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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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/X/ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994
OR
/ /TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
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)
NEW YORK 13-1500700
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
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260 LONG RIDGE ROAD, STAMFORD, CONNECTICUT 06927 (203)357-4000
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) (REGISTRANT'S TELEPHONE NUMBER,
INCLUDING AREA CODE)
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SECURITIES REGISTERED PURSUANT
TO SECTION 12(B) OF THE ACT:
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NAME OF EACH
TITLE OF EACH CLASS EXCHANGE ON WHICH REGISTERED
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7 7/8% GUARANTEED SUBORDINATED NOTES DUE DECEMBER 1, 2006 NEW YORK STOCK EXCHANGE
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SECURITIES REGISTERED PURSUANT
TO SECTION 12(G) OF THE ACT:
NONE.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /X/
AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NONAFFILIATES OF THE
REGISTRANT AT MARCH 29, 1995. NONE.
AT MARCH 29, 1995, 3,837,825 SHARES OF COMMON STOCK WITH A PAR VALUE OF $200
WERE OUTSTANDING.
DOCUMENTS INCORPORATED BY REFERENCE
THE CONSOLIDATED FINANCIAL STATEMENTS OF GENERAL ELECTRIC COMPANY, SET FORTH IN
THE ANNUAL REPORT ON FORM 10-K OF GENERAL ELECTRIC COMPANY FOR THE YEAR ENDED
DECEMBER 31, 1994 ARE INCORPORATED BY REFERENCE INTO PART IV HEREOF.
REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION J(1)(A) AND (B)
OF FORM 10-K AND IS THEREFORE FILING THIS FORM 10-K WITH THE REDUCED DISCLOSURE
FORMAT.
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TABLE OF CONTENTS
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PART I
Item 1. Business............................................................ 1
Item 2. Properties.......................................................... 9
Item 3. Legal Proceedings................................................... 9
Item 4. Submission of Matters to a Vote of Security Holders................. 9
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters........................................................... 10
Item 6. Selected Financial Data............................................. 10
Item 7. Management's Discussion and Analysis of Results of Operations....... 11
Item 8. Financial Statements and Supplementary Data......................... 17
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.............................................. 34
PART III
Item 10. Directors and Executive Officers of the Registrant.................. 35
Item 11. Executive Compensation.............................................. 35
Item 12. Security Ownership of Certain Beneficial Owners and Management...... 35
Item 13. Certain Relationships and Related Transactions...................... 35
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.... 36
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PART I
ITEM 1. BUSINESS.
GENERAL
General Electric Capital Corporation (herein together with its consolidated
affiliates called the "Corporation" or "GE Capital" unless the context otherwise
requires) was incorporated in 1943 in the State of New York, under the
provisions of the New York Banking Law relating to investment companies, as
successor to General Electric Contracts Corporation, formed in 1932. Until
November 1987, the name of the Corporation was General Electric Credit
Corporation. All outstanding common stock of the Corporation is owned by General
Electric Capital Services, Inc. ("GE Capital Services"), formerly General
Electric Financial Services, Inc., the common stock of which is in turn wholly
owned by General Electric Company ("GE Company"). The business of the
Corporation originally related principally to financing the distribution and
sale of consumer and other products of GE Company. Currently, however, the type
and brand of products financed and the financial services offered are
significantly more diversified. Very little of the financing provided by GE
Capital involves products that are manufactured by GE Company.
The Corporation operates in four finance industry segments and in a
specialty insurance industry segment. GE Capital's financing activities include
a full range of leasing, lending, equipment management services and annuities.
The Corporation's specialty insurance activities include providing private
mortgage insurance, financial guaranty insurance, principally on municipal bonds
and structured finance issues, and creditor insurance covering international
customer loan repayments. The Corporation is an equity investor in a retail
organization and certain other service and financial services organizations. GE
Capital's operations are subject to a variety of regulations in their respective
jurisdictions.
Services of the Corporation are offered primarily in the United States,
Canada, Europe and the Pacific basin. The Corporation's principal executive
offices are located at 260 Long Ridge Road, Stamford, Connecticut 06927
(Telephone number (203) 357-4000). At December 31, 1994 the Corporation employed
approximately 32,000 persons.
For accounting purposes, the Corporation's principal financing products are
classified as time sales and loans, investment in financing leases, equipment on
operating leases and investment securities. The following table presents, by
industry segment, these principal financing products which, together with other
assets, comprise the Corporation's total assets at December 31, 1994 and 1993.
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ITEM 1. BUSINESS (Continued).
TOTAL ASSETS BY SEGMENT
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1994 1993
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TIME NET ALLOW. TIME NET
SALES INVESTMENT FOR SALES INVESTMENT
AND NET IN LOSSES AND NET IN
LOANS, INVESTMENT EQUIPMENT AND LOANS, INVESTMENT EQUIPMENT
NET OF IN ON ALL NET OF IN ON
DEFERRED FINANCING OPERATING INVESTMENT OTHER TOTAL DEFERRED FINANCING OPERATING
(IN MILLIONS) INCOME LEASES LEASES SECURITIES ASSETS ASSETS INCOME LEASES LEASES
------- ------- ------- ------- ------- -------- ------- ------- -------
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SPECIALIZED FINANCING
Commercial Real
Estate.............. $11,833 $ 36 $ 55 $ 3,369 $ 15,293 $10,751 $ 35
Global Project and
Structured
Finance............. 1,758 4,780 $ 448 432 496 7,914 2,247 5,013 $ 223
Commercial Finance.... 3,900 109 184 4,193 3,756
Equity Capital
Group............... 302 90 357 749 113
------- ------- ------- ------- ------- -------- ------- ------- -------
Total............. 17,793 4,816 448 686 4,406 28,149 16,867 5,048 223
------- ------- ------- ------- ------- -------- ------- ------- -------
CONSUMER SERVICES
Retailer Financial
Services............ 19,129 76 1,307 20,512 14,514
GNA................... 1,377 13,327 1,816 16,520 1,088
Auto Financial
Services............ 3,682 7,473 124 222 11,501 2,509 5,556 161
Mortgage Servicing.... 1,231 382 3,507 5,120 176
Other................. 123 395 518 155
------- ------- ------- ------- ------- -------- ------- ------- -------
Total............. 25,542 7,473 124 13,785 7,247 54,171 18,442 5,556 161
------- ------- ------- ------- ------- -------- ------- ------- -------
MID-MARKET FINANCING
Commercial Equipment
Financing........... 2,995 6,235 596 2 357 10,185 2,316 6,128 404
Vendor Financial
Services............ 1,252 3,377 28 376 5,033 931 2,799 63
GECC Financial --
Hawaii.............. 1,049 57 7 1,113 933 66 1
Other................. 36 36
------- ------- ------- ------- ------- -------- ------- ------- -------
Total............. 5,296 9,669 624 2 776 16,367 4,180 8,993 468
------- ------- ------- ------- ------- -------- ------- ------- -------
EQUIPMENT MANAGEMENT
Aviation Services..... 919 2,901 3,750 328 281 8,179 881 2,880 3,105
Fleet Services........ 360 2,252 1,795 867 5,274 224 1,364 1,475
Genstar Container..... 459 2,687 269 3,415 417 2,416
Railcar Services...... 342 1,041 2 164 1,549 317 990
Transport
International
Pool................ 96 1,104 279 1,479 73 799
Modular Space......... 16 484 165 665 10 243
Technology Management
Services............ 111 374 393 436 1,314 146 272 333
Satellite
Telecommunications
Services............ 600 600
Other................. 401 321 722 437
------- ------- ------- ------- ------- -------- ------- ------- -------
Total............. 1,390 6,440 11,655 330 3,382 23,197 1,251 5,333 9,798
------- ------- ------- ------- ------- -------- ------- ------- -------
SPECIALTY
INSURANCE............. 5,447 1,190 6,637 8
CORPORATE............... 1,958 425 2,383
------- ------- ------- ------- ------- -------- ------- ------- -------
TOTAL................... $50,021 $28,398 $12,851 $22,208 $17,426 $130,904 $40,748 $24,930 $10,650
======= ======= ======= ======= ======= ======== ======= ======= =======
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ALLOW.
FOR
LOSSES
AND
ALL
INVESTMENT OTHER TOTAL
(IN MILLIONS) SECURITIES ASSETS ASSETS
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SPECIALIZED FINANCING
Commercial Real
Estate.............. $ 37 $ 3,654 $ 14,477
Global Project and
Structured
Finance............. 56 186 7,725
Commercial Finance.... 133 560 4,449
Equity Capital
Group............... 149 156 418
------- ------- --------
Total............. 375 4,556 27,069
------- ------- --------
CONSUMER SERVICES
Retailer Financial
Services............ 52 1,085 15,651
GNA................... 11,270 978 13,336
Auto Financial
Services............ 242 8,468
Mortgage Servicing.... 1 7,408 7,585
Other................. 45 532 732
------- ------- --------
Total............. 11,368 10,245 45,772
------- ------- --------
MID-MARKET FINANCING
Commercial Equipment
Financing........... 9 179 9,036
Vendor Financial
Services............ 184 3,977
GECC Financial --
Hawaii.............. 7 1,007
Other................. 2 2
------- ------- --------
Total............. 9 372 14,022
------- ------- --------
EQUIPMENT MANAGEMENT
Aviation Services..... 372 209 7,447
Fleet Services........ 765 3,828
Genstar Container..... 318 296 3,447
Railcar Services...... 2 167 1,476
Transport
International
Pool................ 273 1,145
Modular Space......... 87 340
Technology Management
Services............ 394 1,145
Satellite
Telecommunications
Services............ 583 583
Other................. 297 734
------- ------- --------
Total............. 692 3,071 20,145
------- ------- --------
SPECIALTY
INSURANCE............. 7,029 2,542 9,579
CORPORATE............... 1,104 248 1,352
------- ------- --------
TOTAL................... $20,577 $21,034 $117,939
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ITEM 1. BUSINESS (Continued).
The Corporation provides a wide variety of financing and insurance products
and services, which are organized into the following industry segments:
- Specialized Financing -- loans and leases for major capital assets
including industrial facilities and equipment and energy-related
facilities; commercial and residential real estate loans and investments;
and loans to and investments in corporate enterprises.
- Consumer Services -- private-label and bank credit card loans, time sales
and revolving credit and inventory financing for retail merchants, auto
leasing and inventory financing, mortgage servicing and annuity and
mutual fund sales.
- Mid-Market Financing -- loans and leases for middle-market customers
including manufacturers, distributors and end-users, for a variety of
equipment, including data processing equipment, medical and diagnostic
equipment, and equipment used in construction, manufacturing, office
applications and telecommunications activities.
- Equipment Management -- leases, loans and asset management services for
portfolios of commercial and transportation equipment including aircraft,
trailers, auto fleets, modular space units, railroad rolling stock, data
processing equipment, ocean-going containers and satellites.
- Specialty Insurance -- financial guaranty insurance, principally on
municipal bonds and structured finance issues; private mortgage
insurance; and creditor insurance covering international customer loan
repayments.
Refer to Item 7, "Management's Discussion and Analysis of Results of
Operations," in this Form 10-K for discussion of the Corporation's Portfolio
Quality.
SPECIALIZED FINANCING
Commercial Real Estate
Commercial Real Estate Financing and Services (CRE) provides funds for the
acquisition, refinancing or renovation of a wide range of commercial and
residential properties located throughout the United States, and, to a lesser
extent, in Canada, Mexico and Europe. CRE also provides asset management
services to real estate investors and selected services to real estate owners.
CRE has field offices located throughout the United States, as well as offices
in Toronto, Canada, Mexico City, Mexico, Singapore and London, England, in
addition to its headquarters in Stamford, Connecticut.
Lending represents a major segment of CRE's business in the form of
intermediate-term senior or subordinated floating-rate loans secured by existing
income-producing commercial properties such as office buildings, rental
apartments, shopping centers, industrial buildings, mobile home parks and
warehouses. Loans range in amount from single-property mortgages typically
greater than $5 million to multi-property portfolios of several hundred million
dollars, and are well dispersed geographically, covering properties located in
most states and several foreign countries. Approximately 90% of all loans are
senior mortgages.
During 1994, CRE continued to broaden its investment base by buying or
providing restructuring financing for portfolios of real estate, mortgage loans,
limited partnerships, REIT's and tax-exempt bonds.
CRE also offers a variety of real estate management services to outside
investors, institutions, corporations and investment banks through its GE
Capital Realty Group subsidiary. Services include acquisitions and dispositions,
strategic asset positioning, asset restructuring, on-site property management,
maintenance, and leasing and loan servicing. CRE also helps owners reduce costs
and enhance value in properties through buying services (e.g. lighting,
appliances) and discount phone services.
Global Project and Structured Finance
The Corporation's Global Project and Structured Finance (GPSF) business
provides financing for major capital investments in various sectors of the
economy, concentrating principally in the North American market with efforts
being made toward Asia, South America and Europe. At year-end 1994, GPSF's
diversified portfolio included investments in industrial facilities and
equipment, energy-related facilities, railcars and marine vessels.
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ITEM 1. BUSINESS (Continued).
GPSF's fundings take various forms ranging from financing leases to total
balance sheet recapitalizations. At December 31, 1994, GPSF's portfolio
consisted of finance leases (both direct financing and leveraged leases),
operating leases, loans (both senior and subordinated) and equity investments
(including collateralized, sinking fund and adjustable rate preferred stock;
joint ventures; and partnerships). Fundings are adequately collateralized in the
form of property liens, preferred mortgages, assignment of earnings, insurance,
guaranties, cash flow streams and the financed assets.
GPSF provides lease syndication and private placement services for
transactions generated by GE Capital as well as other companies. When such
services are performed, GPSF typically retains a portion of the transaction and
sells off the remainder to one or more other financial institutions.
In addition to its Stamford, Connecticut headquarters, GPSF has field
offices in New York City and Chicago, as well as in Mexico, England, Singapore,
Hong Kong, China and India.
Commercial Finance
Commercial Finance (CF) provides both revolving and term debt financing for
working capital and capital expansion. The portfolio is diversified with
approximately 130 accounts dispersed throughout the United States and, to a
lesser degree, Canada and Europe. Loans range in amount from $5 million to
several hundred million dollars with industry concentration in cable
television/media, retail, healthcare and, to a lesser extent, broadcasting and
food and beverage. CF is active in the loan syndication market, selling and
occasionally purchasing participations in leveraged transactions. During 1994,
the highly leveraged transaction portfolio was transferred from Equity Capital
Group, formerly the Corporate Finance Group, to CF.
CF has offices throughout the United States in addition to its headquarters
in Norwalk, Connecticut.
Equity Capital Group
Equity Capital Group (ECG), formerly the Corporate Finance Group, purchases
equity investments, primarily convertible preferred and common stock investments
including, in some cases, stock warrants exercisable into additional ownership
of respective investments. ECG's primary objective is to realize long-term
capital appreciation appropriate to an equity risk profile. During 1994, the
highly leveraged transaction portfolio was transferred from ECG to CF.
The portfolio is geographically diversified with corporate accounts located
throughout the United States, as well as accounts domiciled in Canada and
Europe. Industry concentration is spread among retail, financial services,
healthcare, food and beverage and broadcasting.
ECG has offices throughout the United States in addition to its
headquarters in Stamford, Connecticut.
CONSUMER SERVICES
Retailer Financial Services
Retailer Financial Services (RFS) provides sales financing services to the
distribution chain for various consumer industries. Financing plans offered vary
considerably by client (including Montgomery Ward & Co., Incorporated, through a
wholly-owned affiliate, Montgomery Ward Credit Corporation, "MW Credit"), but
fall into three major product offerings: customized private-label credit card
programs with retailers, bankcard programs direct with consumers and inventory
financing programs with manufacturers, distributors and retailers.
RFS purchases consumer revolving charge accounts from retailers primarily
in the United States, Canada and the United Kingdom, most of whom sell a variety
of products of various manufacturers on a time sales basis. The terms made
available for these financing plans vary by size of contract and the credit
standing of the customer. Maximum maturities ordinarily do not exceed 40 months.
RFS generally maintains a security interest in the merchandise financed.
Financing is provided to consumers under contractual arrangements both with and
without recourse to retailers. RFS' wide range of financial services includes
private-label credit cards, credit promotion and accounting services, billing
(in the store's name) and customer credit and collection services. Similar
services are also provided through joint ventures in Mexico, Spain, Indonesia
and India.
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ITEM 1. BUSINESS (Continued).
RFS provides consumers with Visa and Mastercard products, including the GE
Rewards Credit Card, through GE Capital Consumer Card Co. RFS is also engaged in
the home equity loan business. RFS provides inventory financing for retailers
primarily in the appliance and consumer electronics industries. RFS obtains a
security interest in the inventory and, as part of the agreement, retailers are
required to provide insurance coverage for the merchandise financed.
During 1994, RFS acquired operations which provide credit card services and
consumer loans in the Austrian and Japanese consumer markets. Mercurbank
provides financing services primarily to consumers and also to small and medium
sized businesses in Austria. By acquiring Minebea Credit, RFS became the first
U.S. company to enter the retail finance business in Japan.
GE Capital Credit Services (GECCS) is a new services venture which provides
statement printing, mailing, remittance processing, credit card embossing, and
specialized collections services to over 75 million accounts. GECCS has targeted
the banking, utilities, telecommunications, insurance and transportation
industries. In addition to its Stamford, Connecticut headquarters, GECCS has
sites in Georgia, Kansas and Texas.
GNA
The Corporation acquired two companies during 1993 (GNA Corporation and
United Pacific Life Insurance Company) which together comprise the Corporation's
annuity business ("GNA"). GNA writes and markets tax-deferred, structured and
immediate annuities, credit life and credit disability insurance, traditional
and universal life insurance, accident and health insurance and sells
proprietary and third party mutual funds through independent and captive agents
and financial institutions.
In 1994, GNA acquired Harcourt General's insurance businesses that include
Federal Home Life Insurance Company, PHF Life Insurance Company and The Harvest
Life Insurance Company, which underwrite individual life, health, accident and
credit insurance annuities.
Auto Financial Services
Auto Financial Services (AFS) provides lease financing for automobiles of
domestic and foreign manufacture through dealers, independent leasing companies
and importers of new and used cars throughout the United States, Canada and the
United Kingdom. Contractual terms do not exceed 66 months and have an average
expected term ranging from 30 to 45 months, which includes the estimated effect
of prepayment. Property and casualty insurance is required for all leases, with
the insurer selected by the lessee.
AFS also provides inventory financing programs and direct loans to segments
of the automotive industry, including dealers, rental car companies and leasing
companies located throughout the United States.
AFS purchases auto lease and loan assets from financial institutions and
services the outstanding accounts throughout the liquidation of the portfolios.
AFS is active in the Asian market through equity investments in United
Merchants Finance Ltd. (Hong Kong) and ASTRA Sedaya Finance (Indonesia), and
expanded in 1994 with Taiwan Acceptance Corporation and United Merchants Finance
Private Ltd. (Singapore) and in 1993 with United Motor Works (Malaysia) and GS
Capital Corporation (Thailand). During September 1994, 80% of Australian
Guarantee Limited Taiwan was purchased. All joint ventures provide primarily
automobile and vehicle financing in their respective markets.
On January 1, 1993 AFS and Volvo of North America began a joint venture to
provide financing for Volvo's customers. In 1994, AFS under the name of AFS De
Mexico began providing auto loan financing in the Mexican market.
Mortgage Servicing
GE Capital Mortgage Services, Inc. (GECMSI), wholly owned by GE Capital
Mortgage Corporation (GECMC), is engaged in the business of servicing
residential mortgage loans collateralized by one-to-four-family homes located
throughout the United States. It obtains servicing through the purchase of
mortgage loans and of servicing rights. GECMSI packages the loans it purchases
into mortgage backed securities which are sold to investors. GECMSI is also
engaged in the home equity loan business. GECMC, through GECMSI and other
wholly-owned affiliates, is among the nation's leading asset management,
servicing and disposition organizations.
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ITEM 1. BUSINESS (Continued).
MID-MARKET FINANCING
Commercial Equipment Financing
Commercial Equipment Financing (CEF) offers a broad line of financial
products including municipal financing and loans and leases to middle-market
customers including manufacturers, distributors, dealers and end-users. Products
are designed to meet customers' unique equipment needs and tax requirements and
are either held for CEF's own account or brokered to a third party for a fee.
Generally, transactions range from $50 thousand to several million dollars
with financing terms from 36 to 120 months. CEF enhances the value of its leased
equipment by maintaining an asset management operation that both redeploys
off-lease equipment and monitors asset values.
The portfolio includes vehicles, manufacturing equipment, corporate
aircraft, construction equipment, medical diagnostic equipment, office
equipment, telecommunications equipment and electronics.
CEF operates from offices throughout the United States, Puerto Rico,
Canada, Europe and Asia and through joint ventures in Mexico, Spain, Indonesia
and Hong Kong.
Vendor Financial Services
Vendor Financial Services (VFS) provides captive financing services to
equipment manufacturers and distributors in specific industries including office
furniture, healthcare, franchise, information systems, manufacturing and office
equipment worldwide. The captive financing programs are tailored to meet the
individual needs of each vendor including sales force training, marketing
support and customized financing products. Funding, billing, collections and
other related services are provided by six highly automated service operations
and sales offices located throughout the United States, Canada, Mexico, Asia and
Europe. VFS' headquarters are located in Danbury, Connecticut. VFS' typical
transaction size ranges from $6 thousand to $500 thousand. Security is generally
provided by the asset being financed.
During 1994, VFS acquired Northern Telecom Finance Corporation (NTFC) which
provides financing to customers and dealers of Northern Telecom, Inc. VFS also
acquired the stock of AB Vendax and Nordic Finans AB from a subsidiary of
Skandinaviska Enskilda Banken, a Swedish bank, which provides computer lease and
office equipment financing to key customers, distributors and manufacturers. In
addition, VFS purchased the assets of Union PLC's financing group, made up of
Union Discount Company, Ltd. and Sabre Management Holdings, Ltd., collectively
renamed Sabre Leasing. Sabre Leasing provides small ticket loan and lease
financing throughout the United Kingdom to office equipment distributors.
GECC Financial -- Hawaii
GECC Financial Corporation of Hawaii (GFC) operates exclusively in the
state of Hawaii. Through a network of 10 branch offices, GFC offers commercial
and residential real estate loans, auto and equipment leasing, inventory
financing and equity lines of credit. GFC also offers thrift investment programs
and loan servicing to institutional investors.
EQUIPMENT MANAGEMENT
Aviation Services
GE Capital Aviation Services (GECAS) is a global commercial aviation
financial services business that offers a broad range of financial products to
airlines and aircraft operators, aircraft owners, lenders and investors,
including financing leases, operating leases, tax-advantaged and other
incentives-based financing while also providing management, marketing, and
technical support services to aircraft owners, lenders and investors.
At December 31, 1994, the GECAS fleet was comprised of more than 900 owned
or managed aircraft on lease to 152 customers in 55 countries.
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ITEM 1. BUSINESS (Continued).
GECAS has operations in Stamford, Connecticut, Shannon, Ireland, San
Francisco, California and a number of other locations worldwide including
London, Beijing, Hong Kong and Singapore.
Fleet Services
GE Capital Fleet Services (GECFS) is the leading corporate fleet management
company in North America and Europe with 730,000 cars, trucks and specialty
vehicles under lease and service management. It provides fleet leasing and
management services to corporate customers in the United States, Canada, Mexico
and Europe.
GECFS markets finance and operating leases to several thousand customers
with an average lease term of 33 months. The primary product in North America is
a Terminal Rental Adjustment Clause (TRAC) lease with the customer assuming the
residual risk for the difference between market and book value at termination.
In Europe, the primary product is a closed-end lease with GECFS assuming
residual risk. In addition to the services directly associated with the lease,
GECFS offers value-added fleet management services designed to reduce its
customers' total fleet management costs. These include maintenance management
programs, accident services, national account purchasing programs, fuel
programs, title and licensing services, safety programs and many other
value-added programs. GECFS' customer base is well diversified across all
industries and geographic locations and includes many Fortune 500 companies.
During 1994, GECFS acquired Triathlon Leasing, Canada's leading fleet
management company and added 35,000 units to its European fleet with the
purchase of Skandic Bilfinans in Sweden.
GECFS' headquarters are located in Eden Prairie, Minnesota.
Genstar Container
Genstar Container Corporation maintains a fleet of over 1,300,000 TEU
("twenty-foot equivalent units") of dry-cargo, refrigerated and specialized
containers for intermodal cargo transport on a global basis. Lessees consist
primarily of shipping lines which lease on a long-term or master lease basis.
Genstar is the world's largest lessor of intermodal shipping containers and its
headquarters are in San Francisco, California.
Railcar Service
General Electric Railcar Services Corporation (GERSCO) has a fleet of
approximately 139,000 railcars leased to others in North America (principally
operating leases). Railcar maintenance and repair services are provided by
General Electric Railcar Repair Services Corporation, a wholly-owned affiliate
of GERSCO, at its 17 repair centers in the United States and Canada. General
Electric Railcar Wheel and Parts Services Corporation, a wholly-owned affiliate
of GERSCO, provides railcar refurbishing services and also remanufactures
railcar parts.
Technology Management Services
GE Capital Technology Management Services (GETMS) combines GE Capital
Computer Leasing and GE Capital Computer Services to create one of the largest
providers of information technology services. In 1994, GETMS acquired both
Crowntek Business Centres, Inc. and Total Audio Visual Services, Inc. Crowntek
is a computer hardware reseller, which also provides pre-configuration,
distribution and system integration services while Total Audio Visual Services,
Inc. provides audio visual and staging services. GETMS provides computer
services and financing options, including asset planning, acquisition,
financing, rental, management, remarketing, multi-platform installation,
maintenance, depot services, help desk, deskside support, logistics, test and
measurement equipment rental, repair and calibration.
GETMS's principal locations are Atlanta, Georgia, Emeryville, California,
and Toronto, Canada.
Transport International Pool
Transport International Pool (TIP) rents, leases, sells and finances
over-the-road trailers in the United States, Canada and throughout Europe from
187 locations. TIP's large diversified fleet of over
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ITEM 1. BUSINESS (Continued).
90,000 dry freight vans, refrigerated and double vans, flatbeds and specialized
trailers serves the trailer needs of common and private carriers.
Modular Space
GE Capital Modular Space (GECMS) maintains a fleet of approximately 61,000
non-residential relocatable modular structures for rental, lease and sale from
over 100 facilities in North America and Europe. Markets served include
construction, education, healthcare, financial, commercial, institutional and
government. GECMS' operating leases are primarily rental and short-term leases,
averaging 15 months, in term and usage.
During 1994, GECMS acquired the fleet assets of the Modulaire Division of
Waste Management, Inc., CVC Leasing and ATCO Structures, Inc.
Satellite Telecommunications Services
GE American Communications (GE Americom) is a leading satellite service
supplier to a diverse array of customers, including the broadcast and cable TV
industries, broadcast radio, business information and integrated communications
services for government and commercial customers. GE Americom operates fourteen
communications satellites and maintains a supporting network of earth stations,
central terminal offices, and telemetry, tracking and control facilities, and is
headquartered in Princeton, New Jersey.
In 1994, GE Americom purchased GTE Spacenet satellite communications
business. GE Capital Spacenet Services offers a full range of one way and two
way VSAT network product and services.
SPECIALTY INSURANCE
Mortgage Insurance
GE Mortgage Insurance Companies (GEMICO) are engaged principally in
underwriting residential mortgage guaranty insurance. Operating in 25 field
locations, GEMICO is licensed in 50 states and the District of Columbia and, at
December 31, 1994, was the primary insurance carrier for over 1,227,000
residential homes, with total insurance in force aggregating over $157 billion
and total risk in force aggregating over $31 billion. GEMICO issues both primary
and, on a limited basis, pooled insurance. When a claim is received, GEMICO
proceeds by either paying a guaranteed percentage based on the specified
coverage or paying the mortgage and delinquent interest, taking title to the
property and arranging for its sale. GEMICO is headquartered in Raleigh, North
Carolina.
Financial Guaranty Insurance
FGIC Corporation (FGIC), through its wholly-owned subsidiary Financial
Guaranty Insurance Company (Financial Guaranty), is an insurer of municipal
bonds, including new issues and bonds traded in the secondary market, including
bonds held in unit investment trusts and mutual funds. Financial Guaranty also
guaranties certain structured debt issues in the taxable market. The guarantied
principal, after reinsurance, amounted to approximately $88 billion at December
31, 1994. Approximately 88% of the business written to date by Financial
Guaranty has been municipal bond insurance. FGIC is headquartered in New York,
New York.
Creditor Insurance
Financial Insurance Group (FIG), headquartered in Enfield, Middlesex,
England, is licensed to offer creditor insurance in the European Union. The
insurance, which covers loan repayments, is sold through banks, building
societies and other lenders to retail borrowers.
Life, Property and Casualty Insurance
Employers Reassurance Corporation (ERAC), a Kansas life insurance company,
formerly Puritan Life Insurance Company, was acquired by GE Capital during 1973.
ERAC is licensed to offer life, annuity and accident and health coverage in the
District of Columbia and all states except New York, where it is licensed only
for reinsurance.
Page 8
<PAGE> 11
ITEM 1. BUSINESS (Continued).
Puritan Excess & Surplus Lines Insurance Company (PESLIC), a successor to
the operations of Puritan Insurance Company, began operations as a subsidiary of
GE Capital during 1981. PESLIC is licensed to transact property and casualty
insurance in Connecticut and Missouri. The administrative office of the combined
life and property and casualty insurance operation is located in Overland Park,
Kansas.
In December 1994, ERAC and PESLIC were transferred to Employers Reinsurance
Corporation (ERC), a wholly-owned affiliate of GE Capital Services, from GE
Capital. ERAC and PESLIC have been managed by ERC since 1986.
LOSS EXPERIENCE ON FINANCING RECEIVABLES
The following table sets forth the Corporation's net loss experience on
total financing receivables (time sales, loans and financing lease rentals
receivable) in dollars and as a percentage of average financing receivables
outstanding for each of the last three years. Recoveries on accounts written off
have been netted against gross credit losses.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
(Dollar amounts in millions) 1994 1993 1992
---- ----- ------
<S> <C> <C> <C>
Specialized Financing................................. $214 $391 $396
% of average financing receivables............. 0.82% 1.51% 1.46%
Consumer Services..................................... $470 $467 $535
% of average financing receivables............. 1.64% 2.23% 2.90%
Mid-Market Financing.................................. $50 $70 $57
% of average financing receivables............. 0.31% 0.49% 0.47%
Equipment Management.................................. $6 $62 $21
% of average financing receivables............. 0.06% 0.88% 0.34%
Total................................................. $740 $990 $1,009
% of average financing receivables............. 0.91% 1.46% 1.58%
</TABLE>
REGULATIONS AND COMPETITION
The Corporation's activities are subject to a variety of federal and state
regulations including, at the federal level, the Consumer Credit Protection Act,
the Equal Credit Opportunity Act and certain regulations issued by the Federal
Trade Commission. A majority of states have ceilings on rates chargeable to
customers in retail time sales transactions, installment loans and revolving
credit financing. Common carrier services of GE Americom are subject to
regulation by the Federal Communications Commission. Insurance and reinsurance
operations are subject to regulation by various state insurance commissions or
foreign regulatory authorities, as applicable. The Corporation's international
operations are subject to regulation in their respective jurisdictions. To date
such regulations have not had a material adverse effect on the Corporation's
volume of financing operations or profitability.
The Corporation's charges for providing financing services are changed from
time to time either on a general basis or for specific types of financing when
warranted in light of competition or interest and other costs. The businesses in
which the Corporation engages are highly competitive. The Corporation is subject
to competition from various types of financial institutions, including banks,
thrifts, investment banks, credit unions, leasing companies, consumer loan
companies, independent finance companies and finance companies associated with
manufacturers.
ITEM 2. PROPERTIES.
The Corporation conducts its business from various facilities, most of
which are leased.
ITEM 3. LEGAL PROCEEDINGS.
The Corporation is not involved in any material pending legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Omitted.
Page 9
<PAGE> 12
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
See Note 11 to the Consolidated Financial Statements. The common stock of
the Corporation is owned entirely by GE Capital Services and, therefore, there
is no trading market in such stock.
ITEM 6. SELECTED FINANCIAL DATA.
The following selected financial data should be read in conjunction with
the financial statements of GE Capital and consolidated affiliates and the
related Notes to the Consolidated Financial Statements.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------
(Dollar amounts in millions) 1994 1993 1992 1991 1990
-------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
FOR THE YEAR:
Financing volume.............................. $ 75,438 $ 57,094 $51,186 $45,965 $42,853
======== ======== ======= ======= =======
Earned income................................. $ 16,923 $ 14,444 $12,250 $11,328 $10,121
Interest expense.............................. 4,414 3,461 3,665 4,225 4,228
Operating and administrative expense.......... 5,349 4,894 3,941 2,735 2,369
Insurance losses and policyholder and annuity
benefits.................................... 1,707 1,259 611 599 521
Provision for losses on financing
receivables................................. 873 987 1,056 1,102 688
Depreciation and amortization of buildings and
equipment and equipment on operating
leases...................................... 1,657 1,587 1,297 1,187 940
Minority interest in net earnings of
consolidated affiliates..................... 109 114 14 (7) 4
-------- -------- ------- ------- -------
Earnings before income taxes.................. 2,814 2,142 1,666 1,487 1,371
Provision for income taxes.................... 896 664 415 362 350
-------- -------- ------- ------- -------
Net earnings................................ $ 1,918 $ 1,478 $ 1,251 $ 1,125 $ 1,021
======== ======== ======= ======= =======
Ratio of earnings to fixed charges............ 1.63 1.62 1.44 1.34 1.31
======== ======== ======= ======= =======
Ratio of earnings to combined fixed charges
and preferred stock dividends............... 1.62 1.60 1.43 1.32 1.29
======== ======== ======= ======= =======
AT YEAR END:
Financing receivables:
Time sales and loans, net of deferred
income................................. $ 50,021 $ 40,748 $37,070 $36,849 $35,085
Investment in financing leases, net of
deferred income........................ 28,398 24,930 23,925 20,411 16,530
-------- -------- ------- ------- -------
Total financing receivables......... 78,419 65,678 60,995 57,260 51,615
Allowance for losses on financing
receivables............................ (2,062) (1,730) (1,607) (1,508) (1,360)
-------- -------- ------- ------- -------
Financing receivables -- net........ $ 76,357 $ 63,948 $59,388 $55,752 $50,255
======== ======== ======= ======= =======
Percent of allowance for losses on financing
receivables to total financing
receivables................................. 2.63% 2.63% 2.63% 2.63% 2.63%
-------- -------- ------- ------- -------
Equipment on operating leases -- net.......... $ 12,851 $ 10,650 $ 9,395 $ 7,552 $ 5,557
======== ======== ======= ======= =======
Total assets.................................. $130,904 $117,939 $92,632 $80,528 $70,385
======== ======== ======= ======= =======
Capitalization:
Notes payable within one year................. $ 54,579 $ 52,903 $48,492 $43,152 $36,691
Long-term senior debt......................... 33,615 25,112 21,182 17,946 16,728
Long-term subordinated debt................... 697 697 697 325 112
Equity (a).................................... 10,540 10,370 8,892 7,872 6,886
-------- -------- ------- ------- -------
Debt to equity ratio (a)...................... 7.94 7.96 7.91 7.80 7.77
======== ======== ======= ======= =======
</TABLE>
---------------
(a) The Corporation adopted SFAS No. 115, Accounting for Certain Investments in
Debt and Equity Securities, on December 31, 1993, resulting in the inclusion
in equity, net of tax, of $655 million of net unrealized losses and $485
million of net unrealized gains on investment securities at December 31,
1994 and 1993, respectively. The debt to equity ratio excludes the effects
of such unrealized gains and losses. Including such unrealized gains and
losses, the Corporation's debt to equity ratio would have been 8.43 to 1 and
7.59 to 1 at December 31, 1994 and December 31, 1993, respectively.
Page 10
<PAGE> 13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS.
OVERVIEW
The Corporation's net earnings for 1994 were $1,918 million, which, after
payment of dividends on its variable cumulative preferred stock, resulted in a
contribution of $1,888 million to GE Capital Services' 1994 net earnings, an
increase of 30% over 1993. Net earnings for 1993 were $1,478 million, which,
after payment of dividends on its variable cumulative preferred stock, resulted
in a contribution to GE Capital Services' net earnings of $1,456 million, an
increase of 19% over 1992.
Earnings of the Corporation's lending, leasing and equipment management
businesses are significantly influenced by the level of invested assets, the
related financing spreads (the excess of yields, rates earned, over interest
rates on borrowings) and the quality of those assets. Earnings increases in 1994
and 1993 resulted from asset growth, improved financing spreads and asset
quality. Asset growth in 1994 and 1993 was the result of higher origination
volumes and acquisitions of businesses and portfolios, including the 1993
mid-year acquisition of the annuity business. Financing spreads increased to a
greater extent in 1993, when borrowing rates declined substantially. The
provision for losses on financing receivables declined in both 1994 and 1993 as
the quality of the portfolio improved.
Earnings from the Corporation's Specialty Insurance businesses declined in
1994, primarily due to adverse loss development in the private mortgage
insurance business. In 1993, Specialty Insurance earnings were up sharply
reflecting strong performances by the financial guaranty insurance and creditor
insurance businesses.
OPERATING RESULTS
EARNED INCOME from all sources increased 17% to $16,923 million in 1994,
following an 18% increase in 1993. Asset growth in each of the Corporation's
financing segments, through acquisitions of businesses and portfolios as well as
origination volume, was the primary reason for increased income from time sales,
loans, financing leases and operating lease rentals in both 1994 and 1993.
Yields on related assets increased during 1994 after holding essentially flat in
1993 and 1992. Earned income in 1994 from the Corporation's annuity business,
formed through two mid-year 1993 acquisitions, was $1,102 million and $571
million in 1994 and 1993, respectively.
Gains on sales of warrants and other equity interests obtained in
connection with certain loans, fee income associated with syndication
activities, and sales of certain assets, including real estate investments,
contributed $453 million to pre-tax income in 1994, compared with $647 million
in 1993 and $438 million in 1992.
Earned income of the Corporation's Specialty Insurance segment of $1,976
million in 1994 was essentially flat compared with 1993 reflecting steady growth
in premium revenue offset by a reduction in assumed life reinsurance. The 1993
increase of 20% was primarily the result of growth in premium income and
investment income as well as the impact of a full year of the creditor insurance
business which was consolidated at the end of the second quarter of 1992 when an
existing equity position was converted to a controlling interest.
The correlation between interest rate changes and financing spreads (the
excess of yield over interest rates on borrowings) is subject to many factors
and cannot be forecasted with reliability. Although not necessarily relevant to
future effects, management estimates that, all else constant, an increase of 100
basis points in interest rates for all of 1994 would have reduced net earnings
by approximately $90 million.
INTEREST EXPENSE in 1994 totaled $4.4 billion, 28% higher than 1993 which
was 6% lower than in 1992. The 1994 increase reflected the effects of higher
average borrowings used to finance asset growth as well as the effects of higher
interest rates. The 1993 decrease was the result of substantially lower
composite interest rates which more than offset the effect of higher average
borrowings required to finance the significantly higher level of invested
assets. The Corporation's 1994 composite interest rate of 5.47% was 50 basis
points higher than the 1993 rate, which in turn was 87 basis points lower than
the 1992 rate.
OPERATING AND ADMINISTRATIVE EXPENSES increased 9% to $5,349 million in
1994, compared with a 24% increase to $4,894 million in 1993, primarily
reflecting higher investment levels and costs associated with acquired
businesses and portfolios over the past two years. These increases in both 1994
and 1993 were partially offset by reductions in provisions for losses on
investments charged to operating and administra-
Page 11
<PAGE> 14
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
(Continued).
tive expenses, principally those relating to commercial real estate assets,
highly leveraged transactions (HLT) and commercial aircraft.
