<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
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 JULY 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
-------
---------------------------
COMMISSION FILE NUMBER 1-6461
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GENERAL ELECTRIC CAPITAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<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 July 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.
<PAGE> 2
TABLE OF CONTENTS
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<CAPTION>
PAGE
----
<S> <C>
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. 7
PART II -- OTHER INFORMATION.
Item 1. Legal Proceedings. 8
Item 2. Changes in Securities. 8
Item 3. Defaults Upon Senior Securities. 8
Item 4. Submission of Matters to a Vote of Security Holders. 8
Item 5. Other Information. 8
Item 6. Exhibits and Reports on Form 8-K. 8
Signatures. 9
Index to Exhibits. 10
</TABLE>
<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)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
------------------------------ ------------------------------
(In millions) JULY 2, 1994 JUNE 26, 1993 JULY 2, 1994 JUNE 26, 1993
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
EARNED INCOME $3,982 $3,354 $7,790 $6,485
------ ------ ------ ------
EXPENSES
Interest 1,056 865 2,041 1,644
Operating and administrative 1,312 1,078 2,577 2,126
Insurance losses and policyholder and
annuity benefits 292 272 643 441
Provision for losses on financing
receivables 251 292 421 547
Depreciation and amortization of
buildings and equipment and equipment
on operating leases 382 364 766 704
Minority interest in net earnings of
consolidated affiliates 43 20 61 35
------ ------ ------ ------
3,336 2,891 6,509 5,497
------ ------ ------ ------
EARNINGS
Earnings before income taxes 646 463 1,281 988
Provision for income taxes 205 128 396 282
------ ------ ------ ------
NET EARNINGS 441 335 885 706
Cash dividends paid (94) (6) (287) (161)
Retained earnings at beginning of period 7,259 6,228 7,008 6,012
------ ------ ------ ------
RETAINED EARNINGS AT END OF PERIOD $7,606 $6,557 $7,606 $6,557
====== ====== ====== ======
</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
<TABLE>
<CAPTION>
(In millions) JULY 2, 1994 DECEMBER 31, 1993
------------ -----------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash and equivalents $ 1,264 $ 1,049
Investment securities 18,688 20,577
Financing receivables:
Time sales and loans, net of deferred income 43,742 40,748
Investment in financing leases, net of deferred income 26,794 24,930
-------- --------
70,536 65,678
Allowance for losses on financing receivables (1,858) (1,730)
-------- --------
Financing receivables -- net 68,678 63,948
Other receivables -- net 3,020 4,046
Equipment on operating leases (at cost), less accumulated
amortization of $3,650 and $3,238 11,513 10,650
Other assets 15,768 17,669
-------- --------
TOTAL ASSETS $118,931 $117,939
======== ========
LIABILITIES AND EQUITY
Notes payable within one year $ 50,700 $ 52,903
Senior notes payable after one year 28,987 25,112
Subordinated notes payable after one year 697 697
Insurance reserves and annuity benefits 16,126 16,585
Other liabilities 6,309 6,216
Deferred income taxes 5,250 5,630
-------- --------
Total liabilities 108,069 107,143
-------- --------
Minority interest in equity of consolidated affiliates 684 426
-------- --------
Capital stock 769 769
Additional paid-in capital 2,172 2,172
Retained earnings 7,606 7,008
Other (369) 421
-------- --------
Total equity 10,178 10,370
-------- --------
TOTAL LIABILITIES AND EQUITY $118,931 $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 SIX MONTHS ENDED
--------------------------------
(In millions) JULY 2, 1994 JUNE 26, 1993
------------ -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 885 $ 706
Adjustments to reconcile net earnings to cash provided from
operating activities:
Provision for losses on financing receivables 421 547
Depreciation and amortization of buildings and equipment and
equipment on operating leases 766 704
Other--net (156) 572
-------- --------
Cash provided from operating activities 1,916 2,529
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Increase in loans to customers (13,242) (12,837)
Principal collections from customers 10,880 11,959
Investment in assets on financing leases (3,892) (2,676)
Principal collections on financing leases 2,516 2,679
Net change in credit card receivables (10) 647
Buildings, equipment, and equipment on operating
leases -- additions (1,703) (1,913)
-- dispositions 848 1,098
Payments for principal businesses purchased, net of cash acquired (1,053) (1,197)
Purchases of investment securities by insurance and annuity
affiliates (3,360) (2,484)
Dispositions and maturities of investment securities by insurance
and annuity affiliates 2,838 1,821
Other 3,738 1,112
-------- --------
Cash used for investing activities (2,440) (1,791)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in borrowings (less than 90-day maturities) (3,688) (4,155)
