include all adjustments (consisting of normal
recurring accruals) considered necessary by management to present a fair
statement of the results of operations, financial position and cash flows. The
results reported in these condensed consolidated financial statements should not
be regarded as necessarily indicative of results that may be expected for the
entire year.
3. A summary of changes in share owners' equity that do not result
directly from transactions with share owners is provided below.
THIRD QUARTER ENDED
-------------------
(DOLLARS IN MILLIONS) 9/30/99 9/30/98
------- --------
Net earnings $ 2,653 $ 2,284
Unrealized losses on investment securities - net (563) (272)
Foreign currency translation adjustments - net 54 132
------- --------
Total $ 2,144 $ 2,144
======= ========
NINE MONTHS ENDED
-------------------
9/30/99 9/30/98
------- --------
Net earnings $ 7,628 $ 6,625
Unrealized gains (losses) on investment securities - net (2,320) 180
Foreign currency translation adjustments - net (480) (80)
------- --------
Total $ 4,828 $ 6,725
======= ========
4. In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 133, ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES (the "Statement"). The Statement requires
that, upon adoption, all derivative instruments (including certain derivative
instruments embedded in other contracts) be recognized in the balance sheet at
fair value and that changes in such fair values be recognized in earnings unless
specific hedging criteria are met. Changes in the values of derivatives that
meet these hedging criteria will ultimately offset related earnings effects of
the hedged items; effects of certain changes in fair value are recorded in
equity pending recognition in earnings. In June 1999, the FASB delayed the
required effective date of the new standard to January 1, 2001. The impact of
adoption will be determined by several factors, including the specific hedging
instruments in place and their relationships to hedged items, as well as market
conditions at the date of adoption. Management has not estimated the effect of
adoption as it believes that such determination will not be meaningful until
closer to the adoption date.
5. Inventories consisted of the following:
AT
------------------
(DOLLARS IN MILLIONS) 9/30/99 12/31/98
------- --------
GE
Raw materials and work in process $ 3,490 $ 3,154
Finished goods 3,128 2,967
Unbilled shipments 287 195
Revaluation to LIFO (988) (1,011)
------- -------
5,917 5,305
------- -------
GECS
Finished goods 1,376 744
------- -------
Total $ 7,293 $ 6,049
======= =======
6. Property, plant and equipment (including equipment leased to others)
consisted of the following:
AT
------------------
(DOLLARS IN MILLIONS) 9/30/99 12/31/98
------- --------
ORIGINAL COST
- - GE $28,675 $28,310
- - GECS 36,601 32,790
------- -------
Total 65,276 61,100
------- -------
ACCUMULATED DEPRECIATION AND AMORTIZATION
- - GE 17,438 16,616
- - GECS 10,216 8,754
------- -------
Total 27,654 25,370
------- -------
PROPERTY, PLANT AND EQUIPMENT -- NET
- - GE 11,237 11,694
- - GECS 26,385 24,036
------- -------
Total $37,622 $35,730
======= =======
7. GE's authorized common stock consisted of 4,400,000,000 shares
having a par value of $0.16 each. Information related to the calculation of net
earnings per share follows:
<TABLE>
<CAPTION>
THIRD QUARTER ENDED
---------------------------------------
(DOLLAR AMOUNTS AND SHARES IN MILLIONS; 9/30/99 9/30/98
PER-SHARE AMOUNTS IN DOLLARS) ----------------- -----------------
DILUTED BASIC DILUTED BASIC
------- ----- ------- -----
<S> <C> <C> <C> <C>
CONSOLIDATED OPERATIONS
Net earnings available to common share owners $2,653 $2,653 $2,284 $2,284
Dividend equivalents -- net of tax 2 -- 2 --
------ ------ ------ ------
Net earnings available for per-share calculation $2,655 $2,653 $2,286 $2,284
------ ------ ------ ------
AVERAGE EQUIVALENT SHARES
Shares of GE common stock 3,280 3,280 3,268 3,268
Employee compensation-related shares,
including stock options 53 -- 57 --
------ ------ ------ ------
Total average equivalent shares 3,333 3,280 3,325 3,268
------ ------ ------ ------
Net earnings per share $ 0.80 $ 0.81 $ 0.69 $ 0.70
====== ====== ====== ======
<CAPTION>
NINE MONTHS ENDED
---------------------------------------
9/30/99 9/30/98
----------------- -----------------
DILUTED BASIC DILUTED BASIC
------- ----- ------- -----
<S> <C> <C> <C> <C>
CONSOLIDATED OPERATIONS
Net earnings available to common share owners $7,628 $7,628 $6,625 $6,625
Dividend equivalents -- net of tax 6 -- 11 --
------ ------ ------ ------
Net earnings available for per-share calculation $7,634 $7,628 $6,636 $6,625
------ ------ ------ ------
AVERAGE EQUIVALENT SHARES
Shares of GE common stock 3,276 3,276 3,268 3,268
Employee compensation-related shares,
including stock options 54 -- 64 --
------ ------ ------ ------
Total average equivalent shares 3,330 3,276 3,332 3,268
------ ------ ------ ------
Net earnings per share $ 2.29 $ 2.33 $ 1.99 $ 2.03
====== ====== ====== ======
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
A. RESULTS OF OPERATIONS -- THIRD QUARTER OF 1999 COMPARED WITH THIRD QUARTER
OF 1998
General Electric Company earnings per share increased 16% to $.80, up
from last year's $.69, and net earnings increased 16% to $2.653 billion. Both
earnings per share and earnings were records for the quarter.
