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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM ------- TO -------
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COMMISSION FILE NUMBER 1-6461
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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 (203)357-4000
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) (REGISTRANT'S TELEPHONE NUMBER,
INCLUDING AREA CODE)
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SECURITIES REGISTERED PURSUANT
TO SECTION 12(B) OF THE ACT:
NAME OF EACH
TITLE OF EACH CLASS EXCHANGE ON WHICH REGISTERED
------------------- ----------------------------
7 7/8% GUARANTEED SUBORDINATED NOTES DUE DECEMBER 1, 2006 NEW YORK STOCK EXCHANGE
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
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /X/
AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NONAFFILIATES OF THE
REGISTRANT AT MARCH 21, 1994. NONE.
AT MARCH 21, 1994, 3,837,825 SHARES OF COMMON STOCK WITH A PAR VALUE OF $200
WERE OUTSTANDING.
DOCUMENTS INCORPORATED BY REFERENCE
THE CONSOLIDATED FINANCIAL STATEMENTS OF GENERAL ELECTRIC COMPANY, SET FORTH
IN THE ANNUAL REPORT ON FORM 10-K OF GENERAL ELECTRIC COMPANY FOR THE YEAR
ENDED DECEMBER 31, 1993 ARE INCORPORATED BY REFERENCE INTO PART IV HEREOF.
REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION J(1)(A) AND (B)
OF FORM 10-K AND IS THEREFORE FILING THIS FORM 10-K WITH THE REDUCED DISCLOSURE
FORMAT.
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TABLE OF CONTENTS
PAGE
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PART I
Item 1. Business............................................................ 1
Item 2. Properties.......................................................... 9
Item 3. Legal Proceedings................................................... 9
Item 4. Submission of Matters to a Vote of Security Holders................. 9
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters........................................................... 10
Item 6. Selected Financial Data............................................. 10
Item 7. Management's Discussion and Analysis of Results of Operations....... 11
Item 8. Financial Statements and Supplementary Data......................... 16
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.............................................. 33
PART III
Item 10. Directors and Executive Officers of the Registrant.................. 34
Item 11. Executive Compensation.............................................. 34
Item 12. Security Ownership of Certain Beneficial Owners and Management...... 34
Item 13. Certain Relationships and Related Transactions...................... 34
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.... 35
3
PART I
ITEM 1. BUSINESS.
GENERAL
General Electric Capital Corporation (herein together with its consolidated
affiliates called the "Corporation" or "GE Capital" unless the context otherwise
requires) was incorporated in 1943 in the State of New York, under the
provisions of the New York Banking Law relating to investment companies, as
successor to General Electric Contracts Corporation, formed in 1932. Until
November 1987, the name of the Corporation was General Electric Credit
Corporation. All outstanding common stock of the Corporation is owned by General
Electric Capital Services, Inc. ("GE Capital Services"), formerly General
Electric Financial Services, Inc., which is in turn wholly owned by General
Electric Company ("GE Company"). The business of the Corporation originally
related principally to financing the distribution and sale of consumer and other
products of GE Company. Currently, however, the type and brand of products
financed and the financial services offered are significantly more diversified.
Very little of the financing provided by GE Capital involves products that are
manufactured by GE Company.
The Corporation operates in four finance industry segments and in a
specialty insurance industry segment. GE Capital's financing activities include
a full range of leasing, loan, equipment management services and annuities. The
Corporation's specialty insurance activities include providing private mortgage
insurance, financial (primarily municipal) guarantee insurance, creditor
insurance, reinsurance and, for financing customers, credit life and property
and casualty insurance. The Corporation is an equity investor in a retail
organization and certain other financial services organizations. GE Capital's
operations are subject to a variety of regulations in their respective
jurisdictions.
Services of the Corporation are offered primarily in the United States,
Canada and Europe. Computerized accounting and service centers, including those
located in Connecticut, Ohio, Georgia and England, provide financing offices and
other service locations with data processing, accounting, collection, reporting
and other administrative support. The Corporation's principal executive offices
are located at 260 Long Ridge Road, Stamford, Connecticut 06927 (Telephone
number (203) 357-4000). At December 31, 1993 the Corporation employed
approximately 27,000 persons.
Industry segment operating data and identifiable assets for the years 1993,
1992 and 1991 are shown in Note 17 of the Notes to Financial Statements of
General Electric Capital Corporation and Consolidated Affiliates included in
Item 8 of this Annual Report.
For accounting purposes, the Corporation's principal financing products are
classified as time sales and loans, investment in financing leases or equipment
on operating leases. The following table presents, by industry segment, these
principal financing products which, together with investment securities and
other assets, comprise the Corporation's total assets at December 31, 1993 and
1992.
Page 1
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ITEM 1. BUSINESS (Continued).
TOTAL ASSETS BY SEGMENT
1993
------------------------------------------------------------------------
TIME NET ALLOW.
