UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
------------------------
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 30, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-6461
GENERAL ELECTRIC CAPITAL CORPORATION
(Exact name of registrant as specified in its charter)
NEW YORK 13-1500700
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
260 LONG RIDGE ROAD, STAMFORD, CONNECTICUT 06927
(Address of principal executive offices) (Zip Code)
(203) 357-4000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
At April 26, 1996, 3,837,825 shares of common stock with a par value of $200
were outstanding.
REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(a) AND
(b) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM 10-Q WITH THE REDUCED
DISCLOSURE FORMAT.
<PAGE>
TABLE OF CONTENTS
PAGE
PART I - FINANCIAL INFORMATION.
Item 1. Financial Statements....................................... 1
Item 2. Management's Discussion and Analysis of Results
of Operations............................................. 5
Exhibit 12. Computation of Ratio of Earnings to Fixed Charges
and Computation of Ratio of Earnings to Combined Fixed Charges
and Preferred Stock Dividends..................................... 7
PART II - OTHER INFORMATION.
Item 6. Exhibits and Reports on Form 8-K........................... 8
Signatures......................................................... 9
Index to Exhibits.................................................. 10
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES
CONDENSED STATEMENT OF CURRENT AND RETAINED EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------
(In millions) MARCH 30, APRIL 1,
1996 1995
--------- --------
<S> <C> <C>
EARNED INCOME .......................................... $ 5,620 $ 4,790
-------- --------
EXPENSES
Interest ............................................... 1,668 1,502
Operating and administrative ........................... 1,716 1,432
Insurance losses and policyholder and annuity benefits . 615 516
Provision for losses on financing receivables .......... 213 79
Depreciation and amortization of buildings
and equipment and equipment on operating leases ....... 489 450
Minority interest in net earnings of consolidated
affiliates ............................................ 25 17
-------- --------
4,726 3,996
-------- --------
EARNINGS
Earnings before income taxes ........................... 894 794
Provision for income taxes ............................. (289) (266)
-------- --------
NET EARNINGS ........................................... 605 528
Dividends .............................................. (244) (203)
Retained earnings at beginning of period ............... 8,937 8,321
-------- --------
RETAINED EARNINGS AT END OF PERIOD ..................... $ 9,298 $ 8,646
======== ========
</TABLE>
See Notes to Condensed, Consolidated Financial Statements.
1
<PAGE>
ITEM 1. FINANCIAL STATEMENTS (Continued).
GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES
CONDENSED STATEMENT OF FINANCIAL POSITION
<TABLE>
<CAPTION>
(In millions) MARCH 30, DECEMBER 31,
1996 1995
--------- ------------
(Unaudited)
ASSETS
<S> <C> <C>
Cash and equivalents ................................... $ 1,531 $ 1,316
Investment securities .................................. 26,827 26,991
Financing receivables
Time sales and loans, net of deferred income ........ 58,749 59,591
Investment in financing leases, net of
deferred income .................................... 35,949 36,200
-------- --------
94,698 95,791
Allowance for losses on financing receivables ....... (2,490) (2,519)
-------- --------
Financing receivables -- net ..................... 92,208 93,272
Other receivables -- net ............................... 5,526 6,408
Equipment on operating leases (at cost),
less accumulated amortization of $4,934 and $4,670 .... 14,354 13,793
Other assets ........................................... 20,529 19,045
-------- --------
TOTAL ASSETS ........................................ $160,975 $160,825
======== ========
LIABILITIES AND EQUITY
Short-term borrowings .................................. $ 59,891 $ 59,264
Long-term borrowings
Senior .............................................. 48,508 47,794
Subordinated ........................................ 697 697
Insurance liabilities, reserves and annuity benefits ... 21,862 22,401
Other liabilities ...................................... 8,533 9,202
Deferred income taxes .................................. 6,539 6,562
-------- --------
Total liabilities ................................... 146,030 145,920
-------- --------
Minority interest in equity of consolidated affiliates . 696 703
-------- --------
Capital stock .......................................... 770 770
Additional paid-in capital ............................. 4,022 4,022
Retained earnings ...................................... 9,298 8,937
Unrealized gains on investment securities .............. 232 543
Foreign currency translation adjustments ............... (73) (70)
-------- --------
Total equity ........................................ 14,249 14,202
-------- --------
TOTAL LIABILITIES AND EQUITY ........................... $160,975 $160,825
======== ========
</TABLE>
See Notes to Condensed, Consolidated Financial Statements.