Revenues, including acquisitions, rose to a record $27.2 billion, 13%
higher than last year's third quarter, reflecting continued growth from
globalization and product services.
GE's third-quarter operating margin was 16.7% of sales, up from last
year's 15.5%, and was a record for the quarter. The third-quarter margin growth
reflects the increasing benefits from GE's focus on product services and Six
Sigma quality initiatives.
GE Capital Services' third-quarter earnings rose to $1.262 billion, 17%
more than last year's $1.082 billion. These record results reflect the
globalization and diversity of GE Capital's 28 businesses. GECS' results were
driven by strong double-digit increases in its Consumer Services and Mid-Market
Financing segments.
Cash generated from GE's operating activities during the first nine
months was a record $7.4 billion, up 25% from last year's $5.9 billion. As part
of the six-year $17 billion share repurchase program, GE purchased $418 million
of its stock during the third quarter to reach $14.9 billion--300 million
shares--purchased since December 1994.
As discussed in the 1998 GE Annual Report on Form 10-K, GE and GECS are
applying a Six Sigma quality approach to identify and mitigate Year 2000 issues
in their information systems, products, facilities and suppliers. Each business
has a Year 2000 leader who oversees a multi-functional project team responsible
for remediation and contingency planning, applying a Six Sigma quality approach
in four phases: (1) define/measure - identify and inventory possible sources of
Year 2000 issues; (2) analyze - determine the nature and extent of Year 2000
issues and develop project plans to address those issues; (3) improve - execute
project plans and perform a majority of the testing; and (4) control - complete
testing, continue monitoring readiness and complete necessary contingency plans.
As of the end of June 1999, virtually all significant information systems,
products, facilities, and suppliers were in the control phase. As a final step
in the control phase, GE and GECS have developed, tested and are prepared to
implement contingency plans to minimize disruption of critical business
processes. The specific actions identified in such contingency plans differ
depending on circumstances, but most often include manual work-arounds,
deployment of backup or secondary technologies, rearranging work schedules, and
substitution of suppliers, as appropriate. While management does not expect
significant disruptions of critical business processes caused by internal Year
2000 issues, the likelihood of externally-caused disruptions and the ability of
the contingency plans to minimize such externally-caused disruptions is not
determinable. The total estimate of Year 2000 expenditures, adjusted for
increases related to acquired companies, is in line with previous projections.
The activities related to Year 2000 efforts necessarily involve estimates and
projections of activities and resources that will be required in the future.
These estimates and projections could change as work progresses.
SEGMENT ANALYSIS:
The comments that follow compare revenues and operating profit by
operating segment for the third quarters of 1999 and 1998.
o AIRCRAFT ENGINES reported a 28% increase in operating profit on
revenues that were 3% higher than a year ago. The increase in revenues primarily
reflected higher volume in product services. The improvement in operating profit
was primarily attributable to strong productivity and growth in product services
which more than offset higher costs.
o APPLIANCES revenues decreased 1% over the third quarter of 1998, as
lower selling prices and adverse currency exchange more than offset volume
increases. Operating profit decreased 28% largely as a result of the lower
selling prices and increased spending on new products and e-commerce.
o GE CAPITAL SERVICES third-quarter earnings rose to $1.262 billion, up
17% from last year's $1.082 billion, reflecting strong double-digit increases in
Consumer Services and Mid-Market Financing activities.
o INDUSTRIAL PRODUCTS AND SYSTEMS reported a 25% increase in operating
profit on revenues that were 9% higher than a year ago. The increase in revenues
reflected volume increases across all businesses in the segment, particularly at
Transportation Systems. The improvement in segment operating profit was
primarily attributable to productivity and higher volume, which were partially
offset by the effects of lower selling prices.
