<PAGE>
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
* QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934..................For the period ended March 31, 1998
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>
MARCH 31, DECEMBER 31,
1998 1997
-------------- -------------
<S> <C> <C>
ASSETS
Cash and cash equivalents...................................... $ 636 $ 587
Restricted cash................................................ 866 18,888
Rent receivable from GE Capital Railcar Associates, Inc........ 12,753 12,753
Prepaid expenses and other..................................... 1,057 1,144
-------- --------
Total current assets........................................ 15,312 33,372
Rental equipment............................................... 800,599 813,044
Deferred financing fees........................................ 1,977 2,171
-------- --------
Total assets................................................... $817,888 $848,587
======== ========
LIABILITIES AND TRUST SURPLUS
Accrued interest and other expenses............................ $ 6,281 $ 6,850
Current maturities of long-term debt........................... 95,647 110,999
-------- --------
Total current liabilities................................... 101,928 117,849
Long-term debt:
Trust notes................................................... 617,885 642,351
Secured indebtedness.......................................... 27,537 27,912
-------- --------
Total long-term debt........................................ 645,422 670,263
Minority interest in Partnership............................... 9,287 9,453
Trust surplus:
Capital distributions in excess of contributions.............. (69,355) (69,355)
Cumulative net earnings....................................... 130,606 120,377
-------- --------
Net trust surplus........................................... 61,251 51,022
-------- --------
Total liabilities and trust surplus............................ $817,888 $848,587
======== ========
</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 MONTH PERIOD ENDED
MARCH 31,
1998 1997
-------------- ------------
<S> <C> <C>
Rental revenue from GE Capital Railcar Associates, Inc.................. $ 38,259 $ 38,259
------------- -----------
Operating expenses:
Depreciation.......................................................... (12,445) (12,445)
General, administrative and other..................................... (70) (64)
------------- -----------
Total operating expenses.......................................... (12,515) (12,509)
------------- -----------
Operating income........................................................ 25,744 25,750
Interest expense........................................................ (15,295) (17,064)
Minority interest....................................................... (220) (220)
------------- -----------
Net income.............................................................. $ 10,229 $ 8,466
============= ===========
</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>
THREE MONTH PERIOD ENDED
MARCH 31,
1998 1997
--------- ---------
<S> <C> <C>
Operating activities:
Net income............................................... $ 10,229 $ 8,466
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation........................................... 12,445 12,445
Amortized discount on debt and deferred financing fees. 272 308
Income of minority interest............................ 220 220
Changes in assets and liabilities, net:
Restricted cash...................................... 18,022 16,533
Rent receivable from GE Capital Railcar Associates, - -
Inc.................................................
Other................................................ (524) (866)
--------- --------
Net cash provided by operating activities........... 40,664 37,106
Financing activities:
Principal payments on borrowings......................... (40,229) (36,697)
Distributions to minority interest....................... (386) (386)
--------- --------
Net cash used in financing activities............... (40,615) (37,083)
--------- --------
Net increase in cash...................................... 49 23
Cash and equivalents at beginning of the period........... 587 505
--------- --------
Cash and equivalents at end of the period................. $ 636 $ 528
========= ========
Supplemental cash flow information:
Interest paid during the period......................... $ 15,708 $ 17,747
========= ========
</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 (GECC). 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.
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, 1997. 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.
As mentioned above, the Lessee has an annual obligation to make certain
contingent rental payments ("Additional Rent") to the Partnership in addition to
the previously described quarterly fixed rental payments. The Additional Rent
calculation is prepared by the Lessee and is subject to verification by an
independent auditor. As of March 31, 1998, the audit of Additional Rent had not
been completed for 1996 or 1997 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 or 1997, 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 1996, 1997 or 1998.
4
<PAGE>
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.
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.
Revenue Recognition: All revenue is recognized as received from the
Partnership.
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.
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
------------------ ----------------
(IN THOUSANDS)
<S> <C> <C>
Railcars (at cost)................ $1,388,582 $1,388,582
Accumulated depreciation.......... (587,983) (575,538)
---------- ----------
Net Book Value.................... $ 800,599 $ 813,044
========== ==========
</TABLE>
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:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
-------------- -------------
(IN THOUSANDS)
<S> <C> <C>
Trust notes...................... $711,148 $ 733,806
Secured indebtedness............. 29,921 47,456
-------- ---------
Total debt...................... 741,069 781,262
Less: Current maturities........ (95,647) (110,999)
-------- ---------
Long-term debt.................. $645,422 $ 670,263
======== =========
</TABLE>
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 1998.