2
<PAGE>
ITEM 1. FINANCIAL STATEMENTS (Continued).
GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES
CONDENSED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------
(In millions) MARCH 30, APRIL 1,
1996 1995
--------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net earnings ........................................... $ 605 $ 528
Adjustments to reconcile net earnings to cash
provided from operating activities:
Provision for losses on financing receivables ....... 213 79
Depreciation and amortization of buildings and
equipment and equipment on operating leases ........ 489 450
Other -- net ........................................ 49 (198)
-------- --------
Cash provided from operating activities .......... 1,356 859
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Increase in loans to customers ......................... (11,391) (11,718)
Principal collections from customers ................... 11,876 9,870
Investment in assets on financing leases ............... (2,914) (2,351)
Principal collections on financing leases .............. 2,908 1,551
Net decrease in credit card receivables ................ 172 459
Buildings and equipment and equipment on
operating leases:
- additions ....................................... (1,362) (1,303)
- dispositions .................................... 348 549
Payments for principal businesses purchased,
net of cash acquired .................................. (88) (1,627)
Purchases of investment securities by insurance
affiliates and annuity businesses ..................... (1,628) (1,534)
Dispositions and maturities of investment securities
by insurance affiliates and annuity businesses ........ 1,311 1,541
Other -- net ........................................... (1,280) (95)
-------- --------
Cash used for investing activities ............... (2,048) (4,658)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in borrowings (maturities 90 days or less) .. (1,458) (4,180)
Newly issued debt
- short-term (maturities 91-365 days).............. 882 563
- long-term senior ................................ 7,102 11,965
Proceeds - non-recourse, leveraged lease debt .......... 236 --
Repayments and other reductions
- short-term (maturities 91-365 days) ............. (4,879) (3,712)
- long-term senior ................................ (314) --
Principal payments - non-recourse, leveraged lease debt (103) (99)
Proceeds from sales of investment and annuity contracts 148 387
Redemption of investment and annuity contracts ......... (463) (573)
Dividends paid ......................................... (244) (203)
-------- --------
Cash provided from financing activities .......... 907 4,148
-------- --------
INCREASE IN CASH AND EQUIVALENTS ....................... 215 349
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD ............ 1,316 712
-------- --------
CASH AND EQUIVALENTS AT END OF PERIOD .................. $ 1,531 $ 1,061
======== ========
</TABLE>
See Notes to Condensed, Consolidated Financial Statements.
3
<PAGE>
ITEM 1. FINANCIAL STATEMENTS (Continued).
GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES
NOTES TO CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. The accompanying condensed quarterly financial statements represent the
consolidation of General Electric Capital Corporation ("Corporation") and
all majority-owned and controlled affiliates ("consolidated affiliates").
All significant transactions among the parent and consolidated affiliates
have been eliminated. Certain prior period data have been reclassified to
conform to the current period presentation.
2. The condensed consolidated quarterly financial statements are unaudited.
These statements include all adjustments (consisting of normal recurring
accruals) considered necessary by management to present a fair statement
of the results of operations, financial position and cash flows. The
results reported in these condensed consolidated financial statements
should not be regarded as necessarily indicative of results that may be
expected for the entire year.
3. Two newly issued accounting standards were adopted in the first quarter of
1996 and did not have a material effect on the financial position or
results of operations of the Corporation.
Statement of Financial Accounting Standards (SFAS) No. 121, Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of, requires that certain long-lived assets be reviewed for
impairment when events or circumstances indicate that the carrying amounts
of the assets may not be recoverable. If such review indicates that the
carrying amount of an asset exceeds the sum of its expected future cash
flows, the asset's carrying value is written down to fair value.
