<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 2, 1994
------------
Commission file number 0-14804
General Electric Captial Services, Inc.
--------------------------------------
(Exact name of registrant as specified in its charter)
AMENDMENT NO. 1
THE PURPOSE OF THIS AMENDMENT IS TO INCLUDE THE COVER PAGE OF THE
REGISTRANT'S FORM 10-Q FOR THE QUARTER ENDED JULY 2, 1994, WHICH WAS
INADVERTENTLY OMITTED FROM THE ORIGINAL FILING ON AUGUST 15, 1994, IN THE
SECURITIES AND EXCHANGE COMMISSION'S ELECTRONIC DATA GATHERING, ANALYSIS AND
RETRIEVAL (EDGAR) SYSTEM. NO OTHER CHANGES HAVE BEEN MADE.
<PAGE> 2
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 JULY 2, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM
-------TO
-------
---------------------------
COMMISSION FILE NUMBER 0-14804
---------------------------
GENERAL ELECTRIC CAPITAL SERVICES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 06-1109503
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
260 LONG RIDGE ROAD, STAMFORD, 06927
CONNECTICUT
(Address of principal executive offices) (Zip Code)
(203) 357-4000
(Registrant's telephone number, including area code)
</TABLE>
---------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
At July 20, 1994, 101 shares of common stock with a par value of $10,000
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> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I -- FINANCIAL INFORMATION.
Item 1. Financial Statements. 1
Item 2. Management's Discussion and Analysis of Results of Operations. 5
Exhibit 12. Computation of Ratio of Earnings to Fixed Charges. 8
PART II -- OTHER INFORMATION.
Item 1. Legal Proceedings. 9
Item 2. Changes in Securities. 9
Item 3. Defaults Upon Senior Securities. 9
Item 4. Submission of Matters to a Vote of Security Holders. 9
Item 5. Other Information. 9
Item 6. Exhibits and Reports on Form 8-K. 9
Signatures. 10
Index to Exhibits. 11
</TABLE>
<PAGE> 4
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
GENERAL ELECTRIC CAPITAL SERVICES, INC. AND CONSOLIDATED AFFILIATES
CONDENSED STATEMENT OF CURRENT AND RETAINED EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
------------------------------ ------------------------------
(In millions) JULY 2, 1994 JUNE 26, 1993 JULY 2, 1994 JUNE 26, 1993
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
EARNED INCOME $6,023 $5,129 $11,816 $9,892
------ ------ ------- ------
EXPENSES
Interest 2,153 1,585 4,344 3,007
Operating and administrative 1,775 1,575 3,677 3,103
Insurance losses and policyholder and
annuity benefits 779 692 1,472 1,237
Provision for losses on financing
receivables 251 292 421 547
Depreciation and amortization of
buildings and equipment and equipment
on operating leases 391 376 785 726
Minority interest in net earnings of
consolidated affiliates 50 26 74 45
------ ------ ------- ------
5,399 4,546 10,773 8,665
------ ------ ------- ------
EARNINGS
Earnings before income taxes 624 583 1,043 1,227
Provision for income taxes 161 169 250 362
------ ------ ------- ------
NET EARNINGS 463 414 793 865
Cash dividends paid (87) -- (274) (150)
Retained earnings at beginning of period 8,355 7,316 8,212 7,015
------ ------ ------- ------
RETAINED EARNINGS AT END OF PERIOD $8,731 $7,730 $ 8,731 $7,730
====== ====== ======= ======
</TABLE>
See Notes to Condensed, Consolidated Financial Statements.
1
<PAGE> 5
ITEM 1. FINANCIAL STATEMENTS (Continued).
