<PAGE>
================================================================================
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 period ended June 30, 1997
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 33-44946
RAILCAR TRUST NO. 1992-1
(Exact name of Registrant as specified in its charter)
Delaware 36-3822700
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
c/o Wilmington Trust Company
Rodney Square North
1100 N. Market St.
Wilmington, Delaware 19890
(Address of principal executive offices and ZIP code)
Registrant's telephone number, including area code: (302) 651-1000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
---------------
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
--- ---
================================================================================
<PAGE>
PART I. FINANCIAL INFORMATION
RAILCAR TRUST NO. 1992-1
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
-------- --------
<S> <C> <C>
Assets
Cash and cash equivalents................................ $ 1,243 $ 490
Restricted cash.......................................... 1,568 17,919
Rent receivable from GE Capital Railcar Associates, Inc.. 12,753 12,753
Prepaid expenses and other............................... 957 1,075
-------- --------
Total current assets................................... 16,521 32,237
Rental equipment......................................... 837,935 862,825
Deferred financing fees.................................. 2,590 3,051
-------- --------
Total assets............................................. $857,046 $898,113
======== ========
Liabilities and Trust Surplus
Accrued interest and other liabilities................... $ 7,272 $ 7,600
Current maturities of long-term debt..................... 87,973 84,782
-------- --------
Total current liabilities.............................. 95,245 92,382
Long-term debt:
Trust notes............................................. 688,947 733,663
Secured indebtedness.................................... 31,222 47,456
-------- --------
Total long-term debt................................... 720,169 781,119
Minority interest in Partnership......................... 9,786 10,119
Trust surplus:
Capital distributions in excess of contributions........ (68,605) (68,605)
Cumulative net earnings................................. 100,451 83,098
-------- --------
Net trust surplus...................................... 31,846 14,493
-------- --------
Total liabilities and trust surplus...................... $857,046 $898,113
======== ========
</TABLE>
See accompanying notes to the consolidated financial statements.
1
<PAGE>
RAILCAR TRUST NO. 1992-1
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Rental revenue from GE Capital Railcar
Associates, Inc............................. $ 38,258 $ 38,258 $ 76,517 $ 76,517
-------- -------- -------- --------
Operating expenses:
Depreciation............................... (12,446) (12,446) (24,891) (24,891)
General, administrative and other.......... (147) (182) (211) (246)
-------- -------- -------- --------
Total operating expenses.................. (12,593) (12,628) (25,102) (25,137)
-------- -------- -------- --------
Operating income............................ 25,665 25,630 51,415 51,380
Interest expense............................ (16,557) (18,317) (33,621) (36,985)
Minority interest........................... (219) (220) (439) (440)
-------- -------- -------- --------
Net income.................................. $ 8,889 $ 7,093 $ 17,355 $ 13,955
======== ======== ======== ========
</TABLE>
See accompanying notes to the consolidated financial statements.
2
<PAGE>
RAILCAR TRUST NO. 1992-1
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
Six months ended
June 30,
1997 1996
-------- --------
<S> <C> <C>
Operating activities:
Net income..................................................... $ 17,355 $ 13,955
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation............................................... 24,891 24,891
Amortized discount on debt and deferred financing fees..... 604 688
Income of minority interest................................ 439 440
Changes in assets and liabilities, net:
Restricted cash.......................................... 16,351 15,790
Rent receivable from GE Capital Railcar Associates, Inc.. - -
Other.................................................... (282) (897)
-------- --------
Net cash provided by operating activities.................. 59,358 54,867
Financing activities:
Borrowings..................................................... - -
Principal payments on borrowings............................... (57,832) (54,126)
Distribution to beneficiaries.................................. - -
Cash contributed............................................... - -
Distributions to minority interest............................. (773) (772)
-------- --------
Net cash used in financing activities...................... (58,605) (54,898)
-------- --------
Net increase (decrease) in cash................................... 753 (31)
Cash and equivalents at beginning of the period................... 490 448
-------- --------
Cash and equivalents at end of the period......................... $ 1,243 $ 417
======== ========
Supplemental cash flow information:
Interest paid during the period.............................. $ 32,775 $ 37,391
======== ========
</TABLE>
See accompanying notes to the consolidated financial statements.