Debt Maturities and Repayments
Current maturities of long-term debt of $95.6 million at March 31, 1998
represent debt which is being serviced by 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 three months of both 1998 and 1997, on a consolidated basis the
Trust received rental revenues of $38.3 million pursuant to the Leases.
Operating income was $25.7 million and $25.8 million for the first three months
of 1998 and 1997, respectively. Interest expense, net, was $15.3 million and
$17.1 million for the first three months of 1998 and 1997, respectively. The
reduction of interest expense was due to scheduled repayments of Trust Notes and
Assumed Indebtedness. Consolidated net income of the Trust was $10.2 million and
$8.5 million for the first three months of 1998 and 1997, respectively.
The Trust generated $40.7 million in cash from operating activities during the
first three months of 1998. Those amounts were used to repay the Assumed
Indebtedness and the Trust Notes as payments became due. Of the net cash from
operating activities, $40.2 million was used in order to reduce borrowings and
$.4 million was distributed to the minority interests in the Partnership. The
principal amount outstanding under the Assumed Indebtedness was decreased by
$17.5 million to a total of $29.9 million at quarter-end, and the principal
amount outstanding under the Trust Notes was decreased by $22.7 million to a
total amount of $711.1 million at quarter-end.
During first quarter 1998, 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 March 28, 1998
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 March
28, 1998 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.
May 13, 1998 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. May 13, 1998
-------------------------------------- ----------------------
David A. Vanaskey, Jr.
Assistant Vice President
/s/ Bruce L. Bisson May 13, 1998
-------------------------------------- ----------------------
Bruce L. Bisson
Vice President
8
<PAGE>
Exhibit Index
Exhibits
27 Financial Data Schedule
99 Quarterly Report on Form 10-Q for the quarter ended March
28, 1998 for General Electric Capital Corporation.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<EXCHANGE-RATE> 1
<CASH> 1,502
<SECURITIES> 0
<RECEIVABLES> 12,753
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 15,312
<PP&E> 1,388,582
<DEPRECIATION> 587,983
<TOTAL-ASSETS> 817,888
<CURRENT-LIABILITIES> 101,928
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 61,251
<TOTAL-LIABILITY-AND-EQUITY> 817,888
<SALES> 0
<TOTAL-REVENUES> 38,259
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 12,515
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,295
<INCOME-PRETAX> 10,229
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,229
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<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 March 28, 1998
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,
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 May 11, 1998, 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
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
PART I - FINANCIAL INFORMATION.
Item 1. Financial Statements ..................... 1
Item 2. Management's Discussion and Analysis
of Results of Operations ................. 5
Exhibit 12. Computation of Ratio of Earnings to Fixed
Charges and Computation of Ratio of
Earnings to Combined Fixed Charges and
Preferred Stock Dividends ................ 7
PART II - OTHER INFORMATION.
Item 6. Exhibits and Reports on Form 8-K .......... 8
Signatures .............................................. 9
Index to Exhibits ....................................... 10
</TABLE>
<PAGE>
ITEM 1. FINANCIAL STATEMENTS (Continued).
GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES
CONDENSED STATEMENT OF CURRENT AND RETAINED EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------
MARCH 28, MARCH 29,
(In millions) 1998 1997
-------- --------
<S> <C> <C>
REVENUES
Revenues from services ................................. $ 7,875 $ 6,857
Sales of goods ......................................... 1,626 916
-------- --------
9,501 7,773
-------- --------
EXPENSES
Interest ............................................... 1,948 1,711
Operating and administrative ........................... 2,631 2,217
Cost of goods sold ..................................... 1,482 808
Insurance losses and policyholder and annuity benefits . 1,342 1,149
Provision for losses on financing receivables .......... 332 312
Depreciation and amortization of buildings and equipment
and equipment on operating leases ..................... 652 565
Minority interest in net earnings of consolidated
affiliates ............................................ 11 13
-------- --------
8,398 6,775
-------- --------
EARNINGS
Earnings before income taxes ........................... 1,103 998
Provision for income taxes ............................. (323) (301)
-------- --------
NET EARNINGS ........................................... 780 697
Dividends .............................................. (373) (317)
Retained earnings at beginning of period ............... 11,861 10,678
-------- --------
RETAINED EARNINGS AT END OF PERIOD ..................... $ 12,268 $ 11,058
======== ========
</TABLE>
See Notes to Condensed, Consolidated Financial Statements.