Newly issued debt -- short-term (91-365 days) 1,493 1,894
-- long-term senior 8,933 4,826
Repayments and other reductions -- short-term (4,721) (3,482)
-- long-term senior (983) (76)
Proceeds from sales of investment and annuity contracts 386 179
Redemption of investment and annuity contracts (470) (193)
Principal payments -- non-recourse, leveraged lease debt (164) (158)
Proceeds -- non-recourse, leveraged lease debt -- 35
Dividends paid (287) (161)
Issuance of preferred stock by consolidated affiliate 240 --
-------- --------
Cash provided from (used for) financing activities 739 (1,291)
-------- --------
INCREASE (DECREASE) IN CASH AND EQUIVALENTS 215 (553)
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 1,049 1,240
-------- --------
CASH AND EQUIVALENTS AT END OF PERIOD $ 1,264 $ 687
======== ========
</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 July 2, 1994, the statement of cash flows for the six-month interim
periods ended July 2, 1994, and June 26, 1993, and the results of operations
for the three-month and six-month interim periods ended July 2, 1994, and
June 26, 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 and six month periods ended July 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 six months ended
July 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 six
months ended July 2, 1994.
4
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS.
OVERVIEW
Net earnings for the first half of 1994 were $885 million, a $179 million
(25%) increase over the first half 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 $872 million, a $177 million
(25%) 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 increased slightly compared with the prior year period.
OPERATING RESULTS
EARNED INCOME during the first half of 1994 increased $1,305 million (20%)
over the first half of 1993.
Earned income from the Corporation's specialized financing, mid-market
financing, consumer services and equipment management businesses increased
$1,286 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
$350 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 $19 million (2%) over the first half of 1993, primarily reflecting
growth in premium income in the private mortgage insurance and the creditor
insurance businesses, partially offset by lower premium income in the life
reinsurance business.
INTEREST EXPENSE for the first half of 1994 increased $397 million (24%)
from the first half of the prior year. The increase principally reflected the
effects of additional borrowings required to finance the higher level of
invested assets. The Corporation's composite interest rate for the first half of
1994 was 5.09%, compared with 5.02% for the first half of 1993.
OPERATING AND ADMINISTRATIVE EXPENSES were $2,577 million in the first half
of 1994, up 21% over the first half of 1993. This increase principally 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 $643 million
for the first half of 1994, up 46% over the first half of 1993, principally as a
result of annuity benefits credited to customers of the annuity business which
was acquired in 1993 and higher volume related losses in the private mortgage
insurance business partially offset by lower policyholder benefits in the life
reinsurance business.
PROVISION FOR LOSSES ON FINANCING RECEIVABLES during the first half of 1994
was $421 million, $126 million (23%) 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 $766 million in the first half of 1994, $62 million higher
than in the first half 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 half of 1994 was $396 million (an
effective tax rate of 31%) compared with $282 million (29%) for the comparable
prior year period. The higher provision for income taxes was primarily
attributed to increased before tax earnings subject to regular tax rates and the
1% increase in the federal income tax rate.
PORTFOLIO QUALITY
The portfolio of financing receivables is the Corporation's largest
financing asset and primary source of revenues. The portfolio, net of reserves,
aggregated $68.7 billion at July 2, 1994, an increase of $4.7 billion (7%) from
year-end 1993. Related reserves were $1.9 billion (2.63% of receivables -- the
same level as at the 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.
5
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
(Continued).
CONSUMER LOANS RECEIVABLE, primarily retailer and auto, were $18.5 billion
at July 2, 1994, an increase of $1.2 billion from the end of 1993 reflecting
both origination volume and a business acquisition. In addition, the
Corporation's investment in consumer auto finance leases was $6.8 billion at
July 2, 1994, an increase of $1.2 billion from the end of 1993 reflecting
origination volume. Nonearning receivables were $373 million at July 2, 1994,
compared with $391 million at December 31, 1993. The provision for losses on
retailer and auto financing receivables was $254 million for the first half of
1994, compared with $239 million for the first half of 1993.