INSURANCE LOSSES AND POLICYHOLDER AND ANNUITY BENEFITS increased $448
million to $1,707 million in 1994, compared with a $648 million increase to
$1,259 million in 1993. The 1994 increase was the result of annuity benefits
credited to customers of the annuity business which was acquired in 1993 and
adverse loss development in private mortgage pool insurance, 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 reduced assumed volume.
The 1993 increase largely reflected annuity benefits relating to the 1993
annuity business acquisition. The remainder of the 1993 increase represented
higher losses on increased volume in the life reinsurance and private mortgage
insurance businesses, partially offset by reduced losses in the creditor
insurance business.
PROVISION FOR LOSSES ON FINANCING RECEIVABLES decreased $114 million to
$873 million in 1994, compared with a $69 million decrease to $987 million in
1993. These provisions principally related to the private-label and bank credit
cards, auto leasing, commercial real estate loans and, in 1993, the HLT
portfolio discussed below under Portfolio Quality in connection with other
finance receivables.
DEPRECIATION AND AMORTIZATION OF BUILDINGS AND EQUIPMENT AND EQUIPMENT ON
OPERATING LEASES increased 4% to $1,657 million in 1994, compared with a 22%
increase to $1,587 million in 1993, as a result of additions to equipment on
operating leases through business and portfolio acquisitions as well as
origination volume, and, in 1993, the acceleration of depreciation of certain
assets.
PROVISION FOR INCOME TAXES was $896 million in 1994 (an effective tax rate
of 31.8%), compared with $664 million in 1993 (31.0%) and $415 million (24.9%)
in 1992. The increased provision for income taxes in both 1994 and 1993
reflected the effects of additional income before taxes and, in 1993, the 1%
increase in the U. S. federal income tax rate. Increases impacting the effective
tax rate in 1994, compared with 1993, included proportionately lower tax-exempt
income and an increase in state income taxes. In addition, there was no current
year counterpart to the effects of certain 1993 financing transactions that
reduced the Corporation's obligation for deferred taxes. These increases were
offset by the absence of a current year counterpart to the unfavorable effects
of the 1993 increase in the U.S. federal income tax rate. The higher rate in
1993, compared with 1992, primarily reflected the increase in the U.S. federal
income tax rate and proportionally lower tax-exempt income, partially offset by
the aforementioned 1993 financing transactions.
OPERATING PROFIT BY INDUSTRY SEGMENT
Operating profit (pre-tax income) of the Corporation, by industry segment,
is summarized in Note 16 to the Consolidated Financial Statements and discussed
below.
SPECIALTY INSURANCE operating profit declined from $422 million in 1993 to
$188 million in 1994 as a result of an operating loss in the private mortgage
insurance business. The 1994 operating loss resulted from adverse loss
development in private mortgage pool insurance, the result of poor economic
conditions and housing value declines in southern California. These losses more
than offset operating profit increases in other parts of the segment, including
primary mortgage insurance. Based on conditions at December 31, 1994, management
believes that loss development should diminish in 1995 and in subsequent years.
However, future economic conditions and housing values in southern California
are uncertainties that could affect that outlook. The 1993 operating profit was
40% higher than the $302 million recorded in 1992, reflecting higher premium
volume from bond refunding in the financial guaranty insurance business as well
as reduced claims expense in the creditor insurance business.
CONSUMER SERVICES operating profit increased 50% to $1,067 million from
$709 million in 1993 which was 16% higher than 1992. The strong 1994 growth in
operating profit resulted from origination and acquisition growth in the auto
leasing business and the private-label and bank credit card businesses. In
addition, the operations of the annuity business, purchased in 1993, were
included for a full year in 1994. The 1993 increase reflected lower provisions
for receivable losses in the private-label and bank credit card businesses
resulting from declines in consumer delinquency as well as strong asset growth
and a favorable interest rate environment for both the auto leasing business and
the private-label and bank credit card businesses.
Page 12
<PAGE> 15
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
(Continued).
EQUIPMENT MANAGEMENT operating profit increased to $624 million in 1994
from $246 million in 1993. This increase reflected higher volume in most
businesses, largely the result of portfolio and business acquisitions, and of
improved trailer, container and railcar utilization. In addition, certain
expenses associated with redeployment and refurbishment of owned aircraft
declined in 1994 compared with 1993. Operating profit declined 50% in 1993
resulting from the aforementioned expenses associated with owned aircraft and
the effects of lower utilization and pricing pressures with respect to
ocean-going containers. These declines were partially offset by higher volume in
most businesses, largely the result of asset growth and improved trailer and
railcar utilization.
MID-MARKET FINANCING operating profit of $435 million in 1994 was 7% higher
than that of 1993 which was 74% higher than 1992. The 1994 and 1993 increases
reflected higher levels of invested assets, primarily as a result of business
and portfolio acquisitions and increased financing spreads.
SPECIALIZED FINANCING operating profit was $513 million in 1994, compared
with $366 million in 1993, and $35 million in 1992. The increase in 1994
principally reflected much lower provisions for losses on HLT investments and
commercial real estate assets. The 1993 increase also principally reflected much
lower provisions for losses on HLT investments and higher gains from sales of
commercial real estate assets offset in part by higher loss provisions for
commercial real estate assets. Further details concerning loss provisions
relating to both the commercial real estate portfolio and HLT investments are
discussed below.
CAPITAL RESOURCES AND LIQUIDITY
The Corporation's principal source of cash is financing activities that
involve the continuing rollover of short-term borrowings and appropriate
addition of long-term borrowings, with an appropriate balance of maturities.
Over the past three years, the Corporation's borrowings with maturities of 90
days or less have increased by $3.7 billion. New borrowings of $49.5 billion
having maturities longer than 90 days were added during those years, while $28.7
billion of such longer-term borrowings were retired. The Corporation also
generated significant cash from operating activities, $16.4 billion during the
last three years.
The Corporation's principal use of cash has been investing in assets to
grow the business. Of $39.4 billion that the Corporation invested over the past
three years, $18.4 billion was used for additions to financing receivables,
$12.2 billion for new equipment, primarily for lease to others, and $6.2 billion
to acquire new businesses.
GE Company has agreed to make payments to the Corporation, constituting
additions to pre-tax income, to the extent necessary to cause GE Capital's
consolidated ratio of earnings to fixed charges to be not less than 1.10 for
each fiscal year commencing with fiscal year 1991. Three years advance written
notice is required to terminate this agreement. No payments have been required
under this agreement. The Corporation's ratios of earnings to fixed charges for
the years 1994, 1993 and 1992, were 1.63, 1.62 and 1.44, respectively.
The Corporation's total borrowings were $88.9 billion at December 31, 1994,
of which $54.6 billion was due in 1995 and $34.3 billion was due in subsequent
years. Comparable amounts at the end of 1993 were $78.7 billion total, $52.9
billion due within one year and $25.8 billion due thereafter. A large portion of
the Corporation's borrowings was commercial paper ($41.2 billion and $44.0
billion at the end of 1994 and 1993, respectively). The average remaining terms
and interest rates of commercial paper were 45 days and 5.90%, respectively, at
the end of 1994 compared with 35 days and 3.39% at the end of 1993. The
Corporation's ratio of debt to equity (leverage) was 8.43 to 1 at the end of
1994 compared with 7.59 to 1 at the end of 1993. Excluding net unrealized gains
and losses on investment securities, the Corporation's leverage was 7.94 to 1 at
the end of 1994, compared with 7.96 to 1 at the end of 1993.
Management believes the Corporation is well positioned to meet the global
needs of its customers for capital and to continue growing its diverse asset
base.
INTEREST RATE AND CURRENCY RISK MANAGEMENT
The Corporation is exclusively an end user of derivative financial
instruments that are used to manage interest rate and currency risk. The
Corporation does not engage in any derivatives trading, market-making or other
speculative activities.
Page 13
<PAGE> 16
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
(Continued).
The Corporation manages its exposure to changes in interest rates, in part,
by funding its assets with an appropriate mix of fixed and variable rate debt
and its exposure to currency fluctuations principally by funding local currency
denominated assets with debt denominated in those same currencies. It uses
interest rate swaps and currency swaps (including non-U.S. currency and cross
currency interest rate swaps) to achieve lower borrowing costs. Substantially
all of these swaps have been designated as modifying interest rates and/or
currencies associated with specific debt instruments. All other swaps, forward
contracts and other derivatives have been designated as hedges of non-U.S. net
investments or other assets, and are not significant. These financial
instruments allow the Corporation to lower its cost of funds by substituting
credit risk for interest rate and currency risks. Since the Corporation's
principal use of swaps is to optimize funding costs, changes in interest rates
and exchange rates underlying swaps would not be expected to have a material
impact on the Corporation's financial position or results of operations. The
Corporation conducts almost all activities with these instruments in the
over-the-counter markets.
Established practices require that all derivative financial instruments
relate to specific asset, liability or equity transactions or currency
exposures. Substantially all treasury actions are centrally executed by the
Corporation's Treasury Department, which maintains controls on all exposures,
adheres to stringent counterparty credit standards and actively monitors
marketplace exposures.
Given the ways in which the Corporation uses swaps, market risk associated
with swap activities is meaningful only as it relates to how changes in the
market value of swaps affect credit exposure to individual swap counterparties.
The Corporation has established the following credit policies governing swap
transactions: (a) at inception, counterparties must be rated, at a minimum, Aa3
(Moody's) or AA- (S&P) for swaps of five years or less, and Aaa/AAA for swaps in
excess of five years; and (b) mark to market counterparty exposure is limited to
$50 million for Aa2/AA rated institutions and $75 million for Aaa/AAA rated
institutions. When monthly review of the market values indicate that a
counterparty is approaching the above limits, appropriate actions are initiated
to reduce exposure.
Because of the changing nature of financial markets, the Corporation
incorporates credit downgrade language in its master swap agreements. If either
the Corporation or the counterparty is downgraded below A3 (Moody's) or A-
(S&P), the non-downgraded counterparty has the right to require assignment of
the affected swap to an approved counterparty or termination of the affected
swaps. If termination occurs, the Corporation replaces the swap with an
appropriate counterparty.
The conversion of interest rate and currency risk into credit risk results
in a need to monitor counterparty credit risk actively. At December 31, 1994,
the notional amount of derivatives for which the counterparty was rated below
Aa3/AA- was $1,504 million. These amounts are the result of (1) counterparty
downgrades, (2) transactions executed prior to the adoption of the Corporation's
current counterparty credit standards, and (3) transactions relating to acquired
assets or businesses. The total exposure to market value changes related to
credit risk on swaps at December 31, 1994 was $257 million. The Corporation does
not anticipate any loss on this exposure.
The following chart displays the credit risk exposures at the following
year ends.
PERCENTAGE OF NOTIONAL DERIVATIVE EXPOSURE BY COUNTERPARTY CREDIT RATING
<TABLE>
<CAPTION>
MOODY'S / S&P 1994 1993 1989
------------- ---- ---- ----
<S> <C> <C> <C>
AAA/AAA........................................................... 77% 65% 29%
AA2/AA............................................................ 18% 23% 19%
A2/A.............................................................. 5% 12% 52%
</TABLE>
The optimal funding strategy is sometimes achieved by using multiple swaps.
For example, to obtain fixed rate U.S. dollar funding, several alternatives are
generally available. One alternative is a swap of non-U.S. dollar denominated
fixed rate debt into U.S. dollars. The synthetic U.S. dollar denominated debt
would be effectively created by taking the following steps: (1) issuing fixed
rate, non-U.S. currency denominated debt, (2) entering into a swap under which
fixed rate non-U.S. currency principal and interest will be received and
floating rate non-U.S. currency principal and interest will be paid, and (3)
entering into a swap under which floating rate non-U.S. currency principal and
interest will be received and fixed rate U.S. dollar denominated principal and
interest will be paid. The end result is, in every important respect, fixed rate
U.S. dollar denominated financing with an element of controlled
Page 14
<PAGE> 17
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
(Continued).
credit risk. This type of structure usually results from using several swap
counterparties for steps (2) and (3). The Corporation uses multiple swaps only
as part of such transactions.
The interplay of the Corporation's credit risk policy with its funding
activities is seen in the following example, in which the Corporation is assumed
to have been offered three alternatives for funding five-year fixed rate U.S.
dollar assets with five-year fixed rate U.S. dollar debt.
<TABLE>
<CAPTION>
SPREAD OVER
TREASURIES IN
BASIS POINTS COUNTERPARTY
------------- ------------
<S> <C> <C>
1. Fixed rate 5 year medium term note................ +65 --
2. U.S. dollar commercial paper swapped into 5 year
U.S. dollar fixed rate funding.................... +40 A
3. Swiss franc fixed rate debt swapped into 5 year
U.S. dollar fixed rate funding.................... +35 B
</TABLE>
Counterparty A is a major brokerage house with a Aaa/AAA rated swap
subsidiary and a current exposure to the Corporation of $39 million.
Counterparty B is a Aa2/AA rated insurance company with a current exposure of
$50 million.
In this hypothetical case, the Corporation would have chosen alternative 2.
Alternative 1 is unacceptably costly. Although alternative 3 would have yielded
a lower immediate cost of funds, the additional credit risk would have exceeded
the Corporation's risk management limits.
PORTFOLIO QUALITY
THE PORTFOLIO OF FINANCING RECEIVABLES, which was $76.4 billion at the end
of 1994 and $63.9 billion at the end of 1993, is the Corporation's largest asset
and its primary source of revenues. Related allowances for losses at the end of
1994 aggregated $2.1 billion (2.63% of receivables -- the same level as 1993 and
1992) and are, in management's judgment, appropriate given the risk profile of
the portfolio. A discussion about the quality of certain elements of the
portfolio of financing receivables follows. Further details are included in
Notes 3, 4 and 5 to the Consolidated Financial Statements.
CONSUMER LOANS RECEIVABLE, primarily retailer and auto receivables, were
$23.1 billion and $17.3 billion at the end of 1994 and 1993, respectively. In
addition, the Corporation's investment in consumer auto finance lease
receivables was $7.5 billion and $5.6 billion at the end of 1994 and 1993,
respectively. Nonearning receivables, which were 1.4% of total loans and leases
(1.7% at the end of 1993), aggregated $422 million at the end of 1994. The
provision for losses on retailer and auto financing receivables was $502 million
in 1994, a 7% increase from $469 million in 1993, reflecting growth in the
portfolio of receivables. Most nonearning receivables were private-label credit
card receivables, the majority of which were subject to various loss-sharing
arrangements that provide full or partial recourse to the originating retailer.
COMMERCIAL REAL ESTATE LOANS classified as finance receivables by the
Commercial Real Estate business were $11.9 billion at December 31, 1994, up $1.0
billion from the end of 1993. In addition, the investment portfolio of the
annuity business included $1.4 billion of commercial property loans at December
31, 1994, up $0.3 billion from the end of 1993. Commercial real estate loans are
generally secured by first mortgages. In addition to loans, the commercial real
estate portfolio included, in other assets, $2.1 billion ($2.2 billion in 1993)
of assets acquired for resale from various financial institutions, including the
Resolution Trust Corporation. Values realized on sales of these assets and the
pace of such sales continue to meet or exceed expectations at the time of
purchase. Also included in other assets were investments in real estate ventures
at year-end 1994 totaling $1.4 billion, the same as at year-end 1993. Those
investments are made as a part of original financings and in conjunction with
loan restructurings where management believes that such investments will enhance
economic returns.
Commercial Real Estate's foreclosed properties at the end of 1994 declined
to $20 million from $110 million at the end of 1993, primarily because of sales.
At December 31, 1994, Commercial Real Estate's portfolio included loans
secured by and investments in a variety of property types that continued to be
well dispersed geographically. Nonearning and reduced earning receivables
declined to $179 million in 1994 from $272 million in 1993, reflecting write-
offs and proactive management of delinquent receivables in a stabilized
commercial real estate market. Sustaining the 1994 improvements depends on many
factors, including interest rates and various local
Page 15
<PAGE> 18
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
(Continued).
market conditions. The loss provision for Commercial Real Estate's investments
was $287 million in 1994 ($244 million related to receivables and $43 million
related to other assets), compared with $387 million and $299 million in 1993
and 1992, respectively. The 1994 decrease resulted from lower provisions related
to real estate ventures and foreclosed properties. Loss provisions in 1993
increased as the portfolio was adversely affected by a weakened commercial real
estate market.
OTHER FINANCING RECEIVABLES, $32.5 billion at December 31, 1994, consisted
primarily of a diverse commercial, industrial and equipment loan and lease
portfolio. This portfolio grew $3.5 billion during 1994, while nonearning and
reduced earning receivables decreased to $165 million at year-end 1994 from $237
million at year-end 1993. Included in other financing receivables are financings
provided for highly leveraged management buyouts and corporate
recapitalizations. The portion of those investments classified as financing
receivables was $2.4 billion at the end of 1994, compared with $3.3 billion at
the end of 1993, as repayments continued to reduce this liquidating portfolio.
The year-end balance of the HLT portfolio included amounts that had been written
down to estimated fair value and carried in other assets as a result of
restructuring or in-substance repossession. These balances aggregated $336
million at the end of 1994 and $544 million at the end of 1993 (net of
allowances of $224 million and $244 million, respectively).
The Corporation has loans and leases to commercial airlines, as discussed
in Note 5 to the Consolidated Financial Statements, that aggregated about $7.6
billion at the end of 1994, up from $6.8 billion at the end of 1993. At year-end
1994, the Corporation's commercial aircraft positions included financial
guaranties and funding commitments amounting to $506 million (compared with $450
million in 1993) and conditional commitments to purchase aircraft at a cost of
$81 million ($865 million at December 31, 1993). The decline in purchase
commitments resulted from 1994 purchases of aircraft.
ENTERING 1995, management believes that vigilant attention to risk
management, along with the diversity and strength of the Corporation's
resources, position it to deal effectively with the increasing competition in an
ever-changing global economy.
NEW ACCOUNTING STANDARDS
Principal new accounting standards are SFAS No. 114, Accounting by
Creditors for Impairment of a Loan, and the related SFAS No. 118, which together
modify the accounting and disclosure that applies when it is probable that all
amounts due under contractual terms of a commercial loan will not be collected.
Had these standards been adopted for 1994, there would have been no effect on
earnings or financial position, and management does not foresee any significant
future effect following adoption on January 1, 1995.
Page 16
<PAGE> 19
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
General Electric Capital Corporation
We have audited the financial statements of General Electric Capital
Corporation and consolidated affiliates as listed in Item 14. In connection with
our audits of the consolidated financial statements, we also have audited the
financial statement schedules as listed in Item 14. These consolidated financial
statements and financial statement schedules are the responsibility of the
Corporation's management. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement schedules based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of General
Electric Capital Corporation and consolidated affiliates at December 31, 1994
and 1993, and the results of their operations and their cash flows for each of
the years in the three-year period ended December 31, 1994, in conformity with
generally accepted accounting principles. Also in our opinion, the related
financial statement schedules, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly, in all
material respects, the information set forth therein.
As discussed in Note 11 to the consolidated financial statements, the
Corporation in 1993 adopted required changes in its method of accounting for
investments in certain securities.
/S/ KPMG PEAT MARWICK LLP
Stamford, Connecticut
February 10, 1995
Page 17
<PAGE> 20
GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES
STATEMENT OF CURRENT AND RETAINED EARNINGS
<TABLE>
<CAPTION>
For the years ended December 31 (In millions) 1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
EARNED INCOME
Time sales, loan investment and other income (Note 12)............ $ 9,208 $ 7,558 $ 6,687
Financing leases(Note 12)......................................... 2,539 2,315 2,151
Operating lease rentals (Note 5).................................. 3,802 3,267 2,444
Premium and commission income of insurance affiliates (Note 9).... 1,374 1,304 968
------- ------- -------
Total earned income.......................................... 16,923 14,444 12,250
------- ------- -------
EXPENSES
Interest (Notes 8 & 13)........................................... 4,414 3,461 3,665
Operating and administrative (Note 14)............................ 5,349 4,894 3,941
Insurance losses and policyholder and annuity benefits (Note 9)... 1,707 1,259 611
Provision for losses on financing receivables (Note 4)............ 873 987 1,056
Depreciation and amortization of buildings and equipment and
equipment on operating leases (Notes 5 & 6)..................... 1,657 1,587 1,297
Minority interest in net earnings of consolidated affiliates...... 109 114 14
------- ------- -------
Total expenses............................................... 14,109 12,302 10,584
------- ------- -------
Earnings before income taxes...................................... 2,814 2,142 1,666
Provision for income taxes (Note 15).............................. 896 664 415
------- ------- -------
NET EARNINGS...................................................... 1,918 1,478 1,251
Dividends paid (Note 11).......................................... (605) (482) (326)
Retained earnings at January 1.................................... 7,008 6,012 5,087
------- ------- -------
RETAINED EARNINGS AT DECEMBER 31.................................. $ 8,321 $ 7,008 $ 6,012
======= ======= =======
</TABLE>
See Notes to Consolidated Financial Statements.
Page 18
<PAGE> 21
GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES
STATEMENT OF FINANCIAL POSITION
<TABLE>
<CAPTION>
At December 31 (In millions) 1994 1993
-------- --------
<S> <C> <C>
ASSETS
Cash and equivalents..................................................... $ 712 $ 1,049
Investment securities (Note 2)........................................... 22,208 20,577
Financing receivables (Note 3):
Time sales and loans, net of deferred income........................ 50,021 40,748
Investment in financing leases, net of deferred income.............. 28,398 24,930
-------- --------
78,419 65,678
Allowances for losses on financing receivables (Note 4)............. (2,062) (1,730)
-------- --------
Financing receivables -- net...................................... 76,357 63,948
Other receivables -- net................................................. 3,624 4,046
Equipment on operating leases (at cost), less accumulated amortization of
$4,029 and $3,238 (Note 5)............................................. 12,851 10,650
Buildings and equipment (at cost), less accumulated depreciation of $764
and $555 (Note 6)...................................................... 1,018 910
Other assets (Note 7).................................................... 14,134 16,759
-------- --------
TOTAL ASSETS............................................................. $130,904 $117,939
======== ========
LIABILITIES AND EQUITY
Notes payable within one year (Note 8)................................... $ 54,579 $ 52,903
Notes payable after one year (Note 8).................................... 34,312 25,809
-------- --------
Total notes payable................................................. 88,891 78,712
Accounts and drafts payable.............................................. 3,156 3,452
Insurance liabilities, reserves and annuity benefits (Note 9)............ 18,593 16,585
Other liabilities........................................................ 3,842 2,764
Deferred income taxes (Note 15).......................................... 5,267 5,630
-------- --------
Total liabilities................................................... 119,749 107,143
-------- --------
Minority interest in equity of consolidated affiliates (Note 10)......... 615 426
-------- --------
Variable cumulative preferred stock, $100 par value, liquidation
preference $100,000 per share (10,500 shares authorized and 8,750
shares outstanding at December 31, 1994 and December 31, 1993)......... 1 1
Common stock, $200 par value (3,866,000 shares authorized and 3,837,825
shares outstanding at December 31, 1994 and December 31, 1993)......... 768 768
Additional paid-in capital............................................... 2,172 2,172
Retained earnings........................................................ 8,321 7,008
Unrealized gains (losses) on investment securities....................... (655) 485
Foreign currency translation adjustments................................. (67) (64)
-------- --------
Total equity (Note 11).............................................. 10,540 10,370
-------- --------
TOTAL LIABILITIES AND EQUITY............................................. $130,904 $117,939
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
Page 19
<PAGE> 22
GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
For the years ended December 31 (In millions) 1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings...................................................... $ 1,918 $ 1,478 $ 1,251
Adjustments to reconcile net earnings to cash provided by
operating activities:
Provision for losses on financing receivables................... 873 987 1,056
Increase in insurance liabilities, reserves and annuity
benefits..................................................... 542 764 374
Increase (decrease) in deferred income taxes...................... 721 496 (23)
Depreciation and amortization of buildings and equipment and
equipment on operating leases................................... 1,657 1,587 1,297
Amortization of premium and discount on debt...................... 141 99 197
Change in accounts and drafts payable............................. (656) 624 343
Gain on principal business dispositions........................... -- -- (65)
Other -- net...................................................... (6) 455 271
-------- -------- --------
Cash provided from operating activities......................... 5,190 6,490 4,701
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Increase in loans to customers.................................... (36,560) (30,002) (27,069)
Principal collections from customers.............................. 31,264 27,571 25,136
Investment in assets on financing leases.......................... (10,528) (7,204) (7,758)
Principal collections on financing leases......................... 9,050 6,812 5,338
Net increase in credit card receivables........................... (2,751) (1,341) (330)
Buildings and equipment and equipment on operating leases
-- additions.................................................... (5,734) (3,133) (3,342)
-- dispositions................................................ 2,417 1,080 1,744
Payments for principal businesses purchased, net of cash
acquired........................................................ (2,144) (2,090) (2,013)
Purchases of investment securities by insurance affiliates and
annuity businesses.............................................. (5,484) (7,527) (3,059)
Dispositions of investment securities by insurance affiliates and
annuity businesses.............................................. 4,417 5,623 2,819
Other............................................................. 2,611 (3,724) (3,457)
-------- -------- --------
Cash used for investing activities........................... (13,442) (13,935) (11,991)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in borrowing (maturities 90 days or less).............. (2,429) 2,053 4,123
Newly issued debt -- short term (maturities 91-365 days).......... 3,214 4,315 4,456
-- long-term senior.......................... 19,228 10,885 6,699
-- long-term subordinated.................... -- -- 450
Proceeds -- non-recourse, leverage lease debt..................... 31 53 148
Repayments and other reductions -- short term (maturities 91-365
days)............................. (10,460) (9,008) (6,474)
-- long-term senior......... (930) (206) (658)
-- long-term subordinated... -- -- (76)
Principal payments--non-recourse, leverage lease debt............. (309) (312) (272)
Proceeds from sales of investment and annuity contracts........... 886 509 --
Redemption of investment and annuity contracts.................... (961) (578) --
Dividends paid.................................................... (595) (482) (326)
Capital contributions from parent company......................... -- 25 --
Issuance of variable cumulative preferred stock by consolidated
affiliate....................................................... 240 -- --
-------- -------- --------
Cash provided from financing activities...................... 7,915 7,254 8,070
-------- -------- --------
(DECREASE) INCREASE IN CASH AND EQUIVALENTS
DURING THE YEAR................................................. (337) (191) 780
CASH AND EQUIVALENTS AT BEGINNING OF YEAR......................... 1,049 1,240 460
-------- -------- --------
CASH AND EQUIVALENTS AT END OF YEAR............................... $ 712 $ 1,049 $ 1,240
======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
Page 20
<PAGE> 23
GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION -- The consolidated financial statements represent the adding
together of General Electric Capital Corporation and all majority-owned and
controlled affiliates ("consolidated affiliates"). All significant transactions
among the parent and consolidated affiliates have been eliminated. Other
affiliates, generally companies in which the Corporation owns 20 to 50 percent
of the voting rights ("nonconsolidated affiliates"), are included in other
assets and valued at the appropriate share of equity plus loans and advances.
CASH FLOWS -- Certificates and other time deposits are treated as cash
equivalents.
METHODS OF RECORDING EARNED INCOME -- Income on all loans is recognized on
the interest method. Accrual of interest income is suspended at the earlier of
the time at which collection of an account becomes doubtful or the account
becomes 90 days delinquent.
Financing lease income, which includes residual values and investment tax
credits, is recorded on the interest method so as to produce a level yield on
funds not yet recovered. Unguaranteed residual values are based primarily on
periodic independent appraisals of the values of leased assets remaining at
expiration of the lease terms. Operating lease income is recognized on a
straight-line basis over the terms of the underlying leases.
Origination, commitment and other nonrefundable fees related to fundings
are deferred and recorded in earned income on the interest method. Commitment
fees related to loans not expected to be funded and line-of-credit fees are
deferred and recorded in earned income on a straight-line basis over the period
to which the fees relate. Syndication fees are recorded in earned income at the
time the related services are performed unless significant contingencies exist.
Premiums on short duration insurance contracts are reported as earned
income over the terms of the related reinsurance treaties or insurance policies.
In general, earned premiums are calculated on a pro-rata basis or are determined
based on reports received from reinsureds. Premium adjustments under
retrospectively rated assumed reinsurance contracts are recorded based on
estimated losses and loss expenses, including both case and
incurred-but-not-reported reserves. Premiums on long-duration insurance products
are recognized as earned when due. Premiums received under annuity contracts are
not reported as revenues but as annuity benefits -- a liability -- and are
adjusted according to the terms of the respective policies.
ALLOWANCE FOR LOSSES ON FINANCING RECEIVABLES AND INVESTMENTS -- The
Corporation maintains an allowance for losses on financing receivables at an
amount which it believes is sufficient to provide adequate protection against
future losses in the portfolio. For small-balance receivables, the allowance for
losses is determined principally on the basis of actual experience during the
preceding three years. Further allowances are also provided to reflect
management's judgment of additional loss potential. For other financing
receivables, principally the larger loans and leases, the allowance for losses
is determined primarily on the basis of management's judgment of net loss
potential, including specific allowances for known troubled accounts.
All accounts or portions thereof deemed to be uncollectible or to require
an excessive collection cost are written off to the allowance for losses.
Small-balance accounts are progressively written down (from 10% when more than
three months delinquent to 100% when nine to twelve months delinquent) to record
the balances at estimated realizable value. However, if at any time during that
period an account is judged to be uncollectible, such as in the case of a
bankruptcy, the uncollectible balance is written off. Larger-balance accounts
are reviewed at least quarterly, and those accounts which are more than three
months delinquent are written down, if necessary, to record the balances at
estimated realizable value.
When collateral is repossessed in satisfaction of a loan, the receivable is
written down against the allowance for losses to estimated fair value,
transferred to other assets and subsequently carried at the lower of cost or
estimated current fair value. This accounting has been employed principally for
specialized financing transactions.
INVESTMENT SECURITIES -- The Corporation has designated its investments in
debt securities and marketable equity securities as available-for-sale. Those
securities are reported at fair value, with net
Page 21
<PAGE> 24
unrealized gains and losses included in equity, net of applicable taxes.
Unrealized losses that are other than temporary are recognized in earnings.
EQUIPMENT ON OPERATING LEASES -- Equipment is amortized, principally on a
straight-line basis, to estimated net salvage value over the lease term or the
estimated economic life of the equipment.
BUILDINGS AND EQUIPMENT -- Depreciation is recorded on a sum-of-the-years'
digits basis or a straight-line basis over the lives of the assets.
GOODWILL -- Goodwill is amortized on a straight-line basis over periods not
exceeding 30 years. Goodwill in excess of associated expected operating cash
flows is considered to be impaired and is written down to fair value.
DEFERRED INSURANCE ACQUISITION COSTS -- For the property and casualty
businesses, deferred insurance acquisition costs are amortized pro-rata over the
contract periods in which the related premiums are earned. For the life
insurance business, these costs are amortized over the premium-paying periods of
the contracts in proportion either to anticipated premium income or to gross
profit, as appropriate. For certain annuity contracts, such costs are amortized
on the basis of anticipated gross profits. For other lines of business,
acquisition costs are amortized over the life of the related insurance
contracts. Deferred insurance acquisition costs are reviewed for recoverability;
for short-duration contracts, anticipated investment income is considered in
making recoverability evaluations.
INSURANCE LIABILITIES AND RESERVES -- The estimated liability for insurance
losses and loss expenses consists of both case and incurred-but-not-reported
reserves. Where experience is not sufficient, industry averages are used.
Estimated amounts of salvage and subrogation recoverable on paid and unpaid
losses are deducted from outstanding losses.
The liability for future policyholder benefits of the life insurance
affiliates has been computed mainly by a net-level-premium method based on
assumptions for investment yields, mortality and terminations that were
appropriate at date of purchase or at the time the policies were developed,
including provisions for adverse deviations.
INTEREST RATE AND CURRENCY RISK MANAGEMENT -- As a matter of policy, the
Corporation does not engage in derivatives trading or market-making activities.
Rather, the principal derivative financial instruments used by the Corporation
are interest and currency swaps used in connection with borrowing activities.
Such swaps are accounted for on an accrual basis and included in interest
expense. Other derivatives, including forwards, futures and options, are
principally hedges of identified assets, liabilities or functional currency
equity positions. The cost or revenue from such instruments is recognized in
income or equity in a manner consistent with the accounting for the instrument
being hedged. If, however, an instrument is designated but is ineffective as a
hedge, the instrument is marked to market and recognized in operations
immediately.
Page 22
<PAGE> 25
NOTE 2. INVESTMENT SECURITIES
A summary of investment securities follows.
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
(In millions) COST GAINS LOSSES VALUE
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
DECEMBER 31, 1994
Corporate and other..................................... $10,428 $ 3 $ (755) $ 9,676
Mortgage-backed......................................... 4,448 81 (188) 4,341
State and municipal..................................... 3,440 37 (166) 3,311
Equity.................................................. 2,917 156 (91) 2,982
Non-U.S................................................. 1,084 8 (22) 1,070
U.S. government and federal agency...................... 994 -- (166) 828
--------- ---------- ---------- ---------
$23,311 $285 $ (1,388) $22,208
======== ======== ======== =======
DECEMBER 31, 1993
Corporate and other..................................... $ 9,345 $ 92 $ (49) $ 9,388
Mortgage-backed......................................... 2,487 31 (11) 2,507
State and municipal..................................... 4,646 396 (5) 5,037
Equity.................................................. 977 299 (43) 1,233
Non-U.S................................................. 1,145 53 (10) 1,188
U.S. government and federal agency...................... 1,217 14 (7) 1,224
--------- ---------- ---------- ---------
$19,817 $885 $ (125) $20,577
======== ======== ======== =======
</TABLE>
Contractual maturities of debt securities at December 31, 1994, other than
mortgage-backed securities, are shown below.
<TABLE>
<CAPTION>
ESTIMATED
AMORTIZED FAIR
(In millions) COST VALUE
--------- ---------
<S> <C> <C>
Due in:
1995........................................................... $ 1,179 $ 1,182
1996 - 1999.................................................... 4,764 4,573
2000 - 2004.................................................... 4,174 3,874
2005 and later................................................. 5,829 5,256
</TABLE>
It is expected that actual maturities will differ from contractual
maturities because some borrowers have the right to call or prepay certain
obligations, sometimes without call or prepayment penalties. Proceeds from the
sales of investment securities in 1994, 1993 and 1992 were $3,100 million,
$4,922 million and $1,249 million, respectively; gross realized gains were $143
million, $129 million and $60 million, respectively; and gross realized losses
were $68 million, $31 million and $1 million, respectively.
NOTE 3. FINANCING RECEIVABLES
Financing receivables at December 31, 1994 and 1993 by industry segment are
shown below.
<TABLE>
<CAPTION>
(In millions) 1994 1993
------- -------
<S> <C> <C>
Time sales and loans:
Consumer services..................................................... $25,906 $18,770
Specialized financing................................................. 17,988 17,028
Mid-market financing.................................................. 5,916 4,693
Equipment management.................................................. 1,516 1,331
------- -------
51,326 41,822
Deferred income....................................................... (1,305) (1,074)
------- -------
Time sales and loans -- net of deferred income........................ 50,021 40,748
------- -------
Investment in financing leases:
Direct financing leases............................................... 25,916 22,063
Leveraged leases...................................................... 2,482 2,867
------- -------
Investment in financing leases........................................ 28,398 24,930
------- -------
Total financing receivables................................................ $78,419 $65,678
======= =======
</TABLE>
Time sales and loans represent transactions with customers in a variety of
forms, including time sales, revolving charge and credit arrangements,
mortgages, installment loans, intermediate-term loans and revolving loans
secured by business assets. The portfolio includes time sales and loans carried
at the
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<PAGE> 26
principal amount on which finance charges are billed periodically, and time
sales and loans acquired on a discount basis carried at gross book value, which
includes finance charges. At year-end 1994 and 1993, specialized financing and
consumer services loans included $13,282 million and $11,887 million,
respectively, for commercial real estate loans. Note 5 contains information on
commercial airline loans and leases.
At December 31, 1994, contractual maturities for time sales and loans were
$20,147 million in 1995, $7,466 million in 1996, $5,708 million in 1997, $4,047
million in 1998, $4,115 million in 1999 and $9,843 million thereafter.
Experience of the Corporation has shown that a substantial portion of
receivables will be paid prior to contractual maturity. Accordingly, the
contractual maturities of time sales and loans are not to be regarded as
forecasts of future cash collections.
Financing leases consist of direct financing and leveraged leases of
aircraft, railroad rolling stock, automobiles and other transportation
equipment, data processing equipment, medical equipment, and other
manufacturing, power generation, mining and commercial equipment and facilities.
As the sole owner of assets under direct financing leases and as the equity
participant in leveraged leases, the Corporation is taxed on total lease
payments received and is entitled to tax deductions based on the cost of leased
assets and tax deductions for interest paid to third-party participants. The
Corporation is also generally entitled to any residual value of leased assets
and to any investment tax credit on leased equipment.
Investments in direct financing and leveraged leases represent unpaid
rentals and estimated unguaranteed residual values of leased equipment, less
related deferred income. Because the Corporation has no general obligation for
principal and interest on notes and other instruments representing third-party
participation related to leveraged leases, such notes and other instruments have
not been included in liabilities but have been offset against the related
rentals receivable. The Corporation's share of rentals receivable on leveraged
leases is subordinate to the share of the other participants who also have
security interests in the leased equipment.
The Corporation's investment in financing leases at December 31, 1994 and
1993 is shown below.
<TABLE>
<CAPTION>
DIRECT TOTAL
FINANCING LEASES LEVERAGED LEASES FINANCING LEASES
------------------ ------------------- -------------------
(In millions) 1994 1993 1994 1993 1994 1993
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Total minimum lease payments
receivable........................... $30,338 $26,584 $ 9,630 $11,496 $39,968 $38,080
Less principal and interest on
third-party nonrecourse debt......... -- -- (7,103 ) (8,398 ) (7,103 ) (8,398 )
-------- -------- -------- -------- -------- --------
Net rentals receivable............ 30,338 26,584 2,527 3,098 32,865 29,682
Estimated unguaranteed residual value
of leased assets..................... 3,767 3,323 1,122 1,167 4,889 4,490
Less deferred income(a)................ (8,189 ) (7,844 ) (1,167 ) (1,398 ) (9,356 ) (9,242 )
-------- -------- -------- -------- -------- --------
Investment in financing leases......... 25,916 22,063 2,482 2,867 28,398 24,930
Less: Allowance for losses............. (471 ) (464 ) (99 ) (74 ) (570 ) (538 )
Deferred taxes arising from
financing leases............... (2,470 ) (2,157 ) (2,605 ) (2,760 ) (5,075 ) (4,917 )
-------- -------- -------- -------- -------- --------
Net investment in financing leases..... $22,975 $19,442 $ (222 ) $ 33 $22,753 $19,475
======== ======== ======== ======== ======== ========
</TABLE>
------------
(a) Total financing lease deferred income is net of deferred initial direct
costs of $93 million and $83 million for 1994 and 1993, respectively.
At December 31, 1994, contractual maturities for finance lease rentals
receivable were $7,409 million in 1995, $6,235 million in 1996, $5,148 million
in 1997, $3,050 million in 1998, $2,096 million in 1999, and $8,927 million
thereafter. As with time sales and loans, experience has shown that a portion of
receivables will be paid prior to contractual maturity and these amounts should
not be regarded as forecasts of future cash flows.
In connection with the sales of financing receivables with recourse, the
Corporation received proceeds of $1,239 million in 1994, $1,105 million in 1993
and $1,097 million in 1992. The Corporation's exposure under such recourse
provisions is included in "other financial guaranties" in Note 20.