3
<PAGE>
RAILCAR TRUST NO. 1992-1
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note A Basis of Presentation
Railcar Trust No. 1992-1 (the Trust) holds a majority interest in Railcar
Associates, LP, a limited partnership (the Partnership). The Partnership leases
approximately 59,000 railcars within the United States. GE Railcar Associates,
Inc. (the Lessee) is the sole lessee of the railcars. The leases mature in 2004
with quarterly fixed rental payments totaling approximately $153 million
annually. These rental payments are guaranteed by General Electric Capital
Corporation. The Lessee has an option to purchase all, but not less than all, of
the railcars under lease for approximately $500 million at the end of the lease.
The Lessee is responsible for maintenance, taxes, insurance and other expenses
involved with operating the railcars. The Lessee has an annual obligation to
make certain contingent rental payments to the Partnership, Additional Rent. A
contingent rental payment for 1995 in the amount of $757 thousand has been
received by the Trust. The amount has been recorded as a liability pending
resolution of distribution issues. As of June 30, 1997, an audit of the 1996
contingent rental payment had not been completed and certain components of the
Additional Rent calculation are currently being disputed by the parties to the
Leases. Although management does not expect Additional Rent to be material to
the financial statements of the Partnership for 1996, the outcome of this
dispute, and the amount of Additional Rent, if any, that will ultimately be paid
to the Partnership cannot be determined at this time. As a result, no Additional
Rent has been recorded by the Partnership for 1995, 1996 or 1997.
The accompanying consolidated financial statements should be read in conjunction
with the consolidated financial statements included in the Trust's Annual
Report on Form 10-K for the year ended December 31, 1996. The consolidated
financial information furnished herein reflects all adjustments (consisting of
normal recurring accruals) which are, in the opinion of management, necessary
for a fair presentation of the consolidated statements for the periods shown.
The partnership has the following partners:
Partner Interest (%)
Railcar Trust No. 1992-1 98.99 %
GE Railcar Associates, Inc. 1.00 %
GE Railcar Leasing Associates, Inc. 0.01 %
The Partners share in profits or losses and distributions in accordance with a
specific formula, as defined in the Amended and Restated Agreement of the
Limited Partnership.
Note B Summary of Significant Accounting Policies
Principles of Consolidation: The consolidated financial statements include the
- - ---------------------------
financial results of the Trust and the Partnership. All inter-entity
transactions have been eliminated.
4
<PAGE>
Use of Estimates: The preparation of financial statements requires management
- - ----------------
to make estimates and assumptions that affect amounts reported in the financial
statements and accompanying notes. Such estimates and assumptions could change
in the future as more information becomes known which could impact the amounts
reported and disclosed herein.
Cash, Cash Equivalents, and Restricted Cash: The Trust considers all highly
- - -------------------------------------------
liquid investments with an original maturity of three months or less to be cash
equivalents. Due to the short maturity of these instruments, the carrying amount
approximates fair value. Restricted cash balances represent short-term
investments held by GECC. The investments are restricted as to the availability
to the Partnership and are available only to service principal and interest
payments on the Partnership's debt.
Rental Equipment: Rental equipment (railcars) are carried at cost, which is
- - ----------------
based upon the historical cost of the contributing partners. Railcars are
depreciated to estimated residual value using the straight-line method over the
term of the leases.
June 30, December 31,
1997 1996
------------ ----------
(In Thousands)
Rail cars (at cost)............. $ 1,388,582 $1,388,582
Accumulated depreciation........ (550,647) (525,757)
------------ ----------
Net Book Value.................. $ 837,935 $ 862,825
============ ==========
Income Taxes: The Trust does not provide for income taxes as the liability for
- - ------------
such taxes is that of the beneficial owners of the Trust.
