<PAGE>
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 September 25, 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 October 26, 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 NINE MONTHS ENDED
------------------- --------------------
SEPTEMBER SEPTEMBER SEPTEMBER SEPTEMBER
25, 26, 25, 26,
(In millions) 1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUES
Revenues from services ......................................... $ 11,650 $ 10,210 $ 33,810 $ 29,643
Sales of goods ................................................. 2,352 1,806 5,953 5,325
-------- -------- -------- --------
14,002 12,016 39,763 34,968
-------- -------- -------- --------
EXPENSES
Interest ....................................................... 2,291 2,188 6,641 6,400
Operating and administrative ................................... 4,010 3,311 11,507 9,690
Cost of goods sold ............................................. 2,124 1,681 5,441 4,891
Insurance losses and policyholder and annuity benefits ......... 2,764 2,239 8,088 6,852
Provision for losses on financing receivables .................. 227 306 1,048 1,047
Depreciation and amortization of buildings and
equipment and equipment on operating leases ................... 792 669 2,300 1,929
Minority interest in net earnings of consolidated affiliates ... 49 38 132 104
-------- -------- -------- --------
12,257 10,432 35,157 30,913
-------- -------- -------- --------
EARNINGS
Earnings before income taxes ................................... 1,745 1,584 4,606 4,055
Provision for income taxes ..................................... (483) (502) (1,220) (1,159)
-------- -------- -------- --------
NET EARNINGS ................................................... 1,262 1,082 3,386 2,896
Dividends ...................................................... (473) (433) (1,268) (1,312)
Retained earnings at beginning of period ....................... 16,404 13,886 15,075 12,951
-------- -------- -------- --------
RETAINED EARNINGS AT END OF PERIOD ............................. $ 17,193 $ 14,535 $ 17,193 $ 14,535
======== ======== ======== ========
</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
SEPTEMBER DECEMBER
25, 31,
(In millions) 1999 1998
-------- --------
(Unaudited)
<S> <C> <C>
ASSETS
Cash and equivalents ................................................................... $ 5,109 $ 3,342
Investment securities .................................................................. 77,827 78,458
Financing receivables:
Time sales and loans, net of deferred income ......................................... 84,679 77,283
Investment in financing leases, net of deferred income ............................... 46,124 47,571
-------- --------
130,803 124,854
Allowance for losses on financing receivables ........................................ (3,447) (3,288)
-------- --------
Financing receivables - net ........................................................ 127,356 121,566
Other receivables - net ................................................................ 30,268 25,973
Inventories ............................................................................ 1,376 744
Equipment on operating leases (at cost), less accumulated amortization of
$7,700 and $7,021 ..................................................................... 22,227 20,941
Intangible assets ...................................................................... 14,376 13,639
Other assets ........................................................................... 45,268 38,634
-------- --------
TOTAL ASSETS ..................................................................... $323,807 $303,297
======== ========
LIABILITIES AND SHARE OWNERS' EQUITY
Short-term borrowings .................................................................. $118,394 $113,162
Long-term borrowings:
Senior ............................................................................... 64,618 58,042
Subordinated ......................................................................... 996 996
Insurance liabilities, reserves and annuity benefits ................................... 83,898 77,259
Other liabilities ...................................................................... 24,377 21,062
Deferred income taxes .................................................................. 7,639 9,590
-------- --------
Total liabilities ................................................................ 299,922 280,111
-------- --------
Minority interest in equity of consolidated affiliates ................................. 4,358 3,459
-------- --------
Accumulated unrealized gains (losses) on investment securities - net ................... (66) 2,376
Accumulated foreign currency translation adjustments ................................... (283) (215)
-------- --------
Accumulated non-owner changes in share owners' equity .................................. (349) 2,161
Capital stock .......................................................................... 11 11
Additional paid-in capital ............................................................. 2,672 2,480
Retained earnings ...................................................................... 17,193 15,075
-------- --------
Total share owners' equity ....................................................... 19,527 19,727
-------- --------
TOTAL LIABILITIES AND SHARE OWNERS' EQUITY ....................................... $323,807 $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)
NINE MONTHS ENDED
--------------------
SEPTEMBER SEPTEMBER
25, 26,
(In millions) 1999 1998
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings ........................................................................... $ 3,386 $ 2,896
Adjustments to reconcile net earnings to cash provided from operating
activities:
Provision for losses on financing receivables ...................................... 1,048 1,047
Depreciation and amortization of buildings and equipment and equipment
on operating leases ............................................................... 2,300 1,929
Other - net ........................................................................ 3,812 2,126
-------- --------
Cash from operating activities ................................................... 10,546 7,998
