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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported) June 28, 1995
General Electric Capital Services, Inc.
(Exact name of registrant as specified in its charter)
Delaware 0-14804 06-1109503
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
260 Long Ridge Road, Stamford, CT 06927
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (203) 357-4000
Not Applicable
(Former name or former address, if changed since last report)
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Item 5. Other Events
General Electric Capital Services, Inc., all of whose common stock is
owned by General Electric Company, is the sole owner of the common
stock of General Electric Capital Corporation and GE Global Insurance
Holding Corporation which, together with their subsidiaries and
affiliates, constitute General Electric Company's principal financial
services businesses. General Electric Capital Services, Inc. and its
consolidated affiliates ("GE Capital Services") have completed several
business acquisitions, and entered into definitive agreements to
consummate other business acquisitions, none of which, on a stand
alone basis, were deemed significant for purposes of Regulation S-X.
In aggregate, however, GE Capital Services' completed and probable
acquisitions became significant for purposes of Regulation S-X on June
28, 1995. The acquisitions, described below, represent substantially
all of the completed and probable acquisitions (collectively called
the "Acquired Companies" or "Acquisitions") since December 31, 1994.
The Acquisitions involve expansion of GE Capital Services' existing
lines of business. GE Capital Services operates in four finance
industry segments and a specialty insurance segment. The segments
most affected by current year acquisitions are mid-market financing,
consumer services and specialty insurance.
General Electric Capital Corporation
Mid-market financing acquired the equipment finance and small business
finance businesses from a large multinational financial corporation.
The equipment finance business provides financing for customers to
purchase or lease capital assets, whereas the small business finance
business is the second largest non-bank lender under the Small
Business Administration's Section 7(a) loan program.
Two other acquisitions were completed jointly by mid-market financing
and consumer services as the activities acquired contain a mix of
financial products applicable to both segments. The first acquisition
resulted in the purchase of GE Capital Services' joint venture
partner's ownership share of a Hong Kong restricted license bank whose
business consists of deposit taking and installment finance, including
personal loans, leasing, business loans, property financing,
residential mortgages and related types of financing. The second
acquisition involved the purchase of a family owned business with half
of its portfolio invested in retail auto point of sale financing and
the other half invested in light equipment (e.g., copiers, security
systems) and heavy equipment (e.g., factory equipment) financing.
This business operates exclusively in France and its territories.
Other acquisitions, which relate solely to the consumer services
segment, included the purchase of a private label credit card business
from Australia's largest retail corporation and the purchase of a U.S.
based life insurance company providing long-term care, long-term
disability, corporate owned life and other group insurance (primarily
accidental death insurance).
GE Global Insurance Holding Corporation
GE Global Insurance Holding Corporation, the principal reinsurance
subsidiary of which is Employers Reinsurance Corporation, acquired two
major German reinsurance companies. These acquisitions provide a
foothold in the German market, an increased presence in the European
Union and the position of third largest global reinsurer. These
acquisitions expand existing services to include industrial business
reinsurance primarily focused on underwriting motor, fire and aviation
risks.
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Pro Forma Financial Information
-------------------------------
The accompanying unaudited pro forma condensed, combined financial
information gives effect to the Acquired Companies described above.
The unaudited pro forma condensed, combined statement of financial
position as of July 1, 1995, combines the historical consolidated
balance sheets of GE Capital Services and the companies acquired, or
are probable of being acquired, subsequent to July 1, 1995, as if the
transactions had been effective July 1, 1995. The unaudited pro forma
condensed, combined statement of operations for the year ended
December 31, 1994, and for the six-month period ended July 1, 1995,
combine the historical consolidated statements of operations of GE
Capital Services and all Acquisitions as if the transactions had been
effective on January 1 of each respective period.
The unaudited pro forma condensed, combined financial information has
been prepared by GE Capital Services based upon the principles of
purchase accounting assuming an aggregate estimated purchase price of
$3,209 million, including acquisition costs and estimable purchase
price adjustments as described in the accompanying notes. Under this
method of accounting, which is required by generally accepted
accounting principles, assets and liabilities of the Acquired
Companies are adjusted to their estimated fair values.
GE Capital Services continues to obtain detailed information in order
to appropriately allocate the cost of its investments to the fair
values of the Acquired Companies' assets and liabilities. The
allocation of the cost of the investments reflected in the pro forma
data has been made based on available information or assumptions
management believes to be reasonable. The excess of the purchase
price over the estimated fair value of the net assets acquired has
been treated as goodwill. Actual adjustments may differ based on the
results of further evaluation of the fair values of the assets and
liabilities of the Acquired Companies.
Certain amounts relating to the unaudited pro forma condensed,
combined financial information of the Acquired Companies have been
reclassified to conform to GE Capital Services' presentation. It is
possible that a more detailed evaluation of the Acquired Companies may
result in additional reclassifications or adjustments of accounts or
result in changes to accounting principles of the Acquired Companies.