SALES INVESTMENT FOR
AND NET IN LOSSES
LOANS, INVESTMENT EQUIPMENT AND
NET OF IN ON ALL
DEFERRED FINANCING OPERATING INVESTMENT OTHER TOTAL
(IN MILLIONS) INCOME LEASES LEASES SECURITIES ASSETS ASSETS
------- ------- --------- ------- ------- --------
SPECIALIZED FINANCING
Commercial Real
Estate............... $10,751 $ 35 $ $ 37 $ 3,657 $ 14,480
Global Project and
Structured Finance... 2,957 7,893 1,193 428 211 12,682
Corporate Finance
Group................ 3,239 436 279 802 4,756
------- ------- ------- ------- ------- --------
Total.............. 16,947 7,928 1,629 744 4,670 31,918
------- ------- ------- ------- ------- --------
CONSUMER SERVICES
Retailer Financial
Services............. 14,512 52 1,052 15,616
Auto Financial
Services............. 2,510 5,556 161 243 8,470
Mortgage Servicing..... 177 1 7,408 7,586
GNA.................... 1,088 11,270 981 13,339
Other.................. 155 45 535 735
------- ------- ------- ------- ------- --------
Total.............. 18,442 5,556 161 11,368 10,219 45,746
------- ------- ------- ------- ------- --------
MID-MARKET
FINANCING
Commercial Equipment
Financing............ 3,030 5,877 424 12 454 9,797
Vendor Financial
Services............. 847 2,404 43 137 3,431
GECC Financial --
Hawaii............... 933 65 1 8 1,007
Computer Leasing....... 146 223 225 61 655
------- ------- ------- ------- ------- --------
Total.............. 4,956 8,569 693 12 660 14,890
------- ------- ------- ------- ------- --------
EQUIPMENT
MANAGEMENT
Fleet Services......... 224 2,011 1,475 757 4,467
Genstar Container...... 417 2,416 318 296 3,447
Railcar Services....... 317 990 2 169 1,478
Polaris Aircraft....... 171 2,137 189 2,497
Transport International
Pool................. 73 799 278 1,150
Satellite
Telecommunications
Services............. 584 584
Computer Services...... 49 107 335 491
Modular Space.......... 10 243 87 340
------- ------- ------- ------- ------- --------
Total.............. 395 2,877 8,167 320 2,695 14,454
------- ------- ------- ------- ------- --------
SPECIALTY
INSURANCE.............. 8 7,029 2,542 9,579
CORPORATE................ 1,104 248 1,352
------- ------- ------- ------- ------- --------
TOTAL.................... $40,748 $24,930 $10,650 $20,577 $21,034 $117,939
------- ------- ------- ------- ------- --------
------- ------- ------- ------- ------- --------
TOTAL ASSETS BY SEGMENT
1992
---------------------------------------------------------------
TIME NET ALLOW.
SALES INVESTMENT FOR
AND NET IN LOSSES
LOANS, INVESTMENT EQUIPMENT AND
NET OF IN ON ALL
DEFERRED FINANCING OPERATING INVESTMENT OTHER TOTAL
INCOME LEASES LEASES SECURITIES ASSETS ASSETS
(IN MILLIONS) ------- ------- ------ --------- ------- -------
SPECIALIZED FINANCING
Commercial Real
Estate............... $10,476 $ 33 $ $ 51 $ 2,940 $13,500
Global Project and
Structured Finance... 2,838 7,549 772 26 612 11,797
Corporate Finance
Group................ 5,157 482 929 6,568
------- ------- ------ ------- ------- -------
Total.............. 18,471 7,582 1,254 77 4,481 31,865
------- ------- ------ ------- ------- -------
CONSUMER SERVICES
Retailer Financial
Services............. 12,817 6 8 721 13,552
Auto Financial
Services............. 1,841 4,827 234 336 7,238
Mortgage Servicing..... 129 3,038 3,167
GNA....................
Other.................. 202 5 207
------- ------- ------ ------- ------- -------
Total.............. 14,989 4,827 240 8 4,100 24,164
------- ------- ------ ------- ------- -------
MID-MARKET
FINANCING
Commercial Equipment
Financing............ 1,980 5,652 321 1 486 8,440
Vendor Financial
Services............. 569 2,774 80 153 3,576
GECC Financial --
Hawaii............... 915 81 1 12 1,009
Computer Leasing....... 75 241 231 93 640
------- ------- ------ ------- ------- -------
Total.............. 3,539 8,748 633 1 744 13,665
------- ------- ------ ------- ------- -------
EQUIPMENT
MANAGEMENT
Fleet Services......... 3 2,096 1,418 956 4,473
Genstar Container...... 324 2,111 250 2,685
Railcar Services....... 264 1,033 20 196 1,513
Polaris Aircraft....... 68 1,884 1 183 2,136
Transport International
Pool................. 56 493 157 706
Satellite
Telecommunications
Services............. 524 524
Computer Services...... 19 128 178 325
Modular Space.......... 9 201 68 278
------- ------- ------ ------- ------- -------
Total.............. 71 2,768 7,268 21 2,512 12,640
------- ------- ------ ------- ------- -------
SPECIALTY
INSURANCE.............. 5,654 1,765 7,419
CORPORATE................ 2,170 709 2,879
------- ------- ------ ------- ------- -------
TOTAL.................... $37,070 $23,925 $9,395 $ 7,931 $14,311 $92,632
------- ------- ------ ------- ------- -------
------- ------- ------ ------- ------- -------
The Corporation provides a wide variety of financing and insurance products
and services, which are organized into the following industry segments:
o Specialized Financing -- loans and leases for major capital assets
including aircraft, industrial facilities and equipment and
energy-related facilities; commercial and residential real estate loans
and investments; and loans to and investments in corporate enterprises.
o Consumer Services -- private label and bank credit card loans, time sales
and revolving credit and inventory financing for retail merchants, auto
leasing and inventory financing, mortgage servicing and annuities.
o Mid-Market Financing -- loans and financing and operating leases for
middle-market customers including manufacturers, distributors and
end-users, for a variety of equipment, including data processing
equipment, medical and diagnostic equipment, and equipment used in
construction, manufacturing, office applications and telecommunications
activities.
