<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 June 30, 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. 19921
(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,
1998 1997
-------------- --------------
<S> <C> <C>
Assets
Cash and cash equivalents...................................... $ 688 $ 587
Restricted cash................................................ 873 18,888
Rent receivable from GE Capital Railcar Associates, Inc........ 12,753 12,753
Prepaid expenses and other..................................... 805 1,144
-------- --------
Total current assets........................................ 15,119 33,372
Rental equipment............................................... 788,154 813,044
Deferred financing fees........................................ 1,793 2,171
-------- --------
Total assets................................................... $805,066 $848,587
======== ========
Liabilities and Trust Surplus
Accrued interest and other liabilities......................... $ 5,683 $ 6,850
Current maturities of long-term debt........................... 97,545 110,999
-------- --------
Total current liabilities................................... 103,228 117,849
Long-term debt:
Trust notes................................................... 593,978 642,351
Secured indebtedness.......................................... 26,627 27,912
-------- --------
Total long-term debt........................................ 620,605 670,263
Minority interest in Partnership............................... 9,119 9,453
Trust surplus:
Capital distributions in excess of contributions.............. (74,623) (69,355)
Cumulative net earnings....................................... 146,737 120,377
-------- --------
Net trust surplus........................................... 72,114 51,022
-------- --------
Total liabilities and trust surplus............................ $805,066 $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 months ended Six months ended
June 30, June 30,
1998 1997 1998 1997
------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Rental revenue from GE Capital Railcar
Associates, Inc........................ $ 43,580 $ 38,258 $ 81,839 $ 76,517
-------- -------- -------- --------
Operating expenses:
Depreciation........................... (12,445) (12,446) (24,890) (24,891)
General, administrative and other...... (71) (147) (141) (211)
--------- -------- -------- --------
Total operating expenses............. (12,516) (12,593) (25,031) (25,102)
--------- -------- -------- --------
Operating income........................ 31,064 25,665 56,808 51,415
Interest expense........................ (14,660) (16,557) (29,955) (33,621)
Minority interest....................... (273) (219) (493) (439)
-------- -------- -------- --------
Net income.............................. $ 16,131 $ 8,889 $ 26,360 $ 17,355
======== ======== ======== ========
</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,
1998 1997
-------------- ------------
<S> <C> <C>
Operating activities:
Net income.............................................. $ 26,360 $ 17,355
Adjustments to reconcile net income to net cash
provided by operating activities: 24,890 24,891
Depreciation..........................................
Amortized discount on debt and deferred financing fees 532 604
Income of minority interest........................... 493 439
Changes in assets and liabilities, net:
Restricted cash..................................... 18,015 16,351
Rent receivable from GE Capital Railcar Associates,
Inc................................................
Other............................................... (910) (282)
-------- --------
Net cash provided by operating activities............. 69,380 59,358
Financing activities:
Borrowings.............................................. - -
Principal payments on borrowings........................ (63,184) (57,832)
Distribution to beneficiaries........................... (5,268) -
Cash contributed........................................ - -
Distributions to minority interest...................... (827) (773)
-------- --------
Net cash used in financing activities................. (69,279) (58,605)
-------- --------
Net increase (decrease) in cash.......................... 101 753
Cash and equivalents at beginning of the period.......... 587 490
-------- --------
Cash and equivalents at end of the period................ $ 688 $ 1,243
======== ========
Supplemental cash flow information:
Interest paid during the period........................ $ 30,511 $ 32,775
======== ========
</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.
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 June 30, 1998, the audit of Additional Rent had not
been completed for 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, 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 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>
June 30, December 31,
1998 1997
---------------------- -------------------
(In Thousands)
<S> <C> <C>
Railcars (at cost)... $1,388,582 $1,388,582
Accumulated (600,428) (575,538)
depreciation........ ---------- ----------
Net Book Value....... $ 788,154 $ 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>
June 30, December 31,
1998 1997
---------------------- ----------------------
(IN THOUSANDS)
<S> <C> <C>
Trust notes....... $689,088 $ 733,806
Secured 29,062 47,456
indebtedness..... -------- ---------
Total debt....... 718,150 781,262
Less: Current (97,545) (110,999)
maturities....... -------- ---------
Long-term debt... $620,605 $ 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 $97.5 million at June 30, 1998 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 1998 and 1997, on a consolidated basis the
Trust received rental revenues pursuant to the Leases of $81.8 million and $76.5
million respectively. Operating income was $56.8 million and $51.4 million for
the first six months of 1998 and 1997, respectively. The increase of income was
due to the receipt of $5.3 million of additional rent. Interest expense, net,
was $30.0 million and $33.6 million for the first six 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 $26.4 million and $17.4 million for the first six months of 1998 and 1997,
respectively.