o NBC reported a 31% increase in operating profit on revenues that were
4% higher than in the third quarter of 1998. The improvement in revenues
reflected continued growth in cable operations, particularly at CNBC, and in
owned-and-operated stations. The increase in operating profit was primarily
attributable to a strong marketplace, improved results in network operations,
cable, and stations, as well as continuing benefits from cost reductions across
the business, which more than offset higher license fees for certain sports and
prime-time programs that were renewed.
o PLASTICS revenues were 5% higher than a year ago, primarily as a
result of improved volume which more than offset lower selling prices. Operating
profit decreased by 5% reflecting lower selling prices which more than offset
productivity and the volume increase.
o POWER SYSTEMS revenues increased 28%, primarily as a result of
sharply higher volume in gas turbines and continued growth in product services,
including acquisitions. Operating profit rose 51%, reflecting productivity and
the increase in volume.
o TECHNICAL PRODUCTS & SERVICES revenues increased 30% from the third
quarter of 1998, principally as a result of sharply higher volume at Medical
Systems, including the contribution of acquisitions. Operating profit grew 27%
in the third quarter, reflecting volume growth at Medical Systems and
productivity which more than offset lower selling prices across the segment.
B. RESULTS OF OPERATIONS -- FIRST NINE MONTHS OF 1999 COMPARED WITH FIRST
NINE MONTHS OF 1998
Net earnings were $7.628 billion in the first nine months of 1999, up
15% from $6.625 billion in the first nine months of 1998. Earnings per share
increased 15% to $2.29 from $1.99.
Consolidated revenues for the first nine months of 1999 aggregated
$78.8 billion, up 10% from the comparable $71.8 billion in 1998's first nine
months. GE's sales of goods and services were 7% higher, led by Medical Systems,
Power Systems and Transportation Systems. The improvement in sales was largely
attributable to increases in the volume of goods and services sold which were
partially offset by the effects of lower selling prices overall.
Operating margin in the first nine months of 1999 was 17.5% of sales,
an improvement over last year's 16.3%. The growth reflects the increasing
benefits from GE's focus on product services and Six Sigma quality initiatives.
SEGMENT ANALYSIS:
The following comments compare revenues and operating profit by
industry segment for the first nine months of 1999 with the same period of 1998.
o AIRCRAFT ENGINES reported a 21% increase in operating profit on
revenues that were 3% higher than a year ago. The increase in revenues was
primarily attributable to higher volume in product services. The improvement in
operating profit was primarily attributable to growth in product services and
productivity, which more than offset higher costs.
o APPLIANCES revenues were about the same as in the first nine months
of 1998, as lower selling prices and adverse currency exchange offset volume
increases. Operating profit decreased 14% largely as a result of the lower
selling prices and increased spending on new products.
o GE CAPITAL SERVICES year-to-date earnings rose to $3.386 billion, up
17% from last year's $2.896 billion, reflecting strong double-digit increases in
Consumer Services and Mid-Market Financing activities.
o INDUSTRIAL PRODUCTS AND SYSTEMS reported a 13% increase in operating
profit on revenues that were 4% higher than a year ago. The increase in revenues
reflected volume increases across all businesses in the segment, particularly at
Transportation Systems. The improvement in segment operating profit was
primarily attributable to productivity, which was partially offset by the
effects of lower selling prices.
o NBC reported a 17% increase in operating profit on revenues that were
3% higher than in the first nine months of 1998. The improvement in revenues
reflected continued growth in cable operations, particularly at CNBC, and in
owned-and-operated stations. The increase in operating profit was primarily
attributable to a strong marketplace, strong results in cable operations and
continuing benefits from cost reductions across the business, which more than
offset higher license fees for certain sports and prime-time programs that were
renewed.
o PLASTICS revenues were 3% higher than a year ago, primarily as a
result of improved volume which more than offset lower selling prices. Operating
profit increased by 1% as productivity, volume and lower material costs more
than offset the effects of lower selling prices.
o POWER SYSTEMS revenues increased 14%, primarily as a result of
sharply higher volume in gas turbines and continued growth in product services,
including acquisitions. Operating profit rose 38%, reflecting productivity and
higher volume.
o TECHNICAL PRODUCTS & SERVICES revenues increased 32% over last year,
reflecting sharply higher volume at Medical Systems, including the contribution
of acquisitions. Operating profit grew 22%, largely as a result of volume growth
at Medical Systems which more than offset lower selling prices across the
segment.