<PAGE>
ITEM 1. FINANCIAL STATEMENTS (Continued).
GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES
CONDENSED STATEMENT OF FINANCIAL POSITION
<TABLE>
<CAPTION>
MARCH 28, DECEMBER 31,
(In millions) 1998 1997
-------- --------
(Unaudited)
<S> <C> <C>
ASSETS
Cash and equivalents ................................... $ 4,358 $ 4,648
Investment securities .................................. 54,302 53,103
Financing receivables:
Time sales and loans, net of deferred income ......... 64,255 64,832
Investment in financing leases, net of deferred income 41,580 41,769
-------- --------
105,835 106,601
Allowance for losses on financing receivables ........ (2,786) (2,802)
-------- --------
Financing receivables - net ........................ 103,049 103,799
Other receivables - net ................................ 12,344 11,925
Equipment on operating leases (at cost), less
accumulated amortization of $6,465 and $6,126 ......... 19,102 18,689
Intangible assets ...................................... 9,509 9,459
Inventories ............................................ 808 786
Other assets ........................................... 28,806 26,368
-------- --------
TOTAL ASSETS ...................................... $232,278 $228,777
======== ========
LIABILITIES AND EQUITY
Short-term borrowings .................................. $ 96,038 $ 91,680
Long-term borrowings:
Senior ............................................... 41,578 44,437
Subordinated ......................................... 697 697
Insurance liabilities, reserves and annuity benefits ... 51,110 50,248
Other liabilities ...................................... 14,833 14,315
Deferred income taxes .................................. 8,278 8,167
-------- --------
Total liabilities ................................. 212,534 209,544
-------- --------
Minority interest in equity of consolidated affiliates . 969 860
-------- --------
Unrealized gains on investment securities .............. 1,148 1,145
Foreign currency translation adjustments ............... (155) (147)
-------- --------
Accumulated non-owner changes in equity ................ 993 998
Capital stock .......................................... 770 770
Additional paid-in capital ............................. 4,744 4,744
Retained earnings ...................................... 12,268 11,861
-------- --------
Total equity ...................................... 18,775 18,373
-------- --------
TOTAL LIABILITIES AND EQUITY ...................... $232,278 $228,777
======== ========
</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)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------
MARCH 28, MARCH 29,
(In millions) 1998 1997
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings ........................................... $ 780 $ 697
Adjustments to reconcile net earnings to cash provided
from operating activities:
Provision for losses on financing receivables ........ 332 312
Depreciation and amortization of buildings and
equipment and equipment on operating leases ......... 652 565
Other - net .......................................... 854 176
-------- --------
Cash from operating activities .................... 2,618 1,750
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Increase in loans to customers ......................... (18,844) (10,362)
Principal collections from customers ................... 19,249 10,250
Investment in assets on financing leases ............... (3,596) (3,880)
Principal collections on financing leases .............. 2,856 3,924
Net decrease in credit card receivables ................ 89 1,453
Buildings and equipment and equipment on operating
leases:
- additions ........................................ (1,537) (1,280)
- dispositions ..................................... 1,420 347
Payments for principal businesses purchased, net of
cash acquired ......................................... (660) (27)
Purchases of investment securities by insurance
affiliates and annuity businesses ..................... (4,074) (2,735)
Dispositions and maturities of investment securities by
insurance affiliates and annuity businesses ........... 3,022 2,709
Other - net ............................................ (990) (1,234)
-------- --------
Cash used for investing activities ................ (3,065) (835)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in borrowings (maturities 90 days or less) .. 6,198 1,811
Newly issued debt - short-term (maturities 91-365 days) 1,556 963
- long-term senior .................. 3,853 3,700
Proceeds - non-recourse, leveraged lease debt .......... 156 --
Repayments and other reductions:
- short-term (maturities 91-365 days) (8,221) (7,418)
- long-term senior .................. (2,630) (331)
Principal payments - non-recourse, leveraged lease debt (184) (129)
Proceeds from sales of investment and annuity contracts 1,027 873
Redemption of investment and annuity contracts ......... (1,262) (586)
Dividends paid ......................................... (336) (317)
Issuance of variable cumulative preferred stock by
consolidated affiliate ................................ -- 100
-------- --------
Cash from (used for) financing activities ......... 157 (1,334)
-------- --------
DECREASE IN CASH AND EQUIVALENTS ....................... (290) (419)
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD ............ 4,648 3,074
-------- --------
CASH AND EQUIVALENTS AT END OF PERIOD .................. $ 4,358 $ 2,655
======== ========
</TABLE>
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. Statement of Financial Accounting Standards No. 130, Reporting
Comprehensive Income, was adopted as of January 1, 1998. This Statement
requires reporting of changes in share owners' equity that do not result
directly from transactions with share owners. An analysis of these changes
follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------
MARCH 28, MARCH 29,
(Dollars in millions) 1998 1997
-------- --------
<S> <C> <C>
Net earnings .................................... $ 780 $ 697
Unrealized gains (losses) on investment
securities - net ............................... 3 (384)
Foreign currency translation adjustments ........ (8) (34)
-------- --------
Total ........................................... $ 775 $ 279
======== ========
</TABLE>
4
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS.
