<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
FORM 10-Q
---------------------------
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED OCTOBER 1, 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
---------------------------
GENERAL ELECTRIC CAPITAL CORPORATION
------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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 (Zip Code)
(Address of principal executive offices)
(203) 357-4000
(Registrant's telephone number, including area code)
-------------------------
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 October 19, 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
<TABLE>
<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
Exhibit 27. Financial Data Schedule
</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 NINE MONTHS ENDED
------------------------------------ ------------------------------------
(In millions) OCTOBER 1, 1994 SEPTEMBER 25, 1993 OCTOBER 1, 1994 SEPTEMBER 25, 1993
--------------- ------------------ --------------- ------------------
<S> <C> <C> <C> <C>
EARNED INCOME $4,306 $3,668 $12,096 $10,153
------ ------ ------- -------
EXPENSES
Interest 1,098 871 3,139 2,515
Operating and administrative 1,222 1,104 3,799 3,230
Insurance losses and policyholder
and annuity benefits 575 381 1,218 822
Provision for losses on financing
receivables 186 200 607 747
Depreciation and amortization of
buildings and equipment and
equipment on operating leases 425 375 1,191 1,079
Minority interest in net earnings
of consolidated affiliates 18 48 79 83
----- ------ ------- -------
3,524 2,979 10,033 8,476
----- ------ ------- -------
EARNINGS
Earnings before income taxes 782 689 2,063 1,677
Provision for income taxes 234 291 630 573
----- ------ ------- -------
NET EARNINGS 548 398 1,433 1,104
Dividends paid (198) (315) (485) (476)
Retained earnings at beginning of
period 7,606 6,557 7,008 6,012
----- ------ ------- -------
RETAINED EARNINGS AT END OF PERIOD $7,956 $6,640 $ 7,956 $ 6,640
====== ====== ======= =======
</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>
OCTOBER 1, 1994 DECEMBER 31, 1993
(In millions) --------------- -----------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash and equivalents $ 878 $ 1,049
Investment securities 19,748 20,577
Financing receivables:
Time sales and loans, net of deferred income 45,327 40,748
Investment in financing leases, net of deferred income 27,182 24,930
-------- --------
72,509 65,678
Allowance for losses on financing receivables (1,910) (1,730)
-------- --------
Financing receivables -- net 70,599 63,948
Other receivables -- net 3,259 4,046
Equipment on operating leases (at cost), less accumulated
amortization of $3,815 and $3,238 12,204 10,650
Other assets 15,592 17,669
-------- --------
TOTAL ASSETS $122,280 $117,939
======== ========
LIABILITIES AND EQUITY
Notes payable within one year $ 50,447 $ 52,903
Senior notes payable after one year 32,406 25,112
Subordinated notes payable after one year 697 697
Insurance reserves and annuity benefits 16,593 16,585
Other liabilities 5,686 6,216
Deferred income taxes 5,418 5,630
-------- --------
Total liabilities 111,247 107,143
-------- --------
Minority interest in equity of consolidated affiliates 674 426
-------- --------
Capital stock 769 769
Additional paid-in capital 2,172 2,172
Retained earnings 7,956 7,008
Other (538) 421
-------- --------
Total equity 10,359 10,370
-------- --------
TOTAL LIABILITIES AND EQUITY $122,280 $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)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
----------------------------------------
(In millions) OCTOBER 1, 1994 SEPTEMBER 25, 1993
--------------- ------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 1,433 $ 1,104
Adjustments to reconcile net earnings to cash provided from
operating activities:
Provision for losses on financing receivables 607 747
Depreciation and amortization of buildings and equipment
and equipment on operating leases 1,191 1,079
Other -- net (368) 1,294
--------- --------
Cash provided from operating activities 2,863 4,224
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Increase in loans to customers (17,811) (19,456)
Principal collections from customers 14,428 17,840
Investment in assets on financing leases (7,175) (4,351)
Principal collections on financing leases 5,062 4,599
Net change in credit card receivables (839) 415
Buildings, equipment, and equipment on operating
leases -- additions (3,625) (2,734)
-- dispositions 2,125 1,319
Payments for principal businesses purchased, net of cash
acquired (1,309) (2,046)
Purchases of investment securities by insurance and annuity
affiliates (4,697) (4,712)
Dispositions and maturities of investment securities by
insurance and annuity affiliates 3,855 2,754
Other 3,373 911
--------- --------
Cash used for investing activities (6,613) (5,461)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in borrowings (less than 90-day maturities) (4,931) (3,631)
Newly issued debt -- short-term (91-365 days) 2,354 2,763
-- long-term senior 15,088 8,123
Repayments and other reductions -- short-term (7,469) (5,688)
-- long-term senior (854) (108)
Proceeds from sales of investment and annuity contracts 585 417
Redemption of investment and annuity contracts (713) (385)
Principal payments -- non-recourse, leveraged lease debt (246) (230)
Proceeds -- non-recourse, leveraged lease debt -- 53
Dividends paid (475) (476)
Issuance of preferred stock by consolidated affiliate 240 --
--------- --------
Cash provided from financing activities 3,579 838
--------- --------
DECREASE IN CASH AND EQUIVALENTS (171) (399)
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 1,049 1,240
--------- --------
CASH AND EQUIVALENTS AT END OF PERIOD $ 878 $ 841
========= ========
</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 October 1, 1994, the statement of cash flows for the nine-month
interim periods ended October 1, 1994, and September 25, 1993, and the
results of operations for the three-month and nine-month interim periods
ended October 1, 1994, and September 25, 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 nine month periods ended October
1, 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 1.65 for the nine months ended
October 1, 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 1.63 for the
nine months ended October 1, 1994.