The Trust generated $69.4 million in cash from operating activities during the
first six 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, $63.2 million was used in order to reduce borrowings, $5.3
million was distributed to the holders of Beneficial Interest in the Trust and
$827 thousand was distributed to the minority interests in the Partnership. The
principal amount outstanding under the Assumed Indebtedness was decreased by
$18.4 million to a total of $29.0 million at quarter-end, and the principal
amount outstanding under the Trust Notes was decreased by $44.7 million to a
total amount of $689.1 million at quarter-end.
6
<PAGE>
PART II
ITEM 5. Other Information
The Quarterly Report on Form 10-Q for the quarter ended June 27, 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 June 27,
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.
August 11, 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. August 11, 1998
- --------------------------------------------- -----------------------
David A. Vanaskey, Jr.
Assistant Vice President
/s/ Bruce L. Bisson August 11, 1998
- --------------------------------------------- -----------------------
Bruce L. Bisson
Vice President
8
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 688
<SECURITIES> 0
<RECEIVABLES> 12,753
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 15,119
<PP&E> 1,388,582
<DEPRECIATION> 600,428
<TOTAL-ASSETS> 805,066
<CURRENT-LIABILITIES> 103,228
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 72,114
<TOTAL-LIABILITY-AND-EQUITY> 805,066
<SALES> 0
<TOTAL-REVENUES> 81,839
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 25,031
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 29,955
<INCOME-PRETAX> 26,360
<INCOME-TAX> 0
<INCOME-CONTINUING> 26,360
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26,360
<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 June 27, 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 July 30, 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
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 ..................................... 9
PART II - OTHER INFORMATION.
Item 6. Exhibits and Reports on Form 8-K .............. 10
Signatures .................................................. 11
Index to Exhibits ........................................... 12
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
<TABLE>
<CAPTION>
GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES
CONDENSED STATEMENT OF CURRENT AND RETAINED EARNINGS
(Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
-------------------- --------------------
JUNE 27, JUNE 28, JUNE 27, JUNE 28,
(In millions) 1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUES
Revenues from services ......................................... $ 8,091 $ 6,597 $ 15,966 $ 13,454
Sales of goods ................................................. 1,893 1,061 3,519 1,977
-------- -------- -------- --------
9,984 7,658 19,485 15,431
-------- -------- -------- --------
EXPENSES
Interest ....................................................... 2,105 1,780 4,053 3,491
Operating and administrative ................................... 2,719 1,925 5,350 4,142
Cost of goods sold ............................................. 1,728 930 3,210 1,738
Insurance losses and policyholder and annuity benefits ......... 1,367 1,106 2,709 2,255
Provision for losses on financing receivables .................. 408 337 740 649
Depreciation and amortization of buildings
and equipment and equipment on operating leases ............... 598 563 1,250 1,128
Minority interest in net earnings of consolidated affiliates ... 10 1 21 14
-------- -------- -------- --------
8,935 6,642 17,333 13,417
-------- -------- -------- --------
EARNINGS
Earnings before income taxes ................................... 1,049 1,016 2,152 2,014
Provision for income taxes ..................................... (236) (298) (559) (599)
-------- -------- -------- --------
NET EARNINGS ................................................... 813 718 1,593 1,415
Dividends ...................................................... (153) (340) (526) (657)
Retained earnings at beginning of period ....................... 12,268 11,058 11,861 10,678
-------- -------- -------- --------
RETAINED EARNINGS AT END OF PERIOD ............................. $ 12,928 $ 11,436 $ 12,928 $ 11,436
======== ======== ======== ========
</TABLE>
See Notes to Condensed, Consolidated Financial Statements.