COMMERCIAL REAL ESTATE LOANS classified as financing receivables by the
Commercial Real Estate business were $11.8 billion at July 2, 1994, compared
with $10.9 billion at December 31, 1993. In addition, the investment portfolio
of the Corporation's annuity business included approximately $1.2 billion of
commercial property loans. Commercial Real Estate's portfolio also included $2.1
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 and are essentially
unchanged since December 31, 1993. Commercial Real Estate's foreclosed
properties decreased to $38 million at July 2, 1994, from $110 million at
December 31, 1993. Nonearning and reduced earning receivables declined to $204
million at July 2, 1994, from $272 million at the end of 1993. Loss provisions
for Commercial Real Estate loans and investments were $164 million for the first
half of 1994, compared with $139 million for the first half of 1993.
HLT PORTFOLIO INVESTMENTS classified as financing receivables totaled $3.0
billion at July 2, 1994, a decrease of $0.3 billion from the end of 1993. The
July 2, 1994, balance of amounts that had been written down to estimated fair
value and carried in other assets aggregated $462 million, net of allowances, a
decrease of $82 million from the end of 1993 reflecting investment sales.
Nonearning and reduced earning receivables were $131 million at July 2, 1994, a
decline of $8 million from 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 half of 1994. Such provisions were $133 million
in the first half of 1993, and comprised $101 million of receivable loss
provisions and $32 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 $121 million at July 2, 1994,
compared with $98 million at the end of 1993.
The Corporation's aggregate loans and leases to commercial airlines at July
2, 1994, increased to approximately $7.0 billion from the December 31, 1993,
balance of approximately $6.8 billion, principally as a result of increased
equipment on operating leases.
OTHER MATTERS
On December 31, 1993, the Corporation adopted Statement of Financial
Accounting Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt
and Equity Securities." All of the Corporation's investment securities were
designated as available-for-sale at both July 2, 1994, and December 31, 1993.
Consequently, such securities were reported at fair value, with net unrealized
gains and losses included in equity. Equity included net unrealized losses of
$315 million at July 2, 1994, and net unrealized gains of $485 million at
December 31, 1993, a difference primarily due to a decrease in the fair value of
fixed-rate debt securities held by the Corporation's annuity and insurance
affiliates, principally resulting from increased interest rates. Carrying
amounts of liabilities of these affiliates are not adjusted for changes in fair
value. In a rising interest rate environment, the fair value of these
liabilities would be expected to decline.
As 1994 progresses, management continues to believe that the diversity and
strength of the Corporation's assets, along with vigilant attention to risk
management, position it to deal effectively with a changing global economic
environment.
6
<PAGE> 9
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 SIX MONTHS ENDED JULY 2, 1994
(Unaudited)
<TABLE>
<CAPTION>
RATIO OF
EARNINGS
RATIO OF TO FIXED
EARNINGS CHARGES AND
TO FIXED PREFERRED STOCK
(Dollar amounts in millions) CHARGES DIVIDENDS
-------- ---------------
<S> <C> <C>
Net earnings $ 885 $ 885
Provision for income taxes 396 396
Minority interest in net earnings of consolidated affiliates 61 61
-------- ------
Income before provision for income taxes and minority interest 1,342 1,342
-------- ------
Fixed charges:
Interest 2,064 2,064
One-third of rentals 74 74
-------- ------
Total fixed charges 2,138 2,138
-------- ------
Less capitalized interest, net of amortization 5 5
-------- ------
Earnings before provision for income taxes and minority interest
plus fixed charges $3,475 $3,475
====== ======
Ratio of earnings to fixed charges 1.63
======
Preferred stock dividend requirements $ 13
Ratio of income before provision for income taxes to net earnings 145%
Preferred stock dividend factor on before tax basis 19
Fixed charges 2,138
------
Total fixed charges and preferred stock dividend requirements $2,157
======
Ratio of earnings to combined fixed charges and preferred stock
dividends 1.61
======
</TABLE>
7
<PAGE> 10
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 FORM 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.
8
<PAGE> 11
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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<S> <C>
Date: August 15, 1994 By: /s/ J. A. PARKE
-----------------------------------------------------
J. A. Parke, Senior Vice President, Finance
(Principal Financial Officer)
Date: August 15, 1994 By: /s/ J. C. AMBLE
-----------------------------------------------------
J. C. Amble, Vice President and Controller
(Principal Accounting Officer)
</TABLE>
9
<PAGE> 12
GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES
INDEX TO EXHIBITS
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<CAPTION>
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 7
</TABLE>
10