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Increase in loans to customers ......................................................... (68,540) (48,120)
Principal collections from customers - loans ........................................... 59,128 43,711
Investment in equipment for financing leases ........................................... (12,503) (13,886)
Principal collections from customers - financing leases ................................ 13,008 11,878
Net change in credit card receivables .................................................. 2,156 3,307
Buildings and equipment and equipment on operating leases:
- additions ........................................................................ (7,559) (4,050)
- dispositions ..................................................................... 4,408 2,031
Payments for principal businesses purchased, net of cash acquired ...................... (6,674) (8,444)
Purchases of securities by insurance and annuity businesses ............................ (20,932) (16,437)
Dispositions and maturities of securities by insurance and annuity businesses .......... 20,222 13,263
Other - net ............................................................................ (2,909) (5,220)
-------- --------
Cash used for investing activities ............................................... (20,195) (21,967)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in borrowings (maturities 90 days or less) .................................. (5,339) 7,050
Newly issued debt - short-term (maturities 91-365 days) ................................ 3,515 4,126
- long-term (longer than one year) ................................... 23,073 26,159
Proceeds - non-recourse, leveraged lease debt .......................................... 559 971
Repayments and other reductions:
- short-term (maturities 91-365 days) ................................ (8,205) (17,992)
- long-term (longer than one year) ................................... (1,302) (4,298)
Principal payments - non-recourse, leveraged lease debt ................................ (248) (333)
Proceeds from sales of investment contracts ............................................ 5,768 3,464
Redemption of investment contracts ..................................................... (5,537) (3,905)
Dividends paid ......................................................................... (1,268) (1,312)
Issuance of variable cumulative preferred stock by consolidated affiliates ............. 400 170
-------- --------
Cash from financing activities ......................................................... 11,416 14,100
-------- --------
INCREASE IN CASH AND EQUIVALENTS ....................................................... 1,767 131
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD ............................................ 3,342 4,904
-------- --------
CASH AND EQUIVALENTS AT END OF PERIOD .................................................. $ 5,109 $ 5,035
======== ========
</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 owners' equity that do not result directly
from transactions with share owners is provided below.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------
SEPTEMBER SEPTEMBER
25, 26,
(In millions) 1999 1998
-------- --------
<S> <C> <C>
Net earnings ........................................................................... $ 1,262 $ 1,082
Unrealized losses on investment securities - net ....................................... (553) (184)
Foreign currency translation adjustments ............................................... 31 (39)
-------- --------
Total ................................................................................ $ 740 $ 859
======== ========
NINE MONTHS ENDED
--------------------
SEPTEMBER SEPTEMBER
25, 26,
1999 1998
-------- --------
Net earnings ........................................................................... $ 3,386 $ 2,896
Unrealized gains (losses) on investment securities - net ............................... (2,442) 240
Foreign currency translation adjustments ............................................... (68) (76)
-------- --------
Total ................................................................................ $ 876 $ 3,060
======== ========
</TABLE>
4
<PAGE>
ITEM 1. FINANCIAL STATEMENTS (Continued)
5. Revenues and net earnings of the Corporation, by operating segment, for
the three months and nine months ended September 25, 1999 and
September 26, 1998 were as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
-------------------- --------------------
SEPTEMBER SEPTEMBER SEPTEMBER SEPTEMBER
25, 26, 25, 26,
(In millions) 1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUES
Consumer Services .............................................. $ 4,855 $ 4,054 $ 12,934 $ 11,530
Equipment Management ........................................... 3,834 3,637 11,449 10,645
Mid-Market Financing ........................................... 1,164 988 3,319 2,630
Specialized Financing .......................................... 1,042 921 2,854 2,445
Specialty Insurance ............................................ 3,116 2,541 9,152 7,647
All other ...................................................... (9) (125) 55 71
-------- -------- -------- --------
Total revenues ............................................... $ 14,002 $ 12,016 $ 39,763 $ 34,968
======== ======== ======== ========
NET EARNINGS
Consumer Services .............................................. $ 397 $ 250 $ 820 $ 551
Equipment Management ........................................... 171 172 605 519
Mid-Market Financing ........................................... 167 132 413 330
Specialized Financing .......................................... 255 228 733 636
Specialty Insurance ............................................ 360 328 1,043 950
All other ...................................................... (88) (28) (228) (90)
-------- -------- -------- --------
Total net earnings ........................................... $ 1,262 $ 1,082 $ 3,386 $ 2,896
======== ======== ======== ========
</TABLE>
5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
OVERVIEW
Net earnings for the first nine months of 1999 were $3,386 million, a $490
million (17%) increase over the first nine months 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.