Note C Debt
Debt consists of the following:
June 30, December 31,
1997 1996
--------- ---------
(In Thousands)
Trust notes....................... $ 759,575 $ 795,645
Secured indebtedness.............. 48,567 70,256
--------- ---------
Total debt..................... 808,142 865,901
Less: Current maturities......... (87,973) (84,782)
--------- ---------
Long-term debt................. $ 720,169 $ 781,119
========= =========
5
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Financial Liquidity and Capital Resources
- - -----------------------------------------
Substantially all of the physical property of the Trust, consisting primarily of
railcars, was contributed to the Partnership of which the Trust is a 98.99%
partner. At such time, the Partnership assumed the Assumed Indebtedness. The
Partnership then leased to the Lessee all of the property contributed by the
Trust, along with other railcars it received as a contribution from its other
partners. Financing of the Trust was accomplished by issuance of $998 million of
Trust Notes secured by the Trust's ownership interest in the Partnership. No new
borrowings have occurred during 1997.
Debt Maturities and Repayments
- - ------------------------------
Current maturities of long-term debt of $88.0 million at June 30, 1997 represent
debt which is being serviced from the cash flow from the leases.
Results of Operations
- - ---------------------
Fixed rental receipts by the Partnership under the Leases are used to service
the Assumed Indebtedness and other expenses of the Partnership. Remaining
Partnership available cash is distributed to the partners, the Trust's share of
which must be used by the Trust to service the Trust Notes.
During the first six months of both 1997 and 1996, on a consolidated basis the
Trust received rental revenues of $76.5 million pursuant to the Leases.
Operating income was $51.4 million for the first six months of both 1997 and
1996. Interest expense, net, was $33.6 million and $37.0 million for the first
six months of 1997 and 1996, respectively. The reduction of interest expense was
due to scheduled repayments of Trust Notes and Assumed Indebtedness.
Consolidated net income of the Trust was $17.4 million and $14.0 million for the
first six months of 1997 and 1996, respectively.
The Trust generated $59.4 million in cash from operating activities during the
first six months of 1997. Those amounts were used to repay the Assumed
Indebtedness and the Trust Notes as payments became due. Of the net cash from
operating activities, $57.8 million was used in order to reduce borrowings and
$773 thousand was distributed to the minority interests in the Partnership. The
principal amount outstanding under the Assumed Indebtedness was decreased by
$21.7 million to a total of $48.6 million at quarter-end, and the principal
amount outstanding under the Trust Notes was decreased by $36.1 million to a
total amount of $760.2 million at quarter-end.
During the first six months of 1997, no distributions were made to the holders
of the Beneficial Interests in the Trust.
6
<PAGE>
PART II
ITEM 5. Other Information
The Quarterly Report on Form 10-Q for the quarter ended June 28, 1997
for General Electric Capital Corporation is hereby incorporated by
reference.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule
99 Quarterly Report on Form 10-Q for the quarter ended
June 28, 1997 for General Electric Capital Corporation.
(b) Reports on Form 8-K
none
7
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
August 13, 1997 RAILCAR TRUST NO. 1992-1
By: /s/ David A. Vanaskey, Jr.
------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the date indicated.
Signature Date
/s/ David A. Vanaskey, Jr. 08/13/97
----------------------------------------- --------------------
David A. Vanaskey, Jr.
Senior Financial Services Officer
/s/ Bruce L. Bisson 08/13/97
----------------------------------------- --------------------
Bruce L. Bisson
Vice President
8
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,243
<SECURITIES> 0
<RECEIVABLES> 12,753
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 16,521
<PP&E> 1,388,582
<DEPRECIATION> 550,647
<TOTAL-ASSETS> 857,046
<CURRENT-LIABILITIES> 95,245
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 31,846
<TOTAL-LIABILITY-AND-EQUITY> 857,046
<SALES> 0
<TOTAL-REVENUES> 76,517
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 25,102
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 33,621
<INCOME-PRETAX> 17,355
<INCOME-TAX> 0
<INCOME-CONTINUING> 17,355
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,355
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<PAGE>
EXHIBIT 99
================================================================================
FORM 10-Q
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 June 28, 1997
-------------
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____ to ____
------------------------
Commission file number 1-6461
------------------------
GENERAL ELECTRIC CAPITAL CORPORATION
------------------------------------
(Exact name of registrant as specified in its charter)
NEW YORK 13-1500700
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
260 LONG RIDGE ROAD, 06927
STAMFORD, CONNECTICUT (Zip Code)
(Address of principal executive offices)
(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 July 28, 1997, 3,837,825 shares of common stock with a par value of $200 were
outstanding.
REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(a) AND (b)
OF FORM 10-Q AND IS THEREFORE FILING THIS FORM 10-Q WITH THE REDUCED DISCLOSURE
FORMAT.
<PAGE>
TABLE OF CONTENTS
PAGE
--------
PART I - FINANCIAL INFORMATION.
Item 1. Financial Statements .............................. 1
Item 2. Management's Discussion and Analysis of Results of
Operations ........................................ 5
Exhibit 12. Computation of Ratio of Earnings to Fixed Charges
and Computation of Ratio of Earnings to Combined
Fixed Charges and Preferred Stock Dividends ....... 8
PART II - OTHER INFORMATION.
Item 6. Exhibits and Reports on Form 8-K .................. 9
Signatures ...................................................... 10
Index to Exhibits ............................................... 11
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES
CONDENSED STATEMENT OF CURRENT AND RETAINED EARNINGS
<TABLE>
<CAPTION>
(Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
--------------------- -------------------
JUNE 28, JUNE 29, JUNE 28, JUNE 29,
(In millions) 1997 1996 1997 1996
------- ------ ------- -------
<S> <C> <C> <C> <C>
EARNED INCOME..................... $ 7,658 $6,068 $15,431 $11,688
------- ------ ------- -------
EXPENSES
Interest.......................... 1,780 1,722 3,491 3,390
Operating and administrative...... 2,855 1,906 5,880 3,622
Insurance losses and
policyholder and annuity
benefits......................... 1,106 777 2,255 1,392
Provision for losses on
financing receivables............ 337 228 649 441
Depreciation and amortization of
buildings and equipment and
equipment on operating leases 563 524 1,128 1,013
Minority interest in net
earnings of consolidated
affiliates....................... 1 17 14 42
------- ------ ------- -------
6,642 5,174 13,417 9,900
------- ------ ------- -------
EARNINGS
Earnings before income taxes...... 1,016 894 2,014 1,788
Provision for income taxes........ (298) (267) (599) (556)
------- ------ ------- -------
NET EARNINGS...................... 718 627 1,415 1,232
Dividends......................... (340) (230) (657) (474)
Retained earnings at beginning
of period........................ 11,058 9,298 10,678 8,937
------- ------ ------- -------
RETAINED EARNINGS AT END OF
PERIOD........................... $11,436 $9,695 $11,436 $ 9,695
======= ====== ======= =======
</TABLE>
See Notes to Condensed, Consolidated Financial Statements.
1
<PAGE>
ITEM 1. FINANCIAL STATEMENTS (Continued).
GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES
CONDENSED STATEMENT OF FINANCIAL POSITION
<TABLE>
<CAPTION>
JUNE 28, DECEMBER 31,
(In millions) 1997 1996
--------- ---------
<S> <C> <C>
(Unaudited)
ASSETS
Cash and equivalents...................................... $ 2,651 $ 3,074
Investment securities..................................... 47,364 44,340
Financing receivables:
Time sales and loans, net of deferred income............. 61,446 62,832
Investment in financing leases, net of deferred income 39,199 39,575
-------- --------
100,645 102,407
Allowance for losses on financing receivables............ (2,647) (2,693)
-------- --------
Financing receivables - net............................. 97,998 99,714
Other receivables - net................................... 10,247 8,456
Equipment on operating leases (at cost), less
accumulated amortization of $5,392 and $5,625............ 17,093 16,134
Intangible assets......................................... 7,522 7,594
Other assets.............................................. 22,589 21,504
-------- --------
TOTAL ASSETS........................................... $205,464 $200,816
======== ========
LIABILITIES AND EQUITY
Short-term borrowings..................................... $ 77,535 $ 74,971
Long-term borrowings:
Senior................................................... 43,613 46,124
Subordinated............................................. 697 697
Insurance liabilities, reserves and annuity benefits...... 46,350 43,263
Other liabilities......................................... 11,976 12,084
Deferred income taxes..................................... 8,028 7,472
-------- --------
Total liabilities...................................... 188,199 184,611
-------- --------
Minority interest in equity of consolidated affiliates . 773 679
-------- --------
Capital stock............................................. 770 770
Additional paid-in capital................................ 4,033 4,024
Retained earnings......................................... 11,436 10,678
Unrealized gains on investment securities................. 391 149
Foreign currency translation adjustments.................. (138) (95)
-------- --------
Total equity........................................... 16,492 15,526
-------- --------
TOTAL LIABILITIES AND EQUITY........................... $205,464 $200,816
======== ========
</TABLE>
See Notes to Condensed, Consolidated Financial Statements.