C. FINANCIAL CONDITION
With respect to the Condensed Statement of Financial Position,
consolidated assets of $380.2 billion at September 30, 1999, were $24.3 billion
higher than at December 31, 1998.
GE assets were $77.8 billion at September 30, 1999, an increase of $3.2
billion from December 31, 1998. The increase was attributable to additions to
intangible assets ($1.2 billion) and increases in all other assets ($2.0
billion). The growth in intangibles related primarily to acquired businesses,
the largest of which was Marquette Medical Systems. The change in all other
assets reflected an increase in the prepaid pension asset, the acquisition of
businesses that were not yet consolidated and numerous smaller changes.
GECS assets increased by $20.5 billion from the end of 1998. Investment
securities decreased $0.6 billion largely as a result of decreases in fair
values of investment securities associated with higher interest rates during the
period. GE Capital's financing receivables, which, net of the allowance for
losses, aggregated $127.4 billion at the end of the third quarter, increased
$5.8 billion from the year-end 1998 level of $121.6 billion. The increase
resulted principally from new volume and acquisitions, the largest of which were
Long Term Credit Bank, AVCO's financial services business and Pheonixcor. Those
increases were partially offset by asset securitizations and foreign currency
translation effects related to European financing receivables. Management
believes that GE Capital's allowance for losses of $3.4 billion at September 30,
1999 is appropriate given the strength and diversity of the portfolio and
current economic circumstances. Other receivables increased $4.3 billion,
principally related to acquisitions of Japan Leasing and Eagle Star. Other
assets increased $5.6 billion primarily reflecting higher investments in and
advances to non-consolidated affiliates and increases in "separate accounts,"
which are investments controlled by policyholders.
Consolidated liabilities of $335.1 billion at September 30, 1999, were
$22.3 billion higher than the year-end 1998 balance of $312.8 billion.
GE liabilities increased $2.1 billion to $37.0 billion. Total
borrowings were $3.3 billion ($2.6 billion short term and $0.7 billion long
term) at September 30, 1999, a decrease of $0.8 billion from December 31, 1998.
The ratio of debt to total capital for GE at the end of the third quarter was
7.6% compared with 9.5% at the end of last year and 11.6% at September 30, 1998.
GECS liabilities increased $19.8 billion to $299.9 billion, compared
with $280.1 billion at the end of 1998. The increase was principally
attributable to higher borrowings ($11.8 billion) and an increase of $6.6
billion in insurance liabilities, reserves and annuity benefits, reflecting
primarily additions to reserves related to volume and increases in separate
accounts. Short-term borrowings increased by $5.2 billion to $118.4 billion and
long-term borrowings increased by $6.6 billion to $65.6 billion.
With respect to cash flows, consolidated cash and equivalents were $6.1
billion at September 30, 1999, an increase of $1.8 billion during the first nine
months of 1999. Cash and equivalents were $5.8 billion at September 30, 1998, a
decrease of $0.1 billion since the beginning of the year.
GE cash and equivalents increased $0.2 billion during the first nine
months of 1999 to $1.4 billion at September 30, 1999. Cash provided from 1999
operating activities was $7.4 billion, an increase of 25% over the $5.9 billion
reported for the first nine months of 1998, reflecting continuing improvements
in earnings and higher progress collections during the period. Cash used for
investing activities ($2.1 billion) principally represented acquisition of
businesses and investments in new plant and equipment for a wide variety of
projects to lower costs and improve efficiencies. Cash used for financing
activities ($5.1 billion) included $1.4 billion for repurchases of the Company's
common stock under the share repurchase program and $3.4 billion for dividends
paid to share owners, a 17% increase in the per-share dividend rate compared
with the first nine months of last year.
GE cash and equivalents decreased $0.4 billion during the first nine
months of 1998 to $0.7 billion at September 30, 1998. Cash provided from 1998
operating activities was $5.9 billion compared with $5.1 billion for the first
nine months of 1997. The improvement resulted from, among other things,
continued improvements in earnings, higher GECS dividends, and increased cash
flows from working capital. Cash used for investing activities ($2.3 billion)
principally represented acquisitions and investments in new plant and equipment
for a wide variety of projects to lower costs and improve efficiencies. Cash
used for financing activities ($4.0 billion) included $2.8 billion for
repurchases of the Company's common stock under the share repurchase program and
$2.9 billion for dividends paid to share owners, a 15% increase in the per-share
dividend rate compared with the first nine months of 1997. The effects of
dividends and share repurchases on cash used for financing activities were
partially offset by cash provided from higher borrowings ($0.6 billion).