GENERAL ELECTRIC CAPITAL SERVICES, INC. AND CONSOLIDATED AFFILIATES
CONDENSED STATEMENT OF FINANCIAL POSITION
<TABLE>
<CAPTION>
(In millions) JULY 2, 1994 DECEMBER 31, 1993
--------------- -----------------
(Unaudited)
<S> <C> <C>
ASSETS
Cash and equivalents $ 1,780 $ 1,682
Trading securities 22,781 30,165
Investment securities 24,748 26,792
Securities purchased under agreements to resell 57,559 43,463
Financing receivables:
Time sales and loans, net of deferred income 43,742 40,748
Investment in financing leases, net of deferred income 26,794 24,930
-------- --------
70,536 65,678
Allowance for losses on financing receivables (1,858) (1,730)
-------- --------
Financing receivables -- net 68,678 63,948
Other receivables -- net 15,873 15,799
Equipment on operating leases (at cost), less accumulated
amortization of $3,650 and $3,238 11,513 10,650
Other assets 17,284 19,231
-------- --------
TOTAL ASSETS $220,216 $211,730
======== ========
LIABILITIES AND EQUITY
Notes payable within one year $ 57,583 $ 60,003
Senior notes payable after one year 28,987 25,126
Subordinated notes payable after one year 759 759
Securities sold under agreements to repurchase 59,321 56,669
Securities sold but not yet purchased -- at market 19,559 15,332
Insurance reserves and annuity benefits 22,739 22,909
Other liabilities 14,637 13,414
Deferred income taxes 4,837 5,408
-------- --------
Total liabilities 208,422 199,620
-------- --------
Minority interest in equity of consolidated affiliates 1,559 1,301
-------- --------
Capital stock 1 1
Additional paid-in capital 1,877 1,877
Retained earnings 8,731 8,212
Other (374) 719
-------- --------
Total equity 10,235 10,809
-------- --------
TOTAL LIABILITIES AND EQUITY $220,216 $211,730
======== ========
</TABLE>
See Notes to Condensed, Consolidated Financial Statements.
2
<PAGE> 6
ITEM 1. FINANCIAL STATEMENTS (Continued).
GENERAL ELECTRIC CAPITAL SERVICES, INC. AND CONSOLIDATED AFFILIATES
CONDENSED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
----------------------------------
(In millions) JULY 2, 1994 JUNE 26, 1993
------------ -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 793 $ 865
Adjustments to reconcile net earnings to cash provided from
operating activities:
Provision for losses on financing receivables 421 547
Depreciation and amortization of buildings and equipment
and equipment on operating leases 785 726
Decrease in securities activities of broker-dealer -- net 167 1,998
Other -- net 242 (1,398)
-------- --------
Cash provided from operating activities 2,408 2,738
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Increase in loans to customers (13,242) (12,837)
Principal collections from customers 10,880 11,959
Net change in credit card receivables (10) 647
Investment in assets on financing leases (3,892) (2,676)
Principal collections on financing leases 2,516 2,679
Buildings and equipment, and equipment on
operating leases -- additions (1,722) (1,927)
-- dispositions 850 1,099
Payments for principal businesses purchased, net of cash
acquired (1,053) (1,197)
Purchases of investment securities by insurance and annuity
affiliates (5,218) (3,984)
Dispositions and maturities of investment securities by
insurance and annuity affiliates 4,322 2,851
Other 3,738 942
-------- --------
Cash used for investing activities (2,831) (2,444)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in borrowings (less than 90-day maturities) (3,905) (3,663)
Newly issued debt -- short-term (91-365 days) 1,493 1,894
-- long-term senior 8,933 4,826
Repayments and other reductions -- short-term (4,721) (3,482)
-- long-term senior (997) (76)
Proceeds from sales of investment and annuity contracts 386 179
Redemption of investment and annuity contracts (470) (193)
Principal payments -- non-recourse, leveraged lease debt (164) (158)
Proceeds -- non-recourse, leveraged lease debt -- 35
Dividends paid to share owner (274) (150)
Issuance of preferred stock by consolidated affiliate 240 --
-------- --------
Cash provided from (used for) financing activities 521 (788)
-------- --------
INCREASE (DECREASE) IN CASH AND EQUIVALENTS 98 (494)
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 1,682 1,940
-------- --------
CASH AND EQUIVALENTS AT END OF PERIOD $ 1,780 $ 1,446
======== ========
</TABLE>
See Notes to Condensed, Consolidated Financial Statements.
3
<PAGE> 7
ITEM 1. FINANCIAL STATEMENTS (Continued).