2
<PAGE>
ITEM 1. FINANCIAL STATEMENTS (Continued).
GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES
CONDENSED STATEMENT OF CASH FLOWS
(Unaudited)
SIX MONTHS ENDED
-------------------
JUNE 28, JUNE 29,
(In millions) 1997 1996
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings.............................................. $ 1,415 $ 1,232
Adjustments to reconcile net earnings to cash provided
from operating activities:
Provision for losses on financing receivables........... 649 441
Depreciation and amortization of buildings and
equipment and equipment on operating leases............ 1,128 1,013
Other - net............................................. 1,275 342
-------- --------
Cash provided from operating activities............... 4,467 3,028
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Increase in loans to customers............................ (21,757) (23,954)
Principal collections from customers...................... 20,571 25,186
Investment in assets on financing leases.................. (7,407) (5,958)
Principal collections on financing leases................. 7,382 5,319
Net decrease (increase) in credit card receivables........ 1,700 (602)
Buildings and equipment and equipment on operating
leases:
- additions........................................... (2,917) (2,647)
- dispositions........................................ 1,119 528
Payments for principal businesses purchased, net of
cash acquired............................................ (581) (1,699)
Purchases of investment securities by insurance
affiliates and annuity businesses........................ (5,160) (2,784)
Dispositions and maturities of investment securities
by insurance affiliates and annuity businesses........... 4,359 2,453
Other - net............................................... (2,165) (2,280)
-------- --------
Cash used for investing activities.................... (4,856) (6,438)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in borrowings (maturities 90 days or less)..... 5,579 3,230
Newly issued debt - short-term (maturities 91-365 days). 2,098 2,473
- long-term senior................................... 7,039 9,925
Proceeds - non-recourse, leveraged lease debt............. -- 429
Repayments and other reductions:
- short-term (maturities 91-365 days). (13,456) (10,694)
- long-term senior................................... (495) (627)
Principal payments - non-recourse, leveraged lease debt (186) (152)
Proceeds from sales of investment and annuity contracts 1,886 850
Redemption of investment and annuity contracts............ (1,942) (1,269)
Dividends paid............................................ (657) (474)
Issuance of variable cumulative preferred stock by
consolidated affiliate................................... 100 --
-------- --------
Cash (used for) provided from financing activities (34) 3,691
-------- --------
(DECREASE) INCREASE IN CASH AND EQUIVALENTS............... (423) 281
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD............... 3,074 1,316
-------- --------
CASH AND EQUIVALENTS AT END OF PERIOD..................... $ 2,651 $ 1,597
======== ========
See Notes to Condensed, Consolidated Financial Statements.
3
<PAGE>
ITEM 1. FINANCIAL STATEMENTS (Continued).
GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES
NOTES TO CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. The accompanying condensed quarterly financial statements represent the
adding together of General Electric Capital Corporation and all majority-
owned and controlled affiliates (collectively called "the Corporation" or
"GECC"). 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. The Corporation has adopted Statement of Financial Accounting Standards
("SFAS") No. 125, Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities. Among other things, this Statement
distinguishes transfers of financial assets that are sales from transfers
that are secured borrowings, based on control of the transferred assets.
SFAS No. 125 applies to all transactions occurring after December 31, 1996;
thus, adoption did not have an effect on the financial position or results
of operations of the Corporation.