For purposes of preparing the accompanying unaudited pro forma
condensed, combined financial information, it is assumed that the
Acquisitions will be financed through commercial paper and long-term
borrowings.
The pro forma information does not purport to be indicative of the
results of operations or financial position of GE Capital Services
that would actually have resulted had the Acquisitions occurred at the
beginning of the periods presented and is not indicative of the
results that will be obtained in the future.
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GENERAL ELECTRIC CAPITAL SERVICES, INC. AND CONSOLIDATED AFFILIATES
AND ACQUIRED COMPANIES
Unaudited Pro Forma Condensed, Combined Statement of Financial Position
July 1, 1995
(In millions)
<TABLE>
<CAPTION> Acquired
Companies
GE Subsequent Pro Forma
Capital to Adjustments Pro Forma
Services July 1, 1995 (Note 2) Combined
-------- ----------- -------- --------
<S> <C> <C> <C> <C>
Assets
Cash and equivalents $ 1,733 $ 402 $ --- $ 2,135
Investment securities 33,500 3,287 175 (A) 36,962
Financing receivables
Time sales and loans, net of deferred income 54,252 648 --- 54,900
Investment in financing leases, net of
deferred income 32,568 --- --- 32,568
-------- --------- -------- ---------
86,820 648 --- 87,468
Allowance for losses on financing receivables (2,283) (11) --- (2,294)
-------- --------- -------- ---------
Financing receivables - net 84,537 637 --- 85,174
Other receivables - net 6,797 3,000 --- 9,797
Equipment on operating leases, at cost, less
accumulated amortization of $4,537 13,769 --- --- 13,769
Other assets 19,148 2,488 596 (A)(B) 22,232
Assets of discontinued operations 2,020 --- --- 2,020
-------- --------- -------- ---------
Total assets $161,504 $ 9,814 $ 771 $ 172,089
======== ========= ======== =========
Liabilities and equity
Notes payable within one year $ 54,455 $ 58 $ 654 (A) $ 55,167
Notes payable after one year 45,902 531 900 (A) 47,333
Insurance liabilities, reserves and annuity
benefits 30,202 7,489 15 (A) 37,706
Other liabilities 11,215 834 10 (A) 12,059
Deferred income taxes 5,907 (87) 181 (A) 6,001
Liabilities of discontinued operations 2,406 --- --- 2,406
-------- --------- -------- ---------
Total liabilities 150,087 8,825 1,760 160,672
Total equity 11,417 989 (989) (A) 11,417
-------- --------- -------- ---------
Total liabilities and equity $161,504 $ 9,814 $ 771 $ 172,089
======== ========= ======== =========
<FN>
See accompanying notes to Unaudited Pro Forma Condensed, Combined Statement
of Financial Position.
</TABLE>
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GENERAL ELECTRIC CAPITAL SERVICES, INC. AND CONSOLIDATED AFFILIATES
AND ACQUIRED COMPANIES
Notes to Unaudited Pro Forma Condensed,
Combined Statement of Financial Position
Note 1: The basis of presentation for the unaudited pro forma
condensed, combined statement of financial position is contained on
pages 1 and 2 of this Form 8-K and should be read in conjunction
with the notes hereto.
Note 2: Pro forma adjustments and eliminations are as follows:
(A) Record the estimated purchase price, adjust the
assets to fair value, eliminate the equity and reflect the
funding of the acquisitions completed subsequent to July 1,
1995. Goodwill arising as a result of these acquisitions is
estimated to be $432 million.
(B) Allocate a portion ($337 million) of the assumed
purchase price to the present value of future profits (PVFP),
representing the present value of estimated net cash flows
embedded in existing insurance contracts as of July 1, 1995.
PVFP is actuarially estimated based on expected cash flows
from contracts in force, which include assumptions related to
investment income, surrender charges, assessments of
mortality, interest credited to in-force contracts, costs and
recurring expenses. Such net cash flows have been discounted
at 15% considering risks associated with the actuarial
assumptions used in estimating future net cash flows and
recent prices paid by others for similar books of business.
Amortization of PVFP, net of accretion, as a percent of the
unamortized PVFP balance is estimated as 12.55% for 1995,
13.20% for 1996 and 1997, 13.88% for 1998 and 15.00% for 1999.
