<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
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/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED APRIL 2, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM
-------TO
-------
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COMMISSION FILE NUMBER 1-6461
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GENERAL ELECTRIC CAPITAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C>
NEW YORK 13-1500700
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
260 LONG RIDGE ROAD, STAMFORD, 06927
CONNECTICUT
(Address of principal executive offices) (Zip Code)
(203) 357-4000
(Registrant's telephone number, including area code)
</TABLE>
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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
At April 20, 1994, 3,837,825 shares of common stock with a par value of
$200 were outstanding.
REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(A)
AND (B) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM 10-Q WITH THE REDUCED
DISCLOSURE FORMAT.
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TABLE OF CONTENTS
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PAGE
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PART I -- FINANCIAL INFORMATION.
Item 1. Financial Statements. 1
Item 2. Management's Discussion and Analysis of Results of Operations. 5
Exhibit 12. Computation of Ratio of Earnings to Fixed Charges and
Computation of Ratio of Earnings to Combined Fixed Charges and Preferred
Stock Dividends. 8
PART II -- OTHER INFORMATION.
Item 1. Legal Proceedings. 9
Item 2. Changes in Securities. 9
Item 3. Defaults Upon Senior Securities. 9
Item 4. Submission of Matters to a Vote of Security Holders. 9
Item 5. Other Information. 9
Item 6. Exhibits and Reports on Form 8-K. 9
Signatures. 10
Index to Exhibits. 11
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<PAGE> 3
PART I--FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES
CONDENSED STATEMENT OF CURRENT AND RETAINED EARNINGS
(Unaudited)
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<CAPTION>
FOR THE THREE MONTHS ENDED
--------------------------------
(In millions) APRIL 2, 1994 MARCH 27, 1993
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<S> <C> <C>
EARNED INCOME $ 3,808 $3,131
------------- -------
EXPENSES
Interest 985 779
Operating and administrative 1,265 1,048
Insurance losses and policyholder and annuity benefits 351 169
Provision for losses on financing receivables 170 255
Depreciation and amortization of buildings and equipment and
equipment on operating leases 384 340
Minority interest in net earnings of consolidated affiliates 18 15
------------- -------
3,173 2,606
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EARNINGS
Earnings before income taxes 635 525
Provision for income taxes 191 154
------------- -------
NET EARNINGS 444 371
Cash dividends paid (193) (155)
Retained earnings at beginning of period 7,008 6,012
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RETAINED EARNINGS AT END OF PERIOD $ 7,259 $6,228
------------- -------
------------- -------
</TABLE>
See Notes to Condensed, Consolidated Financial Statements.
1
<PAGE> 4
ITEM 1. FINANCIAL STATEMENTS (Continued).
GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES
CONDENSED STATEMENT OF FINANCIAL POSITION
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<CAPTION>
APRIL 2, 1994 DECEMBER 31,
(In millions) (UNAUDITED) 1993
-------------- ------------
<S> <C> <C>
ASSETS
Cash and equivalents $ 629 $ 1,049
Investment securities 19,077 20,577
Financing receivables:
Time sales and loans, net of deferred income 41,989 40,748
Investment in financing leases, net of deferred income 25,794 24,930
-------------- ------------
67,783 65,678
Allowance for losses on financing receivables (1,786) (1,730)
-------------- ------------
Financing receivables--net 65,997 63,948
Other receivables--net 4,166 4,046
Equipment on operating leases (at cost), less accumulated
amortization of $3,439 and $3,238 11,337 10,650
Other assets 16,635 17,669
-------------- ------------
TOTAL ASSETS $117,841 $117,939
-------------- ------------
-------------- ------------
LIABILITIES AND EQUITY
Notes payable within one year $ 52,622 $ 52,903
Senior notes payable after one year 26,186 25,112
Subordinated notes payable after one year 697 697
Insurance reserves and annuity benefits 16,534 16,585
Other liabilities 5,795 6,216
Deferred income taxes 5,336 5,630
-------------- ------------
Total liabilities 107,170 107,143
-------------- ------------
Minority interest in equity of consolidated affiliates 659 426
-------------- ------------
Capital stock 769 769
Additional paid-in capital 2,172 2,172
Retained earnings 7,259 7,008
Other (188) 421
-------------- ------------
Total equity 10,012 10,370
-------------- ------------
TOTAL LIABILITIES AND EQUITY $117,841 $117,939
-------------- ------------
-------------- ------------
</TABLE>
See Notes to Condensed, Consolidated Financial Statements.
2
<PAGE> 5
ITEM 1. FINANCIAL STATEMENTS (Continued).
GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES
CONDENSED STATEMENT OF CASH FLOWS
(Unaudited)
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<CAPTION>
FOR THE THREE MONTHS ENDED
---------------------------------
(In millions) APRIL 2, 1994 MARCH 27, 1993
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 444 $ 371
Adjustments to reconcile net earnings to cash provided from
operating activities:
Provision for losses on financing receivables 170 255
Depreciation and amortization of buildings and equipment and
equipment on operating leases 384 340
Other--net (395) 62
-------------- ---------------
Cash provided from operating activities 603 1,028
-------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES
Increase in loans to customers (6,387) (6,738)
Principal collections from customers 5,412 6,705
Investment in assets on financing leases (1,348) (1,215)
Principal collections on financing leases 1,176 1,638
Net change in credit card receivables 247 627
Buildings, equipment, and equipment on operating
leases -- additions (887) (717)
-- dispositions 41 298
Payments for principal businesses purchased, net of cash acquired (565) --
Purchases of investment securities by insurance and annuity
affiliates (1,410) (1,015)
Dispositions and maturities of investment securities by insurance
and annuity affiliates 1,701 825
Other 939 1,520
-------------- ---------------
Cash provided from (used for) investing activities (1,081) 1,928
-------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in borrowings (less than 90-day maturities) (526) (4,317)
Newly issued debt -- short-term (91-365 days) 762 846
-- long-term senior 3,429 2,147
Repayments and other reductions -- short-term (3,194) (1,748)
-- long-term senior (273) (156)
Proceeds from sales of investment and annuity contracts 146 --
Redemption of investment and annuity contracts (234) --
Principal payments -- non-recourse, leveraged lease debt (99) (97)
Proceeds -- non-recourse, leveraged lease debt -- 35
Dividends paid (193) (155)
Issuance of preferred stock by consolidated affiliate 240 --
-------------- ---------------
Cash provided from (used for) financing activities 58 (3,445)
-------------- ---------------
DECREASE IN CASH AND EQUIVALENTS (420) (489)
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 1,049 1,240
-------------- ---------------
CASH AND EQUIVALENTS AT END OF PERIOD $ 629 $ 751
-------------- ---------------
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</TABLE>
See Notes to Condensed, Consolidated Financial Statements.
3
<PAGE> 6
ITEM 1. FINANCIAL STATEMENTS (Continued).
GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES
NOTES TO CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. The condensed, consolidated financial statements represent a consolidation
of General Electric Capital Corporation ("Corporation") and all
majority-owned and controlled affiliates ("consolidated affiliates"). All
significant transactions among the parent and consolidated affiliates have
been eliminated. In the opinion of management, all adjustments of a normal
recurring nature necessary to present a fair statement of financial position
as of April 2, 1994, the statement of cash flows for the three-month interim
periods ended April 2, 1994, and March 27, 1993, and the results of
operations for the three-month interim periods ended April 2, 1994, and
March 27, 1993, have been included. The condensed, consolidated financial
statements have been prepared in accordance with the instructions for Form
10-Q and therefore do not include some information and footnotes necessary
to constitute a complete and detailed presentation in conformity with annual
reporting requirements.
2. The results of operations for the three months ended April 2, 1994, should
not be regarded as necessarily indicative of the results that may be
expected for the entire year.
3. The ratio of earnings to fixed charges was 1.63 for the three months ended
April 2, 1994. For purposes of computing the ratio, earnings consist of net
earnings adjusted for provision for income taxes, minority interest and
fixed charges. Fixed charges consist of interest on all indebtedness and
one-third of annual rentals, which the Corporation believes is a reasonable
approximation of the interest factor of such rentals. The ratio of earnings
to combined fixed charges and preferred stock dividends was 1.61 for the
three months ended April 2, 1994.
4
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS.
OVERVIEW
Net earnings for the first quarter of 1994 were $444 million, a $73 million
(20%) increase over the first quarter of 1993. The Corporation's contribution to
its parent, General Electric Capital Services, Inc., after payment of dividends
on its variable cumulative preferred stock, was $438 million, a $72 million
(20%) increase over the comparable 1993 period. The Corporation's increase in
net earnings principally resulted from a higher average level of invested assets
and reduced provisions for losses on highly leveraged transaction (HLT)
investments. The spread between average financing yields and interest rates paid
on borrowings was approximately the same as in the comparable prior year period.
OPERATING RESULTS
EARNED INCOME during the first quarter of 1994 increased $677 million (22%)
over the same period in the prior year.