Nonearning consumer time sales and loans, primarily private-label credit
card receivables, amounted to $422 million and $391 million at December 31, 1994
and 1993, respectively. A majority of these
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<PAGE> 27
receivables was subject to various loss-sharing arrangements that provide full
or partial recourse to the originating private-label entity. Nonearning and
reduced earning receivables other than consumer time sales and loans were $346
million and $509 million at year-end 1994 and 1993, respectively. Earnings of $4
million and $11 million realized in 1994 and 1993, respectively, were $27
million and $41 million lower than would have been reported had these
receivables earned income in accordance with their original terms.
NOTE 4. ALLOWANCE FOR LOSSES ON FINANCING RECEIVABLES
The allowance for losses on financing receivables represented 2.63% of total
financing receivables at both year-ends 1994 and 1993. The table below shows the
activity in the allowance for losses on financing receivables during each of the
past three years.
<TABLE>
<CAPTION>
(In millions) 1994 1993 1992
------ ------ -------
<S> <C> <C> <C>
Balance at January 1............................... $1,730 $1,607 $ 1,508
Provisions charged to operations................... 873 987 1,056
Net transfers related to companies acquired or
sold............................................. 199 126 52
Amounts written off -- net......................... (740) (990) (1,009)
------ ------ -------
Balance at December 31............................. $2,062 $1,730 $ 1,607
====== ====== =======
</TABLE>
Amounts written off in 1994 were approximately 0.91% of average gross
financing receivables outstanding during the year, compared with 1.46% and 1.58%
of average gross financing receivables outstanding during 1993 and 1992,
respectively.
NOTE 5. EQUIPMENT ON OPERATING LEASES
Equipment on operating leases by type of equipment and accumulated amortization
at December 31, 1994 and 1993 are shown in the following table.
<TABLE>
<CAPTION>
(In millions) 1994 1993
------- -------
<S> <C> <C>
Original Cost
Aircraft......................................................... $ 4,593 $ 3,677
Vehicles......................................................... 4,542 3,568
Marine shipping containers....................................... 3,333 2,985
Railroad rolling stock........................................... 1,605 1,498
Other............................................................ 2,807 2,160
------- -------
16,880 13,888
Accumulated amortization........................................... (4,029) (3,238)
------- -------
$12,851 $10,650
======= =======
</TABLE>
Amortization of equipment on operating leases was $1,435 million in 1994,
$1,395 million in 1993 and $1,133 million in 1992. Noncancelable future rentals
due from customers for equipment on operating leases at year-end 1994 totaled
$7,324 million and were due $2,305 million in 1995, $1,627 million in 1996,
$1,015 million in 1997, $662 million in 1998, $476 million in 1999, and $1,239
million thereafter.
The Corporation acts as a lender and lessor to the commercial airline
industry. At December 31, 1994 and 1993, the aggregate amount of such loans,
leases and equipment leased to others was $7,571 million and $6,776 million,
respectively. In addition, the Corporation had issued financial guaranties and
funding commitments of $506 million at December 31, 1994 ($450 million at
year-end 1993) and had conditional commitments to purchase aircraft at a cost of
$81 million ($865 million at year-end 1993). Included in the Corporation's
equipment leased to others at year-end 1994 is $226 million of commercial
aircraft off-lease ($244 million in 1993).
NOTE 6. BUILDINGS AND EQUIPMENT
Buildings and equipment include office buildings, satellite communications
equipment, data processing equipment, vehicles, furniture and office equipment.
Depreciation expense was $222 million for 1994, $192 million for 1993 and $164
million for 1992.
Page 25
<PAGE> 28
NOTE 7. OTHER ASSETS
Other assets at December 31, 1994 and 1993 are shown in the table below.
<TABLE>
<CAPTION>
(In millions) 1994 1993
------- -------
<S> <C> <C>
Assets acquired for resale......................................... $ 3,867 $ 8,141
Goodwill........................................................... 2,171 1,537
Investments in and advances to nonconsolidated affiliates.......... 2,098 1,574
Real estate ventures............................................... 1,400 1,374
Mortgage servicing rights.......................................... 1,351 832
Other intangibles.................................................. 1,003 805
Miscellaneous investments.......................................... 628 672
Deferred insurance acquisition costs............................... 471 847
Foreclosed real estate properties.................................. 108 213
Other.............................................................. 1,037 764
------- -------
$14,134 $16,759
======= =======
</TABLE>
Goodwill, mortgage servicing rights, and other intangibles are shown net of
accumulated amortization of $672 million at December 31, 1994 and $490 million
at December 31, 1993.
Investments in and advances to nonconsolidated affiliates included advances
of $949 million and $688 million at December 31, 1994 and 1993, respectively.
Assets acquired for resale declined $4.3 billion during 1994 primarily due to
sales of mortgages associated with the mortgage servicing business.
NOTE 8. NOTES PAYABLE
Notes payable at December 31, 1994 totaled $88,891 million, consisting of
$88,194 million of senior debt and $697 million of subordinated debt. The
composite interest rate for the Corporation's finance activities during 1994 was
5.47% compared with 4.97% for 1993 and 5.84% for 1992. Total short-term notes
payable at December 31, 1994 and 1993 consisted of the following.
<TABLE>
<CAPTION>
(In millions) 1994 1993
------- -------
<S> <C> <C>
Commercial paper................................................... $41,217 $43,958
Current portion of long-term debt.................................. 9,695 6,421
Notes with trust departments of banks.............................. 1,774 1,882
Bank borrowings.................................................... 975 197
Other.............................................................. 918 445
------- -------
$54,579 $52,903
======= =======
</TABLE>
The average daily balance of short-term debt, excluding the current portion
of long-term debt, was $43,444 million in 1994 compared with $41,450 million in
1993 and $38,319 million in 1992. The maximum balances of such debt during each
of the past three years were $54,579 million on December 31, 1994, $52,903
million on December 31, 1993 and $48,492 million on December 31, 1992. The
average short-term interest rate, including the effects of associated interest
rate and currency swaps discussed below and excluding the current portion of
long-term debt, for the year 1994 was 4.54%, representing short-term interest
expense divided by the average daily balance, compared with 3.27% for 1993 and
3.91% for 1992. On December 31, 1994 and 1993, average interest rates were 2.46%
and 3.25%, respectively, for bank borrowings, 5.90% and 3.39%, respectively, for
commercial paper and 5.66% and 3.10%, respectively, for notes with trust
departments of banks.
Page 26
<PAGE> 29
Outstanding balances in notes payable after one year at December 31, 1994
and 1993 were as follows.
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
INTEREST
(Dollars in millions) RATE(A) MATURITIES 1994 1993
-------- ----------- ------- -------
<S> <C> <C> <C> <C>
Senior notes
Notes(b)(c)................................... 6.41% 1996-2054 $31,332 $22,028
Reset or remarketed notes(d).................. 8.25 2007-2018 1,025 1,500
Zero coupon/deep discount notes............... 13.58 1996-2001 936 1,407
Floating rate notes........................... (e) 1996-2053 521 521
Less unamortized discount/premium............. (199) (344)
------- -------
Total senior notes....................... 33,615 25,112
------- -------
Subordinated notes(f).............................. 8.04 2006-2012 697 697
------- -------
$34,312 $25,809
======= =======
</TABLE>
---------------
(a) Includes the effects of associated interest rate and currency swaps.
(b) At December 31, 1994 and 1993, the Corporation had agreed with others to
exchange currencies and related interest payments on principal amounts
equivalent to U.S. $12,183 million and $8,101 million, respectively. At
December 31, 1994 and 1993, the Corporation had also entered into interest
rate swaps with others relating to interest on $22,529 million and $11,624
million, respectively.
(c) At December 31, 1993, counterparties held options under which the
Corporation could be caused to execute interest rate swaps associated with
interest payments on $500 million.
(d) Interest rates are reset at the end of the initial and each subsequent
interest period. At each rate-reset date, the Corporation may redeem notes
in whole or in part at its option. Current interest periods range from May
1996 to March 1997.
(e) The rate of interest payable on each note is a variable rate based on the
commercial paper rate each month. Interest is payable either monthly or
semiannually at the option of the Corporation.
(f) Guaranteed by GE Company.
At December 31, 1994, long-term borrowing maturities, including the current
portion of long-term debt, were $9,695 million in 1995, $10,394 million in 1996,
$6,556 million in 1997, $4,507 million in 1998, and $3,417 million in 1999.
At December 31, 1994 the Corporation had committed lines of credit
aggregating $20.8 billion with 131 banks, including $7.0 billion of revolving
credit agreements with 69 banks pursuant to which the Corporation has the right
to borrow funds for periods exceeding one year. A total of $2.6 billion of these
lines were also available for use by GE Capital Services. In addition, at
December 31, 1994, approximately $109 million of committed lines of credit were
directly available to a foreign affiliate of the Corporation. Also, at December
31, 1994, substantially all of the approximately $3.1 billion of GE Company's
credit lines were available for use by the Corporation or GE Capital Services.
During 1994, GE Capital, GE Capital Services and GE Company did not borrow under
any of these credit lines. The Corporation compensates banks for credit
facilities in the form of fees which were immaterial for the past three years.
Interest rate and currency swaps are employed to achieve the lowest cost of
funding for a particular funding strategy. Optimizing funding costs is central
to maintaining satisfactory financing spreads (the difference between the yield
on financial assets and borrowing costs). The Corporation enters into interest
rate swaps and currency swaps (including non-U.S. currency and cross-currency
swaps) to modify interest rates and/or currencies of specific debt instruments.
For example, to fund U.S. operations, GE Capital may issue fixed-rate debt
denominated in a currency other than the U.S. dollar and simultaneously enter
into a currency swap to create synthetic fixed-rate U.S. dollar debt with a
lower yield than could be achieved directly. Virtually all interest rate and
currency swaps have been designated as modifying interest rates and/or
currencies associated with specific debt instruments. All other swaps, forward
contracts and other derivatives have been designated as hedges of non-U.S.
dollar monetary assets or net investments (see Note 20). The debt-associated
swaps allow the Corporation to lower its cost of funds by substituting credit
risk for interest rate and currency risks. Since the Corporation's principal use
of swaps is to optimize funding costs, changes in interest rates and exchange
rates underlying swaps would not be expected to have a material impact on the
Corporation's financial position or results of operations. The Corporation
conducts almost all activities with these instruments in the
Page 27
<PAGE> 30
over-the-counter markets. The Corporation does not engage in derivatives trading
or market-making activities.
Each party in a swap transaction relies on its counterparties to make
contractual payments. Given the ways in which the Corporation uses swaps,
associated market risk is meaningful only as it relates to how changes in the
market value affect credit exposure to individual swap counterparties. To manage
counterparty credit exposure, substantially all transactions are executed
centrally by the Corporation's Treasury Department, which maintains controls on
all exposures, adheres to stringent counterparty credit standards and actively
monitors marketplace exposures. All swap activities are carried out within the
following credit policy constraints:
- At inception, counterparties must be rated, at a minimum, Aa3 (Moody's)
or AA- (S&P) for swaps of five years or less and Aaa/AAA for swaps in
excess of five years.
- Credit exposure is limited to a market value of $50 million for
counterparties rated Aa2/AA and $75 million for those rated Aaa/AAA.
- All swaps are executed under master swap agreements containing mutual
credit downgrade provisions that provide the ability to require
assignment or termination in the event either party is downgraded below
A3 or A-. The total exposure to market value changes related to credit
risk on swaps at December 31, 1994 was $257 million. The Corporation does
not anticipate any loss on this exposure.
NOTE 9. INSURANCE LIABILITIES, RESERVES AND ANNUITY BENEFITS
Insurance liabilities, reserves and annuity benefits represent policyholders'
benefits, unearned premiums and provisions for policy losses and benefits
relating to insurance and annuity businesses. The related balances at December
31, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
(In millions) 1994 1993
------- -------
<S> <C> <C>
Annuity benefits................................................... $12,194 $ 8,894
Other policyholder benefits........................................ 3,778 5,259
Property and casualty reserves..................................... 163 440
Financial and mortgage guaranty reserves........................... 715 607
Unearned premiums.................................................. 1,743 1,385
------- -------
$18,593 $16,585
======= =======
</TABLE>
The liability for future policy benefits of the life insurance affiliates,
included in other policyholder benefits above, has been computed using average
yields of 4.0% to 9.1% in 1994 and 6.2% to 10.1% in 1993.
Activity in the liability for unpaid claims and claims adjustment expenses
is summarized as follows for the past three years:
<TABLE>
<CAPTION>
(In millions) 1994 1993 1992
------ ------ -----
<S> <C> <C> <C>
Balance at January 1 -- gross....................................... $1,047 $ 928 $ 707
Less reinsurance recoverables....................................... (95) (74) (57)
------ ------ -----
Balance at January 1 -- net......................................... 952 854 650
Claims and adjustment expenses incurred
Current year...................................................... 600 434 451
Prior years....................................................... 253 117 29
Claims and adjustment expenses paid
Current year...................................................... (189) (108) (129)
Prior years....................................................... (481) (333) (219)
Reserves transferred to ERC......................................... (291) -- --
Other............................................................... 17 (12) 72
------ ------ -----
Balance at December 31 -- net....................................... 861 952 854
Add reinsurance recoverables........................................ 138 95 74
------ ------ -----
Balance at December 31 -- gross..................................... $ 999 $1,047 $ 928
====== ====== =====
</TABLE>
Page 28
<PAGE> 31
In December 1994, two insurance affiliates were transferred to Employers
Reinsurance Corporation (ERC), another wholly-owned affiliate of GE Capital
Services.
Financial guaranties of insurance affiliates as of December 31, 1994 and
1993 are summarized below.
<TABLE>
<CAPTION>
(In millions) 1994 1993
-------- --------
<S> <C> <C>
Guaranties, principally on municipal bonds and structured
finance issues......................................... $106,726 $101,352
Reinsurance on bonds/finance issues...................... (18,954) (17,287)
Mortgage insurance risk in force (GE Capital Mortgage
Insurance)............................................. 31,463 27,022
Other.................................................... 44 --
-------- --------
$119,279 $111,087
======== ========
</TABLE>
The Corporation's Specialty Insurance businesses cede reinsurance on both a
pro-rata and an excess basis. When the Corporation cedes business to third
parties, it is not relieved of its primary obligation to policyholders and
reinsureds. Consequently, the Corporation establishes allowances for amounts
deemed uncollectible due to the failure of reinsurers to honor their
obligations. The Corporation monitors both the financial condition of individual
reinsurers and risk concentrations arising from similar geographic regions,
activities and economic characteristics of reinsurers. The maximum amount of
individual life insurance retained on any one life is $450,000.
The effects of reinsurance on premiums written and earned were as follows
for the past three years:
<TABLE>
<CAPTION>
WRITTEN PREMIUMS EARNED PREMIUMS
---------------------------- ---------------------------
(In millions) 1994 1993 1992 1994 1993 1992
------ ------ ------ ------ ------ -----
<S> <C> <C> <C> <C> <C> <C>
Direct.......................... $1,422 $1,312 $1,051 $1,401 $1,161 $ 888
Assumed......................... 108 266 221 106 268 222
Ceded........................... (151) (125) (142) (133) (125) (142)
------ ------ ------ ------ ------ -----
Net Premiums.................... $1,379 $1,453 $1,130 $1,374 $1,304 $ 968
====== ====== ====== ====== ====== =====
</TABLE>
Reinsurance recoveries recognized as a reduction of insurance losses and
policyholder and annuity benefits amounted to $40 million, $163 million and $169
million for the periods ended December 31, 1994, 1993 and 1992, respectively.
NOTE 10. MINORITY INTEREST
Minority interest in equity of consolidated affiliates includes 2,400 shares of
$.01 par value variable cumulative preferred stock issued in 1994 by a
subsidiary with a liquidation preference value of $240 million. Dividend rates
ranged from 2.8% to 4.7%.
NOTE 11. EQUITY
All common stock is owned by GE Capital Services, all of the common stock of
which is in turn wholly owned by GE Company. In 1993, GE Capital Services
contributed the minority interest in Financial Insurance Group to the
Corporation. In 1992, GE Company contributed to GE Capital Services the assets
of GE Computer Services. GE Capital Services in turn contributed the assets of
GE Computer Services to the Corporation. These contributions were reflected as
additions to the Corporation's additional paid-in capital of $25 million and
$134 million in 1993 and 1992, respectively. Dividends paid on the common stock
were $575 million in 1994, $460 million in 1993 and $300 million in 1992.
On December 31, 1993, the Corporation adopted Statement of Financial
Accounting Standards (SFAS) No. 115, Accounting for Certain Investments in Debt
and Equity Securities. As a result of adopting this Statement, changes in the
fair value of investment securities are reflected, net of tax, in equity. At
December 31, 1994, unrealized losses on investment securities amounted to $655
million, a reduction in equity of $1,140 million from year-end 1993. The
decrease was primarily attributable to the effect of increases in market
interest rates on the fair value of the securities.
Dividend rates on the Corporation's variable cumulative preferred stock
ranged from 2.3% to 4.9% during 1994, 2.3% to 2.8% during 1993. Dividends paid
on such variable cumulative preferred stock were $30 million in 1994, $22
million in 1993 and $26 million in 1992.
Page 29
<PAGE> 32
NOTE 12. EARNED INCOME
Time sales, loan and investment and other income includes the Corporation's
share of earnings from equity investees of approximately $169 million, $106
million and $72 million for 1994, 1993 and 1992, respectively.
Included in earned income from financing leases for 1994, 1993 and 1992
were gains on the sale of equipment at lease completion or early termination of
$180 million, $145 million and $126 million, respectively.
NOTE 13. INTEREST EXPENSE
Interest expense reported in the Statement of Current and Retained Earnings in
1994, 1993 and 1992 is net of interest income on temporary investments of excess
funds of $41 million, $38 million and $42 million, respectively, and net of
capitalized interest of $9 million, $5 million and $6 million, respectively.
For purposes of computing the ratio of earnings to fixed charges (the
"ratio"), earnings consist of net earnings adjusted for the 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
was 1.63 for 1994, compared with 1.62 for 1993 and 1.44 for 1992.
NOTE 14. OPERATING AND ADMINISTRATIVE EXPENSES
Employees and retirees of the Corporation and its affiliates are covered under a
number of pension, health and life insurance plans. The principal pension plan
is the GE Company pension plan, a defined benefit plan, while employees of
certain affiliates are covered under separate plans. The Corporation provides
health and life insurance benefits to certain of its retired employees,
principally through GE Company's benefit program. The annual cost to the
Corporation of providing these benefits is not material.
GE Company adopted SFAS No. 112, Employers' Accounting for Postemployment
Benefits, in the second quarter of 1993. The Corporation adopted this standard
in conjunction with its parent. This Statement requires that employers expense
the costs of postemployment benefits (as distinct from postretirement pension,
medical and life insurance benefits) over the working lives of their employees.
This change principally affects the Corporation's accounting for severance
benefits, which previously were expensed when the severance event occurred. The
net transition obligation related to the Corporation's employees covered under
GE Company postemployment benefit plans is not separately determinable from the
GE Company plans as a whole; accordingly, there is no financial statement impact
on the Corporation. The net transition obligation for employees covered under
separate plans is not material.
Rental expense relating to equipment the Corporation leases from others for
the purposes of subleasing was $262 million in 1994, $239 million in 1993 and
$151 million in 1992. Other rental expense was $198 million in 1994, $174
million in 1993 and $121 million in 1992, principally for the rental of office
space and data processing equipment. Minimum future rental commitments under
noncancelable leases at December 31, 1994, were $396 million in 1995, $365
million in 1996, $338 million in 1997, $319 million in 1998, $296 million in
1999 and $1,677 million thereafter. The Corporation, as a lessee, has no
material lease agreements classified as capital leases.
Amortization of deferred acquisition costs charged to operations in 1994,
1993 and 1992 was $355 million, $330 million and $211 million, respectively.
NOTE 15. INCOME TAXES
The provision for income tax is summarized in the following table.
<TABLE>
<CAPTION>
(In millions) 1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Estimated taxes payable......................................... $462 $175 $291
Effect of temporary differences................................. 448 496 129
Investment tax credit amortized................................. (14) (7) (5)
---- ---- ----
$896.. $664 $415
==== ==== ====
</TABLE>
Page 30
<PAGE> 33
GE Company files a consolidated U.S. federal income tax return which
includes GE Capital. The provisions for estimated taxes payable include the
effect of the Corporation and its affiliates on the consolidated return.
A reconciliation of the Corporation's actual income tax rate to the U.S.
federal statutory rate follows.
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
U.S. federal statutory income tax rate............................ 35.0% 35.0% 34.0%
Increase (reduction) in rate resulting from:
Rate increase -- deferred taxes................................. -- 5.6 --
State and local taxes........................................... 1.7 0.8 0.7
Tax-exempt income............................................... (4.4) (5.0) (6.1)
Change in tax-rate assumptions for leveraged leases............. (1.0) (1.6) (2.6)
Other -- net.................................................... 0.5 (3.8) (1.1)
---- ---- ----
Actual income tax rate............................................ 31.8% 31.0% 24.9%
==== ==== ====
</TABLE>
The tax effects of principal temporary differences follow.
<TABLE>
<CAPTION>
(In millions) 1994 1993
------- -------
<S> <C> <C>
Assets
Provision for losses............................................. $ (862) $ (825)
Net unrealized losses on investment securities................... (382) --
Insurance reserves............................................... (121) (69)
Other............................................................ (961) (817)
------- -------
Total deferred tax assets.......................................... (2,326) (1,711)
------- -------
Liabilities
Financing leases................................................. 5,075 4,917
Operating leases................................................. 1,233 966
Tax transfer leases.............................................. 338 340
Net unrealized gains on investment securities.................... -- 261
Other............................................................ 947 857
------- -------
Total deferred tax liabilities..................................... 7,593 7,341
------- -------
Net deferred tax liability......................................... $ 5,267 $ 5,630
======= =======
</TABLE>
Page 31
<PAGE> 34
NOTE 16. INDUSTRY SEGMENT DATA
Industry segment operating data and identifiable assets are shown below.
<TABLE>
<CAPTION>
(In millions) 1994 1993 1992
-------- -------- -------
<S> <C> <C> <C>
Earned Income:
Consumer Services.................................... $ 5,508 $ 4,061 $ 3,342
Equipment Management................................. 5,186 4,323 3,387
Specialized Financing................................ 2,638 2,543 2,532
Specialty Insurance.................................. 1,976 2,002 1,663
Mid-Market Financing................................. 1,575 1,472 1,283
-------- -------- -------
16,883 14,401 12,207
Corporate............................................ 40 43 43
-------- -------- -------
Total earned income.................................... $ 16,923 $ 14,444 $12,250
======== ======== =======
Segment operating profit:
Consumer Services.................................... $ 1,067 $ 709 $ 609
Equipment Management................................. 624 246 488
Specialized Financing................................ 513 366 35
Specialty Insurance.................................. 188 422 302
Mid-Market Financing................................. 435 406 234
-------- -------- -------
Total segment operating profit......................... 2,827 2,149 1,668
Corporate............................................ (13) (7) (2)
-------- -------- -------
Earnings before taxes.................................. 2,814 2,142 1,666
Provision for income taxes............................. 896 664 415
-------- -------- -------
Net earnings........................................... $ 1,918 $ 1,478 $ 1,251
======== ======== =======
Identifiable assets at December 31:
Consumer Services.................................... $ 54,171 $ 45,772 $24,445
Equipment Management................................. 23,197 20,145 17,876
Specialized Financing................................ 28,149 27,069 27,645
Specialty Insurance.................................. 6,637 9,579 7,418
Mid-Market Financing................................. 16,367 14,022 12,369
Corporate............................................ 2,383 1,352 2,879
-------- -------- -------
Total assets........................................... $130,904 $117,939 $92,632
======== ======== =======
</TABLE>
NOTE 17. QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data are as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------------------------------------------
MARCH JUNE SEPTEMBER DECEMBER
----------------- ----------------- ----------------- -----------------
(In millions) 1994 1993 1994 1993 1994 1993 1994 1993
------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Earned income.............................. $3,808 $3,131 $3,982 $3,354 $4,306 $3,668 $4,827 $4,291
Expenses:
Interest................................. 985 779 1,056 865 1,098 871 1,275 946
Operating and administrative............. 1,265 1,048 1,312 1,078 1,222 1,104 1,550 1,664
Insurance losses and policyholder and
annuity benefits....................... 351 169 292 272 575 381 489 437
Provision for losses on financing
receivables............................ 170 255 251 292 186 200 266 240
Depreciation and amortization of buildings
and equipment and equipment on operating
leases................................... 384 340 382 364 425 375 466 508
Minority interest in net earnings of
consolidated affiliates.................. 18 15 43 20 18 48 30 31
------ ------ ------ ------ ------ ------ ------ ------
Earnings before income taxes............... 635 525 646 463 782 689 751 465
Provision for income taxes................. 191 154 205 128 234 291 266 91
------ ------ ------ ------ ------ ------ ------ ------
Net earnings............................... $ 444 $ 371 $ 441 $ 335 $ 548 $ 398 $ 485 $ 374
====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
Page 32
<PAGE> 35
NOTE 18. RESTRICTED NET ASSETS OF AFFILIATES
Various state and foreign regulations require that the Corporation's investment
in certain affiliates be maintained at specified minimum levels to provide
additional protection for insurance customers, investment certificate holders
and passbook savings depositors. At December 31, 1994 and 1993, such minimum
investment levels approximated $3,438 million and $4,936 million, respectively.
NOTE 19. SUPPLEMENTAL CASH FLOW INFORMATION
Cash used in 1994, 1993 and 1992 included interest paid by the Corporation of
$4,005 million, $3,298 million and $3,570 million, respectively, and income
taxes paid by the Corporation of $340 million, $133 million and $42 million,
respectively.
NOTE 20. ADDITIONAL INFORMATION ABOUT FINANCIAL INSTRUMENTS
This note contains estimated fair values of certain financial instruments to
which the Corporation is a party. Apart from the Corporation's own borrowings
and certain marketable securities, relatively few of these instruments are
actively traded. Thus, fair values must often be determined by using one or more
models that indicate value based on estimates of quantifiable characteristics as
of a particular date. Because this undertaking is, by its nature, difficult and
highly judgmental, for a limited number of instruments, alternative valuation
techniques may have produced disclosed values different from those that could
have been realized at December 31, 1994 or 1993. Moreover, the disclosed values
are representative of fair values only as of the dates indicated. Assets that,
as a matter of accounting policy, are reflected in the accompanying financial
statements at fair value are not included in the following disclosures; such
assets include cash and equivalents, investment securities, and other
receivables.
Values are estimated as follows.
TIME SALES AND LOANS. Based on quoted market prices, recent transactions and/or
discounted future cash flows, using rates at which similar loans would have been
made to similar borrowers.
INVESTMENTS IN AND ADVANCES TO ASSOCIATED COMPANIES. Based on market
comparables, recent transactions or discounted future cash flows. These equity
interests were generally acquired in connection with financing transactions and,
for the purpose of this disclosure, fair values were estimated.
BORROWINGS. Based on quoted market prices or market comparables. Fair values of
interest rate and currency swaps on borrowings are based on quoted market prices
and include the effects of counterparty creditworthiness.
ANNUITY BENEFITS. Based on expected future cash flows, discounted at currently
offered discount rates for immediate annuity contracts or cash surrender value
for single premium deferred annuities.
FINANCIAL GUARANTIES. Based on future cash flows, considering expected renewal
premiums, claims, refunds and servicing costs, discounted at a market rate.
ALL OTHER INSTRUMENTS. Based on comparable transactions, market comparables,
discounted future cash flows, quoted market prices, and/or estimates of the cost
to terminate or otherwise settle obligations to counterparties.
Page 33
<PAGE> 36
Information about financial instruments that were not carried at fair value
at December 31, 1994 and 1993, is shown below.
<TABLE>
<CAPTION>
1994 1993
----------------------------------------- -----------------------------------------
ESTIMATED FAIR ESTIMATED FAIR
CARRYING VALUE CARRYING VALUE
NOTIONAL AMOUNT ------------------- NOTIONAL AMOUNT -------------------
(In millions) AMOUNT (NET) HIGH LOW AMOUNT (NET) HIGH LOW
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Time sales and loans.................. $ (c ) $48,529 $ 49,496 $ 48,840 $ (c ) $39,556 $ 41,182 $ 40,490
Investments in and advances to
associated companies................ (c ) 2,098 2,561 2,381 (c ) 1,574 2,320 2,156
Other cash financial instruments...... (c ) 2,148 2,320 2,218 (c ) 6,538 6,750 6,597
Liabilities
Borrowings and related instruments
Borrowings(a)(b).................... (c ) (91,399 ) (89,797) (89,797) (c ) (81,052 ) (82,184) (82,184)
Interest rate swaps................. 22,529 -- (20) (24) 11,624 -- (278) (278)
Currency swaps...................... 12,183 -- 83 83 8,101 -- (32) (32)
Annuity benefits...................... (c ) (12,194 ) (11,826) (11,826) (c ) (8,894 ) (8,660) (8,660)
Financial guaranties of insurance
affiliates(d)....................... 119,279 (1,344 ) (269) (348) 111,087 (1,312 ) (135) (220)
Other financial guaranties.............. 3,508 (44 ) (53) (53) 3,647 (42 ) (64) (66)
Mortgage-related positions
Mortgage purchase commitments........... 205 -- (2) (2) 3,950 -- (41) (41)
Mortgage sale commitments............. 1,792 -- 2 2 6,426 -- 49 49
Memo: mortgages held for sale(e).... (c ) 1,764 1,764 1,764 (c ) 5,963 5,983 5,972
Other financial instruments
Loan commitments...................... 13,489 -- (71) (125) 10,421 (18 ) (31) (34)
Foreign currency forwards and
options............................. 3,106 -- 12 12 1,637 -- (2) (2)
Other financial instruments........... 309 13 56 53 1,132 4 15 14
</TABLE>
(a) See Note 8.
(b) Includes interest rate and currency swaps.
(c) Not applicable.
(d) See Note 9.
(e) Included in other cash financial instruments.
FOREIGN CURRENCY AND FOREIGN CURRENCY OPTIONS are employed by the Corporation to
manage certain exposures to changes in currency exchange rates associated with
net investments in foreign affiliates. However, net investments in foreign
affiliates are managed principally by funding local currency denominated assets
with debt denominated in those same currencies.
NOTE 21. GEOGRAPHIC SEGMENT INFORMATION
Geographic segment operating data and total assets are as follows:
<TABLE>
<CAPTION>
EARNED INCOME OPERATING PROFIT
----------------------------- ------------------------
(In millions) 1994 1993 1992 1994 1993 1992
-------- -------- ------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
United States............................. $ 13,858 $ 12,419 $10,627 $2,260 $2,028 $1,524
Other areas of the world.................. 3,065 2,025 1,623 554 114 142
-------- -------- ------- ------ ------ ------
Total................................... $ 16,923 $ 14,444 $12,250 $2,814 $2,142 $1,666
======== ======== ======= ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
TOTAL ASSETS
-----------------------------
(In millions) 1994 1993 1992
-------- -------- -------
<S> <C> <C> <C>
United States............................. $114,314 $108,228 $84,928
Other areas of the world.................. 16,590 9,711 7,704
-------- -------- -------
Total................................... $130,904 $117,939 $92,632
======== ======== =======
</TABLE>
U.S. amounts were derived from the Corporation's operations located in the
U.S.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable
Page 34
<PAGE> 37
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Omitted
ITEM 11. EXECUTIVE COMPENSATION.
Omitted
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Omitted
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Omitted
Page 35
<PAGE> 38
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
<TABLE>
<S> <C>
(a) 1. FINANCIAL STATEMENTS
Included in Part II of this report:
Independent Auditors' Report
Statement of Current and Retained Earnings for each of the years in the three-year
period ended December 31, 1994
Statement of Financial Position at December 31, 1994 and 1993
Statement of Cash Flows for each of the years in the three-year period ended December
31, 1994
Notes to Consolidated Financial Statements
Incorporated by reference:
The consolidated financial statements, of General Electric Company, set forth in the
Annual Report on Form 10-K of General Electric Company for the year ended
December 31, 1994 (pages F-1 through F-41) and Exhibit 12 (Ratio of Earnings to
Fixed Charges) of General Electric Company.
(a) 2. FINANCIAL STATEMENT SCHEDULES
I. Condensed financial information of registrant.
All other schedules are omitted because of the absence of conditions under which they
are required or because the required information is shown in the financial statements
or notes thereto.
(a) 3. EXHIBIT INDEX
The exhibits listed below, as part of Form 10-K, are numbered in conformity with the
numbering used in Item 601 of Regulation S-K of the Securities and Exchange
Commission.
</TABLE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
--------------------- --------------------------------------------------------------------------
<S> <C>
3(i) A complete copy of the Organization Certificate of the Corporation as last
amended on December 6, 1990 and currently in effect. (Incorporated by
reference to Exhibit 3(i) of the Corporation's Form 10-K Report for the
year ended December 31, 1993.)
3(ii) A complete copy of the By-Laws of the Corporation as last amended on June
30, 1994 and currently in effect.
4(iii) Agreement to furnish to the Securities and Exchange Commission upon
request a copy of instruments defining the rights of holders of certain
long-term debt of the registrant and all subsidiaries for which
consolidated or unconsolidated financial statements are required to be
filed.
12(a) Computation of ratio of earnings to fixed charges.
12(b) Computation of ratio of earnings to combined fixed charges and preferred
stock dividends.
23(ii) Consent of KPMG Peat Marwick LLP.
24 Power of Attorney.
27 Financial Data Schedule (filed electronically herewith).
99(a) Income Maintenance Agreement dated March 28, 1991 between General Electric
Company and the Corporation. (Incorporated by reference to Exhibit 28(a)
of the Corporation's Form 10-K Report for the year ended December 31,
1992.)
99(b) The consolidated financial statements, of General Electric Company, set
forth in the Annual Report on Form 10-K of General Electric Company for
the year ended December 31, 1994 (pages F-1 through F-41) and Exhibit 12
(Ratio of Earnings to Fixed Charges) of General Electric Company.
</TABLE>
(b) REPORTS ON FORM 8-K
None.
Page 36
<PAGE> 39
GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT
GENERAL ELECTRIC CAPITAL CORPORATION
CONDENSED STATEMENT OF FINANCIAL POSITION
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
(In millions) 1994 1993
-------- -------
<S> <C> <C>
ASSETS
Cash and equivalents...................................................... $ 145 $ 85
Investment securities..................................................... 3,097 1,959
Financing receivables:
Time sales and loans................................................. 25,525 22,576
Investment in financing leases....................................... 10,129 9,802
-------- -------
35,654 32,378
Allowance for losses on financing receivables........................ (997) (874)
-------- -------
Financing receivables -- net.................................... 34,657 31,504
Investments in and advances to affiliates................................. 54,883 52,219
Equipment on operating leases (at cost), less accumulated amortization of
$258 and $245........................................................... 1,897 1,106
Other assets.............................................................. 5,597 5,138
-------- -------
Total assets.............................................................. $100,276 $92,011
======== =======
LIABILITIES AND EQUITY
Notes payable:
Due within one year..................................................... $ 50,765 $51,265
Long-term (including notes payable to affiliates of $914 and $971)...... 31,769 24,145
Other liabilities......................................................... 4,898 4,254
Deferred income taxes..................................................... 2,304 1,977
-------- -------
Total liabilities............................................... 89,736 81,641
-------- -------
Capital stock............................................................. 769 769
Additional paid-in capital................................................ 2,172 2,172
Retained earnings......................................................... 8,321 7,008
Unrealized gains (losses) on investment securities........................ (655) 485
Foreign currency translation adjustments.................................. (67) (64)
-------- -------
Total equity.................................................... 10,540 10,370
-------- -------
Total liabilities and equity.............................................. $100,276 $92,011
======== =======
</TABLE>
See Notes to Condensed Financial Statements.
Page 37
<PAGE> 40
GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT -- (CONTINUED)
GENERAL ELECTRIC CAPITAL CORPORATION
CONDENSED STATEMENT OF CURRENT AND RETAINED EARNINGS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
(In millions) 1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Earned income....................................................... $3,942 $3,782 $4,012
------ ------ ------
Expenses:
Interest....................................................... 2,597 1,925 2,219
Operating and administrative................................... 1,113 1,340 1,592
Provision for losses on financing receivables.................. 397 382 443
Depreciation and amortization.................................. 157 209 183
------ ------ ------
4,264 3,856 4,437
------ ------ ------
Loss before income taxes and equity in earnings of affiliates....... (322) (74) (425)
Income tax (provision) benefit...................................... 54 (72) 205
Equity in earnings of affiliates.................................... 2,186 1,624 1,471
------ ------ ------
Net earnings........................................................ 1,918 1,478 1,251
Dividends paid...................................................... (605) (482) (326)
Retained earnings at January 1...................................... 7,008 6,012 5,087
------ ------ ------
Retained earnings at December 31.................................... $8,321 $7,008 $6,012
====== ====== ======
</TABLE>
See Notes to Condensed Financial Statements.
Page 38
<PAGE> 41
GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT -- (CONTINUED)
GENERAL ELECTRIC CAPITAL CORPORATION
CONDENSED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
(In millions) 1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
CASH PROVIDED FROM OPERATING ACTIVITIES........................... $ 1,150 $ 1,117 $ 1,958
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Increase in loans to customers.................................... (30,198) (27,112) (24,993)
Principal collections from customers.............................. 27,155 27,237 23,028
Investment in assets on financing leases.......................... (1,937) (1,271) (2,042)
Principal collections on financing leases......................... 1,701 1,728 1,796
Net change in credit card receivables............................. (620) 299 (66)
Buildings, equipment and equipment on operating leases
--additions.................................................. (809) (610) (254)
--dispositions............................................... 76 365 87
Payments for principal businesses purchased, net of cash
acquired........................................................ (817) (2,090) (780)
Change in investment in and advances to affiliates................ (859) (10,296) 226
Other -- net...................................................... (1,236) 1,093 (4,998)
-------- -------- --------
CASH USED FOR INVESTING ACTIVITIES................................ (7,544) (10,657) (7,996)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in borrowings (less than 90-day maturities)............ (2,970) 3,969 1,894
Newly issued debt
--short-term (91-365 days)................................... 3,214 4,315 4,456
--long-term senior........................................... 16,641 10,188 6,582
--long-term subordinated..................................... -- -- 450
Proceeds -- non-recourse, leveraged lease debt.................... 31 -- 118
Repayments and other reductions
--short-term................................................. (8,823) (8,636) (6,197)
--long-term senior........................................... (912) (157) (395)
--long-term subordinated..................................... -- -- (50)
Principal payments -- non-recourse, leveraged lease debt.......... (132) (198) (127)
Dividends paid.................................................... (595) (482) (326)
Contributions to additional paid-in capital....................... -- 25 --
-------- -------- --------
CASH PROVIDED FROM FINANCING ACTIVITIES........................... 6,454 9,024 6,405
-------- -------- --------
INCREASE (DECREASE) IN CASH AND EQUIVALENTS DURING THE YEAR....... 60 (516) 367
CASH AND EQUIVALENTS AT BEGINNING OF YEAR......................... 85 601 234
-------- -------- --------
CASH AND EQUIVALENTS AT END OF YEAR............................... $ 145 $ 85 $ 601
======== ======== ========
</TABLE>
See Notes to Condensed Financial Statements
Page 39
<PAGE> 42
GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT -- (CONCLUDED)
GENERAL ELECTRIC CAPITAL CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Certain reclassifications have been made to prior year amounts to conform
with 1994 presentation.
NOTES PAYABLE
Outstanding balances in notes payable after one year at December 31, 1994
and 1993 are shown below.