1
<PAGE>
ITEM 1. FINANCIAL STATEMENTS (Continued).
<TABLE>
<CAPTION>
GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES
CONDENSED STATEMENT OF FINANCIAL POSITION
(In millions) JUNE 27, DECEMBER 31
1998 1997
-------- --------
(Unaudited)
<S> <C> <C>
ASSETS
Cash and equivalents ................................................................... $ 2,750 $ 4,648
Investment securities .................................................................. 56,196 53,103
Financing receivables:
Time sales and loans, net of deferred income ......................................... 65,615 64,832
Investment in financing leases, net of deferred income ............................... 43,641 41,769
-------- --------
109,256 106,601
Allowance for losses on financing receivables ........................................ (2,871) (2,802)
-------- --------
Financing receivables - net ........................................................ 106,385 103,799
Other receivables - net ................................................................ 14,367 11,925
Equipment on operating leases (at cost), less accumulated amortization
of $6,368 and $6,126 .................................................................. 19,783 18,689
Intangible assets ...................................................................... 9,898 9,459
Inventories ............................................................................ 764 786
Other assets ........................................................................... 30,665 26,368
-------- --------
TOTAL ASSETS ..................................................................... $240,808 $228,777
======== ========
LIABILITIES AND EQUITY
Short-term borrowings .................................................................. $ 97,699 $ 91,680
Long-term borrowings:
Senior ............................................................................... 46,573 44,437
Subordinated ......................................................................... 697 697
Insurance liabilities, reserves and annuity benefits ................................... 52,182 50,248
Other liabilities ...................................................................... 14,447 14,315
Deferred income taxes .................................................................. 8,524 8,167
-------- --------
Total liabilities ................................................................ 220,122 209,544
-------- --------
Minority interest in equity of consolidated affiliates ................................. 1,049 860
-------- --------
Unrealized gains on investment securities .............................................. 1,305 1,145
Foreign currency translation adjustments ............................................... (180) (147)
-------- --------
Accumulated non-owner changes in equity ................................................ 1,125 998
Capital stock .......................................................................... 770 770
Additional paid-in capital ............................................................. 4,814 4,744
Retained earnings ...................................................................... 12,928 11,861
-------- --------
Total equity ..................................................................... 19,637 18,373
-------- --------
TOTAL LIABILITIES AND EQUITY ..................................................... $240,808 $228,777
======== ========
</TABLE>
See Notes to Condensed, Consolidated Financial Statements.
2
<PAGE>
ITEM 1. FINANCIAL STATEMENTS (Continued).
<TABLE>
<CAPTION>
GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES
CONDENSED STATEMENT OF CASH FLOWS
(Unaudited)
SIX MONTHS ENDED
--------------------
JUNE 27, JUNE 28,
(In millions) 1998 1997
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings ........................................................................... $ 1,593 $ 1,415
Adjustments to reconcile net earnings to cash provided from operating activities:
Provision for losses on financing receivables ........................................ 740 649
Depreciation and amortization of buildings and equipment and
equipment on operating leases ....................................................... 1,250 1,128
Other - net .......................................................................... 1,209 1,275
-------- --------
Cash provided from operating activities ............................................ 4,792 4,467
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Increase in loans to customers ......................................................... (30,358) (21,757)
Principal collections from customers ................................................... 28,864 20,571
Investment in assets on financing leases ............................................... (8,867) (7,407)
Principal collections on financing leases .............................................. 7,121 7,382
Net decrease (increase) in credit card receivables ..................................... (484) 1,700
Buildings and equipment and equipment on operating leases:
- additions ......................................................... (3,921) (2,917)
- dispositions ...................................................... 2,951 1,119
Payments for principal businesses purchased, net of cash acquired ...................... (849) (581)
Purchases of investment securities by insurance affiliates and annuity businesses ...... (8,925) (5,160)
Dispositions and maturities of investment securities by insurance affiliates
and annuity businesses ................................................................ 6,242 4,359
