<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------
FORM 10-Q
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| X | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 26, 1999
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)
DELAWARE 06-1109503
(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 August 9, 1999, 1,012 shares of common stock with a par value of $1,000 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>
TABLE OF CONTENTS
PAGE
--------
PART I - FINANCIAL INFORMATION.
Item 1. Financial Statements ........................... 1
Item 2. Management's Discussion and Analysis of Results
of Operations .................................. 6
Exhibit 12. Computation of Ratio of Earnings to Fixed
Charges and Computation of Ratio of Earnings
to Combined Fixed Charges and Preferred Stock
Dividends ...................................... 10
PART II - OTHER INFORMATION.
Item 6. Exhibits and Reports on Form 8-K ............... 11
Signatures ................................................... 12
Index to Exhibits ............................................ 13
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
<TABLE>
<CAPTION>
GENERAL ELECTRIC CAPITAL SERVICES, INC. AND CONSOLIDATED AFFILIATES
CONDENSED STATEMENT OF CURRENT AND RETAINED EARNINGS
(Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
-------------------- --------------------
JUNE 26, JUNE 27, JUNE 26, JUNE 27,
(In millions) 1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUES
Revenues from services ......................................... $ 11,417 $ 9,908 $ 22,160 $ 19,433
Sales of goods ................................................. 1,961 1,893 3,601 3,519
-------- -------- -------- --------
13,378 11,801 25,761 22,952
-------- -------- -------- --------
EXPENSES
Interest ....................................................... 2,237 2,187 4,350 4,212
Operating and administrative ................................... 3,859 3,221 7,497 6,379
Cost of goods sold ............................................. 1,806 1,728 3,317 3,210
Insurance losses and policyholder and annuity benefits ......... 2,705 2,400 5,324 4,613
Provision for losses on financing receivables .................. 442 409 821 741
Depreciation and amortization of buildings and equipment
and equipment on operating leases ............................. 823 604 1,508 1,260
Minority interest in net earnings of consolidated affiliates ... 45 33 83 66
-------- -------- -------- --------
11,917 10,582 22,900 20,481
-------- -------- -------- --------
EARNINGS
Earnings before income taxes ................................... 1,461 1,219 2,861 2,471
Provision for income taxes ..................................... (369) (286) (737) (657)
-------- -------- -------- --------
NET EARNINGS ................................................... 1,092 933 2,124 1,814
Dividends ...................................................... (409) (376) (795) (879)
Retained earnings at beginning of period ....................... 15,721 13,329 15,075 12,951
-------- -------- -------- --------
RETAINED EARNINGS AT END OF PERIOD ............................. $ 16,404 $ 13,886 $ 16,404 $ 13,886
======== ======== ======== ========
</TABLE>
See Notes to Condensed, Consolidated Financial Statements.
1
<PAGE>
ITEM 1. FINANCIAL STATEMENTS (Continued).