Page 2
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ITEM 1. BUSINESS (Continued).
o Equipment Management -- leases, loans and asset management services for
portfolios of commercial and transportation equipment including aircraft,
trailers, auto fleets, modular space units, railroad rolling stock, data
processing equipment, ocean-going containers and satellites.
o Specialty Insurance -- financial guaranty insurance, principally on
municipal bonds and structured finance issues; private mortgage
insurance; creditor insurance covering international customer loan
repayments; and property, casualty and life insurance.
Refer to Item 7 "Management's Discussion and Analysis of Results of
Operations" in this Form 10-K for discussion of the Corporation's Portfolio
Quality.
SPECIALIZED FINANCING
Commercial Real Estate
Commercial Real Estate Financing and Services (CRE) provides funds for the
acquisition, refinancing or renovation of a wide range of commercial and
residential properties located throughout the United States, and, to a lesser
extent, in Canada, Mexico and Europe. CRE also provides selected asset
management services to real estate investors. CRE has field offices located
throughout the United States, as well as offices in Toronto, Canada, Mexico
City, Mexico and London, England, in addition to its headquarters in Stamford,
Connecticut.
Lending represents a major segment of CRE's business in the form of
intermediate-term senior or subordinated floating-rate loans secured by existing
income-producing commercial properties such as office buildings, rental
apartments, shopping centers, industrial buildings, mobile home parks and
warehouses. Loans range in amount from single-property mortgages typically
greater than $5 million to multi-property portfolios of several hundred million
dollars, and are well dispersed geographically, covering properties located in
38 states and several foreign countries. Approximately 90% of all loans are
senior mortgages.
During 1993, CRE continued to broaden its investment base by acquiring
certain loans and properties from both government and private institutions. CRE
actively buys or provides restructuring financing for portfolios of real estate,
mortgage loans, limited partnerships, REIT's, and tax-exempt bonds.
CRE also offers a variety of real estate management services to outside
investors, institutions, corporations and investment banks through its GE
Capital Realty Group subsidiary. Services include acquisitions and dispositions,
strategic asset positioning, asset restructuring, on-site property management,
maintenance, and leasing and loan servicing.
Global Project and Structured Finance
The Corporation's Global Project and Structured Finance (GP&SF) business
provides financing for major capital investments in various sectors of the
economy, concentrating principally in the North American market with efforts
being made toward Asia, South America and Europe. At year-end 1993, GP&SF's
diversified portfolio included investments in commercial aircraft (38%),
industrial facilities and equipment (24%), energy-related facilities (30%),
railcar rolling stock (5%), and marine vessels (3%).
GP&SF's fundings take various forms ranging from financing leases to total
balance sheet recapitalizations. At December 31, 1993, GP&SF's portfolio
consisted of finance leases (both direct financing and leveraged leases),
operating leases, loans (both senior and subordinated) and equity investments
(including collateralized, sinking fund and adjustable rate preferred stock;
joint ventures; and partnerships). Fundings are adequately collateralized in the
form of property liens, preferred mortgages, assignment of earnings, insurance,
guarantees, cash flow streams and the financed assets.
GP&SF provides lease syndication and private placement services for
transactions generated by GE Capital as well as other companies. When such
services are performed, GP&SF typically retains a portion of the transaction and
sells off the remainder to one or more other financial institutions.
In addition to its Stamford, Connecticut headquarters, GP&SF has field
offices in New York City and Chicago, as well as in Canada, Mexico, England,
Singapore, Hong Kong, China and India.
Page 3
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ITEM 1. BUSINESS (Continued).
Corporate Finance Group
The Corporate Finance Group (CFG) provides senior and subordinated loans,
on both a revolving and term basis, secured by various assets, which may include
accounts receivable, inventory, property, plant and equipment and intangible
assets (e.g. franchise licenses). Loans range in size from $5 million to several
hundred million dollars with maturities generally between 5 and 10 years. CFG is
active in the loan syndication market, selling and occasionally purchasing
participations in leveraged transactions. CFG also makes preferred and common
stock investments and frequently receives warrants exercisable into a certain
percentage of the financed entities' common stock. In addition, with the
diminished market for acquisition related transactions, CFG has expanded the
scope of its business into other financing opportunities, such as providing
lines of credit to bankrupt companies undergoing reorganization.
The portfolio is diversified with approximately 100 accounts dispersed
throughout the United States and, to a lesser degree, Canada and Europe.
Industry concentration is spread among cable television, commercial and
industrial, retail, financial services, media, and, to a lesser extent,
healthcare, food and beverage and broadcasting.
CFG has offices throughout the United States in addition to its
headquarters in Stamford, Connecticut.
CONSUMER SERVICES
Retailer Financial Services
Retailer Financial Services (RFS) provides sales financing services to the
distribution chain for various consumer industries. Financing plans offered vary
considerably by client (including Montgomery Ward & Co., Incorporated, through a
wholly-owned affiliate Montgomery Ward Credit Corporation, "MW Credit"), but
fall into three major product offerings: customized private label credit card
programs with retailers, bankcard programs direct with consumers and inventory
financing programs with manufacturers, distributors and retailers.
RFS purchases consumer revolving charge accounts from retailers in the
United States, Canada and the United Kingdom, most of whom sell a variety of
products of various manufacturers on a time sales basis. The terms made
available for these financing plans vary by size of contract and the credit
standing of the customer. Maximum maturities ordinarily do not exceed 40 months.
The Corporation generally maintains a security interest in the merchandise
financed. Financing is provided to consumers under contractual arrangements both
with and without recourse to retailers. RFS's wide range of financial services
includes private label credit cards, credit promotion and accounting services,
billing (in the store's name) and customer credit and collection services.