4
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS.
OVERVIEW
Net earnings for the first nine months of 1994 were $1,433 million, a $329
million (30%) increase over the first nine months 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 $1,413
million, a $325 million (30%) increase over the comparable 1993 period. The
Corporation's increase in net earnings principally resulted from a higher
average level of invested assets, lower provision for losses in the specialized
financing businesses and no current year counterpart to the unfavorable effects
of the 1993 increase in the federal income tax rate from 34% to 35%. These
increases were offset in part by increased insurance losses and policyholder and
annuity benefits. 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 nine months of 1994 increased $1,943 million
(20%) over the first nine months of 1993.
Earned income from the Corporation's specialized financing, mid-market
financing, consumer services and equipment management businesses increased
$1,931 million (22%) 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.
INTEREST EXPENSE for the first nine months of 1994 increased $624 million
(25%) from the first nine months 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 nine months of 1994 was 5.23%, compared with 5.02% for the first nine
months of 1993.
OPERATING AND ADMINISTRATIVE EXPENSES were $3,799 million in the first nine
months of 1994, up 18% over the first nine months 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 $1,218 million
for the first nine months of 1994, up 48% over the first nine months of 1993,
principally as a result of annuity benefits credited to customers of the annuity
business which was acquired in 1993, and adverse loss development in the private
mortgage insurance business, particularly related to the effects of poor
economic conditions and housing value declines in southern California. These
increases were partially offset by lower policyholder benefits in the life
reinsurance business resulting from the recapture of reinsurance treaties during
1994 and reduced assumed volume.
PROVISION FOR LOSSES ON FINANCING RECEIVABLES during the first nine months
of 1994 was $607 million, $140 million (19%) lower than during the comparable
prior year period, principally reflecting lower provisions for losses in the
specialized financing businesses.
DEPRECIATION AND AMORTIZATION OF BUILDINGS AND EQUIPMENT AND EQUIPMENT ON
OPERATING LEASES was $1,191 million in the first nine months of 1994, $112
million higher than in the first nine months 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 nine months of 1994 was $630
million (an effective tax rate of 31%) compared with $573 million (34%) for the
comparable prior year period. The higher provision for income taxes was
primarily attributable to significantly higher earnings before taxes partially
offset by the effect of the 1993 increase in federal tax rates from 34% to 35%
for which there was no 1994 counterpart.
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 $70.6 billion at October 1, 1994, an increase of $6.7 billion (10%)
from year-end 1993. Related reserves were $1.9 billion (2.63% of
receivables -- the same percentage
5
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
(Continued).
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.
CONSUMER LOANS RECEIVABLE, primarily retailer and auto, were $19.7 billion
at October 1, 1994, an increase of $2.4 billion from the end of 1993, reflecting
both origination volume and business and portfolio acquisitions. In addition,
the Corporation's investment in consumer auto finance leases was $7.1 billion at
October 1, 1994, an increase of $1.5 billion from the end of 1993, reflecting
origination volume. Nonearning receivables were $423 million at October 1, 1994,
compared with $391 million at December 31, 1993. The provision for losses on
retailer and auto financing receivables was $342 million for the first nine
months of 1994, compared with $346 million for the first nine months of 1993.