<TABLE>
<CAPTION>
GENERAL ELECTRIC CAPITAL SERVICES, INC. AND CONSOLIDATED AFFILIATES
CONDENSED STATEMENT OF FINANCIAL POSITION
JUNE DECEMBER
26, 31,
(In millions) 1999 1998
-------- --------
(Unaudited)
<S> <C> <C>
ASSETS
Cash and equivalents ................................................................... $ 4,142 $ 3,342
Investment securities .................................................................. 76,059 78,458
Financing receivables:
Time sales and loans, net of deferred income ......................................... 81,526 77,283
Investment in financing leases, net of deferred income ............................... 46,696 47,571
-------- --------
128,222 124,854
Allowance for losses on financing receivables ........................................ (3,376) (3,288)
-------- --------
Financing receivables - net ........................................................ 124,846 121,566
Other receivables - net ................................................................ 30,976 25,973
Inventories ............................................................................ 682 744
Equipment on operating leases (at cost), less accumulated amortization of $7,569
and $7,021 ............................................................................ 21,390 20,941
Intangible assets ...................................................................... 13,692 13,639
Other assets ........................................................................... 41,451 38,634
-------- --------
TOTAL ASSETS ..................................................................... $313,238 $303,297
======== ========
LIABILITIES AND SHARE OWNERS' EQUITY
Short-term borrowings .................................................................. $119,246 $113,162
Long-term borrowings:
Senior ............................................................................... 59,211 58,042
Subordinated ......................................................................... 996 996
Insurance liabilities, reserves and annuity benefits ................................... 80,897 77,259
Other liabilities ...................................................................... 21,665 21,062
Deferred income taxes .................................................................. 7,868 9,590
-------- --------
Total liabilities ................................................................ 289,883 280,111
-------- --------
Minority interest in equity of consolidated affiliates ................................. 4,287 3,459
-------- --------
Accumulated unrealized gains on investment securities - net ............................ 487 2,376
Accumulated foreign currency translation adjustments ................................... (314) (215)
-------- --------
Accumulated non-owner changes in share owners' equity .................................. 173 2,161
Capital stock .......................................................................... 11 11
Additional paid-in capital ............................................................. 2,480 2,480
Retained earnings ...................................................................... 16,404 15,075
-------- --------
Total share owners' equity ....................................................... 19,068 19,727
-------- --------
TOTAL LIABILITIES AND SHARE OWNERS' EQUITY ....................................... $313,238 $303,297
======== ========
</TABLE>
See Notes to Condensed, Consolidated Financial Statements.
2
<PAGE>
ITEM 1. FINANCIAL STATEMENTS (Continued).
<TABLE>
<CAPTION>
GENERAL ELECTRIC CAPITAL SERVICES, INC. AND CONSOLIDATED AFFILIATES
CONDENSED STATEMENT OF CASH FLOWS
(Unaudited)
SIX MONTHS ENDED
--------------------
JUNE 26, JUNE 27,
(In millions) 1999 1998
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings ........................................................................... $ 2,124 $ 1,814
Adjustments to reconcile net earnings to cash provided from operating activities:
Provision for losses on financing receivables ........................................ 821 741
Depreciation and amortization of buildings and equipment and
equipment on operating leases ....................................................... 1,508 1,260
Other - net .......................................................................... 2,400 1,074
-------- --------
Cash from operating activities ................................................... 6,853 4,889
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Increase in loans to customers ......................................................... (40,346) (30,376)
Principal collections from customers - loans ........................................... 35,456 28,864
Investment in equipment for financing leases ........................................... (7,949) (8,867)
Principal collections from customers - financing leases ................................ 6,426 7,121
Net change in credit card receivables .................................................. 858 (484)
Buildings and equipment and equipment on operating leases:
- additions ........................................................................ (4,165) (3,951)
- dispositions ..................................................................... 3,788 2,959
Payments for principal businesses purchased, net of cash acquired ...................... (5,978) (993)
Purchases of securities by insurance and annuity businesses ............................ (11,525) (12,010)
Dispositions and maturities of securities by insurance and annuity businesses .......... 11,236 9,335
Other - net ............................................................................ (2,860) (3,351)
-------- --------
Cash used for investing activities ............................................... (15,059) (11,753)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in borrowings (maturities 90 days or less) .................................. 6,212 5,294
Newly issued debt - short-term (maturities 91-365 days) ................................ 2,541 2,891
- long-term (longer than one year) ................................... 11,855 14,362
Proceeds - non-recourse, leveraged lease debt .......................................... 320 535
Repayments and other reductions:
- short-term (maturities 91-365 days) ................................ (10,249) (13,142)
- long-term (longer than one year) ................................... (1,130) (3,610)
Principal payments - non-recourse, leveraged lease debt ................................ (228) (247)
Proceeds from sales of investment contracts ............................................ 3,644 2,154
Redemption of investment contracts ..................................................... (3,464) (2,445)
Dividends paid ......................................................................... (795) (879)
Issuance of variable cumulative preferred stock by consolidated affiliate .............. 300 70
-------- --------
Cash from financing activities ................................................... 9,006 4,983
-------- --------
INCREASE (DECREASE) IN CASH AND EQUIVALENTS ............................................ 800 (1,881)
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD ............................................ 3,342 4,904
-------- --------
CASH AND EQUIVALENTS AT END OF PERIOD .................................................. $ 4,142 $ 3,023
======== ========
</TABLE>
See Notes to Condensed, Consolidated Financial Statements.