Similar services are also provided through joint ventures in Mexico and Spain.
During 1993, RFS expanded into the Scandinavian market with the purchase of
Finax Finans AB which provides credit card services and consumer loans in Sweden
and Norway.
RFS provides consumers with Visa and Mastercard products, including the new
GE Rewards Credit Card, through Monogram Bank, USA. RFS is also engaged in the
home equity loan business.
RFS provides inventory financing for retailers primarily in the appliance
and consumer electronics industries. The majority of such financing is for
products manufactured by General Electric Company. The Corporation obtains a
security interest in the inventory of retailers to whom financing is provided.
As part of the inventory financing agreement, retailers are required to provide
insurance coverage deemed adequate by RFS on the merchandise financed (with an
insurer selected by the retailer). In addition, RFS usually obtains agreements
from the distributor or manufacturer obligating them to repurchase inventory
repossessed by RFS from defaulting retailers.
Auto Financial Services
Auto Financial Services (AFS) provides lease financing for automobiles of
domestic and foreign manufacture through dealers, independent leasing companies
and importers of new and used cars throughout the United States, Canada and the
United Kingdom. Contractual terms do not exceed 66 months and have an average
expected term ranging from 30 to 45 months. Property and casualty insurance is
required for all leases, with the insurer selected by the lessee.
Page 4
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ITEM 1. BUSINESS (Continued).
AFS also provides inventory financing programs and direct loans to segments
of the automotive industry, including dealers, rental car companies and leasing
companies located throughout the United States.
AFS purchases auto lease and loan assets from financial institutions and
services the outstanding accounts throughout the liquidation of the portfolios.
AFS is active in the Asian market through equity investments in United
Merchants Finance Ltd. (Hong Kong) and ASTRA Sedaya Finance (Indonesia) and
expanded in 1993 with United Motor Works (Malaysia) and Government Savings Bank
and General Finance and Securities (Thailand) which provide primarily automobile
and vehicle financing in their respective markets.
On January 1, 1993 AFS and Volvo of North America began a joint venture to
provide financing for Volvo's customers.
Mortgage Servicing
GE Capital Mortgage Services, Inc. (GECMSI), wholly owned by GE Capital
Mortgage Corporation (GECMC), is engaged in the business of servicing
residential mortgage loans collateralized by one-to-four-family homes located
throughout the United States. It obtains servicing through the purchase of
mortgage loans and of servicing rights. GECMSI packages the loans it purchases
into mortgage-backed securities which are sold to investors. GECMSI is also
engaged in the home equity loan business. GECMC, through GECMSI and other
wholly-owned affiliates, is among the nation's leading asset management,
servicing and disposition organizations.
GNA
The Corporation acquired two companies during 1993 (GNA Corporation and
United Pacific Life Insurance Company) which together comprise the Corporation's
annuity business ("GNA"). GNA writes and markets tax-deferred annuities and
sells proprietary and third party mutual funds through independent agents and
financial institutions.
MID-MARKET FINANCING
Commercial Equipment Financing
Commercial Equipment Financing (CEF) offers a broad line of financial
products including loans, leases and municipal financing to middle-market
customers including manufacturers, distributors, dealers and end-users. Products
are designed to meet customers' unique equipment needs and tax requirements and
are either held for CEF's own account or brokered to a third party for a fee.
Generally, transactions range from $50 thousand dollars to several million
dollars with financing terms from 36 to 120 months. CEF enhances the value of
its leased equipment by maintaining an asset management operation that both
redeploys off-lease equipment and monitors asset values. The portfolio includes
vehicles, manufacturing equipment, corporate aircraft, construction equipment,
medical diagnostic equipment, office equipment, telecommunications equipment and
electronics.
CEF operates from offices throughout the United States, Puerto Rico,
Canada, Europe, Australia and through joint ventures in Mexico, Spain and Hong
Kong. In 1993, Canadian operations were significantly expanded with the purchase
of financing receivables and infrastructure of the National Bank of Canada.
Vendor Financial Services
Vendor Financial Services (VFS) provides captive financing services to
equipment manufacturers and distributors in specific industries including office
furniture, healthcare, franchise, information systems, manufacturing and office
equipment worldwide. The captive financing programs are tailored to meet the
individual needs of each vendor including sales force training, marketing
support and customized financing products. Funding, billing, collections and
other related services are provided by six highly automated service operations
and sales offices located throughout the United States, Canada, Mexico, Asia and
Europe. VFS's typical transaction size ranges from $6 thousand to $500 thousand.
Security is generally provided by the asset being financed.
Page 5
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ITEM 1. BUSINESS (Continued).
During 1993, VFS acquired Digital Equipment Corporation's financing group.
Digital Financial Services, the new name for the VFS unit dedicated to Digital,
provides financing for the acquisition of equipment manufactured by Digital.
GECC Financial -- Hawaii
GECC Financial Corporation of Hawaii (GFC) operates exclusively in the
state of Hawaii. Through a network of 10 branch offices, GFC offers commercial
and residential real estate loans, auto and equipment leasing, inventory
financing and equity lines of credit. GFC also offers thrift investment programs
and loan servicing to institutional investors.
Computer Leasing
GE Capital Computer Leasing Corporation(GECCL), is based in Emeryville,
California and offers primarily lease financing for new and used computer
equipment and peripherals of all major computer manufacturers. GECCL manages
these assets during their product life cycle by offering a wide range of
services including remarketing and trading of used equipment. GECCL's offering
of financial services and products are tailored to provide information
technology solutions to its customers.