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
(Dollars in millions) INTEREST RATE(A) MATURITIES 1994 1993
---------------- --------- ------- -------
<S> <C> <C> <C> <C>
Senior notes
Notes(b)(c).................................. 6.55% 1996-2054 $28,351 $20,181
Zero coupon/deep discount notes.............. 15.80 2001 385 424
Reset or remarked notes(d)................... 8.25 2007-2018 1,025 1,500
Floating rate notes.......................... (e) 1996-2053 521 521
Less unamortized discount/premium............ (124) (149)
------- -------
Total senior notes........................ $30,158 22,477
------- -------
Subordinated notes(f).......................... 8.04 2006-2012 697 697
Intercompany................................... 1996 914 971
------- -------
$31,769 $24,145
======= =======
</TABLE>
---------------
(a) Includes the effects of associated interest rate and currency swaps.
(b) At December 31, 1994 and 1993, the Corporation had agreed with others to
exchange currencies and related interest payments on principal amounts
equivalent to U.S. $12,183 million, and $8,101 million, respectively. At
December 31, 1994 and 1993, the Corporation had entered into interest rate
swaps with others related to interest on $22,529 million and $11,624
million, respectively.
(c) At December 31, 1993, counterparties held options under which the
Corporation could be caused to execute interest rate swaps associated with
interest payments on $500 million.
(d) Interest rates are reset at the end of the initial and each subsequent
interest period. At each rate-reset date, the Corporation may redeem notes
in whole or in part at its option. Current interest periods range from May
1996 to March 1997.
(e) The rate of interest payable on each note is a variable rate based on the
commercial paper rate each month. Interest is payable either monthly or
semi-annually at the option of the Corporation.
(f) Guaranteed by GE Company.
At December 31, 1994, long-term borrowing maturities during the next five
years, including the current portion of long-term notes payable, were $8,402
million in 1995, $9,594 million in 1996, $6,340 million in 1997, $4,040 million
in 1998 and $2,761 million in 1999.
Interest expense on the Condensed Statement of Current and Retained
Earnings is net of interest income on loans and advances to majority owned
affiliates of $1,322 million, $1,335 million and $1,223 million for 1994, 1993
and 1992, respectively.
INCOME TAXES
GE Company files a consolidated U.S. federal income tax return which
includes GE Capital. Income tax (provision) benefit includes the effect of the
Corporation on the consolidated return.
Page 40
<PAGE> 43
EXHIBIT 4 (III)
March 29, 1995
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Subject: General Electric Capital Corporation Annual Report on Form 10-K
for the fiscal year ended December 31, 1994 -- File No. 1-6461
Dear Sirs:
Neither General Electric Capital Corporation (the "Corporation") nor any of
its subsidiaries has outstanding any instrument with respect to its long-term
debt under which the total amount of securities authorized exceeds 10% of the
total assets of the registrant and its subsidiaries on a consolidated basis. In
accordance with paragraph (b) (4) (iii) of Item 601 of Regulation S-K (17 CFR
sec.229.601), the Corporation hereby agrees to furnish to the Securities and
Exchange Commission, upon request, a copy of each instrument which defines the
rights of holders of such long-term debt.
Very truly yours,
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ J. A. PARKE
---------------------------------------
J. A. Parke,
Senior Vice President, Finance
Page 41
<PAGE> 44
EXHIBIT 12(A)
GENERAL ELECTRIC CAPITAL CORPORATION
AND CONSOLIDATED AFFILIATES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------
(Dollar amounts in millions) 1994 1993 1992 1991 1990
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net earnings............................................. $1,918 $1,478 $1,251 $1,125 $1,021
Provision for income taxes............................... 896 664 415 362 350
Minority interest........................................ 109 114 14 (7) 4
------ ------ ------ ------ ------
Earnings before income taxes and minority interest....... 2,923 2,256 1,680 1,480 1,375
------ ------ ------ ------ ------
Fixed charges:
Interest............................................ 4,464 3,503 3,713 4,280 4,334
One-third of rentals................................ 153 138 90 34 33
------ ------ ------ ------ ------
Total fixed charges...................................... 4,617 3,641 3,803 4,314 4,367
------ ------ ------ ------ ------
Less interest capitalized, net of amortization........... 9 4 6 7 19
------ ------ ------ ------ ------
Earnings before income taxes and minority interest plus
fixed charges.......................................... $7,531 $5,893 $5,477 $5,787 $5,723
====== ====== ====== ====== ======
Ratio of earnings to fixed charges....................... 1.63 1.62 1.44 1.34 1.31
====== ====== ====== ====== ======
</TABLE>
Page 42
<PAGE> 45
EXHIBIT 12(B)
GENERAL ELECTRIC CAPITAL CORPORATION
AND CONSOLIDATED AFFILIATES
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK
DIVIDENDS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------
(Dollar amounts in millions) 1994 1993 1992 1991 1990
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net earnings............................................. $1,918 $1,478 $1,251 $1,125 $1,021
Provision for income taxes............................... 896 664 415 362 350
Minority interest........................................ 109 114 14 (7) 4
------ ------ ------ ------ ------
Earnings before income taxes and minority interest....... 2,923 2,256 1,680 1,480 1,375
------ ------ ------ ------ ------
Fixed charges:
Interest............................................... 4,464 3,503 3,713 4,280 4,334
One-third of rentals................................... 153 138 90 34 33
------ ------ ------ ------ ------
Total fixed charges...................................... 4,617 3,641 3,803 4,314 4,367
------ ------ ------ ------ ------
Less interest capitalized, net of amortization........... 9 4 6 7 19
------ ------ ------ ------ ------
Earnings before income taxes and minority interest plus
fixed charges.......................................... $7,531 $5,893 $5,477 $5,787 $5,723
====== ====== ====== ====== ======
Preferred stock dividend requirements.................... $ 30 $ 22 $ 26 $ 41 $ 42
Ratio of earnings before provision for income taxes to
net earnings........................................... 1.47 1.45 1.34 1.32 1.35
------ ------ ------ ------ ------
Preferred stock dividend factor on pre-tax basis......... 44 32 35 54 57
Fixed charges............................................ 4,617 3,641 3,803 4,314 4,367
------ ------ ------ ------ ------
Total fixed charges and preferred stock dividend
requirements........................................... $4,661 $3,673 $3,838 $4,368 $4,424
====== ====== ====== ====== ======
Ratio of earnings to combined fixed charges and preferred
stock dividends........................................ 1.62 1.60 1.43 1.32 1.29
====== ====== ====== ====== ======
</TABLE>
Page 43
<PAGE> 46
EXHIBIT 23(II)
To the Board of Directors
General Electric Capital Corporation
We consent to incorporation by reference in the Registration Statements on
Form S-3 (Nos. 33-36601, 33-37156, 33-39376, 33-43081, 33-43420, 33-39596 and
33-55209) of General Electric Capital Corporation of our report dated February
10, 1995 relating to the statement of financial position of General Electric
Capital Corporation and consolidated affiliates as of December 31, 1994 and 1993
and the related statements of current and retained earnings and cash flows and
related schedules for each of the years in the three-year period ended December
31, 1994, which report appears in the December 31, 1994 annual report on Form
10-K of General Electric Capital Corporation. Our report refers to a change in
1993 in the method of accounting for investments in certain securities.
/s/ KPMG PEAT MARWICK LLP
Stamford, Connecticut
March 31, 1995
Page 44
<PAGE> 47
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned, being
directors and/or officers of General Electric Capital Corporation, a New York
corporation (the "Corporation"), hereby constitutes and appoints Gary C. Wendt,
James A. Parke, Joan C. Amble and Burton J. Kloster, Jr., and each of them, his
true and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead in any and all
capacities, to sign one or more Annual Reports for the Corporation's fiscal year
ended December 31, 1994, on Form 10-K under the Securities Exchange Act of 1934,
as amended, or such other form as such attorney-in-fact may deem necessary or
desirable, any amendments thereto, and all additional amendments thereto in such
form as they or any one of them may approve, and to file the same with all
exhibits thereto and other documents in connection therewith with the Securities
and Exchange Commission, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done to the end that such Annual Report or
Annual Reports shall comply with the Securities Exchange Act of 1934, as
amended, and the applicable Rules and Regulations of the Securities and Exchange
Commission adopted or issued pursuant thereto, as fully and to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them or their or his
substitute or resubstitute, may lawfully do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, each of the undersigned has hereunto set his hand this
29th day of
March, 1995.
/s/ GARY C. WENDT
---------------------------------------------------
Gary C. Wendt,
Chairman of the Board
and Chief Executive Officer
(Principal Executive Officer)
/s/ JAMES A. PARKE
---------------------------------------------------
James A. Parke,
Director and Senior Vice President, Finance
(Principal Financial Officer)
/s/ JOAN C. AMBLE
--------------------------------------------------------------------------
Joan C. Amble,
Vice President and Controller
(Principal Accounting Officer)
/s/ NIGEL D. T. ANDREWS
---------------------------------------------------
Nigel D. T. Andrews, Director
/s/ JAMES R. BUNT
---------------------------------------------------
James R. Bunt, Director
/s/ DENNIS D. DAMMERMAN
---------------------------------------------------
Dennis D. Dammerman, Director
/s/ PAOLO FRESCO
---------------------------------------------------
Paolo Fresco, Director
/s/ DALE F. FREY
---------------------------------------------------
Dale F. Frey, Director
---------------------------------------------------
Benjamin W. Heineman, Jr., Director
/s/ BURTON J. KLOSTER, JR.
---------------------------------------------------
Burton J. Kloster, Jr., Director
/s/ HUGH J. MURPHY
---------------------------------------------------
Hugh J. Murphy, Director
/s/ DENIS J. NAYDEN
---------------------------------------------------
Denis J. Nayden, Director
/s/ MICHAEL A. NEAL
---------------------------------------------------
Michael A. Neal, Director
/s/ JOHN M. SAMUELS
---------------------------------------------------
John M. Samuels, Director
/s/ EDWARD D. STEWART
---------------------------------------------------
Edward D. Stewart, Director
/s/ JOHN F. WELCH, JR.
---------------------------------------------------
John F. Welch, Jr., Director
A MAJORITY OF THE BOARD OF DIRECTORS
Page 45
<PAGE> 48
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) 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.
<TABLE>
<S> <C>
GENERAL ELECTRIC CAPITAL CORPORATION
March 29, 1995 By: /s/ GARY C. WENDT
-------------------------------------
(GARY C. WENDT)
Chairman of the Board
and Chief Executive Officer
</TABLE>
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATE INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
------------------------------------ --------------------------------- ----------------
<S> <C> <C>
Chairman of the Board and March 29, 1995
/s/ GARY C. WENDT Chief Executive Officer
------------------------------------ (Principal Executive Officer)
(GARY C. WENDT)
Director and March 29, 1995
/s/ JAMES A. PARKE Senior Vice President, Finance
------------------------------------ (Principal Financial Officer)
(JAMES A. PARKE)
/s/ JOAN C. AMBLE Vice President and Controller March 29, 1995
------------------------------------ (Principal Accounting Officer)
(JOAN C. AMBLE)
</TABLE>
<TABLE>
<S> <C> <C>
NIGEL D. T. ANDREWS Director
JOHN M. SAMUELS Director
EDWARD D. STEWART Director
JOHN F. WELCH, JR. Director
JAMES R. BUNT Director
DENNIS D. DAMMERMAN Director /s/ JOAN C. AMBLE
PAOLO FRESCO Director ----------------
DALE F. FREY Director (JOAN C. AMBLE)
BURTON J. KLOSTER, JR. Director Attorney-in-fact
HUGH J. MURPHY Director March 29, 1995
DENIS J. NAYDEN Director
MICHAEL A. NEAL Director
JOHN M. SAMUELS Director
EDWARD D. STEWART Director
JOHN F. WELCH, JR. Director
</TABLE>
A MAJORITY OF THE BOARD OF DIRECTORS
Page 46
<PAGE> 49
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
EXHIBITS
TO
10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
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GENERAL ELECTRIC CAPITAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<PAGE> 50
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
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3(i) A complete copy of the Organization Certificate of the
Corporation as last amended on December 6, 1990 and currently
in effect. (Incorporated by reference to Exhibit 3(i) of the
Corporation's Form 10-K Report for the year ended December
31, 1993.)
3(ii) A complete copy of the By-Laws of the Corporation as last
amended on June 30, 1994 and currently in effect.
4(iii) Agreement to furnish to the Securities and Exchange Commission
upon request a copy of instruments defining the rights of
holders of certain long-term debt of the registrant and all
subsidiaries for which consolidated or unconsolidated
financial statements are required to be filed.
12(a) Computation of ratio of earnings to fixed charges.
12(b) Computation of ratio of earnings to combined fixed charges and
preferred stock dividends.
23(ii) Consent of KPMG Peat Marwick LLP.
24 Power of Attorney.
27 Financial Data Schedule (filed electronically herewith).
99(a) Income Maintenance Agreement dated March 28, 1991 between Gen-
eral Electric Company and the Corporation. (Incorporated by
reference to Exhibit 28(a) of the Corporation's Form 10-K
Report for the year ended December 31, 1992.)
99(b) The consolidated financial statements, of General Electric
Company, set forth in the Annual Report on Form 10-K of
General Electric Company for the year ended December 31, 1994
(pages F-1 through F-41) and Exhibit 12 (Ratio of Earnings to
Fixed Charges) of General Electric Company.
</TABLE>
<PAGE> 1
Exhibit 3(ii)
GENERAL ELECTRIC CAPITAL CORPORATION
BY-LAWS
ARTICLE I.
STOCKHOLDERS' MEETINGS
SEC. 1. ANNUAL MEETING. The annual meeting of stockholders for the
election of directors and the transaction of such other business as may
properly come before it shall be held at such place, within or without the
State of New York, as shall be stated in the notice of the meeting, such
meeting to be held on the second Thursday in March of each and every year if
not a legal holiday, and if a legal holiday, then on the next secular day
following, or such other date as shall be designated from time to time by the
board of directors and stated in the notice of the meeting, at such time as
shall be stated in the notice of the meeting.
The Secretary shall serve personally or by mail, not less than ten
nor more than forty days before such meeting, a written notice thereof upon
each person who appears upon the records of the corporation to be a
stockholder. If mailed, it shall be addressed to a stockholder at his address
as it appears on the stock records unless he shall have filed with the
Secretary of the corporation a written request that notices intended for him be
mailed to some other address, in which case it shall be mailed to the address
designated in such request.
The order of business shall be as follows:
1. Roll Call.
2. Proof of notice of meeting.
3. Reports of officers.
4. Election of Directors.
5. Miscellaneous.
SEC. 2. SPECIAL MEETINGS. Special meetings of stockholders, other
than those regulated by statute, may be called at any time by a majority of the
Directors. Written notice of such meeting, stating the purpose for which it is
called, shall be served personally or by mail, not less than five nor more than
twenty days before the date set for such meeting. If mailed it shall be
directed to a stockholder at his address as it appears on the stock records,
unless he shall have filed with the Secretary of the corporation a written
request that notices intended for him be mailed to some other address in which
case it shall be mailed to the address designated in such request. No business
other than that specified in the notice shall be transacted at any special
meeting of stockholders.
<PAGE> 2
SEC. 3. WAIVER. Notwithstanding any provision of the foregoing
Sections 1 and 2, a meeting of the stockholders may be held at any time and at
any place within or without the State of New York, and any action may be taken
thereat, if notice and lapse of time be waived in writing by every stockholder
having the right to vote at such meeting.
SEC. 4. QUORUM. The presence, in person or by proxy, of the holders
of a majority of the outstanding stock entitled to vote shall be necessary to
constitute a quorum for the transaction of business, except at special meetings
held for the election of directors, but a lesser number may adjourn to some
future time not less than six nor more than twenty days later, and the
Secretary shall thereupon mail notice of at least three days to each
stockholder entitled to vote who was absent from such meeting.
SEC. 5. CLOSING STOCK RECORDS. The Directors may prescribe a
period not exceeding twenty days, prior to any meeting of stockholders, during
which no transfer of a stock on the records of the corporation may be made.
SEC. 6. VOTING. All voting at stockholders' meetings shall be by
ballot, each of which shall state the name of the stockholder voting and the
number of shares voted by him, and, if cast by proxy, the name of the proxy.
ARTICLE II.
DIRECTORS
SEC. 1. NUMBER OF DIRECTORS. The board of directors shall
consist of that number of members as shall be fixed, from time to time, by the
stockholders or by a majority of the board of directors within the limits
established by the applicable provisions of the New York Banking Law.
SEC. 2. TERM OF OFFICE. Except as provided in Section 1 of this
Article, the Directors shall be elected at the annual meeting of the
stockholders for the term of one year by a plurality of the votes cast, but any
Director so elected shall be subject to removal before the expiration of his
term, by vote of the holders of a majority of the outstanding stock entitled to
vote for the election of directors. Vacancies in the Board, occurring between
annual meetings may be filled for the unexpired portion of the term by a
majority of the remaining Directors.
SEC. 3. DUTIES AND POWERS. The Board of Directors shall have
the control and management of the affairs of the corporation, and may adopt
such rules and regulations for the conduct of its meetings and the management
of the corporation as it may deem proper, not inconsistent with law or these
By-Laws.
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<PAGE> 3
SEC. 4. MEETINGS. Regular meetings of the Board of Directors shall be
held periodically on such dates as the Board may designate. Special meetings of
the Board of Directors shall be called by the Secretary and held at the request
of the President, the Chairman of the Board, or of any three of the Directors.
The Secretary shall give notice of each meeting of the Board of Directors,
whether regular or special, to each member of the Board by mail or telegraph at
his last known post office address. Such notice shall be given by mailing the
same at least two days before the meeting or by telegram sent at least one day
before the meeting.
One-third in number of the entire Board of Directors shall constitute
a quorum at all meetings thereof, and the act of a majority of the directors
present at any meeting at which there is a quorum shall be the act of the Board
of Directors, except as may be otherwise specifically provided by the statutes
of the State of New York.
The Board of Directors may hold its meetings, regular or special, and
have an office or offices, and keep the records of the corporation, at such
place or places within or without the State of New York as the Board may from
time to time determine, unless otherwise expressly provided by the statutes of
the State of New York.
SEC. 5. EXECUTIVE COMMITTEE AND OTHER COMMITTEES. The Board of
Directors may appoint from among its number an Executive Committee. The
Executive Committee shall have and exercise all the powers of the Board of
Directors in the management of the business and affairs of the corporation
during intervals between meetings of the Board of Directors so far as may be
permitted by law and as may not be inconsistent with the provisions of these
By-Laws; but the Board of Directors may from time to time by resolution abolish
such Executive Committee or so limit its powers as may be deemed expedient.
The Board of Directors may appoint such other committees as the
Board of Directors shall deem appropriate having such powers and functions as
the Board of Directors shall, consistent with applicable law, confer upon such
committees.
Except as otherwise provided in a specific resolution of the Board of
Directors, one-third in number of any committee (including the Executive
Committee) appointed by the Board of Directors in accordance with this Sec. 5
shall constitute a quorum at all meetings of such committee, and the act of a
majority of the directors present at any such committee meeting at which there
is a quorum shall be the act of such committee, except as may be otherwise
specifically provided by the statutes of the State of New York.
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<PAGE> 4
SEC. 6. It shall not be necessary for any director of the corporation
to be a stockholder of said corporation.
SEC. 7. Any one or more members of the Board of Directors or any
committee thereof may participate in a meeting of the Board of Directors or a
committee thereof by means of a conference telephone or similar
communications equipment allowing all persons participating in the meeting to
hear each other at the same time. Participation by such means shall constitute
presence in person at such meeting.
ARTICLE III.
OFFICERS
SEC. 1. The officers of the corporation shall be a Chairman of the
Board of Directors, a Vice Chairman of the Board of Directors, a President, a
Vice President, a Controller, a Treasurer and a Secretary, who shall be
elected by the Board of Directors at its first meeting following the annual
meeting of the stockholders to serve for one year and until their respective
successors are elected and qualified. Additional Vice Presidents may be elected
from time to time for such terms as determined by the Board, which may also
appoint one or more Assistant Secretaries and one or more Assistant Treasurers,
and such subordinate officers and agents of the corporation as it may from time
to time determine. Any vacancy in any office (including any office created
between annual meetings of the Board following the annual meeting of the
stockholders) may be filled for the unexpired term by the Board.
The same person may occupy two or more offices except the offices of
President and Secretary.
SEC. 2. CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of the Board
of Directors shall preside at the meetings of the stockholders and of the Board
of Directors. He shall have supervision of such matters as may be designated to
him by the Board of Directors. No non-U.S. citizen shall be qualified or
authorized to be Chairman of the Board of Directors or to exercise any powers
or duties of the Chairman of the Board of Directors in his absence or during
his disability, for so long as the corporation is required by the United States
maritime laws to be a U.S. citizen by reason of its ownership, direct or
indirect, or other interest in any vessel documented under the laws of the
United States.
SEC. 3. VICE CHAIRMAN OF THE BOARD OF DIRECTORS. In the absence or
disability of the Chairman of the Board, the Vice Chairman of the Board shall
preside at meetings of the stockholders and of the Board of Directors.
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<PAGE> 5
He shall have supervision of such matters as may be designated to him by the
Board of Directors.
SEC. 4. PRESIDENT. In the absence or disability of the Chairman of
the Board and the Vice Chairman of the Board, the President shall preside at
the meetings of the stockholders and of the Board of Directors. Subject to the
Board of Directors, he shall have the general management of the affairs of the
corporation and perform such other duties as by the vote of the Board of
Directors he may be empowered or directed to perform and as may be incidental
to his office. No non-U.S. citizen shall be qualified or authorized to be
President or to exercise any powers or duties of the President in his absence
or during his disability, for so long as the corporation is required by the
United States maritime laws to be a U.S. citizen by reason of its ownership,
direct or indirect, or other interest in any vessel documented under the laws
of the United States.
SEC. 5. VICE PRESIDENTS. Any Vice President may perform the duties of
the President in his absence or during his inability to act, subject to the
direction of the Chairman of the Board. The Vice Presidents shall have such
other and further powers and shall perform such other and further duties as may
be assigned to them by the Board.
SEC. 6. TREASURER. The Treasurer shall have the care, safekeeping and
custody of all funds and securities of the corporation, and he shall perform
such other duties incident to his office as the Board of Directors may empower
or direct him to perform, and in such manner as they may direct from time to
time.
SEC. 7. SECRETARY. The Secretary shall keep the minutes of the
meetings of the Board of Directors and of the stockholders, and he shall be
custodian of the seal of the corporation. He shall have charge of the stock
records and such other corporate books and papers as the Board may entrust to
his custody; he shall attend to the giving and serving of all notices of the
corporation, and he shall keep or cause to be kept, a suitable record of the
names and addresses of stockholders and the number of shares held by them
respectively. He shall attend to such other duties as are incidental to his
office and as may be assigned to him by the President or the Board of
Directors.
SEC. 8. ASSISTANT SECRETARY OR SECRETARIES AND ASSISTANT TREASURER OR
TREASURERS. The Assistant Secretary or Secretaries and the Assistant Treasurer
or Treasurers shall possess all the powers of the Secretary and of the
Treasurer, respectively, in the absence or disability of those officers and
shall have such other and further powers and perform such other and further
duties as may be assigned to them respectively from time to time by the Board
of Directors.
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<PAGE> 6
SEC. 9. All other subordinate officers and agents of the company who
may from time to time be appointed by the Board shall perform such duties and
have such powers as may be assigned to them from time to time by the Board of
Directors. An officer of the corporation may be appointed any such subordinate
office or agent.
SEC. 10. CONTROLLER. The Controller shall keep or cause to be kept
correct books of accounts of all of the corporation's business, and he shall
perform such other duties incident to his office as the Board of Directors may
empower or direct him to perform, and in such manner as they may direct from
time to time.
ARTICLE IV.
FUNDS OF THE CORPORATION
SEC. 1. The funds of the corporation shall be deposited in such banks
and/or trust companies as the directors by resolution may designate.
ARTICLE V.
INSPECTORS
SEC. 1. Two inspectors of election shall be elected at each annual
meeting of stockholders to serve for one year and if any inspector shall refuse
to serve and shall not be present, the meeting may appoint an inspector in his
place.
ARTICLE VI.
SEAL
SEC. 1. The seal of the corporation shall be in the form of a circle
with the following words thereon, to wit: GENERAL ELECTRIC CAPITAL CORPORATION.
It shall be affixed to all instruments requiring a seal.
ARTICLE VII.
WAIVER OF NOTICE
SEC. 1. Whenever, under the provisions of any of these By-Laws, or
of any of the corporate laws of the State of New York, the corporation, its
directors or the stockholders are authorized to take any action or hold any
meeting after notice to its members or after the lapse of a prescribed period
of time, such action may be taken and such meeting may be held without notice
and without the
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<PAGE> 7
lapse of any period of time if such meeting or action be authorized or approved
and such requirements be waived in writing by each person interested and
entitled to notice or by his attorney thereunto authorized, either before or
after such action or meeting.
ARTICLE VIII.
AMENDMENTS
SEC. 1. These By-Laws may be altered, amended or repealed at any
regular meeting of the Board of Directors (or any special meeting thereof duly
called for that purpose) by a majority vote of the Directors attending and
entitled to vote at such meeting, a quorum being present, provided that in the
call for any special meeting notice of intention to amend the By-Laws must be
given.
ARTICLE IX.
EMERGENCY BY-LAW
SEC. 1. This Emergency By-Law shall become effective if the Defense
Council of New York, as constituted under the New York State Defense
Emergency Act now in effect or as it may hereafter be amended from time to
time, shall order the effectiveness of emergency by-laws of New York
corporations and shall cease to be effective when the Council shall so declare.
This Emergency By-Law may also become effective in the manner outlined in
Section 5 of this Article.
SEC. 2. In the event this Emergency By-Law shall become effective the
business of the Company shall continue to be managed by those members of the
Board of Directors in office at the time the emergency arises who are available
to act during the emergency. If less than three such Directors are available to
act, additional Directors, in whatever number is necessary to constitute a
Board of three Directors, shall be selected automatically from the first
available officers or employees of General Electric Company and General
Electric Capital Corporation in the order provided in the emergency succession
list established by the Board of Directors and in effect at the time an
emergency arises.
SEC. 3. For the purposes of Sections 2 and 4(c) of this Article, a
Director shall be deemed unavailable to act if he shall fail to attend a
Directors' meeting called in the manner provided in Section 4(a) of this
Article. This section, however, shall not affect in any way the right of a
Director in office at the time an emergency arises to continue as a Director.
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<PAGE> 8
SEC. 4. The Board of Directors shall be governed by the following
basic procedures and shall have the following specific powers in addition to
all other powers which it would otherwise have.
(a) Meetings of the Board of Directors may be called by any
Director, or by the first available officer or employee in the
order provided in the emergency succession list referred to in
Section 2 of this Article, by mailing to all Directors written
notice thereof at their residence or place of business at least
two days before the meeting and by using other reasonably
available means of communication in an effort to contact each
Director.
(b) Three Directors shall constitute a quorum which may in all cases
act by majority vote.
(c) If the number of Directors who are available to act shall drop
below three, additional Directors, in whatever number is
necessary to constitute a Board of three Directors shall be
selected automatically from the first available officers or
employees in the order provided in the emergency succession
list referred to in Section 2 of this Article.
(d) Additional Directors, beyond the minimum number of three
Directors, but not more than three additional Directors, may be
elected from any officers or employees of General Electric
Company and General Electric Capital Corporation on the
emergency succession list referred to in Section 2 of this
Article.
(e) Any Director, other than a Director in office at the time an
emergency arises, may be removed by a majority vote.
(f) The Board of Directors may establish any additional procedures
and may amend any of the provisions of this Article concerning
the interim management of the affairs of the Company in an
emergency if it considers it to be in the best interests of the
Company to do so, except that it may not change Sections 3 or
4(e) of this Article in any manner which excludes from
participation any person who was a Director in office at the
time an emergency arises.
(g) To the extent that it considers it practical to do so, the
Board of Directors shall manage the business of the Company
during an emergency in a manner which is consistent with the
Charter and By-Laws. It is recognized, however, that in an
emergency it may not always be practical to act in this manner
and this Emergency
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By-Law is intended to and hereby empowers the Board of
Directors with the maximum authority possible under New York
State Defense Emergency Act, and all other applicable law, to
conduct the interim management of the affairs of the Company in
an emergency in what it considers to be the best interests of
the Company.
SEC. 5. If an obvious defense emergency exists because of an enemy
attack and, if by reason of the emergency, the Defense Council of New York is
itself unable to order the effectiveness of emergency by-laws as contemplated
by Section 1 of this Article, then:
(a) A quorum of the Board of Directors pursuant to Article II of
these By-Laws may order the effectiveness of this Emergency
By-Law, or
(b) If a quorum of the Board of Directors pursuant to Article II of
these By-Laws is not present at the first Board of Directors'
meeting called, in the manner provided in Section 4(a) of this
Article, after an emergency arises, then the provisions of this
Emergency By-Law shall automatically become effective and shall
remain in effect until it is practical for a normally
constituted Board of Directors to resume management of the
business of the Company.
ARTICLE X.
INDEMNIFICATION
SEC. 1. The corporation shall, to the fullest extent permitted by
the New York Banking Law, indemnify any person who (i) was or is or has agreed
to become a director or officer of the corporation and (ii) is or was made, or
threatened to be made, a party to an action or proceeding, whether civil or
criminal, whether involving any actual or alleged breach of duty, neglect or
error, any accountability, or any actual or alleged misstatement, misleading
statement or other act or omission and whether brought or threatened in any
court or administrative or legislative body or agency, including an action by
or in the right of the corporation to procure a judgment in its favor and an
action by or in the right of any other enterprise, which any director or
officer of the corporation is serving, has served or has agreed to serve in any
capacity at the request of the corporation, by reason of the fact that he, his
testator or intestate, is or was a director or officer of the corporation, or
is serving or served such other enterprise in any capacity against judgments,
fines, amounts paid or to be paid in settlement, taxes or penalties, and costs,
charges and expenses, including attorney's fees, incurred in connection with
such action or proceeding or any
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<PAGE> 10
appeal therein; provided, however, that no indemnification shall be provided to
any such person if a judgment or other final adjudication adverse to the
director or officer establishes that (x) his act were committed in bad faith or
were the result of active and deliberate dishonesty and, in either case, were
material to the cause of action so adjudicated, or (y) he personally gained in
fact a financial profit or other advantage to which he was not legally
entitled. The corporation shall advance to any person referred to in this
Section 1 the expenses incurred in defending any action or proceeding upon the
receipt of an undertaking by or on behalf of such person to repay such amount
if such person is ultimately found not to be entitled to indemnification. The
benefits of this Section 1 shall extend to the heirs and legal representatives
of any person entitled to indemnification under this paragraph. The right to
indemnification or advancement of expenses, under this Section I shall be
retroactive to events occurring prior to the adoption of this Article X, to the
extent not prohibited by law. No amendment of this by-law shall impair the
rights of any such person arising at any time with respect to events occurring
prior to such amendment.
SEC. 2. The corporation may indemnify to the fullest extent
permitted by law any person who is not a director or officer of the corporation
to whom the corporation is permitted by applicable law to provide
indemnification, whether pursuant to rights granted pursuant to, or provided
by, the New York Banking Law or other rights created by (i) a resolution of
shareholders, (ii) a resolution of directors, or (iii) a written agreement
providing for such indemnification authorized by any officer designated by the
Board of Directors of the corporation for such purpose, it being expressly
intended that these by-laws authorize the creation of other rights in any such
manner. The corporation may advance to any person referred to in this Section 2
the expenses incurred in defending any action or proceeding. The right of any
such person to be indemnified and to receive advancement of expenses as
authorized by this Section 2 shall not be exclusive of any other right which
such person may have or hereafter acquire under any statute, provision of the
Organization Certificate, by-law, agreement, vote of shareholders or
disinterested directors or otherwise. Indemnification under this Section 2 may
be made retroactive and may extend to events occurring prior to the adoption of
this Article X, to the extent not prohibited by law, and the benefits permitted
by this Section 2 shall extend to the heirs and legal representatives of any
person indemnified pursuant to this Section 2.
SEC. 3. For purposes of this Article X: the term"corporation" shall
include any constituent corporation (including any constituent of a
constituent) absorbed by the corporation in a consolidation or merger; the term
"other enterprise" shall include any corporation of any type or kind, domestic
or foreign, or any partnership, joint venture, trust or employee benefit plan;
service "at the request of the corporation" shall include, but not be limited
to, service by any such person as a director or officer of the corporation or
in any capacity with or on behalf of any such other enterprise which imposes
duties on, or involves
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<PAGE> 11
services to the corporation or such other enterprise by, such person with
respect to an employee benefit plan, its participants or beneficiaries; any
excise taxes assessed on any such person with respect to an employee benefit
plan shall be deemed to be indemnifiable expenses; and action by any such
person in good faith with respect to any employee benefit plan which such
person reasonably believes to be in the interest of the participants and
beneficiaries of such plan shall be deemed to be action not opposed to the best
interests of the corporation.
SEC. 4. This Article X may be amended, modified or repealed either by
action of the Board of Directors of the corporation or by the vote of the
shareholders.
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<PAGE> 1
EXHIBIT 4 (III)
March 29, 1995
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Subject: General Electric Capital Corporation Annual Report on Form 10-K
for the fiscal year ended December 31, 1994 -- File No. 1-6461
Dear Sirs:
Neither General Electric Capital Corporation (the "Corporation") nor any of
its subsidiaries has outstanding any instrument with respect to its long-term
debt under which the total amount of securities authorized exceeds 10% of the
total assets of the registrant and its subsidiaries on a consolidated basis. In
accordance with paragraph (b) (4) (iii) of Item 601 of Regulation S-K (17 CFR
sec.229.601), the Corporation hereby agrees to furnish to the Securities and
Exchange Commission, upon request, a copy of each instrument which defines the
rights of holders of such long-term debt.
Very truly yours,
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ J. A. PARKE
---------------------------------------
J. A. Parke,
Senior Vice President, Finance
<PAGE> 1
EXHIBIT 12(A)
GENERAL ELECTRIC CAPITAL CORPORATION
AND CONSOLIDATED AFFILIATES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------
(Dollar amounts in millions) 1994 1993 1992 1991 1990
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net earnings............................................. $1,918 $1,478 $1,251 $1,125 $1,021
Provision for income taxes............................... 896 664 415 362 350
Minority interest........................................ 109 114 14 (7) 4
------ ------ ------ ------ ------
Earnings before income taxes and minority interest....... 2,923 2,256 1,680 1,480 1,375
------ ------ ------ ------ ------
Fixed charges:
Interest............................................ 4,464 3,503 3,713 4,280 4,334
One-third of rentals................................ 153 138 90 34 33
------ ------ ------ ------ ------
Total fixed charges...................................... 4,617 3,641 3,803 4,314 4,367
------ ------ ------ ------ ------
Less interest capitalized, net of amortization........... 9 4 6 7 19
------ ------ ------ ------ ------
Earnings before income taxes and minority interest plus
fixed charges.......................................... $7,531 $5,893 $5,477 $5,787 $5,723
====== ====== ====== ====== ======
Ratio of earnings to fixed charges....................... 1.63 1.62 1.44 1.34 1.31
====== ====== ====== ====== ======
</TABLE>
<PAGE> 1
EXHIBIT 12(B)
GENERAL ELECTRIC CAPITAL CORPORATION
AND CONSOLIDATED AFFILIATES
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK
DIVIDENDS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------
(Dollar amounts in millions) 1994 1993 1992 1991 1990
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net earnings............................................. $1,918 $1,478 $1,251 $1,125 $1,021
Provision for income taxes............................... 896 664 415 362 350
Minority interest........................................ 109 114 14 (7) 4
------ ------ ------ ------ ------
Earnings before income taxes and minority interest....... 2,923 2,256 1,680 1,480 1,375
------ ------ ------ ------ ------
Fixed charges:
Interest............................................... 4,464 3,503 3,713 4,280 4,334
One-third of rentals................................... 153 138 90 34 33
------ ------ ------ ------ ------
Total fixed charges...................................... 4,617 3,641 3,803 4,314 4,367
------ ------ ------ ------ ------
Less interest capitalized, net of amortization........... 9 4 6 7 19
------ ------ ------ ------ ------
Earnings before income taxes and minority interest plus
fixed charges.......................................... $7,531 $5,893 $5,477 $5,787 $5,723
====== ====== ====== ====== ======
Preferred stock dividend requirements.................... $ 30 $ 22 $ 26 $ 41 $ 42
Ratio of earnings before provision for income taxes to
net earnings........................................... 1.47 1.45 1.34 1.32 1.35
------ ------ ------ ------ ------
Preferred stock dividend factor on pre-tax basis......... 44 32 35 54 57
Fixed charges............................................ 4,617 3,641 3,803 4,314 4,367
------ ------ ------ ------ ------
Total fixed charges and preferred stock dividend
requirements........................................... $4,661 $3,673 $3,838 $4,368 $4,424
====== ====== ====== ====== ======
Ratio of earnings to combined fixed charges and preferred
stock dividends........................................ 1.62 1.60 1.43 1.32 1.29
====== ====== ====== ====== ======
</TABLE>
<PAGE> 1
EXHIBIT 23(II)
To the Board of Directors
General Electric Capital Corporation
We consent to incorporation by reference in the Registration Statements on
Form S-3 (Nos. 33-36601, 33-37156, 33-39376, 33-43081, 33-43420, 33-39596 and
33-55209) of General Electric Capital Corporation of our report dated February
10, 1995 relating to the statement of financial position of General Electric
Capital Corporation and consolidated affiliates as of December 31, 1994 and 1993
and the related statements of current and retained earnings and cash flows and
related schedules for each of the years in the three-year period ended December
31, 1994, which report appears in the December 31, 1994 annual report on Form
10-K of General Electric Capital Corporation. Our report refers to a change in
1993 in the method of accounting for investments in certain securities.
/s/ KPMG PEAT MARWICK LLP
Stamford, Connecticut
March 31, 1995
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned, being
directors and/or officers of General Electric Capital Corporation, a New York
corporation (the "Corporation"), hereby constitutes and appoints Gary C. Wendt,
James A. Parke, Joan C. Amble and Burton J. Kloster, Jr., and each of them, his
true and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead in any and all
capacities, to sign one or more Annual Reports for the Corporation's fiscal year
ended December 31, 1994, on Form 10-K under the Securities Exchange Act of 1934,
as amended, or such other form as such attorney-in-fact may deem necessary or
desirable, any amendments thereto, and all additional amendments thereto in such
form as they or any one of them may approve, and to file the same with all
exhibits thereto and other documents in connection therewith with the Securities
and Exchange Commission, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done to the end that such Annual Report or
Annual Reports shall comply with the Securities Exchange Act of 1934, as
amended, and the applicable Rules and Regulations of the Securities and Exchange
Commission adopted or issued pursuant thereto, as fully and to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them or their or his
substitute or resubstitute, may lawfully do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, each of the undersigned has hereunto set his hand this
29th day of
March, 1995.
/s/ GARY C. WENDT
---------------------------------------------------
Gary C. Wendt,
Chairman of the Board
and Chief Executive Officer
(Principal Executive Officer)
/s/ JAMES A. PARKE
---------------------------------------------------
James A. Parke,
Director and Senior Vice President, Finance
(Principal Financial Officer)
/s/ JOAN C. AMBLE
--------------------------------------------------------------------------
Joan C. Amble,
Vice President and Controller
(Principal Accounting Officer)
/s/ NIGEL D. T. ANDREWS
---------------------------------------------------
Nigel D. T. Andrews, Director
/s/ JAMES R. BUNT
---------------------------------------------------
James R. Bunt, Director
/s/ DENNIS D. DAMMERMAN
---------------------------------------------------
Dennis D. Dammerman, Director
/s/ PAOLO FRESCO
---------------------------------------------------
Paolo Fresco, Director
/s/ DALE F. FREY
---------------------------------------------------
Dale F. Frey, Director
---------------------------------------------------
Benjamin W. Heineman, Jr., Director
/s/ BURTON J. KLOSTER, JR.