3
<PAGE>
ITEM 1. FINANCIAL STATEMENTS (Continued).
GENERAL ELECTRIC CAPITAL SERVICES, INC. AND CONSOLIDATED AFFILIATES
NOTES TO CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. The accompanying condensed quarterly financial statements represent
the adding together of General Electric Capital Services, Inc. and all
majority-owned and controlled affiliates (collectively called "the
Corporation" or "GECS"). 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. In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, Accounting for
Derivative Instruments and Hedging Activities (the "Statement"). The
Statement requires that, upon adoption, all derivative instruments
(including certain derivative instruments embedded in other contracts)
be recognized in the balance sheet at fair value, and that changes in
such fair values be recognized in earnings unless specific hedging
criteria are met. Changes in the values of derivatives that meet these
hedging criteria will ultimately offset related earnings effects of
the hedged items; effects of certain changes in fair value are
recorded in equity pending recognition in earnings. In June 1999, the
FASB delayed the required effective date of the new standard to
January 1, 2001. The impact of adoption will be determined by several
factors, including the specific hedging instruments in place and their
relationships to hedged items, as well as market conditions.
Management has not estimated the effect of adoption as it believes
that such determination will not be meaningful until closer to the
adoption date.
4. A summary of changes in share owner's equity that do not result
directly from transactions with share owners is provided below.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------
JUNE 26, JUNE 27,
(In millions) 1999 1998
-------- --------
<S> <C> <C>
Net earnings ........................................... $ 1,092 $ 933
Unrealized gains (losses) on investment securities - net (1,445) 163
Foreign currency translation adjustments ............... (27) 5
-------- --------
Total .................................................. $ (380) $ 1,101
======== ========
SIX MONTHS ENDED
--------------------
JUNE 26, JUNE 27,
1999 1998
-------- --------
Net earnings ........................................... $ 2,124 $ 1,814
Unrealized gains (losses) on investment securities - net (1,889) 424
Foreign currency translation adjustments ............... (99) (37)
-------- --------
Total .................................................. $ 136 $ 2,201
======== ========
</TABLE>
4
<PAGE>
ITEM 1. FINANCIAL STATEMENTS (Continued).
5. Revenues and net earnings of the Corporation, by operating segment,
for the three months and six months ended June 26, 1999 and June 27,
1998 were as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
-------------------- --------------------
JUNE 26, JUNE 27, JUNE 26, JUNE 27,
(In millions) 1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUES
Consumer Services .............. $ 4,064 $ 3,756 $ 8,079 $ 7,476
Equipment Management ........... 4,072 3,705 7,615 7,008
Mid-Market Financing ........... 1,141 834 2,155 1,642
Specialized Financing .......... 1,012 773 1,812 1,524
Specialty Insurance ............ 3,058 2,675 6,036 5,106
All other ...................... 31 58 64 196
-------- -------- -------- --------
Total revenues ................. $ 13,378 $ 11,801 $ 25,761 $ 22,952
======== ======== ======== ========
NET EARNINGS
Consumer Services .............. $ 212 $ 147 $ 423 $ 301
Equipment Management ........... 224 177 434 347
Mid-Market Financing ........... 130 95 246 198
Specialized Financing .......... 283 230 478 408
Specialty Insurance ............ 323 313 683 622
All other ...................... (80) (29) (140) (62)
-------- -------- -------- --------
Total net earnings ............. $ 1,092 $ 933 $ 2,124 $ 1,814
======== ======== ======== ========
</TABLE>
6. Subsequent Event - On July 22, 1999, the Corporation's Board of
Directors approved the amendment of the Corporation's certificate of
incorporation to effect a 10-for-1 stock split and to increase the
authorized common shares from 1,010 to 1,260 (calculated on a
post-split basis). The amendment became effective on July 22, 1999.