EQUIPMENT MANAGEMENT
Fleet Services
GE Capital Fleet Services (GECFS), is the leading corporate fleet
management company in North America and Europe with 620,000 cars, trucks and
specialty vehicles under lease and service management.
GECFS markets finance and operating leases to several thousand customers
with an average lease term of 36 months. The primary product is a Terminal
Rental Adjustment Clause (TRAC) lease with the customer assuming the residual
risk for the difference between market and book value at termination. In
addition to the services directly associated with the lease, GECFS offers
value-added fleet management services designed to reduce its customers' total
fleet management costs. These include maintenance management programs, accident
services, national account purchasing programs, fuel programs, title and
licensing services, safety programs and many other value-added programs. GECFS'
customer base is well diversified across all industries and geographic locations
and includes many Fortune 500 companies.
Genstar Container
In 1993, Genstar Container Corporation maintained a fleet of over 1,300,000
TEU ("twenty-foot equivalent units") of dry-cargo, refrigerated and specialized
containers for intermodal cargo transport on a global basis. Lessees consist
primarily of shipping lines who lease on a long-term or master lease basis.
Genstar is the world's largest lessor of intermodal shipping containers.
Railcar Services
At December 31, 1993, GE Railcar Services Corporation (GERSCO) had
approximately 140,000 railcars leased to others in North America (principally
operating leases). Railcar maintenance and repair services are provided by GE
Railcar Repair Services Corporation, a wholly-owned affiliate of GERSCO, at its
21 repair centers in the United States and Canada. GE Railcar Wheel Services
Corporation, a wholly-owned affiliate of GERSCO, provides railcar refurbishing
services and also remanufactures railcar parts.
Polaris Aircraft
Polaris Holding Company and its subsidiaries (Polaris) provide lease
financing to the commercial airline industry on a worldwide basis, primarily
through short-term operating leases. At December 31, 1993, Polaris' fleet of
aircraft, one of the largest such fleets in the world, consisted of 250 owned or
managed aircraft on lease to 50 customers around the world.
In 1994, the activities of Polaris and the commercial aircraft finance and
leasing assets of the Global Project and Structured Finance business will be
combined to form GE Capital Aviation Services, Inc. (GECAS). GECAS will also
manage the aircraft assets of GPA Group, plc.
Page 6
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ITEM 1. BUSINESS (Continued).
Transport International Pool
Transport International Pool (TIP) rents, leases, sells and finances
over-the-road trailers in the United States, Canada and throughout Europe from
185 locations. In June 1993, TIP acquired an extensive European network by
purchasing TIP Europe plc. and its 65 branches in 10 countries. TIP also
launched its trailer storage and cartage rental business by purchasing the
assets of Trailerco. TIP's large diversified fleet of over 83,000 dry freight
vans, refrigerated and double vans, flatbeds and specialized trailers serves the
trailer needs of common and private carriers.
Satellite Telecommunications Services
GE American Communications (GE Americom) is a leading provider of satellite
communication services (video and audio services) to the media, including the
broadcast and cable TV industries, and voice, facsimile and wideband data
services for various agencies of the federal government. GE Americom operates
seven domestic communications satellites, which carry cable TV programming to
the nation's 11,000 plus cable television systems and is also the leading
satellite carrier of radio programming, serving more than 6,000 radio stations.
It also maintains a supporting network of earth stations, central terminal
offices, and telemetry, tracking and control facilities.
Computer Services
Computer Services, is a combination of four businesses (Computer
Maintenance Service, Rental/Lease, Electronic Services and GE Hamilton
Technology Services). Recognized for its premier service, the Computer
Maintenance Service business provides comprehensive repair, maintenance and
networking services for multi-vendor personal computers. The Rental/Lease
business rents and leases a broad range of brand-name personal computers,
workstations and test and measurement equipment. The Electronic Service business
provides world-class, single-source repair and calibration services for
electronic test equipment from more than 1,000 manufacturers. GE Hamilton
Technology Services provides a diverse base of technology services -- computer
rental, leasing, sales, support and asset management -- to customers seeking
communication solutions.
Modular Space
GE Capital Modular Space (GECMS) maintains a fleet, at December 31, 1993,
of approximately 36,000 non-residential relocatable modular structures for
rental, lease and sale from over 80 facilities in the United States. GECMS'
operating leases are primarily rental and short-term leases, averaging 15
months, in term and usage.
SPECIALTY INSURANCE
Mortgage Insurance
GE Mortgage Insurance Companies (GEMICO) are engaged principally in
underwriting residential mortgage guaranty insurance. Operating in 26 field
locations, GEMICO is licensed in 50 states and the District of Columbia, and at
December 31, 1993, was the primary insurance carrier for over 828,100
residential homes, with total insurance in force aggregating over $149 billion
and total risk in force aggregating over $27 billion. When a claim is received,
GEMICO proceeds by either paying a guaranteed percentage based on the specified
coverage or paying the mortgage and delinquent interest, taking title to the
property and arranging for its sale.
Financial Guaranty Insurance
FGIC Corporation (FGIC), through its wholly-owned subsidiary Financial
Guaranty Insurance Company (Financial Guaranty), is an insurer of municipal
bonds, including new issues and bonds traded in the secondary market, including
bonds held in unit investment trusts and mutual funds. Financial Guaranty also
guarantees certain structured debt issues in the taxable market. The guaranteed
principal, after reinsurance, amounted to approximately $84 billion at December
31, 1993. Approximately 90% of the business written to date by Financial
Guaranty has been municipal bond insurance.
Page 7
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ITEM 1. BUSINESS (Continued).