---------------------------------------------------
Burton J. Kloster, Jr., Director
/s/ HUGH J. MURPHY
---------------------------------------------------
Hugh J. Murphy, Director
/s/ DENIS J. NAYDEN
---------------------------------------------------
Denis J. Nayden, Director
/s/ MICHAEL A. NEAL
---------------------------------------------------
Michael A. Neal, Director
/s/ JOHN M. SAMUELS
---------------------------------------------------
John M. Samuels, Director
/s/ EDWARD D. STEWART
---------------------------------------------------
Edward D. Stewart, Director
/s/ JOHN F. WELCH, JR.
---------------------------------------------------
John F. Welch, Jr., Director
A MAJORITY OF THE BOARD OF DIRECTORS
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD ENDED DECEMBER 31, 1994, AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000040554
<NAME> GENERAL ELECTRIC CAPITAL CORPORATION
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 712
<SECURITIES> 22,208
<RECEIVABLES> 78,419
<ALLOWANCES> 2,062
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 18,662
<DEPRECIATION> 4,793
<TOTAL-ASSETS> 130,904
<CURRENT-LIABILITIES> 0
<BONDS> 34,312
<COMMON> 768
0
1
<OTHER-SE> 9,771
<TOTAL-LIABILITY-AND-EQUITY> 130,904
<SALES> 0
<TOTAL-REVENUES> 16,923
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 5,349
<LOSS-PROVISION> 873
<INTEREST-EXPENSE> 4,414
<INCOME-PRETAX> 2,814
<INCOME-TAX> 896
<INCOME-CONTINUING> 1,918
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,918
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<PAGE> 1
F-1
(ANNUAL REPORT PAGES)
Annual Report Page 25
FINANCIAL SECTION
CONTENTS
INDEPENDENT AUDITORS' REPORT 44
Audited Financial Statements
Earnings 26
Financial Position 28
Cash Flows 30
Notes to Consolidated Financial Statements 45
MANAGEMENT'S DISCUSSION
Operations
Consolidated Operations 32
GE Continuing Operations 32
Industry Segments 33
GECS Continuing Operations 36
International Operations 38
Financial Resources and Liquidity 39
Selected Financial Data 42
Financial Responsibility 44
<TABLE>
CHART:
REVENUES FROM CONTINUING OPERATIONS
<CAPTION>
(In billions) 1990 1991 1992 1993 1994
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$49.696 $51.283 $53.051 $55.701 $60.109
------------------------------------------------------------------------------
</TABLE>
<TABLE>
CHART:
EARNINGS PER SHARE FROM CONTINUING OPERATIONS BEFORE ACCOUNTING CHANGES
<CAPTION>
(In dollars) 1990 1991 1992 1993 1994
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$2.21 $2.27 $2.41 $2.45 $3.46
------------------------------------------------------------------------------
</TABLE>
<TABLE>
CHART:
DIVIDENDS PER SHARE
<CAPTION>
(In dollars) 1990 1991 1992 1993 1994
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$0.96 $1.04 $1.16 $1.305 $1.49
------------------------------------------------------------------------------
</TABLE>
<PAGE> 2
F-2
Annual Report Page 26
STATEMENT OF EARNINGS
<TABLE>
<CAPTION>
General Electric Company
and consolidated affiliates
-----------------------------------
For the years ended December 31 (In millions) 1994 1993 1992
-------------------------------------------------------------- -----------------------------------
<S> <C> <C> <C>
REVENUES
Sales of goods $30,740 $29,509 $29,575
Sales of services 8,803 8,268 8,331
Other income (note 3) 793 735 799
Earnings of GECS from continuing operations - - -
GECS revenues from operations (note 4) 19,773 17,189 14,346
------- ------- -------
Total revenues 60,109 55,701 53,051
------- ------- -------
COSTS AND EXPENSES (note 5)
Cost of goods sold 22,748 22,606 22,107
Cost of services sold 6,214 6,308 6,273
Interest and other financial charges (note 7) 4,949 4,054 4,464
Insurance losses and policyholder and annuity benefits 3,507 3,172 1,957
Provision for losses on financing receivables (note 8) 873 987 1,056
Other costs and expenses 12,987 12,287 11,168
Minority interest in net earnings of consolidated
affiliates 170 151 53
------- ------- -------
Total costs and expenses 51,448 49,565 47,078
------- ------- -------
EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND
ACCOUNTING CHANGE 8,661 6,136 5,973
Provision for income taxes (note 9) (2,746) (1,952) (1,836)
------- ------- -------
EARNINGS FROM CONTINUING OPERATIONS BEFORE ACCOUNTING CHANGE 5,915 4,184 4,137
EARNINGS (LOSS) FROM DISCONTINUED OPERATIONS (note 2) (1,189) 993 588
------- ------- -------
EARNINGS BEFORE ACCOUNTING CHANGE 4,726 5,177 4,725
Cumulative effect of accounting change (note 20) - (862) -
------- ------- -------
Net earnings $ 4,726 $ 4,315 $ 4,725
======= ======= =======
-------------------------------------------------------------- -----------------------------------
NET EARNINGS PER SHARE (in dollars)
Continuing operations before accounting change $ 3.46 $ 2.45 $ 2.41
Discontinued operations before accounting change (0.69) 0.58 0.34
------- ------- -------
Earnings before accounting change 2.77 3.03 2.75
Cumulative effect of accounting change - (0.51) -
------- ------- -------
Net earnings per share $ 2.77 $ 2.52 $ 2.75
======= ======= =======
-------------------------------------------------------------- -----------------------------------
DIVIDENDS DECLARED PER SHARE (in dollars) $ 1.49 $ 1.305 $ 1.16
--------------------------------------------------------------------------------------------------------
<FN>
The notes to consolidated financial statements on pages 45-64 are an integral part of this statement. In 1994,
Kidder, Peabody Group Inc., the securities broker-dealer subsidiary of GECS, was discontinued. Data for 1993
and 1992 have been reclassified to reflect this change. Per-share amounts have been adjusted for the 2-for-1
stock split in April 1994.
</TABLE>
<PAGE> 3
F-3
Annual Report Page 27
<TABLE>
<CAPTION>
GE GECS
-------------------------------- --------------------------------
1994 1993 1992 1994 1993 1992
-------------------------------- --------------------------------
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Sales of goods $30,767 $29,533 $29,595 $ - $ - $ -
Sales of services 8,863 8,289 8,348 - - -
Other income (note 3) 783 730 812 - - -
Earnings of GECS from continuing operations 2,085 1,567 1,331 - - -
GECS revenues from operations (note 4) - - - 19,875 17,276 14,418
------- ------- ------- ------- ------- -------
Total revenues 42,498 40,119 40,086 19,875 17,276 14,418
------- ------- ------- ------- ------- -------
COSTS AND EXPENSES (note 5)
Cost of goods sold 22,775 22,630 22,127 - - -
Cost of services sold 6,274 6,329 6,290 - - -
Interest and other financial charges (note 7) 410 525 768 4,545 3,538 3,726
Insurance losses and policyholder and annuity benefits - - - 3,507 3,172 1,957
Provision for losses on financing receivables (note 8) - - - 873 987 1,056
Other costs and expenses 5,211 5,124 5,319 7,862 7,236 5,904
Minority interest in net earnings of consolidated
affiliates 31 17 13 139 134 40
------- ------- ------- ------- ------- -------
Total costs and expenses 34,701 34,625 34,517 16,926 15,067 12,683
------- ------- ------- ------- ------- -------
EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND
ACCOUNTING CHANGE 7,797 5,494 5,569 2,949 2,209 1,735
Provision for income taxes (note 9) (1,882) (1,310) (1,432) (864) (642) (404)
------- ------- ------- ------- ------- -------
EARNINGS FROM CONTINUING OPERATIONS BEFORE ACCOUNTING CHANGE 5,915 4,184 4,137 2,085 1,567 1,331
EARNINGS (LOSS) FROM DISCONTINUED OPERATIONS (note 2) (1,189) 993 588 (1,189) 240 168
------- ------- ------- ------- ------- -------
EARNINGS BEFORE ACCOUNTING CHANGE 4,726 5,177 4,725 896 1,807 1,499
Cumulative effect of accounting change (note 20) - (862) - - - -
------- ------- ------- ------- ------- -------
Net earnings $ 4,726 $ 4,315 $ 4,725 $ 896 $ 1,807 $ 1,499
======= ======= ======= ======= ======= =======
-----------------------------------------------------------------------------------------------------------------------------------
<FN>
In the consolidating data on this page, "GE" means the basis of consolidation as described in note 1 to the consolidated financial
statements; "GECS" means General Electric Capital Services, Inc. and all of its affiliates and associated companies. Transactions
between GE and GECS have been eliminated from the "General Electric Company and consolidated affiliates" columns on page 26.
</TABLE>
<PAGE> 4
F-4
Annual Report Page 28
Statement of Financial Position
<TABLE>
<CAPTION>
General Electric Company
and consolidated affiliates
------------------------------
At December 31 (In millions) 1994 1993
----------------------------------------------------------------------- ------------------------------
<S> <C> <C>
ASSETS
Cash and equivalents $ 2,591 $ 3,056
Investment securities (note 10) 30,965 26,811
Current receivables (note 11) 7,527 8,195
Inventories (note 12) 3,880 3,824
GECS financing receivables (investment in time sales, loans and
financing leases) - net (note 13) 76,357 63,948
Other GECS receivables 5,763 5,018
Property, plant and equipment (including equipment leased
to others) - net (note 14) 23,465 21,153
Investment in GECS - -
Intangible assets (note 15) 11,373 10,052
All other assets (note 16) 23,950 24,356
Assets of discontinued securities broker-dealer operations (note 2) 8,613 85,093
-------- --------
TOTAL ASSETS $194,484 $251,506
======== ========
----------------------------------------------------------------------- ------------------------------
LIABILITIES AND EQUITY
Short-term borrowings (note 17) $ 57,781 $ 57,375
Accounts payable, principally trade accounts 6,766 5,467
Progress collections and price adjustments accrued 2,065 2,608
Dividends payable 699 615
All other GE current costs and expenses accrued (note 18) 5,543 6,414
Long-term borrowings (note 17) 36,979 28,194
Insurance liabilities, reserves and annuity benefits (note 19) 29,438 22,909
All other liabilities (note 20) 12,906 11,567
Deferred income taxes (note 21) 5,205 5,182
Liabilities of discontinued securities broker-dealer operations (note 2) 8,868 83,695
-------- --------
Total liabilities 166,250 224,026
-------- --------
Minority interest in equity of consolidated affiliates (note 22) 1,847 1,656
-------- --------
Common stock (1,857,013,000 shares issued) 594 584
Unrealized gains (losses) on investment securities (810) 848
Other capital 1,122 550
Retained earnings 30,793 28,613
Less common stock held in treasury (5,312) (4,771)
-------- --------
Total share owners' equity (notes 23 and 24) 26,387 25,824
-------- --------
TOTAL LIABILITIES AND EQUITY $194,484 $251,506
======== ========
-----------------------------------------------------------------------------------------------------------
<FN>
The notes to consolidated financial statements on pages 45-64 are an integral part of this statement. Data for
1993 have been reclassified to state separately the assets and liabilities of the discontinued securities
broker-dealer operations. Share data have been adjusted for the 2-for-1 stock split in April 1994.
</TABLE>
<PAGE> 5
F-5
Annual Report Page 29
<TABLE>
<CAPTION>
GE GECS
-------------------- --------------------
1994 1993 1994 1993
------------------------------------------------------------------------ -------------------- --------------------
<S> <C> <C> <C> <C>
ASSETS
Cash and equivalents $ 1,373 $ 1,536 $ 1,218 $ 1,520
Investment securities (note 10) 93 19 30,872 26,792
Current receivables (note 11) 7,807 8,561 - -
Inventories (note 12) 3,880 3,824 - -
GECS financing receivables (investment in time sales, loans and
financing leases) - net (note 13) - - 76,357 63,948
Other GECS receivables - - 6,012 5,201
Property, plant and equipment (including equipment leased
to others) - net (note 14) 9,525 9,542 13,940 11,611
Investment in GECS 9,380 10,809 - -
Intangible assets (note 15) 6,336 6,466 5,037 3,586
All other assets (note 16) 12,419 10,377 11,531 13,979
Assets of discontinued securities broker-dealer operations (note 2) - - 8,613 85,093
------- ------- -------- --------
TOTAL ASSETS $50,813 $51,134 $153,580 $211,730
======= ======= ======== ========
------------------------------------------------------------------------ -------------------- --------------------
LIABILITIES AND EQUITY
Short-term borrowings (note 17) $ 906 $ 2,391 $ 57,087 $ 55,243
Accounts payable, principally trade accounts 3,141 2,331 3,777 3,396
Progress collections and price adjustments accrued 2,065 2,608 - -
Dividends payable 699 615 - -
All other GE current costs and expenses accrued (note 18) 5,798 6,414 - -
Long-term borrowings (note 17) 2,699 2,413 34,312 25,809
Insurance liabilities, reserves and annuity benefits (note 19) - - 29,438 22,909
All other liabilities (note 20) 8,468 8,482 4,316 3,087
Deferred income taxes (note 21) 268 (299) 4,937 5,481
Liabilities of discontinued securities broker-dealer operations (note 2) - - 8,868 83,695
------- ------- -------- --------
Total liabilities 24,044 24,955 142,735 199,620
------- ------- -------- --------
Minority interest in equity of consolidated affiliates (note 22) 382 355 1,465 1,301
------- ------- -------- --------
Common stock (1,857,013,000 shares issued) 594 584 1 1
Unrealized gains (losses) on investment securities (810) 848 (821) 812
Other capital 1,122 550 2,006 1,784
Retained earnings 30,793 28,613 8,194 8,212
Less common stock held in treasury (5,312) (4,771) - -
------- ------- ------- -------
Total share owners' equity (notes 23 and 24) 26,387 25,824 9,380 10,809
------- ------- -------- --------
TOTAL LIABILITIES AND EQUITY $50,813 $51,134 $153,580 $211,730
======= ======= ======== ========
-----------------------------------------------------------------------------------------------------------------------
<FN>
In the consolidating data on this page, "GE" means the basis of consolidation as described in note 1 to the consolidated
financial statements; "GECS" means General Electric Capital Services, Inc. and all of its affiliates and associated
companies. Transactions between GE and GECS have been eliminated from the "General Electric Company and consolidated
affiliates" columns on page 28.
</TABLE>
<PAGE> 6
F-6
Annual Report Page 30
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
General Electric Company
and consolidated affiliates
-----------------------------------
For the years ended December 31 (In millions) 1994 1993 1992
-------------------------------------------------------------- -----------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 4,726 $ 4,315 $ 4,725
Adjustments for discontinued operations 1,189 (993) (588)
Adjustments to reconcile net earnings to cash provided
from operating activities
Cumulative effect of accounting change - 862 -
Depreciation, depletion and amortization 3,207 3,223 2,785
Earnings retained by GECS - continuing operations - - -
Deferred income taxes 1,228 548 642
Decrease (increase) in GE current receivables 668 (571) 135
Decrease (increase) in GE inventories (56) 750 820
Increase (decrease) in accounts payable 697 639 342
Increase in insurance liabilities, reserves and annuity benefits 1,624 1,479 703
Provision for losses on financing receivables 873 987 1,056
All other operating activities (2,399) 782 (1,172)
-------- -------- --------
Cash from continuing operations 11,757 12,021 9,448
Cash from (used for) discontinued operations 1,635 (1,834) 801
-------- -------- --------
CASH PROVIDED FROM OPERATING ACTIVITIES 13,392 10,187 10,249
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (7,492) (4,727) (4,804)
Dispositions of property, plant and equipment 2,506 1,139 1,795
Net increase in GECS financing receivables (9,525) (4,164) (4,683)
Payments for principal businesses purchased (2,606) (2,090) (2,013)
All other investing activities 372 (6,518) (3,753)
-------- -------- --------
Cash used for investing activities - continuing operations (16,745) (16,360) (13,458)
Cash from (used for) investing activities - discontinued operations 334 779 64
-------- -------- --------
CASH USED FOR INVESTING ACTIVITIES (16,411) (15,581) (13,394)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in borrowings (maturities 90 days or less) (2,784) 2,406 3,418
Newly issued debt (maturities more than 90 days) 23,239 15,468 13,084
Repayments and other reductions (maturities more than 90 days) (13,098) (11,851) (9,007)
Disposition of GE shares from treasury (mainly for employee plans) 771 406 425
Purchase of GE shares for treasury (1,124) (770) (1,206)
Dividends paid to share owners (2,462) (2,153) (1,925)
All other financing activities 181 (69) -
-------- -------- --------
Cash from (used for) financing activities - continuing operations 4,723 3,437 4,789
Cash from (used for) financing activities - discontinued operations (2,169) 2,017 (367)
-------- -------- --------
CASH PROVIDED FROM (USED FOR) FINANCING ACTIVITIES 2,554 5,454 4,422
-------- -------- --------
INCREASE (DECREASE) IN CASH AND EQUIVALENTS DURING YEAR (465) 60 1,277
Cash and equivalents at beginning of year 3,056 2,996 1,719
-------- -------- --------
Cash and equivalents at end of year $ 2,591 $ 3,056 $ 2,996
======== ======== ========
--------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION
Cash paid during the year for interest $ (4,524) $ (3,754) $ (4,081)
Cash paid during the year for income taxes (1,777) (1,644) (1,033)
--------------------------------------------------------------------------------------------------------
<FN>
The notes to consolidated financial statements on pages 45-64 are an integral part of this statement. Data
for 1993 and 1992 have been reclassified to state results of the securities broker-dealer as a
discontinued operation.
</TABLE>
<PAGE> 7
F-7
Annual Report Page 31
<TABLE>
<CAPTION>
GE GECS
-------------------------------- --------------------------------
1994 1993 1992 1994 1993 1992
-------------------------------- --------------------------------
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 4,726 $ 4,315 $ 4,725 $ 896 $ 1,807 $ 1,499
Adjustments for discontinued operations 1,189 (993) (588) 1,189 (240) (168)
Adjustments to reconcile net earnings to cash provided
from operating activities
Cumulative effect of accounting change - 862 - - - -
Depreciation, depletion and amortization 1,545 1,631 1,483 1,662 1,592 1,302
Earnings retained by GECS - continuing operations (1,181) (957) (831) - - -
Deferred income taxes 575 120 675 653 428 (33)
Decrease (increase) in GE current receivables 754 (625) 68 - - -
Decrease (increase) in GE inventories (56) 750 820 - - -
Increase (decrease) in accounts payable 810 114 (43) (222) 540 424
Increase in insurance liabilities, reserves and
annuity benefits - - - 1,624 1,479 703
Provision for losses on financing receivables - - - 873 987 1,056
All other operating activities (2,291) (16) (1,736) 140 770 500
------- ------- ------- -------- -------- -------
Cash from continuing operations 6,071 5,201 4,573 6,815 7,363 5,283
Cash from (used for) discontinued operations - 76 741 1,635 (1,910) 60
------- ------- ------- -------- -------- -------
CASH PROVIDED FROM OPERATING ACTIVITIES 6,071 5,277 5,314 8,450 5,453 5,343
------- ------- ------- -------- -------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (1,743) (1,588) (1,445) (5,749) (3,139) (3,359)
Dispositions of property, plant and equipment 86 55 46 2,420 1,084 1,749
Net increase in GECS financing receivables - - - (9,525) (4,164) (4,683)
Payments for principal businesses purchased (575) - - (2,031) (2,090) (2,013)
All other investing activities 14 298 (13) 176 (6,793) (3,688)
------- ------- ------- -------- -------- -------
Cash used for investing activities - continuing operations (2,218) (1,235) (1,412) (14,709) (15,102) (11,994)
Cash from (used for) investing activities
- discontinued operations - 886 (93) 334 (107) 157
------- ------- ------- -------- -------- -------
CASH USED FOR INVESTING ACTIVITIES (2,218) (349) (1,505) (14,375) (15,209) (11,837)
------- ------- ------- -------- -------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in borrowings (maturities 90 days or less) (566) 46 (763) (2,261) 2,404 4,221
Newly issued debt (maturities more than 90 days) 766 215 1,331 22,473 15,253 11,753
Repayments and other reductions (maturities more than 90 days) (1,399) (2,325) (1,528) (11,699) (9,526) (7,479)
Disposition of GE shares from treasury (mainly for
employee plans) 771 406 425 - - -
Purchase of GE shares for treasury (1,124) (770) (1,206) - - -
Dividends paid to share owners (2,462) (2,153) (1,925) (904) (610) (500)
All other financing activities (2) - - 183 (69) -
------- ------- ------- -------- -------- -------
Cash from (used for) financing activities
- continuing operations (4,016) (4,581) (3,666) 7,792 7,452 7,995
Cash from (used for) financing activities
- discontinued operations - - - (2,169) 2,017 (367)
------- ------- ------- -------- -------- -------
CASH PROVIDED FROM (USED FOR) FINANCING ACTIVITIES (4,016) (4,581) (3,666) 5,623 9,469 7,628
------- ------- ------- -------- -------- -------
INCREASE (DECREASE) IN CASH AND EQUIVALENTS DURING YEAR (163) 347 143 (302) (287) 1,134
Cash and equivalents at beginning of year 1,536 1,189 1,046 1,520 1,807 673
------- ------- ------- -------- -------- -------
Cash and equivalents at end of year $ 1,373 $ 1,536 $ 1,189 $ 1,218 $ 1,520 $ 1,807
======= ======= ======= ======== ======== =======
-----------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION
Cash paid during the year for interest $ (374) $ (473) $ (570) $ (4,150) $ (3,281) $(3,511)
Cash paid during the year for income taxes (1,456) (1,455) (936) (321) (189) (97)
-----------------------------------------------------------------------------------------------------------------------------------
<FN>
In the consolidating data on this page, "GE" means the basis of consolidation as described in note 1 to the consolidated financial
statements; "GECS" means General Electric Capital Services, Inc. and all of its affiliates and associated companies. Transactions
between GE and GECS have been eliminated from the "General Electric Company and consolidated affiliates" columns on page 30.
</TABLE>
<PAGE> 8
F-8
Annual Report Page 32
MANAGEMENT'S DISCUSSION OF OPERATIONS
OVERVIEW
General Electric Company's consolidated financial statements represent the
combination of the Company's manufacturing and nonfinancial services
businesses ("GE") and the accounts of General Electric Capital Services, Inc.
("GECS"). See note 1 to the consolidated financial statements, which explains
how the various financial data are presented.
Management's Discussion of Operations is presented in four parts:
Consolidated Operations, GE Continuing Operations, GECS Continuing Operations
and International Operations.
CONSOLIDATED OPERATIONS
1994 was a year in which the General Electric Company overcame significant
challenges to achieve record results. In the highly competitive global
marketplace, the Company's diversified portfolio of businesses achieved an 8%
increase in revenues from continuing operations. All of its businesses
contributed to the increase except, as expected, Aircraft Engines. Five
businesses - GE Capital Services, Motors and Industrial Systems (Motors),
Transportation Systems, Plastics and Information Services - achieved double-
digit growth rates.
CONSOLIDATED EARNINGS were $4.726 billion ($2.77 per share), up 10% from
1993's $4.315 billion ($2.52 per share) and the same as 1992's $4.725 billion
($2.75 per share). Three factors are important to these comparisons -
discontinued operations of the GECS securities broker-dealer and GE's
Aerospace businesses; 1993 restructuring provisions; and the effect of an
accounting change in 1993. Each is discussed separately below. Without these
items, 1994 earnings would have been $5.915 billion, up 22% from $4.862
billion in 1993, which was up 18% from $4.137 billion in 1992.
* DISCONTINUED OPERATIONS for all three years reflected results of
the GECS securities broker-dealer, Kidder, Peabody Group Inc. (Kidder,
Peabody). In 1993 and 1992, results of the discontinued GE Aerospace
businesses also were included. See note 2 to the financial statements for
details of these discontinued operations. The loss of $1.2 billion in 1994
included provision of $868 million for exit costs expected to be incurred in
connection with the liquidation of Kidder, Peabody. Management expects this
liquidation will be largely complete by the end of 1995 and that no further
associated costs will be incurred.
* RESTRUCTURING PROVISIONS in 1993 amounted to $678 million after
taxes. These provisions covered costs of a plan that will enhance the
Company's global competitiveness. The plan included explicit programs that
resulted in the closing, downsizing and streamlining of certain production,
service and administration facilities worldwide. Costs included, among other
things, asset write-offs, lease terminations and severance benefits.
Essentially all expenditures for the restructuring programs were completed by
the end of 1994. See Industry Segments beginning on page 33 for further
information on restructuring.
* THE 1993 ACCOUNTING CHANGE represented the adoption of Statement
of Financial Accounting Standards (SFAS) No. 112, Employers' Accounting for
Postemployment Benefits (see note 20). The transition effect of the accounting
change decreased net earnings by $862 million ($0.51 per share), with a
corresponding decrease in share owners' equity.
PRINCIPAL NEW ACCOUNTING STANDARDS are SFAS No. 114, Accounting by Creditors
for Impairment of a Loan, and the related SFAS No. 118, which together modify
the accounting and disclosure that applies when it is probable that all
amounts due under contractual terms of a commercial loan will not be
collected. Had these standards been adopted for 1994, there would have been no
effect on earnings or financial position, and management does not foresee any
significant future effect following adoption on January 1, 1995.
DIVIDENDS DECLARED totaled $2.546 billion in 1994. Per-share dividends of
$1.49 were up 14% from the previous year, following a 13% increase from the
year before. The 1994 increase marks the 19th consecutive year of dividend
growth. Even though substantial dividends were paid, the Company retained
sufficient earnings to invest in new plant and equipment for a wide variety of
capital expenditure projects, particularly those which increase productivity,
and to provide adequate financial resources for internal and external growth
opportunities.
GE CONTINUING OPERATIONS
GE TOTAL REVENUES were $42.5 billion in 1994, compared with $40.1 billion in
1993 and 1992.
* GE's sales of goods and services were $39.6 billion in 1994, an
increase of 5% from 1993, which was unchanged from 1992. Overall, volume was
about 6% higher in 1994 than in 1993, with significant increases in Plastics,
Power Systems, Appliances and Transportation Systems. Only Aircraft Engines
had a reduced level of shipments in 1994. Lower 1994 selling prices in many
businesses, particularly Power Systems and Medical Systems, partially offset
the volume increase. Overall, volume was about 2% higher in 1993 than in 1992,
but the increased volume was essentially offset by lower selling prices.
* GE's other income, earned from a wide variety of sources, was $783
million in 1994, $730 million in 1993 and $812 million in 1992. Details of
GE's other income are provided in note 3.
<PAGE> 9
F-9
Annual Report Page 33
* Earnings of GECS from continuing operations were up 33% in 1994,
following an 18% increase the year before. See page 36 for an analysis of
these earnings.
PRINCIPAL COSTS AND EXPENSES FOR GE are those classified as costs of goods and
services sold, and selling, general and administrative expenses.
* Operating margin is sales of goods and services less the costs of
goods and services sold, and selling, general and administrative expenses. In
1994, GE's operating margin rose to a record 13.6% of sales, an improvement of
1.1 percentage points from 12.5% (before restructuring provisions) in 1993,
which in turn was up from a comparable 11.5% in 1992. Including restructuring
provisions, operating margins were 9.9% and 11.1% in 1993 and 1992,
respectively. Appliances, NBC, Power Systems and Transportation Systems
increased their margin rates by one point or more in 1994. In 1993, all
businesses except Aircraft Engines increased their margin rates before
restructuring provisions by one to five points.
* Total cost productivity (sales in relation to costs on a constant
dollar basis) was 3.2% in 1994 compared with 3.8% in 1993 and 4.3% in 1992.
Cost savings provided by such productivity improvements more than offset the
impact of inflation in all three years. Aircraft Engines, because of declining
volume over the three-year period, has adversely affected consolidated
productivity performance. Total cost productivity in GE businesses other than
Aircraft Engines was 4.4% in 1994, compared with 5.3% and 4.8% in 1993 and
1992, respectively.
GE INTEREST EXPENSE in 1994 was $410 million, down 22% from $525 million in
1993. The lower interest expense was attributable principally to a decrease in
the average level of borrowings, partially offset by higher interest rates.
Interest expense decreased 32% in 1993 compared with 1992, primarily because
of lower borrowings and, to a lesser extent, lower interest rates.
ENTERING 1995 with excellent cash flows and a strong balance sheet, the
Company continues to be well positioned to deliver strong results to share
owners in an uncertain global economic environment.
GE INDUSTRY SEGMENT REVENUES AND OPERATING PROFIT for the past five years
are shown in the table on page 35. The industry segment data for prior years
related to the Power Generation and the Industrial Products and Systems
segments have been reclassified. For additional information, including a
description of the products and services included in each segment, see
note 26.
CHART:
GE/S&P DIVIDENDS PER SHARE INCREASE COMPARED WITH 1989
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
GE 12.9% 22.4% 36.5% 53.5% 75.3%
S&P 500 9.5 10.4 12.0 13.8 19.3
------------------------------------------------------------------------------
</TABLE>
* AIRCRAFT ENGINES revenues were down 13% from the 1993 level,
following an 11% decrease the year before, reflecting primarily the continuing
downturn in the military and commercial markets that began about four years
ago. Operating profit increased 17% during 1994, principally because there was
no counterpart to 1993 restructuring provisions ($267 million) to cover
incremental costs associated with closing and relocating certain manufacturing
and warehousing facilities to reduce the cost structure of the business in
line with lower volume. Excluding 1993 restructuring provisions, operating
profit decreased 12% in 1994, following a 16% decline in 1993, both of which
were largely attributable to the lower volume.
About $1.8 billion of 1994 revenues were from sales to the U.S.
government, down about 25% from $2.4 billion in 1993, which was about the same
as in 1992. The lower revenues were primarily attributable to declines in
sales for the F110 jet and T700 helicopter programs.
Firm orders received during 1994 totaled $5.5 billion, down slightly
from $5.7 billion in 1993. The firm orders backlog at year-end 1994 was $7.6
billion ($7.7 billion at the end of 1993), approximately 32% of which was
scheduled for delivery in 1995.
Management has taken aggressive actions over the past four years to
respond to the dual impact of declining military sales and weakness in
worldwide commercial airline markets, reducing the work force by about 16,000
employees, or 40% of its work force, through layoffs and attrition.
* APPLIANCES revenues were up 7% from 1993, which was 4% higher than
in 1992, on considerably higher shipments. For U.S. operations, revenues
increased 12% on a good increase in unit volume, reflecting the combination of
improved markets and slightly higher share. Operating profit was up 84% in
1994, in part because there was no counterpart to provisions for restructuring
of $136 million in 1993 that covered costs associated with closing, downsizing
<PAGE> 10
F-10
Annual Report Page 34
and consolidating consumer service and production facilities. Operating profit
declined 4% in 1993, primarily as a result of restructuring provisions.
Excluding 1993 restructuring provisions, operating profit increased by 34% in
1994 and by 32% in 1993. The improved performance was primarily attributable
to strong productivity as well as higher volume.
* BROADCASTING revenues increased 8% in 1994 as a result of stronger
advertising revenues in sports, prime-time entertainment, the owned-and-
operated stations, and CNBC. 1993 revenues were 8% lower than 1992's,
primarily because there was no counterpart to the 1992 Summer Olympic Games.
Operating profit increased sharply in 1994, following a 29% increase in 1993.
The 1994 increase reflected the impact of higher prices for advertising,
improved ratings performance and substantially improved CNBC operations.
Trends over the three-year period were affected by 1993 restructuring
provisions of $81 million to cover lease terminations, associated asset write-
offs and other incremental costs to enhance productivity. Excluding 1993
restructuring provisions, 1994 operating profit was up 45% from 1993, which
was 69% higher than in 1992. The improvement in 1993 was attributable
primarily to the absence of a counterpart to the programming costs associated
with the Olympic Games and generally lower 1993 overhead costs.
* INDUSTRIAL PRODUCTS AND SYSTEMS (principally the former Industrial
segment) revenues rose 10% in 1994, following a 4% increase in 1993. The
improvements in revenues were largely attributable to significantly higher
shipments of locomotives in Transportation Systems in both years and much
higher Motors volume in 1994. Operating profit increased 47% in 1994, after a
16% decline in 1993, reflecting primarily the $253 million of restructuring
provisions in 1993 for incremental costs of downsizing and consolidating
production and logistical operations worldwide. Absent 1993 restructuring
provisions, operating profit increased 15% from 1993, which was 8% higher than
in 1992. The 1994 increase was attributable to continuing productivity
improvements in Lighting's European operations and a combination of higher
volume and productivity in Motors and Transportation Systems. The 1993
increase resulted primarily from improved productivity across the segment and
substantially improved Lighting operations in Europe.
Transportation Systems orders were $2.8 billion in 1994, up 50% from
1993. The backlog at year-end 1994 was $3.5 billion ($2.0 billion at the end
of 1993), about 37% of which was scheduled for shipment in 1995.
* MATERIALS revenues were up 13% in 1994, primarily because of
increased shipments across all major product groups. Operating profit rose 16%
in 1994, in part because there was no counterpart to $52 million of
restructuring provisions in 1993 for equipment write-offs and downsizing of
European operations. Excluding 1993 restructuring provisions, operating profit
increased 9% as a result of ongoing productivity and improved volume, which
more than offset the impact of lower selling prices and much higher material
costs. Revenues increased 4% in 1993, primarily as a result of higher volume
in U.S. and Asian markets, which was partially offset by worldwide price
declines. Operating profit was 13% higher than in 1992 as substantial
productivity improvements, material cost decreases and favorable exchange
gains much more than offset the lower prices, the impact of inflation and
restructuring provisions.
* POWER GENERATION (principally the former Power Systems segment)
revenues increased 7% in 1994 as a result of considerably higher shipments of
large gas turbines and combined-cycle units, offset in part by lower selling
prices. Operating profit was 21% ahead of 1993, reflecting the lack of a
counterpart to 1993 restructuring provisions of $82 million that covered the
incremental costs of facility demolitions and associated asset write-offs.
Adjusting for 1993 restructuring provisions, operating profit increased 12%,
primarily as a result of lower material costs and volume improvements that
more than offset lower selling prices. Revenues increased 8% in 1993,
principally as a result of higher levels of gas turbine shipments and
increased sales of nuclear fuel. Operating profit increased 20% over 1992,
principally on the strength of gas turbine revenues and productivity, the
combination of which more than offset the impact of restructuring provisions.
Power Generation orders were $5.7 billion for 1994, compared with $5.6
billion in 1993. The backlog of unfilled orders at year-end 1994 was $9.4
billion (about the same as at the end of 1993), with 54% of it scheduled to be
shipped in 1995.
* TECHNICAL PRODUCTS AND SERVICES revenues were up 3% in 1994,
primarily the result of slightly higher volume partially offset by lower
selling prices. For Medical Systems, the impact of a difficult U.S. health
care market was more than offset by strength in European and Asian markets.
Segment operating profit rose 11% in 1994, in part because of 1993
restructuring provisions of $60 million to downsize manufacturing and services
operations worldwide. Excluding such provisions, operating profit was 3% ahead
of 1993, principally reflecting productivity and volume improvements in excess
of price declines in both Medical Systems and Information Services. Strength
in European and Asian markets more than offset the negative effects of U.S.
market conditions. Segment revenues were down 11% in 1993, principally because
of 1992 transfers, dispositions and realignments. Segment operating profit in
<PAGE> 11
F-11
Annual Report Page 35
<TABLE>
<CAPTION>
SUMMARY OF INDUSTRY SEGMENTS
General Electric Company and consolidated affiliates
--------------------------------------------------------
For the years ended December 31 (In millions) 1994 1993 1992 1991 1990
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
REVENUES
GE
Aircraft Engines $ 5,714 $ 6,580 $ 7,368 $ 7,777 $ 7,504
Appliances 5,965 5,555 5,330 5,225 5,592
Broadcasting 3,361 3,102 3,363 3,121 3,236
Industrial Products and Systems 9,406 8,575 8,210 8,248 8,239
Materials 5,681 5,042 4,853 4,736 5,140
Power Generation 5,933 5,530 5,106 4,813 4,071
Technical Products and Services 4,285 4,174 4,674 4,686 4,259
All Other 2,348 1,803 1,581 1,485 1,401
Corporate items and eliminations (195) (242) (399) (538) (352)
------- ------- ------- ------- -------
Total GE 42,498 40,119 40,086 39,553 39,090
------- ------- ------- ------- -------
GECS
Financing 14,932 12,399 10,544 10,069 9,000
Specialty Insurance 4,926 4,862 3,863 2,989 2,853
All Other 17 15 11 (5) (2)
------- ------- ------- ------- -------
Total GECS 19,875 17,276 14,418 13,053 11,851
------- ------- ------- ------- -------
Eliminations (2,264) (1,694) (1,453) (1,323) (1,245)
------- ------- ------- ------- -------
CONSOLIDATED REVENUES $60,109 $55,701 $53,051 $51,283 $49,696
======= ======= ======= ======= =======
-----------------------------------------------------------------------------------------------------------------
OPERATING PROFIT
GE
Aircraft Engines $ 935 $ 798 $ 1,274 $ 1,390 $ 1,253
Appliances 683 372 386 400 435
Broadcasting 500 264 204 209 477
Industrial Products and Systems 1,328 901 1,071 1,088 1,098
Materials 967 834 740 800 1,010
Power Generation 1,238 1,024 854 679 478
Technical Products and Services 787 706 912 693 538
All Other 2,403 1,796 1,549 1,453 1,327
------- ------- ------- ------- -------
Total GE 8,841 6,695 6,990 6,712 6,616
------- ------- ------- ------- -------
GECS
Financing 2,662 1,727 1,366 1,327 1,267
Specialty Insurance 589 770 641 501 457
All Other (302) (288) (272) (290) (275)
------- ------- ------- ------- -------
Total GECS 2,949 2,209 1,735 1,538 1,449
------- ------- ------- ------- -------
Eliminations (2,072) (1,554) (1,317) (1,199) (1,105)
------- ------- ------- ------- -------
CONSOLIDATED OPERATING PROFIT 9,718 7,350 7,408 7,051 6,960
GE interest and financial charges, net of eliminations (417) (529) (752) (881) (941)
GE items not traceable to segments (640) (685) (683) (563) (480)
------- ------- ------- ------- -------
EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
AND ACCOUNTING CHANGES $ 8,661 $ 6,136 $ 5,973 $ 5,607 $ 5,539
======= ======= ======= ======= =======
-----------------------------------------------------------------------------------------------------------------
<FN>
The notes to consolidated financial statements on pages 45-64 are an integral part of this statement. "GE" means
the basis of consolidation as described in note 1 to the consolidated financial statements; "GECS" means General
Electric Capital Services, Inc. and all of its affiliates and associated companies. Operating profit of GE segments
excludes interest and other financial charges; operating profit of GECS includes interest and discount expense,
which is the largest element of GECS' operating costs. Data for prior periods have been reclassified to reflect the
securities broker-dealer segment as a discontinued operation and to conform to the 1994 grouping of products and
services in the Industrial Products and Systems and the Power Generation segments (see note 26).
</TABLE>
<PAGE> 12
F-12
Annual Report Page 36
1993 was down sharply, mainly because there was no counterpart to the 1992
gain on realignment of the equity position of GE and Ericsson in their mobile
communications joint venture and because of restructuring provisions.
Orders received by Medical Systems in 1994 were down slightly from 1993.
A decline in U.S. medical equipment markets more than offset orders growth in
the rest of the world. The backlog of unfilled orders at year-end 1994 was
$1.5 billion ($1.7 billion at the end of 1993), about 93% of which was
scheduled to be shipped in 1995.
* ALL OTHER consists primarily of GECS' earnings, which are
discussed below. Also included are revenues derived from licensing use of GE
know-how to others.
GECS CONTINUING OPERATIONS
GECS conducts its business in two segments. The Financing segment includes
financing operations of General Electric Capital Corporation (GE Capital). The
Specialty Insurance segment includes operations of Employers Reinsurance
Corporation (ERC) and the other insurance businesses described on page 61.