GENERAL ELECTRIC CAPITAL SERVICES, INC. AND CONSOLIDATED AFFILIATES
NOTES TO CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. The condensed, consolidated financial statements represent a consolidation of
General Electric Capital Services, Inc. ("Corporation") and all
majority-owned and controlled affiliates ("consolidated affiliates"). All
significant transactions among the parent and consolidated affiliates have
been eliminated. In the opinion of management, all adjustments of a normal
recurring nature necessary to present a fair statement of financial position
as of July 2, 1994, the statement of cash flows for the six-month interim
periods ended July 2, 1994, and June 26, 1993, and the results of operations
for the three-month and six-month interim periods ended July 2, 1994, and
June 26, 1993, have been included. The condensed, consolidated financial
statements have been prepared in accordance with the instructions for Form
10-Q and therefore do not include some information and footnotes necessary to
constitute a complete and detailed presentation in conformity with annual
reporting requirements.
2. The results of operations for the three and six month periods ended July 2,
1994, should not be regarded as necessarily indicative of the results that
may be expected for the entire year.
3. The ratio of earnings to fixed charges for the six months ended July 2, 1994,
was 1.25. For purposes of computing the ratio, earnings consist of net
earnings adjusted for provision for income taxes, minority interest and fixed
charges. Fixed charges consist of interest on all indebtedness and one-third
of annual rentals, which the Corporation believes is a reasonable
approximation of the interest factor of such rentals.
4. Net earnings for the first half of 1994 included a $210 million ($350 million
before tax) first quarter charge resulting from the discovery of false
trading profits created by the then head U.S. government securities trader at
Kidder, Peabody & Co. Incorporated, a subsidiary within the Corporation's
securities broker-dealer business, Kidder, Peabody Group Inc. (Kidder,
Peabody). Approximately $143 million ($238 million before tax) of the charge
related to periods prior to 1994.
4
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS.
OVERVIEW
Net earnings for the first half of 1994 were $793 million, a $72 million
decrease from the first half of 1993, as negative results at the Corporation's
securities broker-dealer business, Kidder, Peabody Group Inc. (Kidder, Peabody),
discussed below, exceeded the increase in earnings from the Corporation's
financing businesses which principally reflected a higher average level of
invested assets and lower losses on highly leveraged transaction (HLT)
investments.
First half 1994 net earnings included a $210 million ($350 million before
tax) first quarter charge resulting from the discovery of false trading profits
created by the then head U.S. government securities trader at Kidder, Peabody &
Co. Incorporated, a subsidiary of Kidder, Peabody. Approximately $143 million
($238 million before tax) of the charge related to periods prior to 1994.
Kidder, Peabody's net loss amounted to $183 million for the first six months of
1994, compared with reported net income of $115 million for the first six months
of 1993. Excluding estimated effects of the false trading profits from both
periods, Kidder, Peabody's net loss amounted to $40 million for the first six
months of 1994 (compared with net earnings of $81 million for the first six
months of 1993) attributable principally to mortgage-backed securities market
conditions. The United States Securities and Exchange Commission, the United
States Attorney for the Southern District of New York, and The New York Stock
Exchange are conducting investigations relating to the false trading profits.
General Electric Company also completed and released a report on its internal
investigation of the matter.
OPERATING RESULTS
EARNED INCOME during the first half of 1994 increased $1,924 million (19%)
over the first half of 1993.
Earned income from the Corporation's specialized financing, mid-market
financing, consumer services and equipment management businesses increased
$1,286 million (23%) over the comparable prior year period principally
reflecting a higher average level of invested assets resulting from both
origination volume and acquisitions of portfolios and businesses. Approximately
$350 million of the increase was generated by the Corporation's annuity
business, formed through two acquisitions during the second and third quarters
of 1993. Earned income from the Corporation's specialty insurance businesses
increased $127 million (6%) over the first half of 1993 principally reflecting
growth in premium income in the property and casualty reinsurance, private
mortgage insurance and the creditor insurance businesses, partially offset by
lower premium income in the life reinsurance business. Revenues of the
securities broker-dealer business increased $512 million over the first half of
1993 reflecting higher investment income associated with higher average
securities positions, partially offset by both the aforementioned one-time
before tax charge to revenue relating to the false trading profits, as well as
losses in the mortgage-backed securities market.