Other - net ............................................................................ (3,287) (2,165)
-------- --------
Cash used for investing activities ................................................. (11,513) (4,856)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in borrowings (maturities 90 days or less) .................................. 4,821 5,579
Newly issued debt - short-term (maturities 91-365 days) ............................... 2,891 2,098
- long-term senior .................................................. 14,362 7,039
Proceeds - non-recourse, leveraged lease debt .......................................... 535 --
Repayments and other reductions:
- short-term (maturities 91-365 days) ............................... (13,142) (13,456)
- long-term senior .................................................. (3,610) (495)
Principal payments - non-recourse, leveraged lease debt ................................ (247) (186)
Proceeds from sales of investment and annuity contracts ................................ 2,066 1,886
Redemption of investment and annuity contracts ......................................... (2,397) (1,942)
Dividends paid ......................................................................... (526) (657)
Issuance of preferred stock in excess of par value ..................................... 70 --
Issuance of variable cumulative preferred stock by consolidated affiliate .............. -- 100
-------- --------
Cash provided from (used for) financing activities ................................. 4,823 (34)
-------- --------
DECREASE IN CASH AND EQUIVALENTS ....................................................... (1,898) (423)
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD ............................................ 4,648 3,074
-------- --------
CASH AND EQUIVALENTS AT END OF PERIOD .................................................. $ 2,750 $ 2,651
======== ========
</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 ("SFAS") 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
--------------------
JUNE 27, JUNE 28,
(Dollars in millions) 1998 1997
-------- --------
<S> <C> <C>
Net earnings ........................................... $ 813 $ 718
Unrealized gains on investment securities - net ........ 157 626
Foreign currency translation adjustments ............... (25) (9)
-------- --------
Total .................................................. $ 945 $ 1,335
======== ========
SIX MONTHS ENDED
--------------------
JUNE 27, JUNE 28,
1998 1997
-------- --------
Net earnings ........................................... $ 1,593 $ 1,415
Unrealized gains on investment securities - net ........ 160 242
Foreign currency translation adjustments ............... (33) (43)
-------- --------
Total .................................................. $ 1,720 $ 1,614
======== ========
</TABLE>
4
<PAGE>
ITEM 1. FINANCIAL STATEMENTS (Continued).
4. In June 1998, the Financial Accounting Standards Board issued SFAS 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 other comprehensive income pending recognition in earnings.
The Corporation will not adopt the Statement until required to do so on
January 1, 2000.
5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS.
OVERVIEW
Net earnings for the first half of 1998 were $1,593 million, a $178 million
(13%) increase over the first half of 1997. The results reflected the
globalization and diversity of the Corporation's businesses and were led by
double-digit increases in Specialized Financing, Specialty Insurance 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 $1,548 million, a $171 million
(12%) increase over the comparable 1997 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. Net earnings for these businesses increased,
primarily from a higher average level of invested assets and a lower effective
tax rate. These increases were offset in part by decreased earnings from
Consumer Services activities, attributable to the U.S. private-label credit card
and automobile financing businesses. Financing spreads were essentially flat
compared with the prior year, reflecting slightly higher yields offset by higher
borrowing rates.
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.
OPERATING RESULTS
TOTAL REVENUES from all sources increased $4,054 million (26%) to $19,485
million for the first half of 1998, compared with $15,431 million for the first
half of 1997.
Revenues from the equipment management, consumer services, mid-market financing
and specialized financing businesses increased $3,145 million (22%) 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
consumer savings and insurance businesses in 1997 and 1998. Revenues were also
impacted by lower losses associated with the Corporation's equity investment in
Montgomery Ward Holding Corp. This impact was largely offset by no counterpart
to a 1997 gain recognized on the sale of an investment in the stock of a
publicly traded company. Revenues of the Specialty Insurance segment increased
$579 million (50%) to $1,748 million for the first half of 1998 compared with
the first half of 1997. The increase primarily reflected increased investment
income resulting from continued growth in the investment portfolios and a higher
level of gains on investment securities as well as growth in origination volume.
The increase also reflected the 1997 contribution of assets of Consolidated
Insurance Group, a component of Consolidated Financial Insurance, from GECS to
the Corporation.
INTEREST EXPENSE for the first half of 1998 was $4,053 million, 16% higher than
for the first half 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 half of 1998 was 6.11% compared with 5.99% in the first
half of 1997.