OPERATING RESULTS
TOTAL REVENUES from all sources increased $4,795 million (14%) to $39,763
million for the first nine months of 1999, compared with $34,968 million for the
first nine months of 1998. This increase primarily reflected 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 nine months of 1999 was $6,641 million, 4% higher
than for the first nine months 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 nine months of 1999 was 5.16% compared
with 5.99% in the first nine months of 1998.
OPERATING AND ADMINISTRATIVE EXPENSES were $11,507 million for the first nine
months of 1999; a 19% increase over the first nine months 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.
COST OF GOODS SOLD is associated with activities of the Corporation's computer
equipment distribution and retail businesses. This cost amounted to $5,441
million for the first nine months of 1999, compared with $4,891 million for the
first nine months of 1998. The increase primarily reflected the consolidation of
the retail operations.
INSURANCE LOSSES AND POLICYHOLDER AND ANNUITY BENEFITS increased $1,236 million
to $8,088 million for the first nine months of 1999, compared with the first
nine months of 1998. The increase primarily reflected the effects of business
acquisitions, growth in premium volume, and a higher loss ratio within the
reinsurance business attributable to an increase in property-related incurred
losses, partially offset by improved market conditions in the mortgage insurance
business.
PROVISION FOR LOSSES ON FINANCING RECEIVABLES was $1,048 million for the first
nine months of 1999 which was primarily unchanged compared to the first nine
months 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 $371 million to $2,300 million for the first nine
months of 1999 compared with $1,929 million for the first nine months 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 $1,220 million for the first nine months of 1999
(an effective tax rate of 26.5%), compared with $1,159 million for the first
nine months of 1998 (an effective tax rate of 28.6%). 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 nine
months ended September 25, 1999 and September 26, 1998 are summarized and
discussed below.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
--------------------
SEPTEMBER SEPTEMBER
25, 26,
(In millions) 1999 1998
-------- --------
<S> <C> <C>
REVENUES
Consumer Services ...................................................................... $ 12,934 $ 11,530
Equipment Management ................................................................... 11,449 10,645
Mid-Market Financing ................................................................... 3,319 2,630
Specialized Financing .................................................................. 2,854 2,445
Specialty Insurance .................................................................... 9,152 7,647
All other .............................................................................. 55 71
-------- --------
Total revenues ....................................................................... $ 39,763 $ 34,968
======== ========
NET EARNINGS
Consumer Services ...................................................................... $ 820 $ 551
Equipment Management ................................................................... 605 519
Mid-Market Financing ................................................................... 413 330
Specialized Financing .................................................................. 733 636
Specialty Insurance .................................................................... 1,043 950
All other .............................................................................. (228) (90)
-------- --------
Total net earnings ................................................................... $ 3,386 $ 2,896
======== ========
</TABLE>
Consumer Services revenues increased 12% and net earnings increased 49% for the
first nine months of 1999, compared to the first nine months of 1998. The
increase in revenues was led by acquisition-related and core growth in the
non-U.S. consumer finance business and the consumer savings and insurance
business, partially offset by the effects of 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 in the non-U.S.
consumer finance activities.
Equipment Management revenues grew 8% and net earnings grew 17% for the first
nine months of 1999, compared to the corresponding period in 1998. The increase
in revenues and net earnings was primarily attributable to operational
improvements in the information technology products and services business,
acquisition-related growth in fleet services and structured sales of aircraft
and core growth in aviation services.
Mid-Market Financing revenues grew 26% and net earnings increased 25% for the
first nine months of 1999, compared to the corresponding period in 1998,
primarily as a result of acquisition-related growth.
Specialized Financing revenues rose 17% and net earnings increased 15% in the
first nine months of 1999, compared to the first nine months of 1998. The
increases in revenues and net earnings principally reflected asset growth as
well as the effects of asset gains, including securitizations.
Specialty Insurance revenues grew 20% and net earnings grew 10% in the first
nine months of 1999, compared to the corresponding period in 1998. The increase
in revenues 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
in the reinsurance business. The increase in net earnings was principally the
result of improved conditions in the mortgage insurance business and, in the
reinsurance business, a higher level of realized gains on investment securities,
partially offset by increased frequency and severity of property-related losses.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS (Continued)
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 $130.8 billion at September 25, 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 September 25, 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.
CONSUMER FINANCING RECEIVABLES, primarily credit card and personal loans and
auto loans and leases, were $49.0 billion at September 25, 1999, a decrease of
$2.6 billion from the end of 1998. Nonearning receivables were $0.9 billion at
September 25, 1999, 1.8% 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 $0.9 billion for the first nine
months of 1999 compared with $1.1 billion for the first nine months of 1998.
This decrease was primarily attributable to the effects of lower delinquencies
during the first nine months of 1999 as well as the effects of lower average
receivable balances resulting from securitization and other sales of portfolios.