Creditor Insurance
Financial Insurance Group (FIG), headquartered in Enfield, Middlesex,
England, is licensed to offer creditor insurance in the United Kingdom, the
Republic of Ireland and Spain. The insurance, which covers loan repayments, is
sold through banks, building societies and other lenders to retail borrowers.
Life, Property and Casualty Insurance
Employers Reassurance Corporation (ERAC), a Kansas life insurance company,
formerly Puritan Life Insurance Company, was acquired by GE Capital during 1973.
ERAC is licensed to offer life, annuity and accident and health coverage in the
District of Columbia and all states except New York, where it is licensed only
for reinsurance.
Puritan Excess & Surplus Lines Insurance Company (PESLIC), a successor to
the operations of Puritan Insurance Company, began operations as a subsidiary of
GE Capital during 1981. PESLIC is licensed to transact property and casualty
insurance in Connecticut and Missouri. The administrative office of the combined
life and property and casualty insurance operation is located in Overland Park,
Kansas.
ERAC and PESLIC continue to provide reinsurance and credit insurance
coverage to GE Capital customers. ERAC also markets all types of life and
accident and health reinsurance coverage to direct writing life insurance
companies.
Insurance and reinsurance operations are subject to regulation by various
state insurance commissions or foreign regulatory authorities, as applicable.
ALLOWANCE FOR LOSSES AND LOSS EXPERIENCE ON FINANCING RECEIVABLES
The Corporation maintains an allowance for losses on financing receivables
at an amount which it believes is sufficient to provide adequate protection
against future losses in the portfolio. For small-balance financing receivables,
the allowance for losses is determined principally on the basis of actual
experience during the preceding three years. Additional allowances are also
recorded to reflect management's judgment of additional loss potential. For
larger-balance financing receivables, the allowance for losses is determined
primarily on the basis of management's judgment of net loss potential, including
specific allowances for known troubled accounts. Note 6 of the Notes to
Financial Statements shows the activity in the allowance for losses on financing
receivables for the years 1991 through 1993.
The following table sets forth the Corporation's net loss experience on
total financing receivables (time sales, loans and financing lease rentals
receivable) in dollars and as a percentage of average financing receivables
outstanding for each of the last three years. Recoveries on accounts written off
have been netted against gross credit losses.
YEAR ENDED DECEMBER 31,
----------------------------
(Dollar amounts in millions) 1993 1992 1991
------ ------ ------
Specialized Financing............................... $434 $415 $394
% of average financing receivables............. 1.48% 1.37% 1.37%
Consumer Services................................... $467 $535 $627
% of average financing receivables............. 2.23% 2.90% 3.72%
Mid-Market Financing................................ $70 $57 $63
% of average financing receivables............. 0.49% 0.47% 0.62%
Equipment Management................................ $19 $2 $5
% of average financing receivables............. 0.51% 0.06% 0.20%
Total(a)............................................ $990 $1,009 $1,089
% of average financing receivables............. 1.46% 1.58% 1.87%
- ---------------
(a) Write-downs of in-substance repossessions, foreclosed real
estate properties and other investments aggregated $135
million, $243 million and $206 million in 1993, 1992 and
1991, respectively.
All accounts or portions thereof deemed to be uncollectible or to require
an excessive collection cost are written off to the allowance for losses.
Small-balance accounts are progressively written down (from 10% when more than
three months delinquent to 100% when nine to twelve months delinquent) to record
the balances at estimated realizable value. However, if at any time during that
period an account is judged to be uncollectible, such as in the case of a
bankruptcy, the remaining balance is written off.
Page 8
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ITEM 1. BUSINESS (Continued).
Larger-balance accounts are reviewed at least quarterly, and those accounts
which are more than three months delinquent are written down, if necessary, to
record the balances at estimated realizable value.
RATES AND COMPETITION
The Corporation's activities are subject to a variety of federal and state
regulations including, at the federal level, the Consumer Credit Protection Act,
the Equal Credit Opportunity Act and certain regulations issued by the Federal
Trade Commission. A majority of states have ceilings on rates chargeable to
customers in retail time sales transactions, installment loans and revolving
credit financing. The Corporation's international operations are subject to
regulation in their respective jurisdictions. To date such regulations have not
had a material adverse effect on the Corporation's volume of financing
operations or profitability. Common carrier services of GE Americom are subject
to regulation by the Federal Communications Commission.
The Corporation's charges for providing financing services are changed from
time to time either on a general basis or for specific types of financing when
warranted in light of competition or interest and other costs. The businesses in
which the Corporation engages are highly competitive. The Corporation is subject
to competition from various types of financial institutions, including banks,
investment banks, credit unions, leasing companies, consumer loan companies,
independent finance companies and finance companies associated with
manufacturers.
ITEM 2. PROPERTIES.
The Corporation conducts its business from various facilities, most of
which are leased.
ITEM 3. LEGAL PROCEEDINGS.
The Corporation is not involved in any material pending legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Omitted.
Page 9
12
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
See Note 12 of the Notes to Financial Statements. The common stock of the
Corporation is owned entirely by GE Capital Services and therefore there is no
trading market in such stock.
ITEM 6. SELECTED FINANCIAL DATA.
The following selected financial data should be read in conjunction with
the financial statements of GE Capital and consolidated affiliates and the
related Notes to Financial Statements.