GECS cash and equivalents increased $1.8 billion during the first nine
months of 1999. Cash provided from operating activities totaled $10.5 billion,
compared with $8.0 billion for the first nine months of 1998. Cash was used to
fund business acquisitions ($6.7 billion), the largest of which were the
acquisitions of Japan Leasing, the financial services business of AVCO and
Pheonixcor; for additions to property, plant and equipment ($7.6 billion),
principally equipment that is provided to third parties on operating leases; and
for additions to financing receivables ($6.8 billion). Cash provided from
financing activities resulted primarily from increased borrowings ($12.1
billion) during the first nine months of 1999.
GECS cash and equivalents increased $0.1 billion during the first nine
months of 1998. Cash provided from operating activities totaled $8.0 billion,
compared with $5.4 billion for the first nine months of 1997. Cash was used to
fund business acquisitions ($8.4 billion), primarily the acquisition of Met Life
Capital Corporation; for additions to property, plant and equipment ($4.1
billion), principally equipment that is provided to third parties on operating
leases; and for additions to financing receivables ($3.1 billion). Cash provided
from financing activities resulted primarily from increased borrowings ($15.7
billion) during the first nine months of 1998.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
Exhibit 11 Computation of Per Share Earnings*
Exhibit 12 Computation of Ratio of Earnings to Fixed Charges
Exhibit 27 Financial Data Schedule
* Data required by Statement of Financial Accounting Standards No. 128,
Earnings per Share, is provided in note 7 to the condensed
consolidated financial statements in this report.
b. Reports on Form 8-K during the quarter ended September 30, 1999.
No reports on Form 8-K were filed during the quarter ended
September 30, 1999.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
General Electric Company
(Registrant)
October 26, 1999 /s/ Philip D. Ameen
- ---------------- -------------------
Date Philip D. Ameen
Vice President and Comptroller
Duly Authorized Officer and Principal Accounting Officer
EXHIBIT 12
GENERAL ELECTRIC COMPANY
RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN MILLIONS) Nine months ended
September 30, 1999
------------------
GE EXCEPT GECS
Earnings (a) $ 10,064
Less: Equity in undistributed earnings of General Electric
Capital Services, Inc. (b) (2,118)
Plus: Interest and other financial
charges included in expense 595
One-third of rental expense (c) 142
--------
Adjusted "earnings" $ 8,683
========
Fixed Charges:
Interest and other financial charges $ 595
Interest capitalized 11
One-third of rental expense (c) 142
--------
Total fixed charges $ 748
========
Ratio of earnings to fixed charges 11.61
========
GENERAL ELECTRIC COMPANY AND CONSOLIDATED AFFILIATES
Earnings (a) $ 11,416
Plus: Interest and other financial charges
included in expense 7,222
One-third of rental expense (c) 398
--------
Adjusted "earnings" $ 19,036
========
Fixed Charges:
Interest and other financial charges $ 7,222
Interest capitalized 75
One-third of rental expense (c) 398
--------
Total fixed charges $ 7,695
========
Ratio of earnings to fixed charges 2.47
========
(a) Earnings before income taxes and minority interest.
(b) Earnings after income taxes, net of dividends.
(c) Considered to be representative of interest factor in rental expense.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated financial statements for the period ended September 31, 1999
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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 6,112
<SECURITIES> 78,107
<RECEIVABLES> 0<F1>
<ALLOWANCES> 0<F1>
<INVENTORY> 7,293
<CURRENT-ASSETS> 0<F2>
<PP&E> 65,276
<DEPRECIATION> 27,654
<TOTAL-ASSETS> 380,224
<CURRENT-LIABILITIES> 0<F2>
<BONDS> 66,338
0
0
<COMMON> 594
<OTHER-SE> 39,379
<TOTAL-LIABILITY-AND-EQUITY> 380,224
<SALES> 33,335
<TOTAL-REVENUES> 44,735<F3>
<CGS> 23,916
<TOTAL-COSTS> 31,921<F4>
<OTHER-EXPENSES> 0<F1>
<LOSS-PROVISION> 0<F1>
<INTEREST-EXPENSE> 7,122
<INCOME-PRETAX> 11,162
<INCOME-TAX> 3,534
<INCOME-CONTINUING> 7,628
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,628
<EPS-BASIC> 2.33
<EPS-DILUTED> 2.29
<FN>
<F1>Not disclosed in interim periods.
<F2>Not applicable to consolidated GE.
<F3>Sales of goods ($33,335) and services ($11,400).
<F4>Cost of goods ($23,916) and services ($8,005) sold.
</FN>
</TABLE>