OTHER FINANCING RECEIVABLES, totaling $81.8 billion at September 25, 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 September
25, 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. 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
("Signature"), which was not in bankruptcy, for cash, $285 million of which was
collected on loans to MWHC. The Corporation also acquired the equity of the
reorganized retailer, Montgomery Ward, LLC ("Wards"), in exchange for the
Corporation's remaining loans to MWHC. After these transactions, the
Corporation's net investment in Wards and MWHC was $327 million. The financial
condition at September 25, 1999, and the results of operations from August 2,
1999 to September 25, 1999, of Signature and Wards are included in the Consumer
Services segment, and the increases in Sales of Goods and Cost of Goods Sold for
the first nine months of 1999 as compared to the corresponding period in 1998
were substantially the result of the consolidation of Wards.
The Corporation held loans and leases to commercial airlines amounting to $10.8
billion at September 25, 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. 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 has developed, tested and is prepared to
implement contingency plans to minimize 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 management 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 minimize 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
NINE MONTHS ENDED SEPTEMBER 25, 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 ........................................... $ 3,386 $ 3,386
Provision for income taxes ............................. 1,220 1,220
Minority interest in net earnings of consolidated
affiliates ............................................ 132 132
-------- --------
Earnings before provision for income taxes and
minority interest ..................................... 4,738 4,738
-------- --------
Fixed charges:
Interest ............................................. 6,805 6,805
One-third of rentals ................................. 256 256
-------- --------
Total fixed charges .................................... 7,061 7,061
-------- --------
Less interest capitalized, net of amortization ......... (64) (64)
-------- --------
Earnings before provision for income taxes and minority
interest, plus fixed charges .......................... $ 11,735 $ 11,735
======== ========
Ratio of earnings to fixed charges ..................... 1.66
========
Preferred stock dividend requirements .................. $ --
Ratio of earnings before provision for income taxes
to net earnings ....................................... 1.36
--------
Preferred stock dividend factor on pre-tax basis ....... --
Fixed charges .......................................... 7,061
--------
Total fixed charges and preferred stock dividend
requirements .......................................... $ 7,061
========
Ratio of earnings to combined fixed charges and
preferred stock dividends ............................. 1.66
========
</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 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: October 26, 1999 By: /s/ J.A. Parke
------------------------------------
J.A. Parke,
Executive Vice President
and Chief Financial Officer
(Principal Financial Officer)
Date: October 26, 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
- ----------- --------
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>
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
NINE MONTHS ENDED SEPTEMBER 25, 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 ........................................... $ 3,386 $ 3,386
Provision for income taxes ............................. 1,220 1,220
Minority interest in net earnings of consolidated
affiliates ............................................ 132 132
-------- --------
Earnings before provision for income taxes and
minority interest ..................................... 4,738 4,738
-------- --------
Fixed charges:
Interest ............................................. 6,805 6,805
One-third of rentals ................................. 256 256
-------- --------
Total fixed charges .................................... 7,061 7,061
-------- --------
Less interest capitalized, net of amortization ......... (64) (64)
-------- --------
Earnings before provision for income taxes and minority
interest, plus fixed charges .......................... $ 11,735 $ 11,735
======== ========
Ratio of earnings to fixed charges ..................... 1.66
========
Preferred stock dividend requirements .................. $ --
Ratio of earnings before provision for income taxes
to net earnings ....................................... 1.36
--------
Preferred stock dividend factor on pre-tax basis ....... --
Fixed charges .......................................... 7,061
--------
Total fixed charges and preferred stock dividend
requirements .......................................... $ 7,061
========
Ratio of earnings to combined fixed charges and
preferred stock dividends ............................. 1.66
========
</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>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD ENDED SEPTEMBER 25, 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-25-1999
<CASH> 5,109
<SECURITIES> 77,827
<RECEIVABLES> 130,803
<ALLOWANCES> 3,447
<INVENTORY> 1,376
<CURRENT-ASSETS> 0
<PP&E> 36,601
<DEPRECIATION> 10,216
<TOTAL-ASSETS> 323,807
<CURRENT-LIABILITIES> 0
<BONDS> 65,614
0
10
<COMMON> 1
<OTHER-SE> 19,516
<TOTAL-LIABILITY-AND-EQUITY> 323,807
<SALES> 5,953
<TOTAL-REVENUES> 39,763
<CGS> 5,441
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 11,507
<LOSS-PROVISION> 1,048
<INTEREST-EXPENSE> 6,641
<INCOME-PRETAX> 4,606
<INCOME-TAX> 1,220
<INCOME-CONTINUING> 3,386
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,386
<EPS-BASIC> 0.00
<EPS-DILUTED> 0.00
</TABLE>