GECS REVENUES FROM OPERATIONS were $19.9 billion in 1994, up 15% from 1993,
which was up 20% from 1992.
GECS EARNINGS from continuing operations were $2.085 billion in 1994, up 33%
from 1993, which was up 18% from 1992. The 1994 increase reflected a very
strong performance in the Financing segment, resulting primarily from asset
growth, increased financing spreads and improved asset quality. Earnings in
the Specialty Insurance segment declined in 1994 due to higher insurance
losses. The 1993 earnings increase reflected substantially higher earnings in
the Financing segment, mainly as a result of the favorable 1993 interest rate
environment, asset growth and improved asset quality. Earnings in the
Specialty Insurance segment also increased substantially in 1993 over 1992.
GECS' PRINCIPAL COST IS FOR INTEREST on borrowings in the Financing segment.
Interest expense in 1994 was $4.5 billion, 28% higher than in 1993, which was
5% lower than in 1992. The 1994 increase reflected the effects of higher
average borrowings used to finance asset growth as well as the effects of
higher interest rates. The 1993 decrease was a result of substantially lower
interest rates on higher average borrowings. The composite interest rate on
GECS' borrowings was 5.47% in 1994, compared with 4.96% in 1993 and 5.78% in
1992.
GECS' OTHER COSTS AND EXPENSES increased to $7.9 billion in 1994 from $7.2
billion in 1993 and $5.9 billion in 1992, reflecting higher investment levels
and costs associated with acquired businesses and portfolios.
GECS INDUSTRY SEGMENT REVENUES AND OPERATING PROFIT for the past five years
are shown in the table on page 35. Revenues from operations (earned income)
are detailed in note 4.
* FINANCING segment revenues from operations were $14.9 billion in
1994, up 20% from 1993, which was up 18% from 1992. Asset growth and increased
yields (interest rates earned) were significant factors in both years.
Operating profit was $2.7 billion in 1994, up 54% from 1993, which was
26% higher than in 1992, primarily as a result of asset growth and increased
financing spreads, the excess of yield over interest rates on borrowings.
Improved asset quality also contributed to increased operating profit in 1994
and, to a lesser extent, in 1993. Assets grew 14% during 1994 and 30% during
1993 because of higher origination volumes and acquisitions of businesses and
portfolios, including the 1993 acquisition of the annuity business. Yields on
assets increased in 1994 after holding essentially flat in 1993 and 1992.
Financing spreads increased during 1994, as the improvement in yields outpaced
increases in borrowing rates. Financing spreads increased to a greater extent
in 1993, when borrowing rates declined substantially. The provision for losses
on financing receivables declined in both 1994 and 1993 as the quality of the
portfolio improved. Other costs and expenses increased in both years,
primarily as a result of asset growth.
The portfolio of financing receivables, which was $76.4 billion at the
end of 1994 and $63.9 billion at the end of 1993, is the Financing segment's
largest asset and its primary source of revenues. Related allowances for
losses at the end of 1994 aggregated $2.1 billion (2.63% of receivables - the
same level as 1993 and 1992) and are, in management's judgment, appropriate
given the risk profile of the portfolio. A discussion about the quality of
certain elements of the Financing segment investment portfolio follows.
CONSUMER LOANS RECEIVABLE, primarily retailer and auto receivables, were
$23.1 billion and $17.3 billion at the end of 1994 and 1993, respectively. In
addition, GECS' investment in consumer auto finance lease receivables was $7.5
billion and $5.6 billion at the end of 1994 and 1993, respectively. Nonearning
receivables, which were 1.4% of total loans and leases (1.7% at the end of
1993), aggregated $422 million at the end of 1994. The provision for losses on
retailer and auto financing receivables was $502 million in 1994, a 7%
increase from $469 million in 1993, reflecting growth in the portfolio of
receivables. Most nonearning receivables were private-label credit card
receivables, the majority of which were subject to various loss-sharing
arrangements that provide full or partial recourse to the originating
retailer.
COMMERCIAL REAL ESTATE LOANS classified as financing receivables by the
Commercial Real Estate business were $11.9 billion at December 31, 1994, up
$1.0 billion from the end of 1993. In addition, the investment portfolio
<PAGE> 13
F-13
Annual Report Page 37
of the annuity business included $1.4 billion of commercial property
loans at December 31, 1994, up $0.3 billion from the end of 1993. Commercial
real estate loans are generally secured by first mortgages. In addition to
loans, the commercial real estate portfolio included, in other assets, $2.1
billion ($2.2 billion in 1993) of assets acquired for resale from various
financial institutions, including the Resolution Trust Corporation. Values
realized on sales of these assets and the pace of such sales continue to meet
or exceed expectations at the time of purchase. Also included in other assets
were investments in real estate ventures at year-end 1994 totaling $1.4
billion, the same as at year-end 1993. Those investments are made as a part of
original financings and in conjunction with loan restructurings where
management believes that such investments will enhance economic returns.
Commercial Real Estate's foreclosed properties at the end of 1994
declined to $20 million from $110 million at the end of 1993, primarily
because of sales.
At December 31, 1994, Commercial Real Estate's portfolio included loans
secured by and investments in a variety of property types that continued to be
well dispersed geographically. Nonearning and reduced-earning receivables
declined to $179 million in 1994 from $272 million in 1993, reflecting write-
offs and proactive management of delinquent receivables in a stabilized
commercial real estate market. Sustaining the 1994 improvements depends on
many factors, including interest rates and various local market conditions.
The loss provision for Commercial Real Estate's investments was $287 million
in 1994 ($244 million related to receivables and $43 million related to other
assets), compared with $387 million and $299 million in 1993 and 1992,
respectively. The 1994 decrease resulted from lower provisions related to real
estate ventures and foreclosed properties. Loss provisions in 1993 increased
as the portfolio was adversely affected by a weakened commercial real estate
market.
CHART:
<TABLE>
<CAPTION>
GECS REVENUES FROM CONTINUING OPERATIONS
(In billions) 1990 1991 1992 1993 1994
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$11.851 $13.053 $14.418 $17.276 $19.875
------------------------------------------------------------------------------
</TABLE>
OTHER FINANCING RECEIVABLES, $32.5 billion at December 31, 1994,
consisted primarily of a diverse commercial, industrial and equipment loan and
lease portfolio. This portfolio grew $3.5 billion during 1994, while nonearning
and reduced-earning receivables decreased to $165 million at year-end 1994 from
$237 million at year-end 1993. Included in other financing receivables are
financings provided for highly leveraged management buyouts and corporate
recapitalizations. The portion of those investments classified as financing
receivables was $2.4 billion at the end of 1994, compared with $3.3 billion at
the end of 1993, as repayments continued to reduce this liquidating portfolio.
The year-end balance of highly leveraged transactions included amounts that had
been written down to estimated fair value and carried in other assets as a
result of restructuring or in-substance repossession. These balances aggregated
$336 million at the end of 1994 and $544 million at the end of 1993 (net of
allowances of $224 million and $244 million, respectively).
GECS had loans and leases to commercial airlines, as discussed in note
16, that aggregated about $7.6 billion at the end of 1994, up from $6.8 billion
at the end of 1993. At year-end 1994, GECS' commercial aircraft positions
included financial guaranties and funding commitments amounting to $506 million
(compared with $450 million in 1993) and conditional commitments to purchase
aircraft at a cost of $81 million ($865 million at December 31, 1993). The
decline in purchase commitments resulted from 1994 purchases of aircraft.
* Specialty Insurance revenues from operations were $4.9 billion in
1994, essentially the same as 1993, which was up 26% from 1992. The increase in
1993 reflected higher premium and investment income as well as the impact of a
full year of the creditor insurance business, which was consolidated during
1992. Operating profit declined from $770 million in 1993 to $589 million in
1994 as a result of an operating loss in the private mortgage insurance
business. The 1994 operating loss resulted from adverse loss development in
private mortgage pool insurance, the result of poor economic conditions and
housing value declines in southern California. These losses more than offset
operating profit increases in other parts of the segment, including primary
mortgage insurance. Based on conditions at December 31, 1994, management
believes that loss development should diminish in 1995 and in subsequent years.
However, future economic conditions and housing values in southern California
are uncertainties that could affect that outlook. The 1993
<PAGE> 14
F-14
Annual Report Page 38
operating profit was 20% higher than the $641 million recorded in 1992,
reflecting higher premium volume from bond refunding in the financial guaranty
insurance business as well as reduced claims expense in the creditor insurance
business.
ENTERING 1995, management believes that vigilant attention to risk management,
along with the diversity and strength of GECS' resources, position it to deal
effectively with increasing competition in an ever-changing global economy.
INTERNATIONAL OPERATIONS
Estimated results of international operations include all exports from the
United States plus the results of GE's and GECS' operations located outside
the United States. International revenues were $20.0 billion (33% of
consolidated revenues), compared with $18.2 billion in 1993 and $17.8 billion
in 1992. In 1994, about 40% of GE's sales of goods and services were
international, approximately the same as in the previous two years. The chart
below left shows the growth in international revenues in relation to total
revenues over the past five years. International operating profit was $2.6
billion (27% of consolidated operating profit) in 1994, $2.3 billion in 1993
and $2.2 billion in 1992.
GECS' international revenues were $3.7 billion in 1994 on year-end
assets of about $21.5 billion. These revenues, which were derived primarily
from operations in Europe, Canada and the Pacific Basin, almost doubled from
1992's $2.0 billion. Expansion of GECS' operations into the international
marketplace is expected to continue in 1995 and beyond.
The accompanying financial results reported in U.S. dollars are
unavoidably affected by currency exchange. A number of techniques are used to
manage the effects of currency exchange, including selective borrowings in
local currencies and selective hedging of significant cross-currency
transactions. International activity is diverse, as shown for revenues in the
chart at the bottom right of this page. Principal currencies include those of
countries in the European Monetary Union, the Japanese yen and the Canadian
dollar. The 1994 devaluation of the Mexican peso had virtually no effect on
the Company's 1994 financial position or results of operations, and management
does not expect a significant future effect.
GE's export sales by major world areas follow.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
GE'S TOTAL EXPORTS FROM THE UNITED STATES
(In millions) 1994 1993 1992
----------------------------------------------------------------------------
<S> <C> <C> <C>
Pacific Basin $3,260 $2,645 $2,696
Europe 1,319 2,320 2,018
Americas 1,027 981 1,126
Other 821 1,039 1,079
------ ------ ------
Exports to external customers 6,427 6,985 6,919
Exports from U.S. to affiliates 1,683 1,513 1,281
------ ------ ------
Total exports $8,110 $8,498 $8,200
====== ====== ======
----------------------------------------------------------------------------
</TABLE>
GE made a positive 1994 contribution of approximately $4.4 billion to
the U.S. balance of trade. Total exports in 1994 were $8.1 billion; imports
from GE affiliates were $1.2 billion; and direct imports from external
suppliers were $2.5 billion.
<TABLE>
CHART:
CONSOLIDATED REVENUES FROM CONTINUING OPERATIONS
<CAPTION>
(In billions) 1990 1991 1992 1993 1994
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
United States $34.915 $34.631 $35.228 $37.471 $40.064
International 14.781 16.652 17.823 18.230 20.045
------------------------------------------------------------------------------
</TABLE>
<TABLE>
CHART:
CONSOLIDATED INTERNATIONAL REVENUES FROM CONTINUING OPERATIONS
<CAPTION>
(In billions) 1990 1991 1992 1993 1994
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Europe $7.235 $7.972 $8.721 $9.042 $9.116
Pacific Basin 3.093 4.030 4.349 4.531 5.997
Americas 3.268 3.194 3.315 3.215 3.763
Other 1.185 1.456 1.438 1.442 1.169
------------------------------------------------------------------------------
</TABLE>
<PAGE> 15
F-15
Annual Report Page 39
MANAGEMENT'S DISCUSSION OF FINANCIAL RESOURCES AND LIQUIDITY
OVERVIEW
This discussion of financial resources and liquidity focuses on the
Statement of Financial Position (page 28) and the Statement of Cash Flows
(page 30).
Throughout the discussion, it is important to understand the differences
between the businesses of GE and GECS. Although GE's manufacturing and
nonfinancial services activities involve a variety of different businesses,
their underlying characteristics are the development, the preparation for
market and the sale of tangible goods and services. Risks and rewards are
directly related to the ability to manage and finance those activities.
GECS' principal businesses provide financing, asset management and
insurance to third parties. The underlying characteristics of these businesses
involve the management of financial risk. GECS' risks and rewards stem from
the abilities of its businesses to continue on a selective basis to design and
provide a wide range of services, including financial services, in a
competitive marketplace, and to receive adequate compensation for such
services. GECS is not a "captive finance company" or a vehicle for "off-
balance-sheet financing" for GE; very little of GECS' business is directly
related to other GE operations.
Despite the different business profiles of GE and GECS, the global
commercial airline industry is one significant example of an important source
of business for both. GE assumes financing positions primarily in support of
engine sales, whereas GECS is a significant source of lease and loan financing
for the industry (see details in note 16). Even during the current difficult
period in this historically cyclical industry, management believes that the
financing positions are reasonably protected by collateral values and by its
ability to control assets, either by ownership or by security interests.
The fundamental differences between GE and GECS are reflected in the
measurements commonly used by investors, rating agencies and financial analysts.
These differences will become clearer in the discussion that follows with
respect to the more significant items in the financial statements.
DISCONTINUED OPERATIONS are displayed in the accompanying financial statements
separately from data on continuing operations. Details of assets and
liabilities of the GECS securities broker-dealer at December 31, 1994, are
shown in note 2. The assets of $8.6 billion included $1.5 billion of
collateralized mortgage obligations (CMOs). A plan announced on October 6,
1994, to transfer $6.7 billion of CMOs to GE Capital was not executed in light
of the later agreement to transfer certain assets and operations to Paine
Webber Group Inc. (PaineWebber). On January 31, 1995, total assets of Kidder,
Peabody had been reduced to $5.5 billion and investment in CMOs to $0.6
billion. Management does not expect to incur any additional costs in
connection with liquidation of these assets.
<TABLE>
CHART:
CONSOLIDATED ASSETS - CONTINUING OPERATIONS
<CAPTION>
(In billions) 1990 1991 1992 1993 1994
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$111.004 $123.115 $135.472 $166.413 $185.871
------------------------------------------------------------------------------
</TABLE>
Discontinued operations used $200 million of cash from continuing
operations in 1994. In 1993 and 1992, cash provided by discontinued operations
totaled $962 million and $498 million, respectively. The 1993 cash provided
was principally associated with amounts received on transfer of GE's Aerospace
businesses.
STATEMENT OF FINANCIAL POSITION
* INVESTMENT SECURITIES for each of the past two years were mainly
investment-grade debt securities held by GECS' Specialty Insurance and annuity
businesses in support of obligations to policyholders and annuitants. The
increase of $4.1 billion at GECS during 1994 was principally related to
acquisitions, partially offset by declines in fair value resulting from rising
interest rates during the year.
* GE'S CURRENT RECEIVABLES were $7.8 billion and $8.6 billion at the
end of 1994 and 1993, respectively, and included $5.7 billion due from
customers at the end of both years. As a measure of asset utilization,
customer receivables turn-over was 6.9 in 1994, compared with 7.0 in 1993.
Current receivables other than amounts owed by customers are amounts that did
not originate from sales of GE goods or services, such as advances to
suppliers in connection with large contracts.
* INVENTORIES were $3.9 billion at December 31, 1994, up slightly
from the end of 1993. As a measure of inventory utilization, turnover was 6.9
in 1994, compared with 6.0 in 1993, and has been improving dramatically over
the past several years (see chart on page 40). Inventory turnover improved by
more than one turn in Plastics, Motors, Electrical Distribution and Control,
and Transportation Systems in 1994. Last-in, first-out (LIFO) revaluations
decreased $197 million in 1994, compared with decreases of $179 million in
1993 and $204 million in 1992. Included in these changes were decreases of $72
million, $101 million and $183 million (1994, 1993 and 1992, respectively)
<PAGE> 16
F-16
Annual Report Page 40
resulting from lower inventory levels. In each of the last three years, there
was a net current-year cost decrease.
* GECS FINANCING RECEIVABLES were $76.4 billion at year-end 1994, an
increase of $12.4 billion over 1993. These receivables are discussed on page
36 and in note 13.
* PROPERTY, PLANT AND EQUIPMENT (including equipment leased to
others) was $23.5 billion at December 31, 1994, up $2.3 billion from 1993.
GE's property, plant and equipment consists of investments for its own
productive use, whereas the largest element of GECS' investment is in
equipment provided to third parties on operating leases. Details by category
of investment can be found in note 14.
GE's total expenditures for new plant and equipment during 1994 totaled
$1.7 billion, up slightly from $1.6 billion in 1993. Total expenditures for
the past five years were $9.0 billion, of which 25% was to increase
productivity; 22% was to increase capacity; 13% was to support new business
start-ups; 12% was to replace and renew older equipment; and 28% was for such
other purposes as improvement of research and development facilities and
safety and environmental protection.
GECS added $5.6 billion to its equipment leased to others during 1994.
* INTANGIBLE ASSETS were $11.4 billion at year-end 1994. GE's
intangibles were $6.3 billion, about the same as the end of 1993. GECS'
intangibles increased $1.5 billion, most of which was related to acquisitions.
* ALL OTHER ASSETS totaled $24.0 billion at year-end 1994, down $0.4
billion from the end of 1993. The principal reasons for GE's increase of $2.0
billion were the acquisition of Nuovo Pignone, an Italian electrical equipment
manufacturer, which will be consolidated effective January 1, 1995, and the
increase in the prepaid pension asset. GECS' decrease of $2.4 billion related
principally to a decrease in mortgages held for resale associated with the
mortgage servicing businesses, partially offset by PaineWebber securities
received in exchange for certain assets of Kidder, Peabody (see note 2).
* CONSOLIDATED BORROWINGS aggregated $94.8 billion at December 31,
1994, compared with $85.6 billion at the end of 1993. The major debt-rating
agencies evaluate the financial condition of GE and of GE Capital (GECS' major
public borrowing entity) differently because of their distinct business
characteristics. Using criteria appropriate to each and considering their
combined strength, those major rating agencies continue to give the highest
ratings to debt of both GE and GE Capital.
GE has agreed to make payments to GE Capital to the extent necessary to
cause GE Capital's consolidated ratio of earnings to fixed charges to be not
less than 1.10. For the years 1994, 1993 and 1992, such ratios were 1.63, 1.62
and 1.44, respectively, substantially above the level at which payout would be
required. Three years advance notice is required to terminate this agreement.
GE's total borrowings were $3.6 billion at year-end 1994 ($0.9 billion
short-term, $2.7 billion long-term), a decrease of about $1.2 billion from
year-end 1993. A significant portion of this decrease was attributable to
record cash from operating activities arising from continuing improvements in
working capital management. GE's total debt at the end of 1994 equaled 11.9%
of total capital, down 3.6 points from the end of 1993.
GECS' total borrowings were $91.4 billion at December 31, 1994, of which
$57.1 billion was due in 1995 and $34.3 billion was due in subsequent years.
Comparable amounts at the end of 1993 were $81.1 billion total, $55.3 billion
due within one year, and $25.8 billion due thereafter. GECS' composite
interest rates are discussed on page 36. A large portion of GECS' borrowings
was commercial paper ($43.7 billion and $46.3 billion at the end of 1994 and
1993, respectively). Most of this commercial paper is issued by GE Capital.
The average remaining terms and interest rates of GE Capital's commercial
paper were 45 days and 5.90%, respectively, at the end of 1994, compared with
35 days and 3.39% at the end of 1993. GE Capital's ratio of debt to equity
(leverage) was 8.43 to 1 at the end of 1994, compared with 7.59 to 1 at the
end of 1993. Excluding net unrealized gains and losses on investment
securities, GE Capital's leverage was 7.94 to 1 at the end of 1994, compared
with 7.96 to 1 at the end of 1993.
INTEREST RATE AND CURRENCY RISK MANAGEMENT
Both GE and GECS are exposed to various types of risk, although the nature of
their activities means that the respective risks are different. The
multinational nature of GE's operations and its relatively low level of
borrowings means that currency management is more important than managing
exposure to changes in interest rates.
<TABLE>
CHART:
INVENTORY ANNUAL TURNOVER
<CAPTION>
1990 1991 1992 1993 1994
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
4.63 4.71 5.26 5.97 6.86
------------------------------------------------------------------------------
</TABLE>
<PAGE> 17
F-17
Annual Report Page 41
On the other hand, changes in interest rates are the more significant
exposure for GECS because of the potential effects of such changes on
financing spreads.
The correlation between interest rate changes and financing spreads is
subject to many factors and cannot be forecasted with reliability. Although
not necessarily relevant to future effects, management estimates that, all
else constant, an increase of 100 basis points in interest rates for all of
1994 would have reduced GECS net earnings by approximately $90 million.
GE and GECS use various financial instruments, particularly interest
rate, currency and basis swaps, but also options and currency forwards, to
manage their respective risks. GE and GECS are exclusively end users of these
instruments, which are commonly referred to as derivatives; neither GE nor
GECS engages in trading, market-making or other speculative activities in the
derivatives markets. Established practices require that derivative financial
instruments relate to specific asset, liability or equity transactions or to
currency exposures.
The total exposure of GE and GECS to credit risk associated with changes
in the market value of swaps at December 31, 1994, was $39 million and $412
million, respectively. Management does not anticipate any loss from this
exposure.
More detailed information regarding these financial instruments, as well
as the strategies and policies for their use, is contained in notes 1, 17, and
28.
STATEMENT OF CASH FLOWS
Because cash management activities of GE and GECS are separate and distinct,
it is more useful to review their cash flows statements separately.
GE
GE's cash and equivalents aggregated $1.4 billion at the end of 1994, slightly
lower than at the end of 1993. During 1994, GE generated a record $6.1 billion
in cash from continuing operating activities. This provided resources to pay
$2.5 billion in dividends to share owners, to invest $1.7 billion in new plant
and equipment and to reduce total debt by $1.2 billion.
Operating activities are the principal source of GE's cash flows from
continuing operations. Over the past three years, operating activities have
provided more than $15.8 billion of cash. Principal applications were payment
of dividends to share owners ($6.5 billion), investment in new plant and
equipment ($4.8 billion) and reduction of debt ($4.2 billion). In addition,
the Company repurchased and placed into treasury $3.1 billion of its common
stock during the past three years.
<TABLE>
CHART:
GE BORROWINGS AS A PERCENT OF TOTAL CAPITAL INVESTED
<CAPTION>
1990 1991 1992 1993 1994
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
23.55% 26.18% 22.39% 15.50% 11.87%
------------------------------------------------------------------------------
</TABLE>
In December 1994, GE's Board of Directors authorized the repurchase of
up to $5 billion of the Company's common stock over the next two years. This
program is a direct result of GE's solid financial condition and cash-
generating capability, and it was authorized after evaluating various
alternatives to enhance long-term share owner value.
Based on past performance and current expectations, in combination with
the financial flexibility that comes with a strong balance sheet and the
highest credit ratings, management believes that GE is in a sound position to
complete the two-year share repurchase program, to grow dividends in line with
earnings and to continue making long-term investments for future growth,
including selective acquisitions and investments in joint ventures.
Expenditures for new plant and equipment in 1995 are expected to be about the
same as in 1994.
GECS
GECS' primary source of cash is financing activities involving the continued
rollover of short-term borrowings and appropriate addition of borrowings with
a reasonable balance of maturities. Over the past three years, GECS'
borrowings with maturities of 90 days or less have increased by $4.4 billion.
New borrowings of $49.5 billion having maturities longer than 90 days were
added during those years, while $28.7 billion of such longer-term borrowings
were retired. GECS also generated $19.5 billion from continuing operating
activities.
GECS' principal use of cash has been investing in assets to grow its
businesses. Of the $41.8 billion that GECS invested over the past three years,
$18.4 billion was used for additions to financing receivables, $12.2 billion
was used to invest in new equipment, principally for lease to others, and $6.1
billion was for acquisitions of new businesses.
With the financial flexibility that comes with excellent credit ratings,
management believes GECS is well positioned to meet the global needs of its
customers for capital and to continue providing GE share owners with good
returns.
<PAGE> 18
F-18
Annual Report Page 42
MANAGEMENT'S DISCUSSION OF SELECTED FINANCIAL DATA
SELECTED FINANCIAL DATA summarizes on the opposite page some data frequently
requested about General Electric Company. The data are divided into three
sections: upper portion - consolidated data; middle portion - GE data that
reflect various conventional measurements for industrial enterprises; and
lower portion - GECS data that reflect key information pertinent to financial
services.
GE'S TOTAL RESEARCH AND DEVELOPMENT (R&D) expenditures were $1,741 million in
1994, down $214 million or 11% from 1993. In 1994, expenditures of $1,176
million were from GE's own funds, down 9% from 1993. This decrease was more
than accounted for by a decline at Aircraft Engines as two major development
programs were completed and the engines certified, and by completion of GE's
obligation to the Sarnoff laboratory. The remaining businesses had a modest
1994 increase in R&D expenditures, reflecting continuation of new product
programs such as the AC locomotive, ultrasound, high-efficiency lighting and
the next generation of gas turbines. Expenditures from funds provided by
customers (mainly the U.S. government) were $565 million in 1994, down $93
million, reflecting principally the completion of certain development work on
Aircraft Engines programs.
GE'S TOTAL BACKLOG of firm unfilled orders at the end of 1994 was $24.3
billion, up $1.5 billion from the 1993 level, principally because of strong
growth in international orders for locomotives. Orders constituting this
backlog may be canceled or deferred by customers, subject in certain cases to
cancellation penalties. See Industry Segments beginning on page 33 for further
discussion on unfilled orders of relatively long-cycle manufacturing
businesses. About 50% of total unfilled orders at the end of 1994 was
scheduled to be shipped in 1995, with most of the remainder to be shipped in
the two years after that. For comparison, about 42% of the 1993 backlog was
expected to be shipped in 1994.
REGARDING ENVIRONMENTAL MATTERS, the Company's operations, like operations of
other companies engaged in similar businesses, involve the use, disposal and
cleanup of substances regulated under environmental protection laws.
In 1994, GE had capital expenditures of about $63 million for projects
related to the environment. The comparable amount in 1993 was about $140
million. These amounts exclude expenditures for remediation actions, which are
principally expensed and discussed below. Capital expenditures for
environmental purposes have included pollution control devices - such as
wastewater treatment plants, groundwater monitoring devices, air strippers or
separators, and incinerators - at new and existing facilities constructed or
upgraded in the normal course of business. Consistent with policies stressing
environmental responsibility, average annual capital expenditures other than
for remediation projects are presently expected to be about $100 million over
the next two years. This level is in line with existing levels for new or
expanded programs to build facilities or modify manufacturing processes to
minimize waste and reduce emissions.
GE also is involved in a sizable number of remediation actions to clean
up hazardous wastes as required by federal and state laws. Such statutes
require that responsible parties fund remediation actions regardless of fault,
legality of original disposal or ownership of a disposal site. Expenditures
for site remediation actions amounted to approximately $98 million in 1994
compared with $80 million in 1993. It is presently expected that remediation
actions will require average annual expenditures in the range of $80 million
to $110 million over the next two years. Liabilities for remediation costs are
based on management's best estimate of future costs; when there appears to be
a range of possible costs with equal likelihood, liabilities are based on the
lower end of such range. Possible insurance recoveries are not considered in
estimating liabilities.
It is difficult to estimate with any meaning the annual level of future
remediation expenditures because of the many uncertainties, including
uncertainties about the status of the law, regulation, technology and
information related to individual sites. Subject to the foregoing, management
believes that capital expenditures and remediation actions to comply with the
present laws governing environmental protection will not have a material
effect on consolidated earnings, liquidity or competitive position. In making
this determination, management considered the fact that, if remediation
expenditures were to continue at the 1994 level, liabilities recorded at the
end of 1994 would be sufficient to cover expenditures through the end of the
century, and the probability of incurring more than nominal expenditures
beyond 2015 is remote. Of course, lower annual expenditures could be incurred
over a longer period without increasing the total expenditures.
<TABLE>
CHART:
CONSOLIDATED EMPLOYMENT AT YEAR END - CONTINUING OPERATIONS
<CAPTION>
------------------------------------------------------------------------------
(In thousands) 1990 1991 1992 1993 1994
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
United States 183 173 168 157 156
Other countries 62 63 58 59 60
------------------------------------------------------------------------------
</TABLE>
<PAGE> 19
F-19
Annual Report Page 43
<TABLE>
SELECTED FINANCIAL DATA
<CAPTION>
--------------------------------------------------------------
(Dollar amounts in millions; per-share amounts in dollars) 1994 1993 1992 1991 1990
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
GENERAL ELECTRIC COMPANY AND CONSOLIDATED AFFILIATES
Revenues $ 60,109 $55,701 $53,051 $51,283 $ 49,696
Earnings from continuing operations 5,915 4,184 4,137 3,943 3,920
Earnings (loss) from discontinued operations (1,189) 993 588 492 383
Earnings before accounting changes 4,726 5,177 4,725 4,435 4,303
Net earnings 4,726 4,315 4,725 2,636 4,303
Dividends declared 2,546 2,229 1,985 1,808 1,696
Earned on average share owners' equity 18.1% 17.5% 20.9% 12.2% 20.2%
Per share
Earnings from continuing operations $ 3.46 $ 2.45 $ 2.41 $ 2.27 $ 2.21
Earnings (loss) from discontinued operations (0.69) 0.58 0.34 0.28 0.21
Earnings before accounting changes 2.77 3.03 2.75 2.55 2.42
Net earnings 2.77 2.52 2.75 1.51 2.42
Dividends declared 1.49 1.305 1.16 1.04 0.96
Stock price range 54 7/8-45 53 1/2-40 3/8 43 3/4-36 3/8 39-26 1/2 37 3/4-25
Total assets 194,484 251,506 192,876 166,508 152,000
Long-term borrowings 36,979 28,194 25,298 22,602 20,886
Shares outstanding - average (in thousands) 1,708,738 1,707,979 1,714,396 1,737,863 1,775,104
Share owner accounts - average 458,000 464,000 481,000 495,000 506,000
Employees at year end
United States 156,000 157,000 168,000 173,000 183,000
Other countries 60,000 59,000 58,000 62,000 62,000
Discontinued operations (primarily U.S.) 5,000 6,000 42,000 49,000 53,000
-------- -------- -------- -------- --------
Total employees 221,000 222,000 268,000 284,000 298,000
======== ======== ======== ======== ========
-----------------------------------------------------------------------------------------------------------------------
GE DATA
Short-term borrowings $ 906 $ 2,391 $ 3,448 $ 3,482 $ 2,721
Long-term borrowings 2,699 2,413 3,420 4,332 4,048
Minority interest 382 355 350 353 288
Share owners' equity 26,387 25,824 23,459 21,683 21,680
-------- -------- -------- -------- --------
Total capital invested $ 30,374 $ 30,983 $30,677 $29,850 $ 28,737
======== ======== ======== ======== ========
Return on average total capital invested 15.9% 15.2% 16.9% 11.1% 17.4%
Borrowings as a percentage of total capital invested 11.9% 15.5% 22.4% 26.2% 23.6%
Working capital $544 $(419) $(822) $(231) $ 813
Property, plant and equipment additions 1,743 1,588 1,445 2,164 2,102
Year-end orders backlog 24,324 22,861 25,434 26,049 25,195
-----------------------------------------------------------------------------------------------------------------------
GECS DATA
Revenues $ 19,875 $ 17,276 $14,418 $13,053 $11,851
Earnings from continuing operations 2,085 1,567 1,331 1,221 1,125
Earnings (losses) from discontinued operations (1,189) 240 168 54 (31)
Net earnings 896 1,807 1,499 1,256 1,094
Share owner's equity 9,380 10,809 8,884 7,758 6,833
Minority interest 1,465 1,301 994 865 923
Borrowings from others 91,399 81,052 72,360 63,313 55,378
Ratio of debt to equity at GE Capital (a) 7.94:1 7.96:1 7.91:1 7.80:1 7.77:1
Total assets of GE Capital $130,904 $117,939 $92,632 $80,528 $70,385
Reserve coverage on financing receivables 2.63% 2.63% 2.63% 2.63% 2.63%
Insurance premiums written $3,962 $3,956 $ 2,900 $2,155 $ 1,981
(a) Equity excludes unrealized gains and losses on investment securities.
-----------------------------------------------------------------------------------------------------------------------
<FN>
Prior-period data have been reclassified, when necessary, to reflect classification of securities broker-dealer
activities as a discontinued operation. See note 20 to the consolidated financial statements for information about
the 1993 accounting change. The 1991 accounting change represented the adoption of SFAS No. 106, Employers'
Accounting for Postretirement Benefits Other Than Pensions. "GE" means the basis of consolidation as described in
note 1 to the consolidated financial statements; "GECS" means General Electric Capital Services, Inc. and all of its
affiliates and associated companies. Transactions between GE and GECS have been eliminated from the "consolidated
information." Share data reflect the 2-for-1 stock split in April 1994.
</TABLE>
<PAGE> 20
F-20
Annual Report Page 44
MANAGEMENT'S DISCUSSION OF FINANCIAL RESPONSIBILITY
The financial data in this report, including the audited financial statements,
have been prepared by management using the best available information and
applying judgment. Accounting principles used in preparing the financial
statements are those that are generally accepted in the United States.
Management believes that a sound, dynamic system of internal financial
controls that balances benefits and costs provides the best safeguard for
Company assets. Professional financial managers are responsible for
implementing and overseeing the financial control system, reporting on
management's stewardship of the assets entrusted to it by share owners and
maintaining accurate records.
GE is dedicated to the highest standards of integrity, ethics and social
responsibility. This dedication is reflected in written policy statements
covering, among other subjects, environmental protection, potentially
conflicting outside interests of employees, compliance with antitrust laws,
proper business practices and adherence to the highest standards of conduct
and practices in transactions with the U.S. government. Management continually
emphasizes to all employees that even the appearance of impropriety can erode
public confidence in the Company. Ongoing education and communication programs
and review activities, such as those conducted by the Company's Policy
Compliance Review Board, are designed to create a strong compliance culture -
one that encourages employees to raise their policy questions and concerns and
that prohibits retribution for doing so.
KPMG Peat Marwick LLP provide an objective, independent review of
management's discharge of its obligations relating to the fairness of
reporting operating results and financial condition. Their report for 1994
appears below. The Audit Committee of the Board (consisting solely of
Directors from outside GE) maintains an ongoing appraisal - on behalf of share
owners - of the activities and independence of the Company's independent
auditors, the activities of its internal audit staff, financial reporting
process, internal financial controls and compliance with key Company policies.
John F. Welch, Jr. Dennis D. Dammerman
Chairman of the Board and Senior Vice President
Chief Executive Officer Finance
February 10, 1995
INDEPENDENT AUDITORS' REPORT
TO SHARE OWNERS AND BOARD OF DIRECTORS OF
GENERAL ELECTRIC COMPANY
We have audited the financial statements of General Electric Company and
consolidated affiliates as listed in Item 14(a)(1) on page 23. In connection
with our audits of the consolidated financial statements, we also have audited
the financial statement schedule as listed in Item 14(a)(2) on page 23. These
consolidated financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and financial statement
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the aforementioned financial statements present fairly, in all
material respects, the financial position of General Electric Company and
consolidated affiliates at December 31, 1994 and 1993, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1994, in conformity with generally accepted accounting
principles. Also in our opinion, the related financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information set forth
therein.
As discussed in notes 20 and 23 to the consolidated financial statements, the
Company in 1993 adopted required changes in its methods of accounting for
postemployment benefits and for investments in certain securities.
KPMG Peat Marwick LLP
Stamford, Connecticut
February 10, 1995
<PAGE> 21
F-21
Annual Report Page 45
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION. The consolidated financial statements represent the adding
together of all affiliates - companies that General Electric directly or
indirectly controls, either through majority ownership or otherwise. Results
of associated companies - generally companies that are 20% to 50% owned and
over which GE, directly or indirectly, has significant influence - are
included in the financial statements on a "one-line" basis.
FINANCIAL STATEMENT PRESENTATION. Financial data and related measurements are
presented in the following categories.
* GE. This represents the adding together of all affiliates other
than General Electric Capital Services, Inc. ("GECS"), whose continuing
operations are presented on a one-line basis.
* GECS. This affiliate owns all of the common stock of General
Electric Capital Corporation (GE Capital), Employers Reinsurance Corporation
(ERC) and Kidder, Peabody Group Inc. (Kidder, Peabody). GE Capital, ERC and
their respective affiliates are consolidated in the GECS columns and
constitute its business. In 1994, Kidder, Peabody was classified as a
discontinued operation (see note 2). Prior-period data shown in the financial
statements and the related notes have been reclassified, as appropriate, to
reflect this change.
* CONSOLIDATED. These data represent the adding together of GE
and GECS.
The effects of transactions among related companies within and between
each of the above-mentioned groups are eliminated. Transactions between GE and
GECS are not material.
SALES OF GOODS AND SERVICES. A sale is recorded when title passes to the
customer or when services are performed in accordance with contracts.
GECS REVENUES FROM OPERATIONS ("EARNED INCOME"). Income on all loans is
recognized on the interest method. Accrual of interest income is suspended at
the earlier of the time at which collection of an account becomes doubtful or
the account becomes 90 days delinquent.
Financing lease income, which includes residual values and investment
tax credits, is recorded on the interest method so as to produce a level yield
on funds not yet recovered. Unguaranteed residual values included in lease
income are based primarily on periodic independent appraisals of the values of
leased assets remaining at expiration of the lease terms.
Operating lease income is recognized on a straight-line basis over the
terms of underlying leases.
Origination, commitment and other nonrefundable fees related to fundings
are deferred and recorded in earned income on the interest method. Commitment
fees related to loans not expected to be funded and line-of-credit fees are
deferred and recorded in earned income on a straight-line basis over the
period to which the fees relate. Syndication fees are recorded in earned
income at the time related services are performed unless significant
contingencies exist.
Premiums on short-duration insurance contracts are reported as earned
income over the terms of the related reinsurance treaties or insurance
policies. In general, earned premiums are calculated on a pro rata basis or
are determined based on reports received from reinsureds. Premium adjustments
under retrospectively rated reinsurance contracts are recorded based on
estimated losses and loss expenses, including both case and incurred-but-not-
reported reserves. Revenues on long-duration insurance contracts are reported
as earned when due. Premiums received under annuity contracts are not reported
as revenues but as annuity benefits - a liability - and are adjusted according
to terms of the respective policies.
DEPRECIATION AND AMORTIZATION. The cost of most of GE's manufacturing plant
and equipment is depreciated using an accelerated method based primarily on a
sum-of-the-years digits formula. If manufacturing plant and equipment is
subject to abnormal economic conditions or obsolescence, additional
depreciation is provided.
The cost of GECS' equipment leased to others on operating leases is
amortized, principally on a straight-line basis, to estimated net salvage
value over the lease term or over the estimated economic life of the
equipment. Depreciation of property and equipment for GECS' own use is
recorded on either a sum-of-the-years digits formula or a straight-line basis
over the lives of the assets.
RECOGNITION OF LOSSES ON FINANCING RECEIVABLES AND INVESTMENTS. GE Capital
maintains an allowance for losses on financing receivables at an amount that
it believes is sufficient to provide adequate protection against future losses
in the portfolio. When collateral is repossessed in satisfaction of a loan,
the receivable is written down against the allowance for losses to estimated
fair value, transferred to other assets and subsequently carried at the lower
of cost or estimated fair value. This accounting has been employed principally
for specialized financing transactions.
See note 8 for further information on GECS' allowance for losses on
financing receivables.
CASH EQUIVALENTS. Marketable securities with original maturities of three
months or less are included in cash equivalents.