Earned income from the Corporation's specialized financing, mid-market
financing, consumer services and equipment management businesses increased $621
million (23%) over the comparable prior year period principally reflecting a
higher average level of invested assets resulting from both origination volume
and acquisitions of portfolios and businesses. Approximately $230 million of the
increase was generated by the Corporation's annuity business, formed through
acquisitions during the second and third quarters of 1993. Earned income from
the Corporation's specialty insurance businesses increased $56 million (14%)
over the first quarter of 1993 primarily reflecting growth in premium and
investment income in the private mortgage insurance business.
INTEREST EXPENSE for the first quarter of 1994 increased $206 million (26%)
from the first quarter of last year. The increase reflected the effects of
additional borrowings required to finance the higher level of invested assets.
The Corporation's composite interest rate for the first quarter of 1994 was
4.88%, compared with 4.90% for the first quarter of 1993.
OPERATING AND ADMINISTRATIVE expenses were $1,265 million in the first
quarter of 1994, up 21% over the first quarter of 1993. This increase reflected
operating costs associated with the higher level of assets, largely the result
of businesses and portfolios acquired over the past year.
INSURANCE LOSSES AND POLICYHOLDER AND ANNUITY BENEFITS were $351 million
for the first quarter of 1994, double that of the first quarter of 1993,
principally as a result of annuity benefits credited to customers of the annuity
business which was acquired in 1993.
PROVISION FOR LOSSES ON FINANCING RECEIVABLES during the first quarter of
1994 was $170 million, $85 million (33%) lower than during the comparable prior
year period, principally reflecting lower provisions for losses on HLT
receivables.
DEPRECIATION AND AMORTIZATION OF BUILDINGS AND EQUIPMENT AND EQUIPMENT ON
OPERATING LEASES was $384 million in the first quarter of 1994, $44 million
higher than in the first quarter of 1993, reflecting higher levels of equipment
on operating leases as a result of portfolio growth and acquisitions.
PROVISION FOR INCOME TAXES for the first quarter of 1994 was $191 million
(an effective tax rate of 30%) compared with $154 million (29%) for the
comparable prior year period. The higher provision for income taxes was
primarily attributed to increased pre-tax earnings subject to regular tax rates
and the 1% increase in the federal income tax rate.
PORTFOLIO QUALITY
Financing revenues are directly related to the largest financing asset, the
portfolio of financing receivables. The portfolio, net of reserves, aggregated
$66.0 billion at April 2, 1994, an increase of $2.1 billion (3%) from year-end
1993. Related reserves were $1.8 billion (2.63% of receivables--the same level
as at the
5
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
(Continued).
end of 1993) and are, in management's judgment, appropriate given the risk
profile of the portfolio. A discussion of the portfolio quality of certain
elements of financing receivables and investments follows.
CONSUMER LOANS RECEIVABLE, primarily retailer and auto, were $17.6 billion
at April 2, 1994, an increase of $0.3 billion from the end of 1993. The
Corporation's investment in consumer auto finance lease receivables was $6.1
billion at April 2, 1994, compared with $5.6 billion at December 31, 1993.
Nonearning receivables were $384 million at April 2, 1994, compared with $391
million at December 31, 1993. The provision for losses on retailer and auto
financing receivables was $113 million for the first quarter of 1994,
approximately the same as for the first quarter of 1993.
COMMERCIAL REAL ESTATE LOANS classified as financing receivables by the
Commercial Real Estate business were $11.3 billion at April 2, 1994, compared
with $10.9 billion at December 31, 1993. In addition, the investment portfolio
of the Corporation's annuity business included approximately $1.1 billion of
commercial property loans. Commercial Real Estate's portfolio also included $2.4
billion of assets purchased from the Resolution Trust Corporation (RTC) and
other institutions for resale and $1.4 billion of investments in real estate
joint ventures, both of which are included in other assets. Commercial Real
Estate's foreclosed properties decreased to $84 million at April 2, 1994, from
$110 million at December 31, 1993. Nonearning and reduced earning receivables
declined to $218 million at April 2, 1994, from $272 million at the end of 1993.
Loss provisions for Commercial Real Estate loans and investments were $56
million for the first quarter of 1994, compared with $22 million for the first
quarter of 1993 reflecting higher write-offs in the first quarter of 1994,
compared with the first quarter of 1993.