COMMERCIAL REAL ESTATE LOANS classified as financing receivables by the
Commercial Real Estate business were $11.8 billion at October 1, 1994, compared
with $10.9 billion at December 31, 1993. In addition, the investment portfolio
of the Corporation's annuity business included approximately $1.3 billion of
commercial property loans. The commercial real estate portfolio also included
$2.1 billion of assets purchased from the Resolution Trust Corporation and other
institutions for resale and $1.5 billion of investments in real estate joint
ventures, both of which are included in other assets and are essentially
unchanged from December 31, 1993. Commercial Real Estate's foreclosed properties
decreased to $53 million at October 1, 1994, from $110 million at December 31,
1993, primarily due to sales. Nonearning and reduced earning receivables
declined to $184 million at October 1, 1994, from $272 million at the end of
1993. Loss provisions for Commercial Real Estate loans and investments were $218
million for the first nine months of 1994, compared with $194 million for the
first nine months of 1993.
HIGHLY LEVERAGED TRANSACTION (HLT) PORTFOLIO INVESTMENTS classified as
financing receivables totaled $2.8 billion at October 1, 1994, a decrease of
$0.5 billion from the end of 1993. The October 1, 1994, balance of amounts that
had been written down to estimated fair value and carried in other assets
aggregated $452 million, net of allowances, a decrease of $92 million from the
end of 1993, reflecting investment sales. Nonearning and reduced earning
receivables were $132 million at October 1, 1994, a decline of $7 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
nine months of 1994. Such provisions were $126 million in the first nine months
of 1993, and comprised $94 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 $118 million at October 1, 1994,
compared with $98 million at the end of 1993.
The Corporation's aggregate loans and leases to commercial airlines at
October 1, 1994, increased to approximately $7.3 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 October 1, 1994, and December 31, 1993.
Consequently, such securities were reported at fair value, with net unrealized
gains and losses included in equity, net of applicable taxes. Equity included
net unrealized losses of $483 million at October 1, 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 NINE MONTHS ENDED OCTOBER 1, 1994
(Unaudited)
<TABLE>
<CAPTION>
RATIO OF
EARNINGS TO
COMBINED
FIXED
RATIO OF CHARGES AND
EARNINGS PREFERRED
TO FIXED STOCK
(Dollar amounts in millions) CHARGES DIVIDENDS
-------- -----------
<S> <C> <C>
Net earnings $1,433 $ 1,433
Provision for income taxes 630 630
Minority interest in net earnings of consolidated affiliates 79 79
------ -------
Income before provision for income taxes and minority interest 2,142 2,142
------ -------
Fixed charges:
Interest 3,172 3,172
One-third of rentals 114 114
------ -------
Total fixed charges 3,286 3,286
------ -------
Less capitalized interest, net of amortization 7 7
------ -------
Earnings before provision for income taxes and minority interest
plus fixed charges $5,421 $ 5,421
====== =======
Ratio of earnings to fixed charges 1.65
======
Preferred stock dividend requirements $ 20
Ratio of income before provision for income taxes to net earnings 144%
Preferred stock dividend factor on before tax basis 30
Fixed charges 3,286
-------
Total fixed charges and preferred stock dividend requirements $ 3,316
=======
Ratio of earnings to combined fixed charges and preferred stock
dividends 1.63
=======
</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.
Exhibit 27. Financial Data Schedule.
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)
<TABLE>
<S> <C>
Date: November 2, 1994 By: /s/ J. A. PARKE
------------------------------------------------
J. A. Parke, Senior Vice President, Finance
(Principal Financial Officer)
Date: November 2, 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
<TABLE>
<CAPTION>
EXHIBIT NO. PAGE NO.
- ----------- --------
<S> <C> <C>
12 Computation of ratio of earnings to fixed charges and
computation of ratio of earnings to combined fixed charges
and preferred stock dividends 7
27 Financial Data Schedule
</TABLE>
10
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000040554
<NAME> GENERAL ELECTRIC CAPITAL CORPORATION
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> OCT-01-1994
<CASH> 878
<SECURITIES> 19,748
<RECEIVABLES> 72,509
<ALLOWANCES> 1,910
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 17,650
<DEPRECIATION> 4,527
<TOTAL-ASSETS> 122,280
<CURRENT-LIABILITIES> 0
<BONDS> 33,103
<COMMON> 768
0
1
<OTHER-SE> 9,590
<TOTAL-LIABILITY-AND-EQUITY> 122,280
<SALES> 0
<TOTAL-REVENUES> 12,096
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,799
<LOSS-PROVISION> 607
<INTEREST-EXPENSE> 3,139
<INCOME-PRETAX> 2,063
<INCOME-TAX> 630
<INCOME-CONTINUING> 1,433
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,433
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