4. The Corporation has a noncontrolling investment in the common stock of
Montgomery Ward Holding Corp. ("MWHC"), which, together with its wholly-
owned subsidiary, Montgomery Ward & Co., Incorporated ("MWC"), is engaged in
retail merchandising and direct response marketing (conducted primarily
through Signature Financial/Marketing, Inc.("Signature"), which markets
consumer club and insurance products). At June 28, 1997, MWHC and certain of
its affiliates were in negotiations with lenders to restructure debt and to
obtain additional financing. On July 7, 1997, MWHC, MWC and certain of their
affiliates (excluding Signature), filed for reorganization under Chapter 11
of the U.S. Bankruptcy Code. As a result, loans to MWHC and affiliates
became "impaired" loans, as defined by generally accepted accounting
principles, because, due to the automatic stay in bankruptcy, the
Corporation is not receiving current interest payments on its loans and it
is therefore probable that the Corporation will be unable to collect all
amounts due according to original contractual terms of the loan agreements
(refer to Management's Discussion and Analysis of Results of Operations,
Other Matters).
4
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS.
OVERVIEW
Net earnings for the first half of 1997 were $1,415 million, a $183 million
(15%) increase over the first half of 1996. The Corporation's contribution to
its parent, General Electric Capital Services, Inc. ("GECS"), after payment of
dividends on its variable cumulative preferred stock, was $1,377 million, a $183
million (15%) increase over the comparable 1996 period.
Earnings of the lending, leasing and equipment management businesses are
significantly influenced by the level of invested assets, the related financing
spreads (the excess of rates earned -- yields -- over rates on borrowings) and
the quality of those assets. The increase in net earnings for these businesses
principally resulted from a higher average level of invested assets as well as
increased financing spreads, reflecting both higher yields and lower borrowing
rates. Earnings growth from the consumer savings and insurance operations also
contributed to the increase in net earnings, principally reflecting the effects
of acquisitions during 1996. The Specialty Insurance segment added to the
increase in net earnings primarily due to increased premium and investment
income.
OPERATING RESULTS
EARNED INCOME from all sources was $15,431 million for the first half of 1997, a
32% increase compared with $11,688 million for the first half of 1996.
Earned income from the equipment management, consumer services, mid-market
financing and specialized financing businesses increased $3,557 million (33%)
over the comparable prior-year period. A significant portion of this increase
was the contribution provided by the computer equipment businesses and the
consumer savings and insurance businesses acquired during 1996. The increase
also reflected a higher average level of invested assets, resulting from both
origination volume and acquisitions of portfolios and businesses. Earned income
was impacted by higher losses associated with the Corporation's equity
investment in Montgomery Ward Holding Corp. ("MWHC"), including the write-off of
the Corporation's remaining common stock investment in MWHC (refer to Other
Matters below). This impact was largely offset by a gain recognized on the sale
of an investment in the stock of a publicly traded company.
Earned income of the Specialty Insurance segment increased $243 million (26%) to
$1,169 million for the first half of 1997 compared with the first half of 1996
reflecting growth in premium and investment income.
INTEREST EXPENSE for the first half of 1997 was $3,491 million, 3% higher than
for the first half of 1996. The increase reflected the effects of higher average
borrowings used to finance asset growth, offset by the effects of lower average
interest rates. The composite interest rate on the Corporation's borrowings for
the first half of 1997 was 5.99% compared with 6.36% in the first half of 1996.
OPERATING AND ADMINISTRATIVE EXPENSES were $5,880 million for the first half of
1997, a 62% increase over the first half of 1996. The increase primarily
reflected the inclusion of costs of sales and services of the computer equipment
businesses acquired in the third quarter of 1996. The remainder of the increase
primarily resulted from other costs associated with businesses and portfolios
acquired over the past year and higher investment levels.
INSURANCE LOSSES AND POLICYHOLDER AND ANNUITY BENEFITS increased 62% to $2,255
million for the first half of 1997, compared with $1,392 million for the first
half of 1996. The increase primarily reflected the consumer savings and
insurance businesses acquired in 1996 and growth in origination volume.
PROVISION FOR LOSSES ON FINANCING RECEIVABLES increased to $649 million for the
first half of 1997 from $441 million for the first half of 1996. These
provisions principally related to private-label and bank credit cards in the
Consumer Services segment which are discussed below under Portfolio Quality. The
increase principally reflects higher average receivable balances as well as
increased delinquencies in the consumer portfolio, consistent with industry
experience.
5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS (Continued).