5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS.
OVERVIEW
Net earnings for the first half of 1999 were $2,124 million, a $310 million
(17%) increase over the first half of 1998. The results reflected the
globalization and diversity of the Corporation's businesses and were led by
double-digit increases in each of its five segments. The improvement in earnings
was largely attributable to the effects of continued asset growth, principally
from acquisitions of businesses and portfolios and higher origination volume,
and a higher level of asset gains.
OPERATING RESULTS
TOTAL REVENUES from all sources increased $2,809 million (12%) to $25,761
million for the first half of 1999, compared with $22,952 million for the first
half of 1998. This increase was led by acquisition-related growth in the
Mid-Market Financing segment and a combination of core and acquisition growth in
the Consumer Services, Specialty Insurance and Equipment Management segments.
INTEREST EXPENSE for the first half of 1999 was $4,350 million, 3% higher than
for the first half of 1998. The increase reflected the effects of higher average
borrowings used to finance asset growth, partially offset by the effects of
lower average interest rates. The composite interest rate on the Corporation's
borrowings for the first half of 1999 was 5.22% compared with 6.13% in the first
half of 1998.
OPERATING AND ADMINISTRATIVE EXPENSES were $7,497 million for the first half of
1999, an 18% increase over the first half of 1998. The increase primarily
reflected costs associated with businesses and portfolios acquired over the past
year, higher investment levels and increases in insurance commissions and other
costs that vary directly with increased revenues.
COST OF GOODS SOLD is associated with activities of the Corporation's computer
equipment distribution businesses. This cost amounted to $3,317 million for the
first half of 1999, compared with $3,210 million for the first half of 1998. The
increase primarily reflected increased volume partially offset by reduced
product costs.
INSURANCE LOSSES AND POLICYHOLDER AND ANNUITY BENEFITS increased $711 million to
$5,324 million for the first half of 1999, compared with the first half of 1998.
The increase primarily reflected the effects of business acquisitions and growth
in premium volume throughout the period, and to a lesser extent a higher loss
ratio caused by an increase in property incurred losses, partially offset by
improved market conditions in the mortgage insurance business.
PROVISION FOR LOSSES ON FINANCING RECEIVABLES increased to $821 million for the
first half of 1999 from $741 million for the first half of 1998. These
provisions principally related to credit cards, personal loans and auto loans
and auto leases in the Consumer Services segment, which are discussed below
under Portfolio Quality.
DEPRECIATION AND AMORTIZATION OF BUILDINGS AND EQUIPMENT AND EQUIPMENT ON
OPERATING LEASES increased $248 million to $1,508 million for the first half of
1999 compared with $1,260 million for the first half of 1998. The increase was
principally the result of higher levels of equipment on operating leases,
primarily reflecting acquisition growth.
PROVISION FOR INCOME TAXES was $737 million for the first half of 1999 (an
effective tax rate of 25.8%), compared with $657 million for the first half of
1998 (an effective tax rate of 26.6%). The higher provision for income taxes
primarily reflected increased pre-tax earnings subject to statutory rates
partially offset by the lower effective tax rate caused by decreased taxes on
non-U.S. earnings.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS (Continued).
OPERATING SEGMENTS
Revenues and net earnings of the Corporation, by operating segment, for the six
months ended June 26, 1999 and June 27, 1998 are summarized and discussed below.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
--------------------
JUNE 26, JUNE 27,
(In millions) 1999 1998
-------- --------
<S> <C> <C>
REVENUES
Consumer Services ...................................... $ 8,079 $ 7,476
Equipment Management ................................... 7,615 7,008
Mid-Market Financing ................................... 2,155 1,642
Specialized Financing .................................. 1,812 1,524
Specialty Insurance .................................... 6,036 5,106
All other .............................................. 64 196
-------- --------
Total revenues ......................................... $ 25,761 $ 22,952
======== ========
NET EARNINGS
Consumer Services ...................................... $ 423 $ 301
Equipment Management ................................... 434 347
Mid-Market Financing ................................... 246 198
Specialized Financing .................................. 478 408
Specialty Insurance .................................... 683 622
All other .............................................. (140) (62)
-------- --------
Total net earnings ..................................... $ 2,124 $ 1,814
======== ========
</TABLE>
Consumer Services revenues increased 8% and net earnings increased 40% for the
first half of 1999, compared to the first half of 1998. The increase in revenues
was led by acquisition-related and core growth at Global Consumer Finance and GE
Financial Assurance, the Corporation's consumer savings and insurance business,
partially offset by the effects of planned asset reductions in U.S. consumer
credit card and automobile financing activities. The increase in net earnings
was led by a combination of acquisition-related and core growth at Global
Consumer Finance.