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GENERAL ELECTRIC CAPITAL SERVICES, INC. AND CONSOLIDATED AFFILIATES
AND COMPANIES ACQUIRED
Unaudited Pro Forma Condensed, Combined Statement of Operations
For the Year Ended December 31, 1994
<TABLE>
<CAPTION>
(In millions)
GE Pro Forma
Capital Acquired Adjustments Pro Forma
Services Companies (Note 2) Combined
-------- --------- -------- --------
<S> <C> <C> <C> <C>
Earned income $19,875 $4,186 $ (24) (A) $ 24,037
Expenses
Interest 4,545 169 138 (B) 4,852
Operating and administrative 6,339 1,075 55 (C) 7,469
Insurance losses and policyholder and
annuity benefits 3,507 2,575 --- 6,082
Provision for losses on financing
receivables 873 42 --- 915
Depreciation and amortization of
buildings and equipment
and equipment on operating leases 1,662 1 --- 1,663
------- ------- ------- --------
Earnings before income taxes 2,949 324 (217) 3,056
Provision for income taxes 864 87 (76) (D) 875
------- ------- ------- --------
Net income from continuing operations $ 2,085 $ 237 $ (141) $ 2,181
======= ======= ======= ========
<FN>
See accompanying notes to Unaudited Pro Forma Condensed, Combined Statement
of Operations.
</TABLE>
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GENERAL ELECTRIC CAPITAL SERVICES, INC. AND CONSOLIDATED AFFILIATES
AND ACQUIRED COMPANIES
Unaudited Pro Forma Condensed, Combined Statement of Operations
For the Six Months Ended July 1, 1995
<TABLE>
<CAPTION>
(In millions)
GE Pro Forma Pro
Capital Acquired Adjustments Forma
Services Companies (Note 2) Combined
------- --------- ---------- --------
<S> <C> <C> <C> <C>
Earned income $12,169 $ 2,085 $ (9) (A) $ 14,245
Expenses
Interest 3,220 47 65 (B) 3,332
Operating and administrative 3,690 510 18 (C) 4,218
Insurance losses and policyholder and
annuity benefits 2,314 1,356 --- 3,670
Provision for losses on financing
receivables 358 13 --- 371
Depreciation and amortization of
buildings and equipment
and equipment on operating leases 943 4 --- 947
------- -------- -------- -------
Earnings before income taxes 1,644 155 (92) 1,707
Provision for income taxes 513 56 (32) (D) 537
------- -------- -------- -------
Net income from continuing
operations $1,131 $ 99 $ (60) $ 1,170
======= ======== ======== =======
<FN>
See accompanying notes to Unaudited Pro Forma Condensed, Combined Statement
of Financial Position.
</TABLE>
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GE CAPITAL SERVICES, INC. AND CONSOLIDATED AFFILIATES
COMPANIES ACQUIRED
Notes to Unaudited Pro Forma Condensed, Combined Statement of Operations
Note 1: The basis of presentation for the unaudited pro forma
condensed, combined statement of operations is contained on pages 1
and 2 of this Form 8-K and should be read in conjunction with the
notes hereto.
<TABLE>
Note 2: Pro forma adjustments and eliminations are as follows:
<CAPTION>
Year Ended Six Months Ended
December 31, 1994 July 1, 1995
----------------- ----------------
(In millions) (In millions)
<S> <C> <C>
(A) Elimination of net gains on sales of securities
realized by the Acquired Companies. Such gains would not
have been recognized if the Acquisitions had taken place
on January 1 of each period as such investments
would have been recorded at fair value as a result of
purchase business combination accounting. Gains, if any,
that would have been realized under GE Capital Services'
ownership are not determinable. $ (22) $ (5)
Elimination of investment income of the Acquired
Companies as a result of recording investments at fair
value assuming the Acquisitions were effected at January 1 (2) (4)
--------- ---------
$ (24) $ (9)
========= =========
(B) Interest expense on assumed additional borrowings
required to finance the Acquired Companies 307 112
Less: Elimination of interest expense
associated with the refinancing of the
Acquired Companies' debt by GE Capital Services (169) (47)
--------- ---------
$ 138 $ 65
========= =========
(C) Amortization of goodwill from the Acquisitions,
assumed to be over 15-20 years 48 14
Estimated costs, principally certain salaries, bonuses
and employee benefits, that the Acquired Companies
would not have incurred had the Acquisitions been
effected on January 1 (6) (1)
Elimination of amortization of deferred acquisition
costs which would not have been expensed during
1994 or the six months ended July 1, 1995 as a result
of purchase business combination accounting had the
Acquisitions been effected on January 1 (29) (16)
Assumed net amortization of PVFP 42 21
--------- ---------
$ 55 $ 18
========= =========
(D) Provisions for income taxes are based on the statutory
rate of 35%. The rate was applied to the pre-tax income
effects of pro forma adjustments for the year ended
December 31, 1994 and for the six months ended
July 1, 1995.
</TABLE>
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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: September 12,1995 By: /s/ J. A. Parke
------------ --------------------------------------
J. A. Parke, Senior Vice President,
Finance
(Principal Financial Officer)
Date: September 12, 1995 By: /s/ J. C. Amble
------------ -------------------------------------
J. C. Amble, Vice President and
Controller
(Principal Accounting Officer)
8