INVESTMENT SECURITIES. The Company has designated its investments in debt
securities and marketable equity securities as available-for-sale. Those
securities are reported at fair value, with net unrealized gains and losses
<PAGE> 22
F-22
Annual Report Page 46
included in equity, net of applicable taxes. Unrealized losses that are other
than temporary are recognized in earnings.
INVENTORIES. All inventories are stated at the lower of cost or realizable
values. Cost for virtually all of GE's U.S. inventories is stated on a last-
in, first-out (LIFO) basis; cost of other inventories is primarily determined
on a first-in, first-out (FIFO) basis.
INTANGIBLE ASSETS. Goodwill is amortized over its estimated period of benefit
on a straight-line basis; other intangible assets are amortized on appropriate
bases over their estimated lives. No amortization period exceeds 40 years.
Goodwill in excess of associated expected operating cash flows is considered
to be impaired and is written down to fair value.
DEFERRED INSURANCE ACQUISITION COSTS. For the property and casualty business,
deferred insurance acquisition costs are amortized pro rata over the contract
periods in which the related premiums are earned. For the life insurance
business, these costs are amortized over the premium-paying periods of the
contracts in proportion either to anticipated premium income or to gross
profit, as appropriate. For certain annuity contracts, such costs are
amortized on the basis of anticipated gross profits. For other lines of
business, acquisition costs are amortized over the life of the related
insurance contracts. Deferred insurance acquisition costs are reviewed for
recoverability; for short-duration contracts, anticipated investment income is
considered in making recoverability evaluations.
INTEREST RATE AND CURRENCY RISK MANAGEMENT. As a matter of policy, neither GE
nor GECS engages in derivatives trading or market-making activities.
Generally, payments and receipts associated with financial instruments used to
manage interest rate and currency risk are recognized along with the effects
of associated transactions. If, however, an instrument is designated but is
ineffective as a hedge, the instrument is marked to market and recognized in
operations immediately.
NOTE 2 DISCONTINUED OPERATIONS
A summary of discontinued operations follows.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
(In millions) 1994 1993 1992
----------------------------------------------------------------------------
<S> <C> <C> <C>
Earnings (loss) from GECS securities
broker-dealer $(1,189) $240 $168
Earnings from GE Aerospace - 753 420
------- ---- ----
Earnings (loss) from discontinued
operations $(1,189) $993 $588
======= ==== ====
----------------------------------------------------------------------------
</TABLE>
GECS SECURITIES BROKER-DEALER. In November 1994, GE elected to terminate the
operations of Kidder, Peabody, the GECS securities broker-dealer, by
initiating an orderly liquidation of its assets and liabilities. As part of
the liquidation plan, GE received securities of Paine Webber Group Inc. valued
at $657 million in exchange for certain broker-dealer assets and operations.
Summary operating results of the discontinued broker-dealer operations follow.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
(In millions) 1994 1993 1992
----------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues $ 4,578 $ 4,861 $ 4,022
======= ======= =======
Earnings (loss) before income taxes $ (551) $ 439 $ 300
Provision (benefit) for income taxes (230) 199 132
------- ------- -------
Earnings (loss) from discontinued
operations (321) 240 168
Provision for loss, net of income tax
benefit of $266 (868) - -
------- ------- -------
Earnings (loss) from GECS securities
broker-dealer $(1,189) $ 240 $ 168
======= ======= =======
----------------------------------------------------------------------------
</TABLE>
A summary of Kidder, Peabody's assets and liabilities at December 31,
1994, which are expected to be substantially liquidated in 1995, follows.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
(In millions)
----------------------------------------------------------------------------
<S> <C>
Assets at liquidation values
Trading securities <F1> $2,808
Securities purchased under agreements to resell 2,400
Trade receivables 2,934
Other 471
------
$8,613
======
Liabilities at settlement values
Short-term borrowings $2,869
Trade accounts payable 2,019
Securities sold under agreements to repurchase 2,231
Other 1,749
------
$8,868
======
----------------------------------------------------------------------------
<FN>
<F1> Trading securities included $1.5 billion of collateralized mortgage
obligations (CMOs).
----------------------------------------------------------------------------
</TABLE>
<PAGE> 23
F-23
Annual Report Page 47
GE AEROSPACE. In April 1993, General Electric Company transferred GE's
Aerospace business segment, GE Government Services, Inc., and an operating
component of GE that operated Knolls Atomic Power Laboratory under a contract
with the U.S. Department of Energy to a new company controlled by the
shareholders of Martin Marietta Corporation in a transaction valued at $3.3
billion. Summary operating results of discontinued aerospace operations
follow.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
(In millions) 1993 1992
----------------------------------------------------------------------------
<S> <C> <C>
Revenues $996 $5,231
==== ======
Earnings before income taxes $119 $ 668
Provision for income taxes 44 248
----- ------
Earnings from discontinued operations 75 420
Gain on transfer, net of income taxes of $752 678 -
----- ------
Earnings from GE Aerospace $753 $ 420
==== ======
----------------------------------------------------------------------------
</TABLE>
NOTE 3 GE OTHER INCOME
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
(In millions) 1994 1993 1992
----------------------------------------------------------------------------
<S> <C> <C> <C>
Royalty and technical agreements $395 $371 $384
Associated companies 115 65 195
Marketable securities and
bank deposits 77 75 73
Customer financing 28 29 40
Other investments
Dividends 62 50 18
Interest 21 21 22
Other sundry items 85 119 80
---- ---- ----
$783 $730 $812
==== ==== ====
----------------------------------------------------------------------------
</TABLE>
NOTE 4 GECS REVENUES FROM OPERATIONS
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
(In millions) 1994 1993 1992
----------------------------------------------------------------------------
<S> <C> <C> <C>
Time sales, loan, investment
and other income $ 9,709 $ 7,997 $ 7,136
Financing leases 2,539 2,315 2,151
Operating lease rentals 3,802 3,267 2,444
Premium and commission income of insurance
affiliates 3,825 3,697 2,687
------- ------- -------
$19,875 $17,276 $14,418
======= ======= =======
----------------------------------------------------------------------------
</TABLE>
Included in earned income from financing leases were gains on the sale
of equipment at lease completion of $180 million in 1994, $145 million in 1993
and $126 million in 1992.
NOTE 5 SUPPLEMENTAL COST DETAILS
Total expenditures for research and development were $1,741 million, $1,955
million and $1,896 million in 1994, 1993 and 1992, respectively. The Company-
funded portion aggregated $1,176 million in 1994, $1,297 million in 1993 and
$1,353 million in 1992.
Rental expense under operating leases was as follows.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------
(In millions) 1994 1993 1992
-----------------------------------------------------------------------------
<S> <C> <C> <C>
GE $514 $635 $683
GECS 468 413 276
-----------------------------------------------------------------------------
</TABLE>
At December 31, 1994, minimum rental commitments under noncancelable
operating leases aggregated $2,496 million and $3,427 million for GE and GECS,
respectively. Amounts payable over the next five years are as follows.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------
(In millions) 1995 1996 1997 1998 1999
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
GE $341 $257 $217 $192 $147
GECS 403 370 341 321 299
-----------------------------------------------------------------------------
</TABLE>
GE's selling, general and administrative expense totaled $5,211 million,
$5,124 million and $5,319 million in 1994, 1993 and 1992, respectively.
NOTE 6 PENSION AND OTHER RETIREE BENEFITS
GE and its affiliates sponsor a number of pension, retiree health and life
insurance and other retiree benefit plans. Principal plans are discussed
below; other plans are not significant individually or in the aggregate.
PRINCIPAL PENSION PLANS are the GE Pension Plan and the GE Supplementary
Pension Plan.
The GE Pension Plan covers substantially all GE em-ployees and 55% of
GECS employees in the United States. Generally, benefits are based on the
greater of a formula recognizing career earnings or a formula recognizing
length of service and final average earnings. Benefit provisions are subject
to collective bargaining. At the end of 1994, the GE Pension Plan covered
approximately 459,000 participants, including 139,000 employees, 143,000
former employees with vested rights to future benefits and 177,000 retirees
and beneficiaries receiving benefits.
The GE Supplementary Pension Plan is an unfunded plan providing
supplementary retirement benefits primarily to higher-level, longer-service
U.S. employees.
<PAGE> 24
F-24
Annual Report Page 48
PRINCIPAL RETIREE BENEFIT PLANS generally provide health and life insurance
benefits to employees who retire under the GE Pension Plan with 10 or more
years of service. Benefit provisions are subject to collective bargaining. At
the end of 1994, these plans covered approximately 248,000 retirees and
dependents.
TRANSFER OF AEROSPACE BUSINESSES in 1993 resulted in associated transfers of
GE Pension Plan assets of $1,169 million and projected benefit obligations of
$979 million to new pension plans. The 1993 gain on transfer of discontinued
operations included pension plan curtailment/settlement losses of $125 million
before income taxes and retiree health and life plan curtailment/settlement
gains of $245 million before income taxes.
Pension, retiree health and life insurance benefits of the discontinued
securities broker-dealer were not significant.
ACTUARIAL ASSUMPTIONS used to determine benefit obligations for principal
plans at December 31, 1994, included a discount rate of 8.5% (7.25% at
December 31, 1993) and an average rate of future increases in benefit
compensation of 5.5% (4.25% at December 31, 1993).
The assumed rate of future increases in per capita cost of health care
benefits (the health care cost trend rate) was 9.5% for 1994, decreasing to
9.0% for 1995 and gradually decreasing to 5.0% after the year 2022. Increasing
the health care cost trend rates by one percentage point would increase the
December 31, 1994, accumulated postretirement benefit obligation by $54
million and would increase annual aggregate service and interest costs by $5
million.
Recognized return on plan assets was determined by applying the expected
long-term rate of return of 9.5% to the market-related value of assets.
Gains and losses that occur because actual experience differs from
actuarial assumptions are amortized over the average future service period of
employees. Amounts allocable to prior service for plan amendments are
amortized in a similar manner.
EMPLOYER COSTS for principal pension and retiree health and life insurance
benefit plans follow.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
COST (INCOME) FOR PENSION PLANS
(In millions) 1994 1993 1992
----------------------------------------------------------------------------
<S> <C> <C> <C>
Benefit cost for service during
the year - net of employee
contributions $ 496 $ 452 $ 494
Interest cost on benefit obligation 1,491 1,486 1,502
Actual return on plan assets (316) (3,221) (1,562)
Unrecognized portion of return (1,951) 1,066 (584)
Amortization (294) (352) (436)
------- ------- --------
Pension plan cost (income) $ (574) $ (569)<F1> $ (586)<F1>
======= ======= ========
----------------------------------------------------------------------------
<FN>
<F1> Amounts excluding discontinued Aerospace operations were $(555) million
for 1993 and $(494) million for 1992.
----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
COST (INCOME) FOR RETIREE HEALTH AND LIFE PLANS
(In millions) 1994 1993 1992
----------------------------------------------------------------------------
<S> <C> <C> <C>
RETIREE HEALTH PLANS
Benefit cost for service during the year $ 78 $ 49 $ 62
Interest cost on benefit obligation 191 192 203
Actual return on plan assets - (3) (4)
Unrecognized portion of return (1) 1 -
Amortization (3) (26) (40)
---- ---- ----
Retiree health plan cost 265 213 221
---- ---- ----
RETIREE LIFE PLANS
Benefit cost for service during the year 24 21 24
Interest cost on benefit obligation 105 111 110
Actual return on plan assets (2) (152) (78)
Unrecognized portion of return (120) 42 (20)
Amortization 8 7 2
---- ---- ----
Retiree life plan cost 15 29 38
---- ---- ----
Total $280 $242 <F1> $259 <F1>
==== ==== ====
----------------------------------------------------------------------------
<FN>
<F1>Amounts excluding discontinued Aerospace operations were $224 million for
1993 and $213 million for 1992.
----------------------------------------------------------------------------
</TABLE>
FUNDING POLICY for the GE Pension Plan is to contribute amounts sufficient to
meet minimum funding requirements set forth in employee benefit and tax laws
plus such additional amounts as GE may determine to be appropriate from time
to time. GE has not made contributions since 1987 because the fully funded
status of the GE Pension Plan precludes current tax deduction and because any
Company contribution would require the Company to pay annual excise taxes.
Subject to limits imposed by tax laws, GE funds the present value of future
life insurance benefits for retirees. In general, retiree health benefits are
paid as covered expenses are incurred.
The following table compares the market-related value of assets with the
present value of benefit obligations, recognizing the effects of future
compensation and service. The market-related value of assets is based on cost
plus recognition of market appreciation and depreciation in the portfolio over
five years, a method that reduces the short-term impact of market
fluctuations.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
FUNDED STATUS OF PRINCIPAL PLANS
(In millions) 1994 1993 1992
----------------------------------------------------------------------------
<S> <C> <C> <C>
PENSION PLANS
Market-related value of assets $25,441 $24,532 $24,204
Projected benefit obligation 19,334 20,796 17,999
RETIREE HEALTH AND LIFE PLANS
Market-related value of assets 1,346 1,252 1,220
Accumulated postretirement
benefit obligation 3,701 4,120 3,743
----------------------------------------------------------------------------
</TABLE>
Trust assets consist mainly of common stock and fixed-income
investments. GE common stock represents less than 3% of trust assets and is
held in part in an indexed portfolio.
Schedules reconciling the benefit obligations for principal plans with
GE's recorded liabilities in the Statement of Financial Position are shown on
the following page.
<PAGE> 25
F-25
Annual Report Page 49
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
RECONCILIATION OF BENEFIT OBLIGATION
WITH RECORDED LIABILITY Pension plans Retiree health plans Retiree life plans
----------------- ------------------- -----------------
December 31 (In millions) 1994 1993 1994 1993 1994 1993
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Benefit obligation $ 19,334 $ 20,796 $2,386 $2,586 $ 1,315 $ 1,534
Fair value of trust assets (26,166) (27,193) - (13) (1,323) (1,317)
Unamortized balances
SFAS No. 87 transition gain 923 1,077 - - - -
Experience gains (losses) 2,548 2,371 (112) (654) (198) (206)
Plan amendments (602) (395) 188 580 130 -
Recorded prepaid asset 4,489 3,840 - - 76 -
-------- -------- ------ ------ ------- -------
Recorded liability $ 526 $ 496 $2,462 $2,499 $ - $ 11
======== ======== ====== ====== ======= =======
-----------------------------------------------------------------------------------------------------------
</TABLE>
The portion of the projected benefit obligation representing the
accumulated benefit obligation for pension plans was $18,430 million and
$19,890 million at the end of 1994 and 1993, respectively. The vested benefit
obligation for pension plans was $18,305 million and $19,732 million at the
end of 1994 and 1993, respectively.
Details of the accumulated postretirement benefit obligation are shown
below.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
ACCUMULATED POSTRETIREMENT BENEFIT OBLIGATION
December 31 (In millions) 1994 1993
----------------------------------------------------------------------------
<S> <C> <C>
RETIREE HEALTH PLANS
Retirees and dependents $1,858 $2,017
Employees eligible to retire 101 119
Other employees 427 450
------ ------
$2,386 $2,586
====== ======
RETIREE LIFE PLANS
Retirees $1,099 $1,147
Employees eligible to retire 55 79
Other employees 161 308
------ ------
$1,315 $1,534
====== ======
----------------------------------------------------------------------------
</TABLE>
NOTE 7 INTEREST AND OTHER FINANCIAL CHARGES
GE. Interest capitalized, principally on major property, plant and equipment
projects, was $21 million in 1994 and 1993, and $29 million in 1992.
GECS. Interest and discount expense reported in the Statement of Earnings is
net of interest income on temporary investments of excess funds ($45 million,
$42 million and $48 million in 1994, 1993 and 1992, respectively) and
capitalized interest ($9 million, $5 million and $6 million in 1994, 1993 and
1992, respectively).
NOTE 8 GECS ALLOWANCE FOR LOSSES ON FINANCING RECEIVABLES
GECS allowance for losses on financing receivables represented 2.63% of total
financing receivables at year-end 1994 and 1993. The allowance for small-
balance receivables is determined principally on the basis of actual
experience during the preceding three years. Further allowances are provided
to reflect management's judgment of additional loss potential. For other
receivables, principally the larger loans and leases, the allowance for losses
is determined primarily on the basis of management's judgment of net loss
potential, including specific allowances for known troubled accounts. The
table below shows the activity in the allowance for losses on financing
receivables during each of the past three years.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
(In millions) 1994 1993 1992
----------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at January 1 $1,730 $1,607 $ 1,508
Provisions charged to operations 873 987 1,056
Net transfers related to
companies acquired or sold 199 126 52
Amounts written off - net (740) (990) (1,009)
------ ------ -------
Balance at December 31 $2,062 $1,730 $ 1,607
====== ====== =======
----------------------------------------------------------------------------
</TABLE>
All accounts or portions thereof deemed to be uncollectible or to
require an excessive collection cost are written off to the allowance for
losses. Generally, small-balance accounts are progressively written down (from
10% when more than three months delinquent to 100% when 9-12 months
delinquent) to record the balances at estimated realizable value. If at any
time during that period an account is judged to be uncollectible, such as in
the case of a bankruptcy, the uncollectible balance is written off. Large-
balance accounts are reviewed at least quarterly, and those accounts that are
more than three months delinquent are written down, if necessary, to record
the balances at estimated realizable value. Amounts written off in 1994 were
approximately 0.91% of average gross financing receivables outstanding during
the year, compared with 1.46% and 1.58% of average gross financing receivables
outstanding during 1993 and 1992, respectively.
<PAGE> 26
F-26
Annual Report Page 50
NOTE 9 PROVISION FOR INCOME TAXES
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
(In millions) 1994 1993 1992
----------------------------------------------------------------------------
<S> <C> <C> <C>
GE
Estimated amounts payable $1,305 $1,207 $ 697
Deferred tax expense from
temporary differences 592 120 762
Investment credit deferred
(amortized) - net (15) (17) (27)
------ ------ ------
1,882 1,310 1,432
------ ------ ------
GECS
Estimated amounts payable 447 221 307
Deferred tax expense from
temporary differences 431 428 102
Investment credit deferred
(amortized) - net (14) (7) (5)
------ ------ ------
864 642 404
------ ------ ------
CONSOLIDATED
Estimated amounts payable 1,752 1,428 1,004
Deferred tax expense from
temporary differences 1,023 548 864
Investment credit deferred
(amortized) - net (29) (24) (32)
------ ------ ------
$2,746 $1,952 $1,836
====== ====== ======
----------------------------------------------------------------------------
</TABLE>
GE includes GECS in filing a consolidated U.S. federal income tax
return. GECS' provision for estimated taxes payable includes its effect on the
consolidated return.
Estimated consolidated amounts payable includes amounts applicable to
non-U.S. jurisdictions of $453 million, $302 million and $257 million in 1994,
1993 and 1992, respectively.
Deferred income tax balances reflect the impact of temporary differences
between the carrying amount of assets and liabilities and their tax bases and
are stated at enacted tax rates expected to be in effect when taxes are
actually paid or recovered. See note 21 for details.
Except for certain earnings that GE intends to reinvest indefinitely,
provision has been made for the estimated U.S. federal income tax liabilities
applicable to undistributed earnings of affiliates and associated companies.
Based on location (not tax jurisdiction) of the business providing goods
and services, consolidated U.S. income before taxes was $7,491 million in
1994, $5,611 million in 1993 and $5,410 million in 1992. The corresponding
amounts for non-U.S. based operations were $1,170 million in 1994, $525
million in 1993 and $563 million in 1992.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
RECONCILIATION OF U.S. FEDERAL CONSOLIDATED GE GECS
STATUTORY RATE TO ACTUAL TAX RATE ---------------------- ---------------------- ----------------------
1994 1993 1992 1994 1993 1992 1994 1993 1992
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Statutory U.S. federal income tax rate 35.0% 35.0% 34.0% 35.0% 35.0% 34.0% 35.0% 35.0% 34.0%
---- ---- ---- ---- ---- ---- ---- ---- ----
Increase (reduction) in rate
resulting from:
Inclusion of after-tax earnings
of GECS in before-tax
earnings of GE - - - (9.4) (10.0) (8.1) - - -
Rate increase - deferred taxes - 1.6 - - (0.2) - - 5.2 -
Amortization of goodwill 1.1 1.5 1.3 0.8 1.2 0.9 1.0 1.2 1.4
Tax-exempt income (2.4) (2.9) (2.8) - - - (6.9) (8.3) (9.6)
Foreign Sales Corporation tax benefits (1.1) (1.3) (1.2) (1.2) (1.5) (1.3) - - -
Dividends received, not fully taxable (0.5) (0.7) (0.3) (0.3) (0.3) - (0.8) (1.2) (1.1)
All other - net (0.4) (1.4) (0.3) (0.8) (0.4) 0.2 1.0 (2.8) (1.4)
---- ---- ---- ---- ---- ---- ---- ---- ----
(3.3) (3.2) (3.3) (10.9) (11.2) (8.3) (5.7) (5.9) (10.7)
---- ---- ---- ---- ---- ---- ---- ---- ----
Actual income tax rate 31.7% 31.8% 30.7% 24.1% 23.8% 25.7% 29.3% 29.1% 23.3%
==== ==== ==== ==== ==== ==== ==== ==== ====
----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 27
F-27
Annual Report Page 51
NOTE 10 GECS INVESTMENT SECURITIES
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
Gross Gross
Amortized Estimated unrealized unrealized
(In millions) cost fair value gains losses
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DECEMBER 31, 1994
Corporate and other $10,883 $10,124 $ 4 $ (763)
State and municipal 9,193 8,947 146 (392)
Mortgage-backed 4,927 4,789 82 (220)
Non-U.S. 3,892 3,836 20 (76)
Equity 2,147 2,168 201 (180)
U.S. government and federal agency 1,185 1,008 - (177)
------- ------- ------ -------
$32,227 $30,872 $ 453 $(1,808)
======= ======= ====== =======
DECEMBER 31, 1993
Corporate and other $ 9,972 $10,047 $ 124 $ (49)
State and municipal 8,859 9,636 786 (9)
Mortgage-backed 2,487 2,507 31 (11)
Non-U.S. 1,476 1,548 82 (10)
Equity 1,517 1,826 393 (84)
U.S. government and federal agency 1,220 1,228 15 (7)
------- ------- ------ -------
$25,531 $26,792 $1,431 $ (170)
======= ======= ====== =======
-----------------------------------------------------------------------------------------
</TABLE>
At December 31, 1994, contractual maturities of debt securities, other
than mortgage-backed securities, were as follows.
<TABLE>
<CAPTION>
-------------------------------------------------------------------
GECS CONTRACTUAL MATURITIES
(EXCLUDING MORTGAGE-BACKED SECURITIES)
Amortized Estimated
(In millions) cost fair value
-------------------------------------------------------------------
<S> <C> <C>
Due in
1995 $1,792 $1,797
1996-1999 7,021 6,811
2000-2004 5,732 5,408
2005 and later 10,608 9,899
-------------------------------------------------------------------
</TABLE>
It is expected that actual maturities will differ from contractual
maturities because borrowers have the right to call or prepay certain
obligations, sometimes without call or prepayment penalties. Proceeds from
sales of investment securities in 1994 were $5,821 million ($6,112 million in
1993 and $3,514 million in 1992). Gross realized gains were $281 million in
1994 ($173 million in 1993 and $171 million in 1992). Gross realized losses
were $112 million in 1994 ($34 million in 1993 and $4 million in 1992).
NOTE 11 GE CURRENT RECEIVABLES
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
December 31 (In millions) 1994 1993
----------------------------------------------------------------------------
<S> <C> <C>
Aircraft Engines $1,183 $1,860
Appliances 499 456
Broadcasting 493 431
Industrial Products and Systems 1,503 1,379
Materials 1,256 1,060
Power Generation 1,925 1,866
Technical Products and Services 603 548
All Other 282 242
Corporate 268 889
8,012 8,731
Less allowance for losses (205) (170)
------ ------
$7,807 $8,561
====== ======
----------------------------------------------------------------------------
</TABLE>
Of the total receivables balances at December 31, 1994 and 1993, $5,668
million and $5,719 million, respectively, were from sales of goods and
services to customers, and $196 million and $292 million, respectively, were
from transactions with associated companies.
Current receivables of $387 million at year-end 1994 and $402 million at
year-end 1993 arose from sales, principally of aircraft engine goods and
services, on open account to various agencies of the U.S. government, which is
GE's largest single customer (about 6%, 8% and 9% of GE's sales of goods and
services were to the U.S. government in 1994, 1993 and 1992, respectively).
NOTE 12 GE INVENTORIES
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
December 31 (In millions) 1994 1993
----------------------------------------------------------------------------
<S> <C> <C>
Raw materials and work in process $2,933 $2,983
Finished goods 2,165 2,314
Unbilled shipments 214 156
------ ------
5,312 5,453
Less revaluation to LIFO (1,432) (1,629)
------ ------
$3,880 $3,824
====== ======
----------------------------------------------------------------------------
</TABLE>
LIFO revaluations decreased $197 million in 1994, compared with
decreases of $179 million and $204 million in 1993 and 1992, respectively.
Included in these changes were decreases of $72 million, $101 million and $183
million (1994, 1993 and 1992, respectively) resulting from lower inventory
levels. There were net cost decreases in 1994, 1993 and 1992. As of December
31, 1994, GE is obligated to acquire, under take-or-pay or similar
arrangements, about $200 million per year of raw materials at market prices
through 1999.
<PAGE> 28
F-28
Annual Report Page 52
NOTE 13 GECS FINANCING RECEIVABLES (INVESTMENT IN TIME SALES, LOANS AND
FINANCING LEASES)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
December 31 (In millions) 1994 1993
----------------------------------------------------------------------------
<S> <C> <C>
TIME SALES AND LOANS
Consumer services $25,906 $18,770
Specialized financing 17,988 17,028
Mid-market financing 5,916 4,693
Equipment management 1,516 1,331
------- -------
51,326 41,822
Deferred income (1,305) (1,074)
------- -------
Time sales and loans - net 50,021 40,748
------- -------
INVESTMENT IN FINANCING LEASES
Direct financing leases 25,916 22,063
Leveraged leases 2,482 2,867
------- -------
Investment in financing leases 28,398 24,930
------- -------
78,419 65,678
Less allowance for losses (2,062) (1,730)
------- -------
$76,357 $63,948
======= =======
----------------------------------------------------------------------------
</TABLE>
Time sales and loans represents transactions in a variety of forms,
including time sales, revolving charge and credit, mortgages, installment
loans, intermediate-term loans and revolving loans secured by business assets.
The portfolio includes time sales and loans carried at the principal amount on
which finance charges are billed periodically, and time sales and loans
acquired on a discount basis carried at gross book value, which includes
finance charges. At year-end 1994 and 1993, specialized financing and consumer
services loans included $13,282 million and $11,887 million, respectively, for
commercial real estate loans. Note 16 contains information on airline loans
and leases.
At December 31, 1994, contractual maturities for time sales and loans
over the next five years and after were: $20,147 million in 1995; $7,466
million in 1996; $5,708 million in 1997; $4,047 million in 1998; $4,115
million in 1999; and $9,843 million in 2000 and later - aggregating $51,326
million. Experience has shown that a substantial portion of receivables will
be paid prior to contractual maturity. Accordingly, the maturities of time
sales and loans are not to be regarded as forecasts of future cash
collections.
Financing leases consists of direct financing and leveraged leases of
aircraft, railroad rolling stock, autos, other transportation equipment, data
processing equipment, medical equipment, and other manufacturing, power
generation, mining and commercial equipment and facilities.
As the sole owner of assets under direct financing leases and as the
equity participant in leveraged leases, GECS is taxed on total lease payments
received and is entitled to tax deductions based on the cost of leased assets
and tax deductions for interest paid to third-party participants. GECS
generally is entitled to any residual value of leased assets and to any
investment tax credit on leased equipment.
Investment in direct financing and leveraged leases represents unpaid
rentals and estimated unguaranteed residual values of leased equipment, less
related deferred income. Because GECS has no general obligation for principal
and interest on notes and other instruments representing third-party
participation related to leveraged leases, such notes and other instruments
have not been included in liabilities but have been offset against the related
rentals receivable. GECS' share of rentals receivable on leveraged leases is
subordinate to the share of other participants who also have security
interests in the leased equipment.
GECS' investment in financing leases is shown on the following page.
<PAGE> 29
F-29
Annual Report Page 53
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
Investment in financing leases Total financing leases Direct financing leases Leveraged leases
---------------------- ----------------------- ------------------
December 31 (In millions) 1994 1993 1994 1993 1994 1993
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total minimum lease payments receivable $39,968 $38,080 $30,338 $26,584 $ 9,630 $11,496
Less principal and interest on third-party
nonrecourse debt (7,103) (8,398) - - (7,103) (8,398)
------- ------- ------- ------- ------ -------
Rentals receivable 32,865 29,682 30,338 26,584 2,527 3,098
Estimated unguaranteed residual value of
leased assets 4,889 4,490 3,767 3,323 1,122 1,167
Less deferred income <F1> (9,356) (9,242) (8,189) (7,844) (1,167) (1,398)
------- ------- ------- ------- ------ -------
INVESTMENT IN FINANCING LEASES (as shown
on the previous page) 28,398 24,930 25,916 22,063 2,482 2,867
Less amounts to arrive at net investment
Allowance for losses (570) (538) (471) (464) (99) (74)
Deferred taxes arising from financing leases (5,075) (4,917) (2,470) (2,157) (2,605) (2,760)
------- ------- ------- ------- ------ -------
NET INVESTMENT IN FINANCING LEASES $22,753 $19,475 $22,975 $19,442 $ (222) $ 33
======= ======= ======= ======= ======= =======
------------------------------------------------------------------------------------------------------------------
<FN>
<F1> Total financing lease deferred income is net of deferred initial direct costs of $93 million and $83 million
for 1994 and 1993, respectively.
------------------------------------------------------------------------------------------------------------------
</TABLE>
At December 31, 1994, contractual maturities for rentals receivable over
the next five years and after were: $7,409 million in 1995; $6,235 million in
1996; $5,148 million in 1997; $3,050 million in 1998; $2,096 million in 1999;
and $8,927 million in 2000 and later - aggregating $32,865 million. As with
time sales and loans, experience has shown that a portion of receivables will
be paid prior to contractual maturity and these amounts should not be regarded
as forecasts of future cash flows.
Nonearning consumer time sales and loans, primarily private-label credit
card receivables, amounted to $422 million and $391 million at December 31,
1994 and 1993, respectively. A majority of these receivables were subject to
various loss-sharing arrangements that provide full or partial recourse to the
originating private-label entity. Nonearning and reduced-earning receivables
other than consumer time sales and loans were $346 million and $509 million at
year-end 1994 and 1993, respectively. Earnings of $4 million and $11 million
realized in 1994 and 1993, respectively, were $27 million and $41 million
lower than would have been reported had these receivables earned income in
accordance with their original terms.
NOTE 14 PROPERTY, PLANT AND EQUIPMENT (INCLUDING EQUIPMENT LEASED TO OTHERS)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
December 31 (In millions) 1994 1993
----------------------------------------------------------------------------
<S> <C> <C>
ORIGINAL COST
GE
Land and improvements $ 416 $ 395
Buildings, structures and related equipment 5,547 5,370
Machinery and equipment 15,847 15,420
Leasehold costs and manufacturing
plant under construction 1,073 1,170
Other 24 86
------- -------
22,907 22,441
------- -------
GECS
Buildings and equipment 1,875 1,542
Equipment leased to others
Aircraft <F1> 4,601 3,677
Vehicles 4,542 3,568
Marine shipping containers 3,333 2,985
Railroad rolling stock 1,605 1,498
Other 2,807 2,160
------- -------
18,763 15,430
------- -------
$41,670 $37,871
======= =======
ACCUMULATED DEPRECIATION, DEPLETION
AND AMORTIZATION
GE $13,382 $12,899
GECS
Buildings and equipment 794 581
Equipment leased to others 4,029 3,238
------- -------
$18,205 $16,718
======= =======
----------------------------------------------------------------------------
<FN>
<F1> Includes $226 million and $244 million of commercial aircraft off-
lease in 1994 and 1993, respectively.
----------------------------------------------------------------------------
</TABLE>
Current-year amortization of GECS' equipment leased to others was $1,435
million, $1,395 million and $1,133 million in 1994, 1993 and 1992,
respectively. Noncancelable future rentals due from customers for equipment on
operating leases at year-end 1994 totaled $7,329 million and are due as
follows: $2,306 million in 1995; $1,628 million in 1996; $1,015 million in
1997; $663 million in 1998; $477 million in 1999; and $1,240 million
thereafter.
<PAGE> 30
F-30
Annual Report Page 54
NOTE 15 INTANGIBLE ASSETS
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
December 31 (In millions) 1994 1993
----------------------------------------------------------------------------
<S> <C> <C>
GE
Goodwill $ 5,605 $ 5,713
Other intangibles 731 753
------- -------
6,336 6,466
------- -------
GECS
Goodwill 2,513 1,840
Mortgage servicing rights 1,351 832
Other intangibles 1,173 914
------- -------
5,037 3,586
------- -------
$11,373 $10,052
======= =======
----------------------------------------------------------------------------
</TABLE>
GE's intangible assets are shown net of accumulated amortization of
$2,049 million in 1994 and $1,760 million in 1993. GECS' intangible assets are
net of accumulated amortization of $988 million in 1994 and $781 million in
1993.
NOTE 16 ALL OTHER ASSETS
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
December 31 (In millions) 1994 1993
----------------------------------------------------------------------------
<S> <C> <C>
GE
Investments
Associated companies <F1> $ 1,945 $ 1,336
Government and government-
guaranteed securities 273 293
Other 1,713 1,639
------- -------
3,931 3,268
Prepaid pension asset 4,489 3,840
Other 3,999 3,269
------- -------
12,419 10,377
------- -------
GECS
Investments
Assets acquired for resale 3,867 8,141
Associated companies <F2> 2,098 1,574
Real estate ventures 1,400 1,374
Other 1,652 887
------- -------
9,017 11,976
Deferred insurance acquisition costs 1,290 987
Foreclosed real estate properties 108 213
Other 1,116 803
------- -------
11,531 13,979
------- -------
$23,950 $24,356
======= =======
----------------------------------------------------------------------------
<F1> Includes advances of $234 million and $131 million at December 31,
1994 and 1993, respectively.
<F2> Includes advances of $949 million and $688 million at December 31,
1994 and 1993, respectively.
----------------------------------------------------------------------------
</TABLE>
GECS' assets acquired for resale declined $4.3 billion during 1994,
primarily due to sales of mortgages associated with the mortgage servicing
business.
In line with industry practice, sales of commercial jet aircraft engines
often involve long-term customer financing commitments. In making such
commitments, it is GE's general practice to require that it have or be able to
establish a secured position in the aircraft being financed. Under such
airline financing programs, GE had issued loans and guaranties (principally
guaranties) amounting to $1,260 million at year-end 1994 and $1,201 million at
year-end 1993; and it had entered into commitments totaling $1.1 billion and
$1.4 billion at year-end 1994 and 1993, respectively, to provide financial
assistance on future aircraft engine sales. Estimated fair values of the
aircraft securing these receivables and associated guaranties exceeded the
related account balances and guaranteed amounts at December 31, 1994. GECS
acts as a lender and lessor to the commercial airline industry. At December
31, 1994 and 1993, the balance of such GECS loans, leases and equipment leased
to others was $7,571 million and $6,776 million, respectively. In addition,
GECS had issued financial guaranties and funding commitments of $506 million
at December 31, 1994 ($450 million at year-end 1993) and had conditional
commitments to purchase aircraft at a cost of $81 million ($865 million at
year-end 1993).
At year-end 1994, the National Broadcasting Company had $3,818 million
of commitments to acquire broadcast material or the rights to broadcast
television programs and commitments under long-term television station
affiliation agreements that require payments through the year 2004.
In connection with numerous projects, primarily power generation bids
and contracts, GE had issued various bid and performance bonds and guaranties
totaling $2,229 million at year-end 1994 and $1,124 million at year-end 1993.
<PAGE> 31
F-31
Annual Report Page 55
NOTE 17 BORROWINGS
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
SHORT-TERM BORROWINGS 1994 1993
------------------ ------------------
December 31 Average Average
(In millions) Amount rate <F1> Amount rate <F1>
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
GE
Payable to banks $ 353 8.21% $ 588 6.41%
Notes to trust
departments 53 5.52 102 3.03
Commercial paper - 708 3.36
Other <F2> 500 993
------- -------
906 2,391
------- -------
GECS
Commercial paper 43,697 5.90 46,298 3.39
Payable to banks 984 2.46 197 3.25
Notes to trust
departments 1,793 5.66 1,882 3.10
Other <F2> 10,613 6,866
------- -------
57,087 55,243
------- -------
ELIMINATIONS (212) (259)
------- -------
$57,781 $57,375
======= =======
--------------------------------------------------------------------------------------
<FN>
<F1> Includes the effects of associated interest rate and currency swaps which are
summarized in the notes to the long-term borrowings table.
<F2> Includes the current portion of long-term debt.
--------------------------------------------------------------------------------------
</TABLE>
Confirmed credit lines of approximately $3.1 billion had been extended
to GE by 40 banks at year-end 1994. Substantially all of GE's credit lines are
available to GE Capital and GECS in addition to their own credit lines.
At year-end 1994, GE Capital had committed lines of credit aggregating
$20.8 billion with 131 banks, including $7.0 billion of revolving credit
agreements pursuant to which GE Capital has the right to borrow funds for
periods exceeding one year. A total of $2.6 billion of GE Capital's credit
lines is available for use by GECS; $1.8 billion is available for use by GE.
During 1994, GE, GE Capital and GECS did not borrow under any of these
credit lines. Each compensates banks for credit facilities either in the form
of fees or a combination of balances and fees as agreed to with each bank.
Compensating balances and commitment fees were immaterial in each of the past
three years.
Aggregate amounts of long-term borrowings that mature during the next
five years are as follows.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
(In millions) 1995 1996 1997 1998 1999
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
GE $ 243 $ 623 $ 522 $ 999 $ 87
GECS 9,695 10,394 6,556 4,507 3,417
----------------------------------------------------------------------------
</TABLE>
Outstanding balances in long-term borrowings were as follows.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
LONG-TERM BORROWINGS
Weighted
December 31 average interest
(In millions) rate <F1> Maturities 1994 1993
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
GE
Notes <F2> 7.44% 1996-1998 $ 1,480 $ 1,694
Industrial development/
pollution control
bonds <F2> 3.09 1996-2019 261 272
Other <F2><F3> 958 447
------- -------
2,699 2,413
------- -------
GECS
Senior notes
Notes <F2><F4> 6.41 1996-2054 31,332 22,028
Zero coupon/deep discount notes 13.58 1996-2001 936 1,407
Reset or remarketed notes <F5> 8.25 2007-2018 1,025 1,500
Floating rate notes <F6> 1996-2053 521 521
Less unamortized discount/premium (199) (344)
------- -------
33,615 25,112
Subordinated notes <F7> 8.04 2006-2012 697 697
------- -------
34,312 25,809
------- -------
ELIMINATIONS (32) (28)
------- -------
$36,979 $28,194
======= =======
--------------------------------------------------------------------------------------
<FN>
<F1> Includes the effects of associated interest rate and currency swaps.
<F2> At December 31, 1994, GE and GECS had agreed with others to exchange
currencies on principal amounts equivalent to U.S. $393 million and $12,183
million, respectively, and related interest payments. GE and GECS also had entered
into interest rate swaps with others related to interest on $89 million and $24,129
million, respectively. At December 31, 1993, GE and GECS had agreed with others to
exchange currencies on principal amounts equivalent to U.S. $498 million and $8,101
million, respectively, and related interest payments. GE and GECS also had entered
into interest rate swaps with others relating to interest on $610 million and
$13,224 million, respectively.
<F3> Includes original issue premium and discount and a variety of obligations
having various interest rates and maturities, including borrowings by parent
operating components and all affiliate borrowings.