Equipment Management revenues grew 9% and net earnings grew 25% for the first
half of 1999, compared to the corresponding period in 1998. The increase in
revenues was primarily attributable to increased volume at Information
Technology Solutions, acquisition-related growth in fleet services and asset
gains and core growth in aviation services. The increase in net earnings was led
by asset gains.
Mid-Market Financing revenues grew 31% and net earnings increased 24% for the
first half of 1999, compared to the corresponding period in 1998, primarily as a
result of acquisition growth.
Specialized Financing revenues rose 19% and net earnings increased 17% in the
first half of 1999, compared to the first half of 1998. The increases in
revenues and net earnings principally reflected asset growth as well as the
effects of asset gains, including securitizations.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS (Continued).
Specialty Insurance revenues grew 18% and net earnings grew 10% in the first
half of 1999, compared to the corresponding period in 1998. These increases
resulted from increased premium and investment income associated with
acquisitions, origination volume and continued growth in the investment
portfolios, as well as a higher level of realized gains on investment
securities. Net earnings were also favorably affected by improved conditions in
the mortgage insurance business, the result of improvements in loss experience,
partially offset by increased frequency and severity of property losses in the
reinsurance business.
PORTFOLIO QUALITY
FINANCING RECEIVABLES are the financing businesses largest asset and their
primary source of revenues. The portfolio of financing receivables, before
allowance for losses, increased to $128.2 billion at June 26, 1999, from $124.9
billion at the end of 1998, primarily reflecting the effects of higher
origination volume and acquisition growth, partially offset by foreign currency
translation on European financing receivables. The related allowances for losses
at June 26, 1999 amounted to $3.4 billion ($3.3 billion at the end of 1998) and,
in management's judgment, are 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 (or for which collection has otherwise become doubtful)
and "reduced-earning" receivables are commercial receivables whose terms have
been restructured to a below-market yield. The following discussion of the
nonearning and reduced-earning receivable balances and write-off amounts
excludes amounts related to Montgomery Ward Holding Corp. and affiliates, which
are separately discussed below.
CONSUMER FINANCING RECEIVABLES, primarily credit card and personal loans and
auto loans and leases, were $51.7 billion at June 26, 1999, an increase of $0.1
billion from the end of 1998. Nonearning receivables were $1.1 billion at June
26, 1999, 2.1% of total consumer financing receivables, compared with $1.3
billion, 2.4% of total consumer receivables, at December 31, 1998. Write-offs of
consumer receivables decreased to $481 million for the first half of 1999,
compared with $714 million for the first half of 1998. This decrease was
primarily attributable to the effects of lower delinquencies during the first
half of 1999 as well as the effects of lower average receivable balances
resulting from securitization and other sales of portfolios.
OTHER FINANCING RECEIVABLES, totaling $76.5 billion at June 26, 1999 ($73.3
billion at December 31, 1998), consisted of a diverse commercial, industrial and
equipment loan and lease portfolio. Related nonearning and reduced-earning
receivables were less than 1% of total other financing receivables at June 26,
1999 and December 31, 1998.