DEPRECIATION AND AMORTIZATION OF BUILDINGS AND EQUIPMENT AND EQUIPMENT ON
OPERATING LEASES increased $115 million (11%) to $1,128 million for the first
half of 1997 compared with $1,013 million for the first half of 1996. The
increase was principally the result of higher levels of equipment on operating
leases, primarily reflecting a shift in auto lease volume from financing leases
to operating leases as well as origination volume and acquisition growth.
PROVISION FOR INCOME TAXES was $599 million for the first half of 1997 (an
effective tax rate of 29.7%), compared with $556 million for the first half of
1996 (an effective tax rate of 31.1%). The higher provision for income taxes
reflected increased pre-tax earnings subject to statutory rates.
PORTFOLIO QUALITY
THE PORTFOLIO OF FINANCING RECEIVABLES, before allowance for losses, decreased
to $100.6 billion at June 28, 1997, from $102.4 billion at the end of 1996.
Financing receivables are the financing segment's largest asset and its primary
source of revenues. Related allowances for losses at June 28, 1997, aggregated
$2.6 billion (2.63% of receivables - the same as at the end of 1996) and are, in
management's judgment, appropriate given the risk profile of the portfolio. A
discussion about the quality of certain elements of the portfolio of financing
receivables follows. "Nonearning" receivables are those that are 90 days or more
delinquent and "reduced earning" receivables are commercial receivables whose
terms have been restructured to a below-market yield. Refer to Other Matters for
a discussion of receivables related to MWHC and affiliates. The nonearning and
reduced earning receivable balances and the write-off amounts discussed below
exclude amounts related to MWHC and affiliates.
CONSUMER RECEIVABLES, primarily credit card and personal loans and auto loans
and leases, were $44.4 billion at June 28, 1997, a decrease of $1.8 billion from
the end of 1996. Nonearning receivables increased to $936 million at June 28,
1997, from $926 million at December 31, 1996. Write-offs of consumer receivables
increased to $607 million for the first half of 1997, compared with $397 million
for the first half of 1996. This increase was primarily attributable to higher
average receivable balances resulting from a combination of origination volume
and acquisitions of businesses and portfolios as well as higher delinquencies,
consistent with overall industry experience.
COMMERCIAL REAL ESTATE LOANS classified as financing receivables were $12.1
billion at June 28, 1997, the same as at year-end 1996. Nonearning and reduced
earning receivables were $165 million at June 28, 1997, compared with $158
million at December 31, 1996. Write-offs of commercial real estate loans were
$15 million for the first half of 1997, compared with $18 million for the first
half of 1996. At June 28, 1997, the commercial real estate portfolio also
included, in other assets, $1.7 billion of assets acquired for resale from
various financial institutions ($1.6 billion at year-end 1996) and $2.1 billion
of investments in real estate ventures ($2.5 billion at year-end 1996).
OTHER FINANCING RECEIVABLES, totaling $44.1 billion at June 28, 1997 (the same
as at December 31, 1996), consisted of a diverse commercial, industrial and
equipment loan and lease portfolio. Related nonearning and reduced-earning
receivables were $260 million at June 28, 1997, compared with $313 million at
year-end 1996.
The Corporation held loans and leases to commercial airlines amounting to $8.4
billion at June 28, 1997, up from $8.2 billion at the end of 1996.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS (Continued).
OTHER MATTERS
The Corporation has a noncontrolling investment in the common stock of
Montgomery Ward Holding Corp. ("MWHC"), which, together with its wholly-owned
subsidiary, Montgomery Ward & Co., Incorporated ("MWC"), is engaged in retail
merchandising and direct response marketing (conducted primarily through
Signature Financial/Marketing, Inc. ("Signature"), which markets consumer club
and insurance products). At June 28, 1997, MWHC and certain of its affiliates
were in negotiations with lenders to restructure debt and to obtain additional
financing. On July 7, 1997, MWHC, MWC and certain of their affiliates filed for
reorganization under Chapter 11 of the U.S. Bankruptcy Code.