HLT PORTFOLIO INVESTMENTS classified as financing receivables totaled $3.0
billion at April 2, 1994, a decrease of $0.3 billion from the end of 1993. The
April 2, 1994, balance of amounts that had been written down to estimated fair
value and carried in other assets aggregated $536 million, net of allowances, a
decrease of $8 million from the end of 1993. Nonearning and reduced earning
receivables were $139 million at April 2, 1994, the same as at year-end 1993. As
a result of a stronger economic climate and successful past actions, loss
provisions for HLT investments were insignificant during the first quarter of
1994. Such provisions were $145 million in the first quarter of 1993, comprised
of $114 million of receivable loss provisions and $31 million of loss provisions
for other investments.
OTHER FINANCING RECEIVABLES relate primarily to a diverse commercial,
industrial and equipment loan and lease portfolio. Nonearning and reduced
earning receivables in these portfolios were $97 million at April 2, 1994,
compared with $98 million at the end of 1993.
The Corporation's aggregate loans and leases to commercial airlines at
April 2, 1994, increased to approximately $6.9 billion from the December 31,
1993, balance of approximately $6.8 billion, principally as a result of
increased equipment on operating leases.
Other Matters
The Corporation adopted Statement of Financial Accounting Standards (SFAS)
No. 115, "Accounting for Certain Investments in Debt and Equity Securities," on
December 31, 1993, and designated all of its investment securities as
available-for-sale at both December 31, 1993, and April 2, 1994. Under SFAS No.
115, unrealized gains and losses, net of deferred taxes, on available-for-sale
securities are included in a separate component of equity. Equity included net
unrealized gains of $485 million at December 31, 1993, and net unrealized losses
of $138 million at April 2, 1994. This change principally reflected the adverse
effects of rising interest rates during the first quarter on the fair value of
fixed income investments held by the Corporation's annuity and insurance
affiliates. SFAS No. 115 does not provide for recording liabilities of these
affiliates at fair value, which would have the opposite effect in a rising
interest rate environment. Such affiliates purchase securities with specific
maturities considering many factors, including the expected timing and amounts
of payments for annuity and policyholder benefits and insurance losses.
6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
(Continued).
As 1994 progresses, management continues to believe that the diversity and
strength of the Corporation's assets, along with vigilant attention to risk
management, positions it to deal effectively with a changing global economic
environment.
7
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EXHIBIT 12
GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
AND
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK
DIVIDENDS
FOR THE THREE MONTHS ENDED APRIL 2, 1994
(Unaudited)
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<CAPTION>
RATIO OF
EARNINGS
RATIO OF TO FIXED
EARNINGS CHARGES AND
TO FIXED PREFERRED STOCK
(Dollar amounts in millions) CHARGES DIVIDENDS
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<S> <C> <C>
Net earnings $ 444 $ 444
Provision for income taxes 191 191
Minority interest in net earnings of consolidated affiliated 18 18
-------- -------
Income before provision for income taxes and minority interest 653 653
-------- -------
Fixed charges:
Interest 999 999
One-third of rentals 37 37
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Total fixed charges 1,036 1,036
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Less interest capitalized, net of amortization 2 2
-------- -------
Earnings before provision for income taxes and minority interest
plus fixed charges $1,687 $ 1,687
-------- -------
-------- -------
Ratio of earnings to fixed charges 1.63
--------
--------
Preferred stock dividend requirements $ 6
Ratio of income before provision for income taxes to net earnings 143%
Preferred stock dividend factor on pre-tax basis 9
Fixed charges 1,036
-------
Total fixed charges and preferred stock dividend requirements $ 1,045
-------
-------
Ratio of earnings to combined fixed charges and preferred stock
dividends 1.61
-------
-------
</TABLE>
8
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PART II--OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Corporation is not involved in any material pending legal proceedings.
ITEM 2. CHANGES IN SECURITIES.
Omitted.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Omitted.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FROM 8-K.
a. EXHIBITS.
Exhibit 12. Computation of ratio of earnings to fixed charges and
computation of ratio of earnings to combined fixed charges and preferred
stock dividends.
b. REPORTS ON FORM 8-K.
None.
9
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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 CAPITAL CORPORATION
(Registrant)
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Date: May 10, 1994 By: /s/ J. A. PARKE
------------------------------------------------
J. A. Parke, Senior Vice President, Finance
(Principal Financial Officer)
Date: May 10, 1994 By: /s/ J. P. MALFETTONE
-------------------------------------------------
J. P. Malfettone, Vice President and Comptroller
(Principal Accounting Officer)
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10
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GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES
INDEX TO EXHIBITS
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EXHIBIT NO. PAGE NO.
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12 Computation of ratio of earnings to fixed charges and
computation of ratio of earnings to combined fixed charges
and preferred stock dividends 8
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11