OVERVIEW
Net earnings for the first quarter of 1998 were $780 million, an $83 million
(12%) increase over the first quarter of 1997. The results reflected the
globalization and diversity of the Corporation's businesses and were led by
double digit increases in Specialty Insurance, Equipment Management and Mid-
Market Financing activities. The Corporation's contribution to its parent,
General Electric Capital Services, Inc. ("GECS"), after payment of dividends on
its variable cumulative preferred stock, was $758 million, a $79 million (12%)
increase over the comparable 1997 period.
The increase in net earnings in the Specialty Insurance segment reflected
improved earnings in the mortgage insurance business, the result of improved
market conditions, as well as increases in the other insurance businesses.
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. Net earnings for these businesses reflected
increases, primarily from a higher average level of invested assets, offset by
decreased earnings from Consumer Services activities, attributable to increased
losses and lower volumes for U.S. private-label credit cards and increased
automobile residual losses. These impacts were partially offset by lower losses
associated with the Corporation's equity investment in Montgomery Ward Holding
Corp. Financing spreads decreased slightly compared with the prior year's
quarter, reflecting both lower yields and higher borrowing rates.
OPERATING RESULTS
TOTAL REVENUES from all sources was $9,501 million for the first quarter of
1998, a 22% increase compared with $7,773 million for the first quarter of 1997.
Revenues from the equipment management, consumer services, mid-market financing
and specialized financing businesses increased $1,324 million (18%) over the
comparable prior-year period. A significant portion of the increase arose from
sales of goods by the computer equipment distribution businesses, reflecting
both acquisition and core growth. The increase also reflected a higher average
level of invested assets, resulting principally from acquisitions of portfolios
and businesses, as well as increased premiums related to the acquisition of a
consumer savings and insurance business in 1997. Revenues of the Specialty
Insurance segment increased $281 million (49%) to $852 million for the first
quarter of 1998 compared with the first quarter of 1997. The increase primarily
reflected increased investment income resulting from origination volume,
continued growth in the investment portfolios and higher gains on investment
securities.
INTEREST EXPENSE for the first quarter of 1998 was $1,948 million, 14% higher
than for the first quarter of 1997. The increase reflected the effects of higher
average borrowings used to finance asset growth combined with the effects of
higher average interest rates. The composite interest rate on the Corporation's
borrowings for the first quarter of 1998 was 6.08% compared with 6.02% in the
first quarter of 1997.
OPERATING AND ADMINISTRATIVE EXPENSES were $2,631 million for the first quarter
of 1998, a 19% increase over the first quarter of 1997. The increase primarily
reflected costs associated with businesses and portfolios acquired over the past
year and higher investment levels.
INSURANCE LOSSES AND POLICYHOLDER AND ANNUITY BENEFITS increased $193 million to
$1,342 million for the first quarter of 1998, compared with the first quarter of
1997. The increase primarily reflected the consumer savings and insurance
business acquired in 1997 and growth in origination volume, partially offset by
improved market conditions in the mortgage insurance business.
PROVISION FOR LOSSES ON FINANCING RECEIVABLES increased to $332 million for the
first quarter of 1998 from $312 million for the first quarter of 1997. These
provisions principally related to private-label and bank credit cards in the
Consumer Services segment that 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 $87 million (15%) to $652 million for the first
quarter of 1998 compared with $565 million for the first quarter of 1997. The
increase was principally the result of higher levels of equipment on operating
leases, primarily reflecting automobile and aircraft volume and acquisition
growth.