MWHC reported losses from operations during the first half of 1997, and the
Corporation's investment was reduced for its share of such losses. The
Corporation has also written off its remaining investment in MWHC common stock,
resulting in total pre-tax losses of $323 million for the first six months of
1997. In addition to the investment in MWHC common stock, the Corporation
engages in various ordinary course of business transactions with MWHC and its
affiliates. At June 28, 1997, such investments, primarily inventory financing
and preferred stock from MWHC and its affiliates, amounted to approximately
$1,060 million, an increase of $313 million from December 31, 1996, primarily
resulting from increased inventory financing. No impairment writedown was
considered necessary for these investments as of June 28, 1997; however, the
Corporation has suspended income recognition on these investments. Management
will continue to carefully monitor these investments for recoverability.
Subsequent to the MWHC bankruptcy filing, the Corporation announced a $1,000
million Debtor-In-Possession financing commitment ("the commitment"), subject to
certain conditions, to MWHC for the purchase of inventory and other costs.
Approximately $300 million of the financing, which has an administrative
priority in bankruptcy, has been approved by the bankruptcy court, with the
remainder still subject to court approval. The Corporation intends to syndicate
a substantial portion of any borrowings under the commitment.
The Corporation also provides financing to customers of MWHC and affiliates
through the Corporation's wholly-owned affiliates, Montgomery Ward Credit
Corporation and Monogram Credit Card Bank of Georgia. These receivables, which
represent revolving credit card transactions directly with customers of MWHC and
affiliates, aggregated approximately $4,559 million at June 28, 1997, including
$1,669 million that have been sold with recourse by the Corporation's
affiliates. The obligations of customers with respect to these receivables are
not affected by the Chapter 11 bankruptcy filing.
MWHC and its affiliates, under new management in 1997, are continuing their
restructuring efforts as well as developing a plan of reorganization.
Restructuring plans are likely to include the implementation of a revised
merchandising strategy and the closing and/or upgrading of selected retail
stores. Signature is not included in the Chapter 11 bankruptcy filing, and the
possibility of sale of Signature will continue to be evaluated.
7
<PAGE>
EXHIBIT 12
GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
AND
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
SIX MONTHS ENDED JUNE 28, 1997
(Unaudited)
RATIO OF
EARNINGS
TO
COMBINED
FIXED
RATIO OF CHARGES
EARNINGS AND
TO PREFERRED
FIXED STOCK
(Dollar amounts in millions) CHARGES DIVIDENDS
------- ---------
Net earnings....................................... $1,415 $1,415
Provision for income taxes......................... 599 599
Minority interest in net earnings of consolidated
affiliates........................................ 14 14
------ ------
Earnings before provision for income taxes and
minority interest................................. 2,028 2,028
------ ------
Fixed charges:
Interest.......................................... 3,539 3,539
One-third of rentals.............................. 109 109
------ ------
Total fixed charges................................ 3,648 3,648
------ ------
Less interest capitalized, net of amortization..... 23 23
------ ------
Earnings before provision for income taxes and
minority interest, plus fixed charges............. $5,653 $5,653
====== ======
Ratio of earnings to fixed charges ................ 1.55
======
Preferred stock dividend requirements ............. $ 38
Ratio of earnings before provision for income taxes
to net earnings ................................... 1.42
Preferred stock dividend factor on pre-tax basis .. 54
Fixed charges ..................................... 3,648
------
Total fixed charges and preferred stock dividend
requirements ...................................... $3,702
======
Ratio of earnings to combined fixed charges and
preferred stock dividends ......................... 1.53
======
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.
8
<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.
9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GENERAL ELECTRIC CAPITAL CORPORATION
------------------------------------
(Registrant)
Date: July 30, 1997 By: /s/ J.A. Parke
---------------------------------
J.A. Parke,
Senior Vice President, Finance
(Principal Financial Officer)
Date: July 30, 1997 By: /s/ J.C. Amble
---------------------------------
J.C. Amble,
Vice President and Controller
(Principal Accounting Officer)
10
<PAGE>
GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES
INDEX TO EXHIBITS
EXHIBIT NO. PAGE
----------- ----
12 Computation of ratio of earnings to fixed
charges and computation of ratio of
earnings to combined fixed charges and
preferred stock dividends ................. 8
27 Financial Data Schedule (filed electronically
only)
11