As discussed in the Corporation's Annual Report on Form 10-K for the year ended
December 31, 1998, Montgomery Ward Holding Corp. ("MWHC") filed a bankruptcy
petition for reorganization in 1997. The Corporation's recorded investment in
MWHC and affiliates at June 26, 1999 was $565 million ($622 million at the end
of 1998). Subsequent to the filing of the petition, the Corporation committed to
provide MWHC up to $1.0 billion in debtor-in-possession financing, a majority of
which has been syndicated: the Corporation's loans under this facility at June
26, 1999 were approximately $226 million. The Corporation also provides
revolving credit card financing directly to customers of MWHC and affiliates;
such receivables totaled $2.8 billion at June 26, 1999, including $1.6 billion
that have been sold with recourse. The obligations of customers with respect to
these receivables are not affected by the bankruptcy filing. On August 2, 1999,
MWHC emerged from bankruptcy under a plan of reorganization that was approved on
July 15, 1999. As part of the restructuring, the Corporation acquired The
Signature Group, which was not in bankruptcy, as well as the equity of the
reorganized retailer.
The Corporation held loans and leases to commercial airlines amounting to $10.7
billion at June 26, 1999, up from $10.2 billion at the end of 1998.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS (CONTINUED).
OTHER MATTERS
YEAR 2000
As discussed in the Corporation's Annual Report on Form 10-K for the year ended
December 31, 1998, the Corporation is applying a Six Sigma quality approach to
identify and mitigate Year 2000 issues in its information systems, products and
services, facilities and suppliers, as well as to assess the extent to which
Year 2000 issues will affect its customers. Each business has a Year 2000 leader
who oversees a multi-functional project team responsible for remediation and
contingency planning, applying a Six Sigma quality approach in four phases: (1)
define/measure- identify and inventory possible sources of Year 2000 issues; (2)
analyze- determine the nature and extent of Year 2000 issues and develop project
plans to address those issues; (3) improve- execute project plans and perform a
majority of the testing; and (4) control- complete testing, continue monitoring
readiness and complete necessary contingency plans. As of the end of June 1999,
virtually all significant information systems, products and services,
facilities, and suppliers were in the control phase. As a final step in the
control phase, the Corporation is developing, testing and implementing
contingency plans to ameliorate any potential internal or external disruption of
critical business processes. The specific actions identified in such contingency
plans differ depending on circumstances, but most often include manual
work-arounds, deployment of backup or secondary technologies, rearranging work
schedules, and substitution of suppliers, as appropriate. While the Corporation
does not expect significant disruptions of critical business processes caused by
internal Year 2000 issues, the likelihood of externally-caused disruptions and
the ability of the contingency plans to ameliorate the effects of any such
externally-caused disruptions is not determinable. The total estimate of Year
2000 expenditures, adjusted for increases related to acquired companies, is in
line with previous projections. The activities related to Year 2000 efforts
necessarily involve estimates and projections of activities and resources that
will be required in the future. These estimates and projections could change as
work progresses.
9
<PAGE>
EXHIBIT 12
<TABLE>
<CAPTION>
GENERAL ELECTRIC CAPITAL SERVICES, INC. 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
SIX MONTHS ENDED JUNE 26, 1999
(Unaudited)
RATIO OF
EARNINGS
TO
COMBINED
FIXED
RATIO OF CHARGES
EARNINGS AND
TO PREFERRED
FIXED STOCK
(Dollar amounts in millions) CHARGES DIVIDENDS
-------- --------
<S> <C> <C>
Net earnings ........................................... $ 2,124 $ 2,124
Provision for income taxes ............................. 737 737
Minority interest in net earnings of consolidated
affiliates ............................................ 83 83
-------- --------
Earnings before provision for income taxes and
minority interest ..................................... 2,944 2,944
-------- --------
Fixed charges:
Interest ............................................. 4,461 4,461
One-third of rentals ................................. 171 171
-------- --------
Total fixed charges .................................... 4,632 4,632
-------- --------
Less interest capitalized, net of amortization ......... 48 48
-------- --------
Earnings before provision for income taxes and
minority interest, plus fixed charges ................. $ 7,528 $ 7,528
======== ========
Ratio of earnings to fixed charges ..................... 1.63
========
Preferred stock dividend requirements .................. $ --
Ratio of earnings before provision for income taxes to
net earnings .......................................... 1.35
Preferred stock dividend factor on pre-tax basis ....... --
Fixed charges .......................................... 4,632
--------
Total fixed charges and preferred stock dividend
requirements .......................................... $ 4,632
========
Ratio of earnings to combined fixed charges and
preferred stock dividends ............................. 1.63
========
</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.