Long-lived assets to be disposed of are reported at the lower of carrying
amount or fair value less cost to sell.
SFAS No. 122, Accounting for Mortgage Servicing Rights, requires that
capitalized rights to service mortgage loans be assessed for impairment by
individual risk stratum by comparing each stratum's carrying amount with
its fair value. Strata are based on the predominant risk characteristics
of the underlying loans, which include loan type and note rate. Fair
values are estimated based on discounted anticipated future net cash flows
considering market consensus for loan prepayment predictions and other
economic factors. To the extent that the carrying value of mortgage
servicing rights exceeds fair value by individual stratum, the resulting
impairment is recognized in earnings through a valuation allowance.
4
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS.
OVERVIEW
Net earnings for the first quarter of 1996 were $605 million, a $77
million (15%) increase over the first quarter of 1995. The Corporation's
contribution to its parent, General Electric Capital Services, Inc. (GECS),
after payment of dividends on its variable cumulative preferred stock, was $586
million, a $68 million (13%) increase over the comparable 1995 period.
Earnings of the lending, leasing and equipment management businesses
are significantly influenced by the level of invested assets, the related
financing spreads (the excess of rates earned -- yields -- over rates on
borrowings) and the quality of those assets. The Corporation's increase in net
earnings principally reflected a higher average level of invested assets,
partially offset by higher provisions for losses on financing receivables.
Financing spreads were essentially the same in both periods as the decrease in
interest rates paid on borrowings were offset by a decrease in yields. The
Specialty Insurance segment also contributed to the increase in net earnings
primarily resulting from increased premium and investment income.
OPERATING RESULTS
EARNED INCOME from all sources increased $830 million (17%) to $5,620
million for the first quarter of 1996 over the first quarter of 1995.
Earned income from the specialized financing, mid-market financing,
consumer services and equipment management businesses increased $721 million
(17%) over the comparable prior-year period principally reflecting a higher
average level of invested assets, resulting from both origination volume and
acquisitions of portfolios and businesses. A portion of the increase was also
attributable to higher consumer insurance premiums due to the acquisition of the
long-term care business during 1995. Earned income of the Specialty Insurance
segment increased $109 million (23%) to $582 million for the first quarter of
1996 compared with the first quarter of 1995 reflecting growth in premium and
investment income.
INTEREST EXPENSE for the first quarter of 1996 was $1,668 million, 11%
higher than for the first quarter of 1995. The increase reflected the effects of
higher average borrowings used to finance asset growth partially offset by the
effects of lower interest rates. The composite interest rate on the borrowings
for the first quarter of 1996 was 6.38% compared with 6.66% in the first quarter
of 1995.
OPERATING AND ADMINISTRATIVE EXPENSES were $1,716 million for the first
quarter of 1996, a 20% increase over the first quarter of 1995. The increase
primarily reflected costs associated with businesses and portfolios acquired
over the past year and higher investment levels.
INSURANCE LOSSES AND POLICYHOLDER AND ANNUITY BENEFITS increased 19% to
$615 million for the first quarter of 1996, compared with $516 million for the
first quarter of 1995. The increase primarily resulted from higher policyholder
benefit costs due to the acquisition of the long-term care insurance business
during 1995.
PROVISION FOR LOSSES ON FINANCING RECEIVABLES increased to $213 million
for the first quarter of 1996 from $79 million for the first quarter of 1995.
These provisions principally related to private-label and bank credit cards in
the Consumer Segment which are discussed below under Portfolio Quality.
5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
(Continued).
DEPRECIATION AND AMORTIZATION OF BUILDINGS AND EQUIPMENT AND EQUIPMENT
ON OPERATING LEASES increased $39 million (9%) to $489 million for the first
quarter of 1996 compared with $450 million for the first quarter of 1995. The
increase principally reflected higher levels of equipment on operating leases as
a result of portfolio growth and acquisitions.