<F4> At December 31, 1993, counterparties held options under which GECS could be
caused to execute interest rate swaps associated with interest payments on $500
million.
<F5> Interest rates are reset at the end of the initial and each subsequent
interest period. At each rate-reset date, GECS may redeem notes in whole or in part
at its option. Current interest periods range from May 1996 to March 1997.
<F6> The rate of interest payable on each note is a variable rate based on the
commercial paper rate each month. Interest is payable either monthly or
semiannually at the option of GECS.
<F7> Guaranteed by GE.
--------------------------------------------------------------------------------------
</TABLE>
INTEREST RATE AND CURRENCY SWAPS are employed by GE and GECS to achieve the
lowest cost of funds for a particular funding strategy. For GECS, optimizing
funding costs is central to maintaining satisfactory financing spreads (the
difference between the yield on financial assets and borrowing costs). GECS
enters into interest rate swaps and currency swaps (including non-U.S.
currency and cross-currency interest rate swaps) to modify interest rates
<PAGE> 32
F-32
Annual Report Page 56
and/or currencies of specific debt instruments. For example, to fund U.S.
operations, GE Capital may issue fixed-rate debt denominated in a currency
other than the U.S. dollar and simultaneously enter into a currency swap to
create synthetic fixed-rate U.S. dollar debt with a lower yield than could be
achieved directly. Virtually all GE and GECS interest rate and currency swaps
have been designated as modifying interest rates, currencies, or both. Other
swaps and forward contracts have been designated as hedges of non-U.S. dollar
monetary assets or net investments (see note 28). Neither GE nor GECS engages
in derivatives trading or market-making activities.
Each party in a swap transaction relies on its counterparty to make
contractual payments. Given the ways in which GE and GECS use swaps,
associated market risk is meaningful only as it relates to how changes in the
market value affects credit exposure to individual swap counterparties. To
manage counterparty credit exposure, all swap activities are carried out
within the following credit policy constraints:
* At inception, counterparties must be rated, at a minimum, Aa3/AA-
for swaps of five years or less and AAA for swaps in excess of five years.
* Credit exposure is limited to a market value of $50 million for
counterparties rated AA and $75 million for those rated AAA.
* All swaps are executed under master swap agreements containing
mutual credit downgrade provisions that provide the ability to require
assignment or termination in the event either party is downgraded below A3
or A-.
NOTE 18 GE ALL OTHER CURRENT COSTS AND EXPENSES ACCRUED
At year-end 1994 and 1993, this account included taxes accrued of $1,238
million and $1,664 million, respectively, and compensation and benefit
accruals of $1,191 million and $1,311 million, respectively. Also included are
amounts for product warranties, estimated costs on shipments billed to
customers and a variety of sundry items.
NOTE 19 INSURANCE LIABILITIES, RESERVES AND ANNUITY BENEFITS
Insurance liabilities, reserves and annuity benefits represents policyholders'
benefits, unearned premiums and provisions for policy losses in GECS'
insurance and annuity businesses. The estimated liability for insurance losses
and loss expenses consists of both case and incurred-but-not-reported
reserves. Where GECS' experience is not sufficient to determine reserves,
industry averages are used. Estimated amounts of salvage and subrogation
recoverable on paid and unpaid losses are deducted from outstanding losses.
The insurance subsidiaries of GECS have no significant permitted statutory
accounting practices that differ from either statutorially prescribed or
generally accepted accounting principles.
Activity in the liability for unpaid claims and claims adjustment
expenses is summarized as follows.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
(In millions) 1994 1993 1992
----------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at January 1 - gross $ 6,405 $ 5,484 $4,565
Less reinsurance recoverables (1,142) (1,191) (688)
------- ------- ------
Balance at January 1 - net 5,263 4,293 3,877
Claims and adjustments incurred
Current year 2,016 2,051 1,679
Prior years 558 359 117
Claims and adjustments paid
Current year (543) (378) (464)
Prior years (1,432) (1,048) (967)
Other 86 (14) 51
------- ------- ------
Balance at December 31 - net 5,948 5,263 4,293
Add reinsurance recoverables 1,084 1,142 1,191
------- ------- ------
Balance at December 31 - gross $ 7,032 $ 6,405 $5,484
======= ======= ======
----------------------------------------------------------------------------
</TABLE>
The liability for future policy benefits of the life insurance
affiliates has been computed mainly by a net-level-premium method based on
assumptions for investment yields, mortality and terminations that were
appropriate at date of purchase or at the time the policies were developed,
including provisions for adverse deviations. Average yields used in these
computations ranged from 4.0% to 9.1% in 1994 and 6.2% to 10.1% in 1993.
<PAGE> 33
F-33
Annual Report Page 57
Financial guaranties of insurance affiliates are summarized below.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
December 31 (In millions) 1994 1993
----------------------------------------------------------------------------
<S> <C> <C>
Guaranties, principally on municipal
bonds and structured finance issues $106,726 $101,352
Reinsurance on bonds/finance issues (18,954) (17,287)
Mortgage insurance risk in force
(GE Capital Mortgage Insurance) 31,463 27,022
Other 191 84
-------- --------
$119,426 $111,171
======== ========
----------------------------------------------------------------------------
</TABLE>
NOTE 20 GE ALL OTHER LIABILITIES
This account includes noncurrent compensation and benefit accruals at year-end
1994 and 1993 of $4,632 million and $4,507 million, respectively. Other
noncurrent liabilities include amounts for deferred incentive compensation,
product warranties, deferred income and a variety of sundry items.
The Company adopted Statement of Financial Accounting Standards (SFAS)
No. 112, Employers' Accounting for Postemployment Benefits, effective as of
January 1, 1993. This Statement requires that employers recognize over the
service lives of employees the costs of postemployment benefits if certain
conditions are met. The principal effect for GE was to change the method of
accounting for severance benefits. Under the previous accounting policy, the
total cost of severance benefits was expensed when the severance event
occurred. The cumulative effect of the accounting change as of January 1,
1993, amounted to $1,306 million before taxes ($862 million, or $0.51 per
share, after taxes).
NOTE 21 DEFERRED INCOME TAXES
Aggregate deferred tax amounts are summarized below.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------
December 31 (In millions) 1994 1993
----------------------------------------------------------------------------
<S> <C> <C>
ASSETS
GE $ 3,313 $ 3,547
GECS 2,642 2,097
------- -------
5,955 5,644
------- -------
LIABILITIES
GE 3,581 3,248
GECS 7,579 7,578
------- -------
11,160 10,826
------- -------
NET DEFERRED TAX LIABILITY $ 5,205 $ 5,182
======= =======
----------------------------------------------------------------------------
</TABLE>
Principal components of the net deferred tax liability balances for GE
and GECS are as follows.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
December 31 (In millions) 1994 1993
----------------------------------------------------------------------------
<S> <C> <C>
GE
Provisions for expenses $(2,015) $(2,219)
Retiree insurance plans (835) (879)
GE pension 1,387 1,170
Depreciation 860 890
Other - net 871 739
------ ------
268 (299)
------ ------
GECS
Financing leases 5,075 4,917
Operating leases 1,234 966
Tax transfer leases 338 340
Net unrealized gains (losses) on securities (468) 438
Provision for losses (876) (831)
Insurance reserves (460) (370)
Other - net 94 21
------ ------
4,937 5,481
------ ------
NET DEFERRED TAX LIABILITY $5,205 $5,182
====== ======
----------------------------------------------------------------------------
</TABLE>
NOTE 22 MINORITY INTEREST IN EQUITY OF CONSOLIDATED AFFILIATES
Minority interest in equity of consolidated GECS affiliates included 8,750
shares of $100 par value variable cumulative preferred stock issued by GE
Capital, with a liquidation preference value of $875 million, and 2,400 shares
of $0.01 par value variable cumulative preferred stock issued in 1994 by a
subsidiary of GE Capital, with a liquidation preference value of $240 million.
Dividend rates on the preferred stock ranged from 2.3% to 4.9% during 1994 and
from 2.3% to 2.8% during 1993.
<PAGE> 34
F-34
Annual Report Page 58
NOTE 23 SHARE OWNERS' EQUITY
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
(In millions) 1994 1993 1992
----------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK ISSUED
Balance at January 1 $ 584 $ 584 $ 584
Adjustment for stock split 9 - -
Newly issued stock 1 - -
------- ------- -------
Balance at December 31 $ 594 $ 584 $ 584
======= ======= =======
UNREALIZED GAINS (LOSSES) ON
INVESTMENT SECURITIES $ (810) $ 848 $ 36
======= ======= =======
OTHER CAPITAL
Balance at January 1 $ 550 $ 719 $ 932
Currency translation adjustments 180 (279) (209)
Gains (losses) on treasury
stock dispositions 215 110 (4)
Newly issued stock 186 - -
Adjustment for stock split (9) - -
------- ------- -------
Balance at December 31 $ 1,122 $ 550 $ 719
======= ======= =======
RETAINED EARNINGS
Balance at January 1 $28,613 $26,527 $23,787
Net earnings 4,726 4,315 4,725
Dividends declared (2,546) (2,229) (1,985)
------- ------- -------
Balance at December 31 $30,793 $28,613 $26,527
======= ======= =======
COMMON STOCK HELD IN TREASURY
Balance at January 1 $ 4,771 $ 4,407 $ 3,626
Purchases 1,124 770 1,206
Dispositions (583) (406) (425)
------- ------- -------
Balance at December 31 $ 5,312 $ 4,771 $ 4,407
======= ======= =======
----------------------------------------------------------------------------
</TABLE>
In December 1994, GE's Board of Directors authorized the repurchase of
up to $5 billion of Company common stock over a two-year period with funds
generated largely from free cash flow. A total of 1.3 million shares having an
aggregate cost of $69 million had been repurchased under the program and
placed in treasury as of December 31, 1994.
In April 1994, share owners authorized (a) an increase in the number of
authorized shares of common stock from 1.1 billion shares each with a par
value of $0.63 to 2.2 billion shares each with a par value of $0.32 and (b)
the split of each unissued and issued common share, including shares held in
treasury, into two shares of common stock each with a par value of $0.32. All
share data have been adjusted to reflect this change.
Common shares issued and outstanding are summarized in the table below.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
SHARES OF GE COMMON STOCK
December 31 (In thousands) 1994 1993 1992
----------------------------------------------------------------------------
<S> <C> <C> <C>
Issued 1,857,013 1,853,128 1,853,128
In treasury (151,046) (145,826) (142,270)
--------- --------- ---------
Outstanding 1,705,967 1,707,302 1,710,858
========= ========= =========
----------------------------------------------------------------------------
</TABLE>
GE has 50 million authorized shares of preferred stock ($1.00 par
value), but no such shares have been issued.
The effects of translating to U.S. dollars the financial statements of
non-U.S. affiliates whose functional currency is the local currency are
included in other capital. Asset and liability accounts are translated at year-
end exchange rates, while revenues and expenses are translated at average
rates for the period. Cumulative currency translation adjustments were
reductions of other capital of $66 million and $246 million at December 31,
1994 and 1993, respectively, and a cumulative addition to other capital of $33
million at December 31, 1992.
On December 31, 1993, the Company adopted SFAS No. 115, Accounting
for Investments in Certain Debt and Equity Securities. As a result of adopting
this statement, changes in the fair value of investment securities are
reflected, net of tax, in share owners' equity. At December 31, 1994,
unrealized losses on investment securities amounted to $810 million, a
reduction in equity of $1,658 million from year-end 1993. The decrease was
primarily attributable to the effect of increases in market interest rates on
the fair value of the securities.
NOTE 24 OTHER STOCK-RELATED INFORMATION
Stock option plans, stock appreciation rights (SARs), restricted stock and
restricted stock units are described in the Company's current Proxy Statement.
With certain restrictions, the Company can meet requirements for stock option
shares from either unissued or treasury shares.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
STOCK OPTION INFORMATION Average per share
--------------------
Shares subject Option Market
(Shares in thousands) to option price price
----------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at January 1, 1994 59,354 $36.50 $52.44
Options granted 15,134 50.66 50.66
Replacement options 340 36.44 36.44
Options exercised (4,163) 30.35 50.58
Options terminated (1,167) 44.04 -
------
Balance at December 31, 1994 69,498 39.82 51.00
======
----------------------------------------------------------------------------
</TABLE>
The replacement options replaced canceled SARs and have identical terms
thereto. At December 31, 1994, there were 8.1 million SARs exercisable at an
average price of $40.52. There were 3.5 million restricted stock shares and
restricted stock units outstanding at December 31, 1994.
At December 31, 1994 and 1993, there were 16.1 million shares available
for grants of options, SARs, restricted stock and restricted stock units.
Under the 1990 Long-Term Incentive Plan, 0.95% of the Company's issued common
stock (including treasury shares) as of the first day of each calendar year
during which the Plan is in effect becomes available for granting awards in
such year. Any unused portion, in addition to shares allocated to awards that
are canceled or forfeited, is available for later years.
Outstanding options and rights expire on various dates through
December 15,2004. Restricted stock grants vest on various dates up to
normal retirement of grantees.
<PAGE> 35
F-35
Annual Report Page 59
Note 25 Supplemental Cash Flows Information
Changes in operating assets and liabilities are net of acquisitions and
dispositions of businesses. "Payments for principal businesses purchased" in
the Statement of Cash Flows is net of cash acquired and includes debt assumed
and immediately repaid in acquisitions.
"All other operating activities" in the Statement of Cash Flows consists
principally of adjustments to current and noncurrent accruals of costs and
expenses, amortization of premium and discount on debt, and adjustments to
assets such as amortization of goodwill and intangibles.
The Statement of Cash Flows excludes certain noncash transactions that
had no significant effects on the investing or financing activities of GE or
GECS.
Certain supplemental information for GECS' cash flows is shown below.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
For the years ended December 31 (In millions) 1994 1993 1992
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FINANCING RECEIVABLES
Increase in loans to customers $(36,560) $(30,002) $(27,069)
Principal collections from customers 31,264 27,571 25,136
Investment in equipment for financing leases (10,528) (7,204) (7,758)
Principal collections on financing leases 9,050 6,812 5,338
Net change in credit card receivables (2,751) (1,341) (330)
-------- -------- --------
$ (9,525) $ (4,164) $ (4,683)
======== ======== ========
ALL OTHER INVESTING ACTIVITIES
Purchases of securities by insurance and annuity businesses $ (8,663) $(10,488) $ (6,865)
Dispositions and maturities of securities by insurance and
annuity businesses 6,338 7,698 6,200
Other 2,501 (4,003) (3,023)
-------- -------- --------
$ 176 $ (6,793) $ (3,688)
======== ======== ========
NEWLY ISSUED DEBT HAVING MATURITIES MORE THAN 90 DAYS
Short-term (91 to 365 days) $ 3,214 $4,315 $ 4,456
Long-term (over one year) 19,228 10,885 6,699
Long-term subordinated - - 450
Proceeds - nonrecourse, leveraged lease debt 31 53 148
-------- -------- --------
$ 22,473 $ 15,253 $ 11,753
======== ======== ========
REPAYMENTS AND OTHER REDUCTIONS OF DEBT HAVING MATURITIES MORE THAN 90 DAYS
Short-term (91 to 365 days) $(10,460) $ (9,008) $ (6,474)
Long-term (over one year) (930) (206) (657)
Long-term subordinated - - (76)
Principal payments - nonrecourse, leveraged lease debt (309) (312) (272)
-------- -------- --------
$(11,699) $ (9,526) $ (7,479)
======== ======== ========
ALL OTHER FINANCING ACTIVITIES
Proceeds from sales of investment and annuity contracts $ 1,207 $ 509 $ -
Preferred stock issued by consolidated affiliate 240 - -
Redemption of investment and annuity contracts (1,264) (578) -
-------- -------- --------
$ 183 $ (69) $ -
======== ======== ========
-----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 36
F-36
Annual Report Page 60
NOTE 26 INDUSTRY SEGMENTS
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
REVENUES
(In millions) For the years ended December 31
--------------------------------------------------------------------------------------------------------------------
Total revenues Intersegment revenues External revenues
-------------------------- ----------------------- --------------------------
1994 1993 1992 1994 1993 1992 1994 1993 1992
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GE
Aircraft Engines $ 5,714 $ 6,580 $ 7,368 $ 43 $ 59 $ 57 $ 5,671 $ 6,521 $ 7,311
Appliances 5,965 5,555 5,330 3 3 3 5,962 5,552 5,327
Broadcasting 3,361 3,102 3,363 - - - 3,361 3,102 3,363
Industrial Products and
Systems 9,406 8,575 8,210 368 409 425 9,038 8,166 7,785
Materials 5,681 5,042 4,853 43 50 51 5,638 4,992 4,802
Power Generation 5,933 5,530 5,106 44 135 151 5,889 5,395 4,955
Technical Products and
Services 4,285 4,174 4,674 18 18 68 4,267 4,156 4,606
All Other 2,348 1,803 1,581 - - - 2,348 1,803 1,581
Corporate items and
eliminations (195) (242) (399) (519) (674) (755) 324 432 356
------- ------- ------- ----- ----- ------- ------- ------- -------
Total GE 42,498 40,119 40,086 - - - 42,498 40,119 40,086
------- ------- ------- ----- ----- ------- ------- ------- -------
GECS
Financing 14,932 12,399 10,544 - - - 14,932 12,399 10,544
Specialty Insurance 4,926 4,862 3,863 - - - 4,926 4,862 3,863
All Other 17 15 11 - - - 17 15 11
------- ------- ------- ----- ----- ------- ------- ------- -------
Total GECS 19,875 17,276 14,418 - - - 19,875 17,276 14,418
------- ------- ------- ----- ----- ------- ------- ------- -------
Eliminations (2,264) (1,694) (1,453) - - - (2,264) (1,694) (1,453)
------- ------- ------- ----- ----- ------- ------- ------- -------
Consolidated revenues $60,109 $55,701 $53,051 $ - $ - $ - $60,109 $55,701 $53,051
======= ======= ======= ===== ===== ======= ======= ======= =======
--------------------------------------------------------------------------------------------------------------------
<FN>
GE revenues include income from sales of goods and services to customers and other income. Sales from one Company
component to another generally are priced at equivalent commercial selling prices. "All Other" GE revenues consists
primarily of GECS' earnings.
--------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
ASSETS PROPERTY, PLANT AND EQUIPMENT
(INCLUDING EQUIPMENT LEASED TO OTHERS)
(In millions) At December 31 For the years ended December 31
--------------------------------------------------------------------------------------------------------------------
Depreciation, depletion and
Additions amortization
-------------------------- ----------------------- --------------------------
1994 1993 1992 1994 1993 1992 1994 1993 1992
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GE
Aircraft Engines $ 4,751 $ 5,329 $ 6,153 $ 262 $ 208 $ 276 $ 268 $ 339 $ 294
Appliances 2,309 2,193 2,248 165 132 126 84 131 105
Broadcasting 3,881 3,742 3,736 86 56 52 67 98 82
Industrial Products
and Systems 5,862 5,442 5,562 452 414 340 379 346 324
Materials 8,628 8,181 8,081 419 376 255 453 417 393
Power Generation 4,887 3,875 3,035 181 216 205 148 149 117
Technical Products and
Services 2,362 2,179 2,393 155 126 118 96 89 74
All Other 9,768 11,604 9,719 - 1 1 2 3 5
Corporate items and
eliminations 8,365 8,589 5,258 23 59 72 48 59 89
-------- -------- -------- ------ ------ ------ ------ ------ ------
Total GE 50,813 51,134 46,185 1,743 1,588 1,445 1,545 1,631 1,483
-------- -------- -------- ------ ------ ------ ------ ------ ------
GECS
Financing 121,966 106,854 82,208 5,889 3,352 4,761 1,607 1,545 1,260
Specialty Insurance 22,058 18,915 14,624 62 15 17 16 9 13
All Other 943 868 2,178 44 59 118 39 38 29
-------- -------- -------- ------ ------ ------ ------ ------ ------
Total GECS 144,967 126,637 99,010 5,995 3,426 4,896 1,662 1,592 1,302
-------- -------- -------- ------ ------ ------ ------ ------ ------
Eliminations (9,909) (11,358) (9,723) - - - - - -
-------- -------- -------- ------ ------ ------ ------ ------ ------
Consolidated totals $185,871 $166,413 $135,472 $7,738 $5,014 $6,341 $3,207 $3,223 $2,785
======== ======== ======== ====== ====== ====== ====== ====== ======
--------------------------------------------------------------------------------------------------------------------
<FN>
"All Other" GE assets consists primarily of investment in GECS. Assets exclude amounts applicable to discontinued
operations ($8,613 million, $85,093 million, and $57,404 million in 1994, 1993, and 1992 respectively).
--------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 37
F-37
Annual Report Page 61
The industry segment data for prior years related to the Power Generation and
the Industrial Products and Systems segments have been reclassified because
the grouping of products and services for industry segment purposes was
revised in 1994 to provide a sharper focus on the markets served by those
segments. The principal changes were the transfer of industrial drive systems,
power delivery and control products, and related engineering and service
activities from the Power Generation segment to the Industrial Products and
Systems segment.
Details of operating profit by industry segment can be found on page 35
of this report. A description of industry segments for General Electric
Company and consolidated affiliates follows.
* AIRCRAFT ENGINES. Jet engines and replacement parts and repair
services for all categories of commercial aircraft (short/medium, intermediate
and long-range); a wide variety of military aircraft, including fighters,
bombers, tankers and helicopters; and executive and commuter aircraft. Sold
worldwide to airframe manufacturers, airlines and government agencies. Also,
aircraft engine derivatives used as marine propulsion and industrial power
sources.
* APPLIANCES. Major appliances such as refrigerators, freezers,
electric and gas ranges, dishwashers, clothes washers and dryers, microwave
ovens and room air conditioning equipment. Sold primarily in North America,
but also in global markets, under various GE and private-label brands.
Distributed to retail outlets, mainly for the replacement market, and to
building contractors and distributors for new installations.
* BROADCASTING. Primarily the National Broadcasting Company (NBC).
Principal businesses are furnishing of U.S. network television services to
more than 200 affiliated stations, production of television programs,
operation of six VHF television broadcasting stations, operation of three
cable/satellite networks around the world, and investment and programming
activities in multimedia and cable television.
* INDUSTRIAL PRODUCTS AND SYSTEMS. Lighting products (including a
wide variety of lamps, lighting fixtures, wiring devices and quartz products);
electrical distribution and control equipment (including power delivery and
control products such as transformers, meters, relays, capacitors and
arresters); transportation systems products (including diesel-electric
locomotives, transit propulsion equipment and motorized wheels for off-highway
vehicles); electric motors and related products; a broad range of electrical
and electronic industrial automation products, including drive systems;
installation, engineering and repair services, which includes management and
technical expertise for large projects, such as process control systems; and
GE Supply, a network of electrical supply houses. Markets are extremely
diverse. Products are sold to commercial and industrial end users, including
utilities, to original equipment manufacturers, to electrical distributors, to
retail outlets, to railways and to transit authorities. Increasingly, products
are developed for and sold in global markets.
* MATERIALS. High-performance engineered plastics used in
applications such as automobiles and housings for computers and other business
equipment; ABS resins; silicones; superabrasives such as man-made diamonds;
and laminates. Sold worldwide to a diverse customer base consisting mainly of
manufacturers.
* POWER GENERATION. Products mainly for the generation of
electricity. Markets and competition are global. Steam turbine-generators are
sold to electric utilities, to the U.S. Navy and, for cogeneration, to
industrial and other power customers. Marine steam turbines and propulsion
gears are sold to the U.S. Navy. Gas turbines are sold principally as packaged
power plants for electric utilities and for industrial cogeneration and
mechanical drive applications. Power Generation also includes nuclear reactors
and fuel and support services for GE's installed boiling water reactors.
* TECHNICAL PRODUCTS AND SERVICES. Medical systems such as magnetic
resonance (MR) and computed tomography (CT) scanners, x-ray, nuclear imaging,
ultrasound, other diagnostic equipment and related services sold worldwide to
hospitals and medical facilities. This segment also includes a full range of
computer-based information and data interchange services for internal use and
external commercial and industrial customers.
* GECS FINANCING. Operations of GE Capital, as follows:
CONSUMER SERVICES - private-label and bank credit card loans, time sales
and revolving credit and inventory financing for retail merchants, auto
leasing and inventory financing, mortgage servicing, and annuity and mutual
fund sales.
SPECIALIZED FINANCING - loans and financing leases for major capital
assets, including industrial facilities and equipment, and energy-related
facilities; commercial and residential real estate loans and investments; and
loans to and investments in highly leveraged management buyouts and corporate
recapitalizations.
EQUIPMENT MANAGEMENT - leases, loans and asset management services for
portfolios of commercial and transportation equipment, including aircraft,
trailers, auto fleets, modular space units, railroad rolling stock, data
processing equipment, ocean-going containers and satellites.
MID-MARKET FINANCING - loans and financing and operating leases for
middle-market customers, including manufacturers, distributors and end users,
for a variety of equipment that includes data processing equipment, medical
and diagnostic equipment, and equipment used in construction, manufacturing,
office applications and telecommunications activities.
Very few of the products financed by GE Capital are manufactured by
other GE segments.
* GECS SPECIALTY INSURANCE. U.S. and international multiple-line
property and casualty reinsurance, certain directly written specialty
insurance and life reinsurance; financial guaranty insurance, principally on
municipal bonds and structured finance issues; private mortgage insurance and
creditor insurance covering international customer loan repayments.
<PAGE> 38
F-38
Annual Report Page 62
NOTE 27 GEOGRAPHIC SEGMENT INFORMATION(CONSOLIDATED)
U.S. revenues include GE exports to external customers, and royalty and
licensing income from non-U.S. sources. Exports to international customers by
major area of the world are shown on page 38. Assets exclude amounts
applicable to discontinued operations ($8,613 million, $85,093 million, and
$57,404 million in 1994, 1993, and 1992, respectively).
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
REVENUES
(In millions) For the years ended December 31
Total revenues Intersegment revenues External revenues
---------------------------- ---------------------------- ----------------------------
1994 1993 1992 1994 1993 1992 1994 1993 1992
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
United States $49,920 $47,495 $44,882 $ 1,683 $ 1,513 $ 1,281 $48,237 $45,982 $43,601
Europe 7,797 6,722 6,703 579 525 497 7,218 6,197 6,206
Other areas of the world 5,493 4,171 3,879 839 649 635 4,654 3,522 3,244
Intercompany eliminations (3,101) (2,687) (2,413) (3,101) (2,687) (2,413) - - -
------- ------- ------- ------- ------- ------- ------- ------- -------
Total $60,109 $55,701 $53,051 $ - $ - $ - $60,109 $55,701 $53,051
======= ======= ======= ======= ======= ======= ======= ======= =======
-----------------------------------------------------------------------------------------------------------------------
<CAPTION>
OPERATING PROFIT ASSETS
(In millions) For the years ended December 31 At December 31
--------------------------------------------------------------------------------------------------
1994 1993 1992 1994 1993 1992
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
United States $8,445 $6,706 $6,654 $152,151 $145,390 $116,086
Europe 673 360 412 22,464 14,257 13,729
Other areas of the world 595 307 336 11,439 6,954 5,822
Intercompany eliminations 5 (23) 6 (183) (188) (165)
------ ------ ------ -------- -------- --------
Total $9,718 $7,350 $7,408 $185,871 $166,413 $135,472
====== ====== ====== ======== ======== ========
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 28 ADDITIONAL INFORMATION ABOUT FINANCIAL INSTRUMENTS
This note contains estimated fair values of certain financial instruments to
which GE and GECS are parties. Apart from GE's and GECS' own borrowings and
certain marketable securities, relatively few of these instruments are
actively traded. Thus, fair values must often be determined by using one or
more models that indicate value based on estimates of quantifiable
characteristics as of a particular date. Because this undertaking is, by its
nature, difficult and highly judgmental, for a limited number of instruments,
alternative valuation techniques may have produced disclosed values different
from those that could have been realized at December 31, 1994 or 1993.
Moreover, the disclosed values are representative of fair values only as of
the dates indicated. Assets that, as a matter of accounting policy, are
reflected in the accompanying financial statements at fair value are not
included in the following disclosures; such assets include cash and
equivalents, investment securities and other receivables.
Values are estimated as follows:
BORROWINGS. Based on quoted market prices or market comparables. Fair values
of interest rate and currency swaps on borrowings are based on quoted market
prices and include the effects on counterparty creditworthiness.
TIME SALES AND LOANS. Based on quoted market prices, recent transactions
and/or discounted future cash flows, using rates at which similar loans would
have been made to similar borrowers.
INVESTMENTS IN AND ADVANCES TO ASSOCIATED COMPANIES. Based on market
comparables, recent transactions or discounted future cash flows for GECS
investments. These equity interests were generally acquired in connection with
financing transactions and, for the purpose of this disclosure, fair values
were estimated. GE's investments (aggregating $1,945 million and $1,336
million at December 31, 1994 and 1993, respectively) comprise many small
investments, many of which are located outside the United States, and
generally involve joint ventures for specific, limited objectives;
determination of fair values is impracticable.
ANNUITY BENEFITS. Based on expected future cash flows, discounted at currently
offered discount rates for immediate annuity contracts or cash surrender value
for single premium deferred annuities.
<PAGE> 39
F-39
Annual Report Page 63
FINANCIAL GUARANTIES. Based on future cash flows, considering expected renewal
premiums, claims, refunds and servicing costs, discounted at a market rate.
ALL OTHER INSTRUMENTS. Based on comparable transactions, market comparables,
discounted future cash flows, quoted market prices, and/or estimates of the
cost to terminate or otherwise settle obligations to counterparties.
Information about financial instruments that were not carried at fair value at
December 31, 1994 and 1993, is shown below.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
Assets (liabilities) 1994 1993
------------------------------------------- ----------------------------------------
Estimated Estimated
fair value fair value
-------------- -------------
Notional Carrying Notional Carrying
(In millions) amount amount (net) High Low amount amount (net) High Low
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
GE
Borrowings and related instruments
Borrowings <F1><F2> $ <F3> $ (3,605) $ (3,530) $(3,530) $ <F3> $ (4,804) $ (4,933)$ (4,933)
Interest rate swaps 89 - 2 2 610 - - -
Currency swaps 393 - 26 26 498 - (21) (21)
Firm commitments
Currency forwards and options 3,195 - - - 1,386 (13) (13) (13)
Financing commitments 1,153 - - - 1,380 - - -
Financial guaranties 1,520 - - - 1,333 - - -
Other financial instruments <F3> 2,128 2,289 2,269 <F3> 2,105 2,281 2,261
GECS
Assets
Time sales and loans <F3> 48,529 49,496 48,840 <F3> 39,556 41,182 40,490
Investments in and advances to
associated companies <F3> 2,098 2,561 2,381 <F3> 1,574 2,320 2,156
Other cash financial instruments <F3> 1,897 2,026 1,924 <F3> 6,226 6,392 6,238
Liabilities
Borrowings and related instruments
Borrowings <F1><F2> <F3> (91,399) (89,797) (89,797) <F3> (81,052) (82,184) (82,184)
Interest rate swaps 24,129 - 135 131 13,724 - (308) (308)
Currency swaps 12,183 - 83 83 8,101 - (32) (32)
Annuity benefits <F3> (13,186) (12,788) (12,788) <F3> (8,894) (8,660) (8,660)
Financial guaranties of insurance
affiliates 119,426 (1,344) (269) (348) 111,171 (1,312) (135) (220)
Other financial guaranties 3,508 (44) (53) (53) 3,647 (42) (64) (66)
Mortgage-related positions
Mortgage purchase commitments 205 - (2) (2) 3,950 - (41) (41)
Mortgage sale commitments 1,792 - 2 2 6,426 - 49 49
Memo: mortgages held for sale <F4> <F3> 1,764 1,764 1,764 <F3> 5,963 5,983 5,972
Other financial instruments
Loan commitments 13,489 - (71) (125) 10,421 (18) (31) (34)
Foreign currency forwards and options 3,372 - 12 12 1,833 - (2) (2)
Other financial instruments 314 14 56 53 1,132 4 15 14
----------------------------------------------------------------------------------------------------------------------------
<FN>
<F1> See note 17.
<F2> Includes interest rate and currency swaps.
<F3> Not applicable.
<F4> Included in other cash financial instruments.
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
FOREIGN CURRENCY FORWARDS AND FOREIGN CURRENCY OPTIONS are employed by GE and
GECS to manage exposures to changes in currency exchange rates associated with
commercial purchase and sale transactions. Those financial instruments
generally are used to fix the local currency cost of purchased goods or
services or selling prices denominated in currencies other than the functional
currency. Exchange rate exposures that result from net investments in foreign
affiliates are managed principally by funding local currency denominated
assets with debt denominated in those same currencies. In certain
circumstances, net investment exposures are managed using foreign currency
forwards.
<PAGE> 40
F-40
Annual Report Page 64
NOTE 29 QUARTERLY INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
First quarter Second quarter Third quarter Fourth quarter
---------------- ---------------- ---------------- ----------------
(Dollar amounts in millions;
per-share amounts in dollars) 1994 1993 1994 1993 1994 1993 1994 1993
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED OPERATIONS
Earnings from continuing operations $1,219 $1,028 $ 1,554 $ 598 $1,457 $1,135 $ 1,685 $ 1,423
Earnings (losses) from discontinued
operations (151) 132 (32) 58 (89) 71 (49) 54
Gain on transfer of discontinued
Aerospace operations - - - 678 - - - -
Provision for loss on discontinued
securities broker-dealer operations - - - - - - (868) -
Accounting change - (862) - - - - - -
------ ------ ------ ------ ------ ------ ------ -------
Net earnings $1,068 $ 298 $1,522 $1,334 $1,368 $1,206 $ 768 $ 1,477
====== ====== ====== ====== ====== ====== ====== =======
Per share
Earnings from continuing operations $ 0.71 $ 0.60 $ 0.91 $ 0.35 $ 0.85 $ 0.67 $ 0.99 $ 0.84
Earnings (losses) from discontinued
operations (0.09) 0.08 (0.02) 0.43 (0.05) 0.04 (0.54) 0.03
Accounting change - (0.51) - - - - - -
------ ------ ------ ------ ------ ------ ------ -------
Net earnings $ 0.62 $ 0.17 $ 0.89 $ 0.78 $ 0.80 $ 0.71 $ 0.45 $ 0.87
====== ====== ====== ====== ====== ====== ====== =======
SELECTED DATA
GE
Sales of goods and services $8,264 $7,968 $10,038 $9,468 $9,384 $8,779 $11,944 $11,607
Gross profit from sales 2,282 2,074 2,743 1,662 2,441 2,198 3,115 2,929
GECS
Revenues from operations 4,393 3,710 4,730 4,001 5,097 4,340 5,655 5,225
Operating profit 668 542 684 480 857 694 740 493
-----------------------------------------------------------------------------------------------------------------------
<FN>
Quarterly data have been reclassified to state results of the securities broker-dealer as a discontinued operation.
Per-share amounts have been adjusted for the 2-for-1 stock split in April 1994. The accounting change reflects the
cumulative effect to January 1, 1993, of the change in accounting for postemployment benefits (SFAS No. 112). As
originally reported, net earnings for the first quarter of 1993 were $1,160 million, or $0.68 per share.
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
For GE, gross profit from sales is sales of goods and services less
costs of goods and services sold. For GECS, operating profit is income before
taxes.
First-quarter 1994 discontinued operations included a $210 million ($350
million before tax) charge resulting from the discovery of false trading
profits created by the then head U.S. government securities trader in the
discontinued securities broker-dealer. Approximately $143 million ($238
million before tax) of the charge related to periods prior to 1994.
Second-quarter 1993 earnings from continuing operations were reduced by
restructuring provisions of $678 million ($0.40 per share) after tax. Second-
quarter gross profit from sales was reduced by restructuring provisions of
$875 million before tax.
Earnings-per-share amounts for each quarter are required to be computed
independently and, as a result, their sum did not equal the total year
earnings-per-share amounts.
<PAGE> 41
F-41
GENERAL ELECTRIC COMPANY AND CONSOLIDATED AFFILIATES
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
GE allowance for losses
deducted from assets
----------------------------
Accounts
and notes
receivable Investments
---------- ----------
(Amounts in millions)
<S> <C> <C>
Balance, January 1, 1992 $191 $ 66
Provisions charged (credited) to operations 78 10
(Deductions) additions (73) (19)
---- ----
Balance, December 31, 1992 196 <F1> 57
Provisions charged (credited) to operations 51 57
(Deductions) additions (49) (5)
---- ----
Balance, December 31, 1993 198 <F1> 109
Provisions charged (credited) to operations 55 11
(Deductions) additions (10) (56)
---- ----
Balance, December 31, 1994 $243 <F1> $64
==== ====
<FN>
<F1> The year-end balance is segregated on the Statement of Financial
Position as follows:
</TABLE>
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Current receivables $205 $170 $178
Other assets (long-term receivables,
customer financing, etc.) 38 28 18
---- ---- ----
$243 $198 $196
==== ==== ====
<FN>
Reference is made to note 8 in Notes to Consolidated Financial
Statements appearing in the 1994 Annual Report to Share Owners which contains
information with respect to GECS allowance for losses on financing receivables
for 1994, 1993 and 1992.
</TABLE>
<PAGE> 42
<TABLE>
Exhibit 12
GENERAL ELECTRIC COMPANY
RATIO OF EARNINGS TO FIXED CHARGES
<CAPTION>
Year ended December 31
(Dollars in millions) -----------------------------------------------
1990 1991 1992 1993 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
GE except GECS
--------------
"Earnings" <F1> $ 5,256 $ 5,329 $ 5,582 $ 5,511 $ 7,828
Less: Equity in undistributed earnings
of General Electric Capital
Services, Inc. <F2> (775) (871) (831) (957) (1,181)
Plus: Interest and other financial
charges included in expense 962 893 768 525 410
One-third of rental expense <F3> 207 225 228 212 171
------- ------- ------- ------- -------
Adjusted "earnings" $ 5,650 $ 5,576 $ 5,747 $ 5,291 $ 7,228
======= ======= ======= ======= =======
Fixed Charges:
Interest and other financial charges $ 962 $ 893 $ 768 $ 525 $ 410
Interest capitalized 26 33 29 21 21
One-third of rental expense <F3> 207 225 228 212 171
------- ------- ------- ------- -------
Total fixed charges $ 1,195 $ 1,151 $ 1,025 $ 758 $ 602
======= ======= ======= ======= =======
Ratio of earnings to fixed charges 4.73 4.84 5.61 6.98 12.01
======= ======= ======= ======= =======
General Electric Company and consolidated
affiliates
-----------------------------------------
"Earnings" <F1> $ 5,621 $ 5,679 $ 6,026 $ 6,287 $ 8,831
Plus: Interest and other financial
charges included in expense 5,397 5,270 4,512 4,096 4,994
One-third of rental expense <F3> 240 261 320 349 327
------- ------- ------- ------- -------
Adjusted "earnings" $11,258 $11,210 $10,858 $10,732 $14,152
======= ======= ======= ======= =======
Fixed Charges:
Interest and other financial charges $ 5,397 $ 5,270 $ 4,512 $ 4,096 $ 4,994
Interest capitalized 46 41 35 26 30
One-third of rental expense <F3> 240 261 320 349 327
------- ------- ------- ------- -------
Total fixed charges $ 5,683 $ 5,572 $ 4,867 $ 4,471 $ 5,351
======= ======= ======= ======= =======
Ratio of earnings to fixed charges 1.98 2.01 2.23 2.40 2.64
======= ======= ======= ======= =======
<FN>
<F1> Earnings for all years consist of earnings from continuing operations before income taxes and
minority interest. For 1991 and 1993, earnings are before cumulative effects of changes in
accounting principle.
<F2> Earnings for all years consist of earnings from continuing operations after income taxes. For
1991, earnings are from continuing operations before cumulative effect of change in
accounting principle.
<F3> Considered to be representative of interest factor in rental expense.
</TABLE>