10
<PAGE>
PART II--OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a. EXHIBITS.
Exhibit 3(i). A complete copy of the Certificate of Incorporation
of the Corporation as last amended on July 22, 1999 and
currently in effect, consisting of the following: (a) the
Certificate of Incorporation of the Corporation as in
effect immediately prior to the filing of a Certificate of
Amendment on July 22, 1999 (incorporated by reference to
Exhibit 3(i) of the Corporation's Form 10-K Report for the
year ended December 31, 1993); and (b) a Certificate of
Amendment filed with the Office of the Secretary of State,
State of Delaware on July 22, 1999.
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.
11
<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 SERVICES, INC.
---------------------------------------
(Registrant)
Date: August 10, 1999 By: /s/ J.A. Parke
-----------------------------------
J.A. Parke,
Executive Vice President
and Chief Financial Officer
(Principal Financial Officer)
Date: August 10, 1999 By: /s/ J.C. Amble
-----------------------------------
J.C. Amble,
Vice President and Controller
(Principal Accounting Officer)
12
<PAGE>
GENERAL ELECTRIC CAPITAL SERVICES, INC. AND CONSOLIDATED AFFILIATES
INDEX TO EXHIBITS
EXHIBIT NO. PAGE
- ----------- --------
3(i) A complete copy of the Certificate of Incorporation
of the Corporation as last amended on July 22, 1999
and currently in effect, consisting of the following:
(a) the Certificate of Incorporation of the
Corporation as in effect immediately prior to the
filing of a Certificate of Amendment on July 22, 1999
(incorporated by reference to Exhibit 3(i) of the
Corporation's Form 10-K Report for the year ended
December 31, 1993) ; and (b) a Certificate of
Amendment filed with the Office of the Secretary of
State, State of Delaware on July 22, 1999. ......... 14
12 Computation of ratio of earnings to fixed charges and
computation of ratio of earnings to combined fixed
charges and preferred stock dividends ............... 16
27 Financial Data Schedule (filed electronically only)
13
<PAGE>
Page 1
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
GENERAL ELECTRIC CAPITAL SERVICES, INC.
General Electric Capital Services, Inc., a corporation organized
and existing under and by virtue of the General Corporation Law of the
State of Delaware, DOES HEREBY CERTIFY:
FIRST: That at a special meeting of the Board of Directors of
General Electric Capital Services, Inc. held on July 22, 1999 a
resolution was duly adopted setting forth a proposed amendment to the
Certificate of Incorporation of said corporation, declaring said
amendment to be advisable and directing that said amendment be
considered by the stockholders pursuant to written consents signed by
all stockholders of said corporation. The resolution setting forth
said amendment and directing that said amendment be considered by the
stockholders is as follows:
RESOLVED, that the Board of Directors of General Electric
Capital Services, Inc. (hereinafter referred to as the
"corporation"), declares it advisable, and recommends to the
stockholders of the corporation, that the Certificate of
Incorporation of the corporation be amended by amending the first
paragraph of "Article 4" of the Certificate of Incorporation to
read in its entirety as follows:
"4. The aggregate amount of the capital stock which the
corporation is authorized to issue is $801,260,000
consisting of 81,260 shares, of which 1,260 shares, $1,000
par value, shall be Common Stock and 80,000 shares, $10,000
par value, shall be Preferred Stock. The number of
authorized shares of Preferred Stock may be increased or
decreased (but not below the number of shares thereof then
outstanding) by the affirmative vote of the holders of a
majority of the stock of the corporation entitled to vote
irrespective of subsection (b) (2) of Section 242 of the
General Corporation Law of the State of Delaware."