YEAR ENDED DECEMBER 31,
------------------------------------------------
(Dollar amounts in millions) 1993 1992 1991 1990 1989
-------- ------- ------- ------- -------
FOR THE YEAR:
Financing volume.............................. $ 57,094 $51,186 $45,965 $42,853 $38,681
-------- ------- ------- ------- -------
-------- ------- ------- ------- -------
Earned income................................. $ 14,444 $12,250 $11,328 $10,121 $ 8,372
-------- ------- ------- ------- -------
Interest and discount expense................. 3,461 3,665 4,225 4,228 3,674
Operating and administrative expense
(including minority interest)............... 5,008 3,955 2,728 2,373 1,709
Insurance losses and policyholder and annuity
benefits.................................... 1,259 611 599 521 602
Provision for losses on financing
receivables................................. 987 1,056 1,102 688 527
Depreciation and amortization of buildings and
equipment and equipment on operating
leases...................................... 1,587 1,297 1,187 940 698
-------- ------- ------- ------- -------
Earnings before income taxes.................. 2,142 1,666 1,487 1,371 1,162
Provision for income taxes.................... 664 415 362 350 303
-------- ------- ------- ------- -------
Net earnings................................ $ 1,478 $ 1,251 $ 1,125 $ 1,021 $ 859
-------- ------- ------- ------- -------
-------- ------- ------- ------- -------
Ratio of earnings to fixed charges............ 1.62 1.44 1.34 1.31 1.30
-------- ------- ------- ------- -------
-------- ------- ------- ------- -------
Ratio of earnings to combined fixed charges
and preferred stock dividends............... 1.60 1.43 1.32 1.29 1.28
-------- ------- ------- ------- -------
-------- ------- ------- ------- -------
AT YEAR END:
Financing receivables:
Time sales and loans, net of deferred
income................................. $ 40,748 $37,070 $36,849 $35,085 $30,142
Investment in financing leases, net of
deferred income........................ 24,930 23,925 20,411 16,530 12,764
-------- ------- ------- ------- -------
Total financing receivables......... 65,678 60,995 57,260 51,615 42,906
Allowance for losses on financing
receivables............................ (1,730) (1,607) (1,508) (1,360) (1,127)
-------- ------- ------- ------- -------
Financing receivables -- net........ $ 63,948 $59,388 $55,752 $50,255 $41,779
-------- ------- ------- ------- -------
-------- ------- ------- ------- -------
Percent of allowance for losses on financing
receivables to total financing
receivables................................. 2.63% 2.63% 2.63% 2.63% 2.63%
-------- ------- ------- ------- -------
-------- ------- ------- ------- -------
Equipment on operating leases -- net.......... $ 10,650 $ 9,395 $ 7,552 $ 5,557 $ 5,095
-------- ------- ------- ------- -------
-------- ------- ------- ------- -------
Total assets.................................. $117,939 $92,632 $80,528 $70,385 $58,696
-------- ------- ------- ------- -------
-------- ------- ------- ------- -------
Capitalization:
Notes payable within one year................. $ 52,903 $48,492 $43,152 $36,691 $31,485
Long-term senior debt......................... 25,112 21,182 17,946 16,728 11,815
Long-term subordinated debt................... 697 697 325 112 148
Equity(a)..................................... 10,370 8,892 7,872 6,886 5,571
-------- ------- ------- ------- -------
-------- ------- ------- ------- -------
Debt to equity ratio(a)....................... 7.59 7.91 7.80 7.77 7.80
-------- ------- ------- ------- -------
-------- ------- ------- ------- -------
- ------------
(a) The Corporation adopted SFAS No. 115, "Accounting for Certain Investments in
Debt and Equity Securities," on December 31, 1993 resulting in the inclusion
of $485 million of net unrealized gains on investment securities in equity
at the end of the year. Excluding such unrealized gains on investment
securities, the Corporation's equity and debt to equity ratio would have
been $9,885 million and 7.96 to 1 at December 31, 1993, respectively.
Page 10
13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS.
OVERVIEW
The Corporation's net earnings for 1993 were $1,478 million, which, after
payment of dividends on its variable cumulative preferred stock, resulted in a
contribution of $1,456 million to GE Capital Services' 1993 net earnings, an
increase of 19% over 1992. Net earnings for 1992 were $1,251 million, which,
after payment of dividends on its variable cumulative preferred stock, resulted
in a contribution to GE Capital Services' net earnings of $1,225 million, an
increase of 13% over 1991.
Earnings of the Corporation's lending, leasing and equipment management
businesses are significantly influenced by the level of invested assets and the
financing spread on those assets, the excess of yield (rates earned) over
interest rates on borrowings. In 1993, the level of invested assets increased
and lower rates on borrowings resulted in improved spreads. For 1992, the level
of invested assets increased and lower rates on borrowings more than offset
lower yields on assets, also resulting in improved spreads. In both years, these
increases were partially offset by higher administrative expenses related to the
asset growth. As a result of improved asset quality, portfolio loss provisions
were lower in 1993, compared with 1992, which had been higher than in 1991.
In both 1993 and 1992, earnings of the Corporation's Specialty Insurance
businesses were up sharply. 1993's improvement reflected strong performances by
the financial guaranty insurance and creditor insurance businesses. 1992's
increase was primarily the result of growth in both the private mortgage
insurance and financial guaranty insurance businesses.
OPERATING RESULTS
EARNED INCOME from all sources increased 18% in 1993, following an 8%
increase in 1992. Asset growth in each of the Corporation's financing segments,
through acquisitions of businesses and portfolios as well as origination volume,
was the primary reason for increased income from time sales, loans, financing
leases and operating lease rentals in both 1993 and 1992. Yields on related
assets were essentially flat in 1993 compared with 1992, following a decline
from 1991. Earned income in 1993 from the Corporation's annuity business, formed
through two current year acquisitions, was $571 million.