PROVISION FOR INCOME TAXES was $323 million for the first quarter of 1998 (an
effective tax rate of 29.3%), compared with $301 million for the first quarter
of 1997 (an effective tax rate of 30.2%). The higher provision for income taxes
reflected increased pre-tax earnings subject to statutory rates. The decrease in
the 1998 effective tax rate resulted primarily from increased tax credits and
decreases in taxes on non-U.S. income.
PORTFOLIO QUALITY
FINANCING RECEIVABLES are the financing segment's largest asset and its primary
source of revenues. The portfolio of financing receivables, before allowance for
losses, decreased to $105.8 billion at March 28, 1998, from $106.6 billion at
the end of 1997, primarily reflecting seasonal decreases in the credit card
portfolios, partially offset by origination volume and acquisition growth.
Related allowances for losses at March 28, 1998, aggregated $2.8 billion (2.63%
of receivables - the same as at the end of 1997) 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 $47.6 billion at March 28, 1998, a decrease of $0.5
billion from the end of 1997. Nonearning receivables were $1.0 billion at March
28, 1998, 2.1% of total consumer financing receivables, both of which were
substantially the same as at December 31, 1997. Write-offs of consumer
receivables increased to $356 million for the first quarter of 1998, compared
with $293 million for the first quarter of 1997. 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.
OTHER FINANCING RECEIVABLES, totaling $58.2 billion at March 28, 1998 ($58.5
billion at December 31, 1997), consisted of a diverse commercial, industrial and
equipment loan and lease portfolio. Related nonearning and reduced-earning
receivables were $385 million at March 28, 1998, compared with $353 million at
year-end 1997.
As discussed in the Corporation's Annual Report on Form 10-K for the year ended
December 31, 1997, Montgomery Ward Holding Corp. (MWHC) filed a bankruptcy
petition for reorganization in 1997. The Corporation's recorded investment in
MWHC and affiliates at March 28, 1998, was $790 million, a decrease of $5
million from the end of 1997, and consisted primarily of inventory financing.
Income recognition had been suspended on these pre-bankruptcy petition
investments. Subsequent to the petition, the Corporation committed to provide
MWHC up to $1.0 billion in debtor-in-possession financing, subject to certain
conditions, in order to fund working capital requirements and general corporate
expenses. A majority of this facility has been syndicated; the Corporation's
loans under this facility at March 28, 1998 were approximately $81 million. 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 $3.9 billion at March 28, 1998, including
$1.8 billion 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 bankruptcy filing. MWHC and its affiliates, under new management since
1997, are continuing their restructuring efforts as well as developing a plan of
reorganization.
The Corporation held loans and leases to commercial airlines amounting to $9.1
billion at March 28, 1998, up from $9.0 billion at the end of 1997.
6
<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
THREE MONTHS ENDED MARCH 28, 1998
(Unaudited)
<TABLE>
<CAPTION>
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 ........................................... $ 780 $ 780
Provision for income taxes ............................. 323 323
Minority interest in net earnings of consolidated
affiliates ............................................ 11 11
-------- --------
Earnings before provision for income taxes and
minority interest ..................................... 1,114 1,114
-------- --------
Fixed charges:
Interest ............................................. 1,975 1,975
One-third of rentals ................................. 58 58
-------- --------
Total fixed charges .................................... 2,033 2,033
-------- --------
Less interest capitalized, net of amortization ......... 12 12
-------- --------
Earnings before provision for income taxes and minority
interest, plus fixed charges .......................... $ 3,135 $ 3,135
======== ========
Ratio of earnings to fixed charges ..................... 1.54
========
Preferred stock dividend requirements .................. $ 22
Ratio of earnings before provision for income taxes to
net earnings .......................................... 1.41
Preferred stock dividend factor on pre-tax basis ....... 31
Fixed charges .......................................... 2,033
--------
Total fixed charges and preferred stock dividend
requirements .......................................... $ 2,064
========
Ratio of earnings to combined fixed charges and
preferred stock dividends ............................. 1.52
========
</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.
7
<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.
8
<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: May 12, 1998 By: /s/ J.A. Parke
-------------------------------------
J.A. Parke,
Senior Vice President, Finance
(Principal Financial Officer)
Date: May 12, 1998 By: /s/ J.C. Amble
-------------------------------------
J.C. Amble,
Vice President and Controller
(Principal Accounting Officer)
9
<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 ............... 7
27 Financial Data Schedule (filed electronically only)
10