14
<PAGE>
Page 2
SECOND: That thereafter, by written consents signed and
delivered pursuant to Section 228 of the General Corporation Law
of the State of Delaware, the holders of all of the outstanding
stock of General Electric Capital Services, Inc., consented to
and authorized said amendment.
THIRD: That said amendment was duly adopted in accordance
with the provisions of Section 242 of the General Corporation Law
of the State of Delaware.
FOURTH: The 101 shares, par value $10,000 per share, of
Common Stock, which were authorized and outstanding immediately
prior to the date hereof, are hereby split at the rate of 10 for
1 into 1,010 shares, par value $1,000 per share, of Common Stock
issued and outstanding.
IN WITNESS WHEREOF, said General Electric Capital Services, Inc.,
has caused this certificate to be signed by James A. Parke, its
Executive Vice President and Chief Financial Officer and attested by
Nancy E. Barton, Senior Vice President, General Counsel and Secretary,
this 22nd day of July, 1999.
General Electric Capital Services, Inc.
By: /s/ James A. Parke
-----------------------------
Executive Vice President and
Chief Financial Officer
ATTEST:
By: /s/ Nancy E. Barton
------------------------------
Senior Vice President, General
Counsel and Secretary
15
<PAGE>
EXHIBIT 12
<TABLE>
<CAPTION>
GENERAL ELECTRIC CAPITAL SERVICES, INC. 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
SIX MONTHS ENDED JUNE 26, 1999
(Unaudited)
RATIO OF
EARNINGS
TO
COMBINED
FIXED
RATIO OF CHARGES
EARNINGS AND
TO PREFERRED
FIXED STOCK
(Dollar amounts in millions) CHARGES DIVIDENDS
-------- --------
<S> <C> <C>
Net earnings ........................................... $ 2,124 $ 2,124
Provision for income taxes ............................. 737 737
Minority interest in net earnings of consolidated
affiliates ............................................ 83 83
-------- --------
Earnings before provision for income taxes and
minority interest ..................................... 2,944 2,944
-------- --------
Fixed charges:
Interest ............................................. 4,461 4,461
One-third of rentals ................................. 171 171
-------- --------
Total fixed charges .................................... 4,632 4,632
-------- --------
Less interest capitalized, net of amortization ......... 48 48
-------- --------
Earnings before provision for income taxes and
minority interest, plus fixed charges ................. $ 7,528 $ 7,528
======== ========
Ratio of earnings to fixed charges ..................... 1.63
========
Preferred stock dividend requirements .................. $ --
Ratio of earnings before provision for income taxes to
net earnings .......................................... 1.35
Preferred stock dividend factor on pre-tax basis ....... --
Fixed charges .......................................... 4,632
--------
Total fixed charges and preferred stock dividend
requirements .......................................... $ 4,632
========
Ratio of earnings to combined fixed charges and
preferred stock dividends ............................. 1.63
========
</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.
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD ENDED JUNE 26, 1999, AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<CIK> 0000797463
<NAME> GENERAL ELECTRIC CAPITAL SERVICES, INC.
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-26-1999
<CASH> 4,142
<SECURITIES> 76,059
<RECEIVABLES> 128,222
<ALLOWANCES> 3,376
<INVENTORY> 682
<CURRENT-ASSETS> 0
<PP&E> 33,764
<DEPRECIATION> 9,396
<TOTAL-ASSETS> 313,238
<CURRENT-LIABILITIES> 0
<BONDS> 60,207
0
10
<COMMON> 1
<OTHER-SE> 19,057
<TOTAL-LIABILITY-AND-EQUITY> 313,238
<SALES> 3,601
<TOTAL-REVENUES> 25,761
<CGS> 3,317
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 7,497
<LOSS-PROVISION> 821
<INTEREST-EXPENSE> 4,350
<INCOME-PRETAX> 2,861
<INCOME-TAX> 737
<INCOME-CONTINUING> 2,124
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,124
<EPS-BASIC> 0.00
<EPS-DILUTED> 0.00
</TABLE>