PROVISION FOR INCOME TAXES was $289 million for the first quarter of
1996 (an effective tax rate of 32.3%), compared with $266 million for the first
quarter of 1995 (an effective tax rate of 33.5%). The higher provision for
income taxes reflected increased pre-tax earnings. The decrease in the 1996
effective tax rate resulted primarily from the effects of terminating certain
leveraged leases and increased tax credits, partially offset by an increase in
non-U.S. taxes.
PORTFOLIO QUALITY
THE PORTFOLIO OF FINANCING RECEIVABLES, before allowance for losses,
decreased to $94.7 billion at March 30, 1996 from $95.8 billion at the end of
1995. Financing receivables are the Corporation's largest asset and the primary
source of revenues. Related allowances for losses at March 30, 1996, aggregated
$2.5 billion (2.63% of receivables - the same level as at the end of 1995) 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. Nonearning receivables are those that are 90
days or more delinquent and reduced earning receivables are receivables whose
terms have been restructured to a below-market yield.
CONSUMER RECEIVABLES, primarily credit card and personal loans and auto
loans and leases, were $41.4 billion at March 30, 1996, a decrease of $0.6
billion from the end of 1995. Nonearning and reduced earning receivables
increased to $712 million at March 30, 1996, from $671 million at December 31,
1995. Write-offs of consumer receivables increased to $190 million for the first
quarter of 1996, compared with $143 million for the first quarter of 1995,
primarily due to higher average receivable balances resulting from a combination
of origination volume and acquisitions of businesses and portfolios and higher
delinquencies consistent with overall industry experience.
COMMERCIAL REAL ESTATE LOANS classified as financing receivables were
$13.3 billion at March 30, 1996, compared with $13.4 billion at year-end 1995.
Nonearning and reduced earning receivables increased to $263 million at March
30, 1996, from $179 million at December 31, 1995. Write-offs of commercial real
estate loans were $10 million for the first quarter of 1996, compared with $57
million for the first quarter of 1995. At March 30, 1996, the commercial real
estate portfolio also included, in other assets, $2.2 billion of assets acquired
for resale from various financial institutions ($2.3 billion at year-end 1995),
and $1.7 billion of investments in real estate ventures (essentially unchanged
from the prior year end).
OTHER FINANCING RECEIVABLES, totaling $40.0 billion at March 30, 1996
($40.4 billion at December 31, 1995), consisted of a diverse commercial,
industrial and equipment loan and lease portfolio. Nonearning and
reduced-earning receivables increased to $297 million at March 30, 1996, from
$285 million at year-end 1995.
Loans and leases to commercial airlines amounted to $8.4 billion at
March 30, 1996, up slightly from $8.3 billion at the end of 1995.
OTHER MATTERS
As 1996 progresses, management continues to believe that vigilant
attention to risk management and controllership and a strong focus on complete
satisfaction of customer needs position it to deal effectively with the
increasing competition in an ever-changing global economy.
6
<PAGE>
EXHIBIT 12
GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
THREE MONTHS ENDED MARCH 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
RATIO OF
EARNINGS TO
COMBINED
FIXED
CHARGES
RATIO OF AND
EARNINGS PREFERRED
(Dollar amounts in millions) TO FIXED STOCK
CHARGES DIVIDENDS
-------- --------
<S> <C> <C>
Net earnings ........................................... $ 605 $ 605
Provision for income taxes ............................. 289 289
Minority interest in net earnings of consolidated
affiliates ............................................ 25 25
-------- --------
Earnings before provision for income taxes and
minority interest ..................................... 919 919
-------- --------
Fixed charges:
Interest ............................................... 1,683 1,683
One-third of rentals ................................... 40 40
-------- --------
Total fixed charges .................................... 1,723 1,723
-------- --------
Less capitalized interest, net of amortization ......... 6 6
Earnings before provision for income taxes and
minority interest plus fixed charges .................. $ 2,636 $ 2,636
======== ========
Ratio of earnings to fixed charges ..................... 1.53
========
Preferred stock dividend requirements .................. $ 19
Ratio of earnings before provision for
income taxes to net earnings .......................... 1.48
Preferred stock dividend on pre-tax basis .............. 28
Fixed charges .......................................... 1,723
--------
Total fixed charges and preferred stock
dividend requirements ................................. $ 1,751
========
Ratio of earnings to combined fixed charges and
preferred stock dividends ............................. 1.51
========
</TABLE>
For purposes of computing the ratios, fixed charges consist of interest on all
indebtedness and one-third of rentals, which management believes is a reasonable
approximation of the interest factor of such rentals.