INTEREST EXPENSE for the first half of 1994 increased $1,337 million (44%)
over last year's comparable period. The increase principally reflected the
effects of additional borrowings required to finance the higher level of
invested assets in both the securities broker-dealer and the financing
businesses. The composite interest rate incurred on borrowings for the first
half of 1994 was 5.10%, compared with 4.96% for the first half of 1993.
OPERATING AND ADMINISTRATIVE EXPENSE increased 18% to $3,677 million in the
first half of 1994, compared with the first half of 1993. This increase
reflected operating costs associated with the higher level of assets in the
Corporation's financing businesses, including businesses and portfolios acquired
over the past year, as well as the higher volume of securities broker-dealer
activity.
INSURANCE LOSSES AND POLICYHOLDER AND ANNUITY BENEFITS were $1,472 million
for the first half of 1994, a 19% increase over the first half of 1993,
principally as a result of annuity benefits credited to customers of the annuity
business which was acquired in 1993 and higher volume related losses in the
private mortgage insurance and the property and casualty reinsurance businesses,
partially offset by lower policyholder benefits in the life reinsurance
business.
5
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS (Continued).
PROVISION FOR LOSSES ON FINANCING RECEIVABLES during the first half of 1994
was $421 million, $126 million (23%) lower than during the comparable prior year
period, principally reflecting lower provisions for losses on HLT receivables.
DEPRECIATION AND AMORTIZATION OF BUILDINGS AND EQUIPMENT AND EQUIPMENT ON
OPERATING LEASES was $785 million in the first half of 1994, $59 million higher
than in the first half of 1993, reflecting higher levels of equipment on
operating leases as a result of portfolio growth and acquisitions.
PROVISION FOR INCOME TAXES for the first half of 1994 was $250 million (an
effective tax rate of 24%) compared with $362 million (30%) for the comparable
prior year period. The decrease in the provision for income taxes principally
reflects the reduction in earnings before income taxes, partially offset by the
1% increase in the federal income tax rate. The lower effective tax rate was
primarily attributable to a higher relative proportion of tax-exempt income in
relation to earnings before income taxes as well as reduced state and local
taxes.
PORTFOLIO QUALITY
The portfolio of financing receivables is the Corporation's largest
financing asset and primary source of revenues. The portfolio, net of reserves,
aggregated $68.7 billion at July 2, 1994, an increase of $4.7 billion (7%) from
year-end 1993. Related reserves were $1.9 billion (2.63% of receivables -- the
same level as at the end of 1993) and are, in management's judgment, appropriate
given the risk profile of the portfolio. A discussion of the portfolio quality
of certain elements of financing receivables and investments follows.
CONSUMER LOANS RECEIVABLE, primarily retailer and auto, were $18.5 billion
at July 2, 1994, an increase of $1.2 billion from the end of 1993 reflecting
both origination volume and a business acquisition. In addition, the
Corporation's investment in consumer auto finance leases was $6.8 billion at
July 2, 1994, an increase of $1.2 billion from the end of 1993 reflecting
origination volume. Nonearning receivables were $373 million at July 2, 1994,
compared with $391 million at December 31, 1993. The provision for losses on
retailer and auto financing receivables was $254 million for the first half of
1994, compared with $239 million for the first half of 1993.
COMMERCIAL REAL ESTATE LOANS classified as financing receivables by the
Commercial Real Estate business were $11.8 billion at July 2, 1994, compared
with $10.9 billion at December 31, 1993. In addition, the investment portfolio
of the Corporation's annuity business included approximately $1.2 billion of
commercial property loans. Commercial Real Estate's portfolio also included $2.1
billion of assets purchased from the Resolution Trust Corporation (RTC) and
other institutions for resale and $1.4 billion of investments in real estate
joint ventures, both of which are included in other assets and are essentially
unchanged since December 31, 1993. Commercial Real Estate's foreclosed
properties decreased to $38 million at July 2, 1994, from $110 million at
December 31, 1993. Nonearning and reduced earning receivables declined to $204
million at July 2, 1994, from $272 million at the end of 1993. Loss provisions
for Commercial Real Estate loans and investments were $164 million for the first
half of 1994, compared with $139 million for the first half of 1993.