OPERATING AND ADMINISTRATIVE EXPENSES were $5,350 million for the first half of
1998, a 29% increase over the first half 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 $454 million to
$2,709 million for the first half of 1998, compared with the first half of 1997.
The increase primarily reflected the acquisitions of consumer savings and
insurance businesses and higher origination volume, partially offset by improved
market conditions in the mortgage insurance business.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS (Continued).
PROVISION FOR LOSSES ON FINANCING RECEIVABLES increased to $740 million for the
first half of 1998 from $649 million for the first half 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.
DEPRECIATION AND AMORTIZATION OF BUILDINGS AND EQUIPMENT AND EQUIPMENT ON
OPERATING LEASES increased $122 million (11%) to $1,250 million for the first
half of 1998 compared with $1,128 million for the first half of 1997. The
increase was principally the result of higher levels of equipment on operating
leases, primarily reflecting acquisition growth and higher aircraft volume.
PROVISION FOR INCOME TAXES was $559 million for the first half of 1998 (an
effective tax rate of 26.0%), compared with $599 million for the first half of
1997 (an effective tax rate of 29.7%). The lower provision for income taxes and
the decrease in the 1998 effective tax rate resulted primarily from certain
tax-advantaged transactions, 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, increased to $109.3 billion at June 27, 1998, from $106.6 billion at the
end of 1997, primarily reflecting acquisition growth and higher origination
volume, partially offset by seasonal decreases in the credit card portfolios.
Related allowances for losses at June 27, 1998, aggregated $2.9 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 $48.6 billion at June 27, 1998, an increase of $0.5
billion from the end of 1997. Nonearning receivables were $1.1 billion at June
27, 1998, 2.2% of total consumer financing receivables, compared with $1.0
billion, 2.2% of total consumer receivables, at December 31, 1997. Write-offs of
consumer receivables increased to $714 million for the first half of 1998,
compared with $607 million for the first half 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 the effects of higher delinquencies at the end of 1997, consistent
with overall industry experience.
OTHER FINANCING RECEIVABLES, totaling $60.7 billion at June 27, 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 $358 million at June 27, 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 June 27, 1998, was $777 million, a decrease of $18
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 June 27, 1998 were approximately $92 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 $3.6 billion at June 27, 1998, including
$1.7 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.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS (Continued).
The Corporation held loans and leases to commercial airlines amounting to $9.6
billion at June 27, 1998, up from $9.0 billion at the end of 1997.
8
<PAGE>
EXHIBIT 12
<TABLE>
<CAPTION>
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 27, 1998
(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 ........................................... $ 1,593 $ 1,593
Provision for income taxes ............................. 559 559
Minority interest in net earnings of consolidated
affiliates ............................................ 21 21
-------- --------
Earnings before provision for income taxes and
minority interest ..................................... 2,173 2,173
-------- --------
Fixed charges:
Interest ............................................. 4,121 4,121
One-third of rentals ................................. 131 131
-------- --------
Total fixed charges .................................... 4,252 4,252
-------- --------
Less interest capitalized, net of amortization ......... 40 40
-------- --------
Earnings before provision for income taxes and minority
interest, plus fixed charges .......................... $ 6,385 $ 6,385
======== ========
Ratio of earnings to fixed charges ..................... 1.50
========
Preferred stock dividend requirements .................. $ 45
Ratio of earnings before provision for income taxes to
net earnings .......................................... 1.35
Preferred stock dividend factor on pre-tax basis ....... 61
Fixed charges .......................................... 4,252
--------
Total fixed charges and preferred stock dividend
requirements .......................................... $ 4,313
========
Ratio of earnings to combined fixed charges and
preferred stock dividends ............................. 1.48
========
</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.
9
<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.
10
<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 31, 1998 By: /s/ J.A. Parke
------------------------------------
J.A. Parke,
Senior Vice President, Finance
(Principal Financial Officer)
Date: July 31, 1998 By: /s/ J.C. Amble
------------------------------------
J.C. Amble,
Vice President and Controller
(Principal Accounting Officer)
11
<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 ....... 9
27 Financial Data Schedule (filed electronically only)
12