7
<PAGE>
PART II--OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. EXHIBITS.
Exhibit 12. Computation of ratio of earnings to fixed charges and
computation of ratio of earnings to combined fixed charges and
preferred stock dividends.
Exhibit 27. Financial Data Schedule (filed electronically only).
b. REPORTS ON FORM 8-K.
None.
8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GENERAL ELECTRIC CAPITAL CORPORATION
(Registrant)
Date: May 14, 1996 By: /s/ J.A. Parke
-------------------------------------
J.A. Parke, Senior Vice President, Finance
(Principal Financial Officer)
Date: May 14, 1996 By: /s/ J.C. Amble
-------------------------------------
J.C. Amble, Vice President and Controller
(Principal Accounting Officer)
9
<PAGE>
GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES
INDEX TO EXHIBITS
EXHIBIT NO. PAGE
12 Computation of ratio of earnings to fixed charges and
computation of ratio of earnings to combined fixed
charges and preferred stock dividends ....................... 7
27 Financial Data Schedule (filed electronically only)
10
EXHIBIT 12
GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
THREE MONTHS ENDED MARCH 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
RATIO OF
EARNINGS TO
COMBINED
FIXED
CHARGES
RATIO OF AND
EARNINGS PREFERRED
(Dollar amounts in millions) TO FIXED STOCK
CHARGES DIVIDENDS
-------- --------
<S> <C> <C>
Net earnings ........................................... $ 605 $ 605
Provision for income taxes ............................. 289 289
Minority interest in net earnings of consolidated
affiliates ............................................ 25 25
-------- --------
Earnings before provision for income taxes and
minority interest ..................................... 919 919
-------- --------
Fixed charges:
Interest ............................................... 1,683 1,683
One-third of rentals ................................... 40 40
-------- --------
Total fixed charges .................................... 1,723 1,723
-------- --------
Less capitalized interest, net of amortization ......... 6 6
Earnings before provision for income taxes and
minority interest plus fixed charges .................. $ 2,636 $ 2,636
======== ========
Ratio of earnings to fixed charges ..................... 1.53
========
Preferred stock dividend requirements .................. $ 19
Ratio of earnings before provision for
income taxes to net earnings .......................... 1.48
Preferred stock dividend on pre-tax basis .............. 28
Fixed charges .......................................... 1,723
--------
Total fixed charges and preferred stock
dividend requirements ................................. $ 1,751
========
Ratio of earnings to combined fixed charges and
preferred stock dividends ............................. 1.51
========
</TABLE>
For purposes of computing the ratios, fixed charges consist of interest on all
indebtedness and one-third of rentals, which management believes is a reasonable
approximation of the interest factor of such rentals.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD ENDED MARCH 30, 1996, 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-30-1996
<CASH> 1,531
<SECURITIES> 26,827
<RECEIVABLES> 94,698
<ALLOWANCES> 2,490
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 21,744
<DEPRECIATION> 5,916
<TOTAL-ASSETS> 160,975
<CURRENT-LIABILITIES> 0
<BONDS> 49,205
0
2
<COMMON> 768
<OTHER-SE> 13,479
<TOTAL-LIABILITY-AND-EQUITY> 160,975
<SALES> 0
<TOTAL-REVENUES> 5,620
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,716
<LOSS-PROVISION> 213
<INTEREST-EXPENSE> 1,668
<INCOME-PRETAX> 894
<INCOME-TAX> 289
<INCOME-CONTINUING> 605
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 605
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