HLT PORTFOLIO INVESTMENTS classified as financing receivables totaled $3.0
billion at July 2, 1994, a decrease of $0.3 billion from the end of 1993. The
July 2, 1994, balance of amounts that had been written down to estimated fair
value and carried in other assets aggregated $462 million, net of allowances, a
decrease of $82 million from the end of 1993 reflecting investment sales.
Nonearning and reduced earning receivables were $131 million at July 2, 1994, a
decline of $8 million from year-end 1993. As a result of a stronger economic
climate and successful past actions, loss provisions for HLT investments were
insignificant during the first half of 1994. Such provisions were $133 million
in the first half of 1993, and comprised $101 million of receivable loss
provisions and $32 million of loss provisions for other investments.
6
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS (Continued).
OTHER FINANCING RECEIVABLES relate primarily to a diverse commercial,
industrial and equipment loan and lease portfolio. Nonearning and reduced
earning receivables in these portfolios were $121 million at July 2, 1994,
compared with $98 million at the end of 1993.
The Corporation's aggregate loans and leases to commercial airlines at July
2, 1994, increased to approximately $7.0 billion from the December 31, 1993,
balance of approximately $6.8 billion, principally as a result of increased
equipment on operating leases.
OTHER MATTERS
On December 31, 1993, the Corporation adopted Statement of Financial
Accounting Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt
and Equity Securities." All of the Corporation's investment securities were
designated as available-for-sale at both July 2, 1994 and December 31, 1993.
Consequently, such securities were reported at fair value, with net unrealized
gains and losses included in equity. Equity included net unrealized losses of
$306 million at July 2, 1994, and net unrealized gains of $812 million at
December 31, 1993, a difference primarily due to a decrease in the fair value of
fixed-rate debt securities held by the Corporation's annuity and insurance
affiliates, principally resulting from increased interest rates. Carrying
amounts of liabilities of these affiliates are not adjusted for changes in fair
value. In a rising interest rate environment, the fair value of these
liabilities would be expected to decline.
As 1994 progresses, management continues to believe that the diversity and
strength of the Corporation's assets, along with vigilant attention to risk
management, position it to deal effectively with a changing global economic
environment.
7
<PAGE> 11
EXHIBIT 12
GENERAL ELECTRIC CAPITAL SERVICES, INC. AND CONSOLIDATED AFFILIATES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
(Dollar amounts in millions) JULY 2, 1994
----------------
<S> <C>
Net earnings $ 793
Provision for income taxes 250
Minority interest in net earnings of consolidated affiliates 74
------
Income before provision for income taxes and minority interest 1,117
------
Fixed charges:
Interest 4,369
One-third of rentals 84
------
Total fixed charges 4,453
Less capitalized interest, net of amortization 5
------
Earnings before provision for income taxes and minority interest plus fixed
charges $5,565
======
Ratio of earnings to fixed charges 1.25
======
</TABLE>
8
<PAGE> 12
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Corporation is not involved in any material pending legal proceedings.
ITEM 2. CHANGES IN SECURITIES.
Omitted.
ITEM 3.DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Omitted.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
A. EXHIBITS.
Exhibit 12. Computation of ratio of earnings to fixed charges.
B. REPORTS ON FORM 8-K.
None.
9
<PAGE> 13
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 SERVICES, INC.
(Registrant)
Date: August 15, 1994 By: /s/ J. A. PARKE
----------------------------------------
J. A. Parke, Senior Vice
President, Finance
(Principal Financial Officer)
Date: August 15, 1994 By: /s/ J. C. AMBLE
----------------------------------------
J. C. Amble, Vice President
and Controller
(Principal Accounting Officer)
10
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GENERAL ELECTRIC CAPITAL SERVICES, INC. AND CONSOLIDATED AFFILIATES
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. PAGE NO.
- ----------- --------
<S> <C> <C>
12 Computation of ratio of earnings to fixed charges 8
</TABLE>
11
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this amendment to be signed on its behalf by the
undersigned thereunto duly authorized.
GENERAL ELECTRIC CAPITAL SERVICES, INC.
---------------------------------------
(Registrant)
Date: August 16, 1994 By /s/ J.C. AMBLE
-----------------------------------------
J.C. Amble, Vice President and Controller
(Principal Accounting Officer)