Gains on sales of warrants and other equity interests obtained in
connection with certain loans, fee income associated with syndication
activities, and sales of certain assets, including real estate investments,
contributed $647 million to pre-tax income in 1993, compared with $438 million
in 1992 and $261 million in 1991. In addition, pre-tax income in 1992 included
$65 million of gains from the disposition of partial interests in several
affiliates while pre-tax income in 1991 included a $134 million gain from the
disposition of a significant portion of the Corporation's auto auction
affiliate.
Earned income of the Corporation's Specialty Insurance segment in 1993 was
20% higher than in 1992, which in turn was 35% higher than in 1991. The 1993
increase was primarily the result of growth in premium income in the private
mortgage, life reinsurance and financial guaranty insurance businesses and
reflected the full year impact of the creditor insurance business which was
consolidated at the end of the second quarter of 1992 when an existing equity
position was converted to a controlling interest. The 1992 increase was
primarily the result of growth in premium and investment income in the private
mortgage and financial guaranty insurance businesses and reflected revenue from
the creditor insurance business for the second half of the year.
INTEREST AND DISCOUNT EXPENSE in 1993 totaled $3.5 billion, 6% lower than
in 1992, which was 13% lower than in 1991. Both decreases reflected
substantially lower composite interest rates which more than offset the effect
of higher average borrowings required to finance the significantly higher level
of invested assets. The Corporation's 1993 composite interest rate of 4.97% was
87 basis points lower than the 1992 rate, which in turn was 167 basis points
lower than the 1991 rate.
OPERATING AND ADMINISTRATIVE EXPENSES increased 24% to $4,894 million in
1993, compared with a 44% increase to $3,941 million in 1992, primarily
reflecting operating costs associated with businesses and portfolios acquired
during the past two years. Overall, provisions for losses on investments that
were charged to operating and administrative expense decreased in 1993,
following an increase in 1992. These
Page 11
14
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
(Continued).
provisions principally related to the Commercial Real Estate and highly
leveraged transaction (HLT) portfolios and, in 1993, to commercial aircraft as
well.
INSURANCE LOSSES AND POLICYHOLDER AND ANNUITY BENEFITS increased $648
million to $1,259 million in 1993, compared with a $12 million increase to $611
million in 1992. The 1993 increase largely reflected annuity benefits credited
to customers following the current year annuity business acquisitions. The
remainder of the 1993 increase represented higher losses on increased volume in
the life reinsurance and private mortgage insurance businesses, partially offset
by reduced losses in the creditor insurance business. In 1992, lower losses in
the life reinsurance business were more than offset by higher losses on
increased volume in the private mortgage insurance business and the effects of
the creditor insurance business for the second half of the year.
PROVISION FOR LOSSES ON FINANCING RECEIVABLES decreased $69 million to $987
million in 1993, compared with a $46 million decrease to $1,056 million in 1992.
These provisions principally related to the Consumer Services, Commercial Real
Estate and HLT portfolios discussed below.
DEPRECIATION AND AMORTIZATION OF BUILDINGS AND EQUIPMENT AND EQUIPMENT ON
OPERATING LEASES increased 22% to $1.6 billion in 1993, compared with a 9%
increase to $1.3 billion in 1992. Increases in both years were primarily a
result of additions to equipment on operating leases through business and
portfolio acquisitions.
INCOME TAX PROVISION was $664 million in 1993 (an effective tax rate of
31.0%), compared with $415 million in 1992 (24.9%) and $362 million (24.3%) in
1991. The increased provision for income taxes in both 1993 and 1992 reflected
the effects of additional income before taxes and, in 1993, the 1% increase in
the U.S. Federal income tax rate. The higher rate in 1993 compared with 1992
reflected the 1% increase in the U.S. Federal income tax rate and a lower
proportion of tax-exempt income. These items were partially offset by the
effects of certain unrelated financing transactions that will result in future
cash savings and reduced the Corporation's obligation for previously accrued
deferred taxes. The higher rate in 1992 compared with 1991 reflected a
relatively lower proportion of tax-exempt income and a 1991 adjustment for
tax-deductible claims reserves of the property insurance affiliates, for which
there was no 1992 counterpart.
OPERATING PROFIT BY INDUSTRY SEGMENT
Operating profit (pre-tax income) of the Corporation, by industry segment,
is summarized in Note 17 and discussed below:
CONSUMER SERVICES operating profit of $695 million in 1993 was 32% higher
than that of 1992. This increase reflected lower provisions for receivable
losses in Retailer Financial Services resulting from declines in consumer
delinquency as well as strong asset growth and interest rate favorability in
both Auto Financial Services and Retailer Financial Services. Operating profit
of $525 million in 1992 was 53% higher than that of 1991 (excluding the impact
in 1991 of the $134 million gain on the disposition of a significant portion of
GE Capital's auto auction affiliate). This increase reflected higher financing
spreads in Retailer Financial Services and increased asset levels in Auto
Financial Services.
EQUIPMENT MANAGEMENT operating profit increased $9 million to $377 million
in 1993. This increase reflected higher volume in most businesses, largely the
result of portfolio and business acquisitions, and improved trailer and railcar
utilization, offset by lower average rental rates in Fleet Services and Computer
Services, and the effects of lower utilization and pricing pressures at Genstar
Container. Operating profit decreased $13 million to $368 million in 1992 due to
lower utilization in the Railcar Services and Genstar Container businesses,
partially offset by operating profit generated as a result of Fleet Services'
acquisition of the fleet leasing operations of Avis-Europe.
MID-MARKET FINANCING operating profit of $454 million in 1993 was 29%
higher than that of 1992 and reflected higher spreads and higher levels of
invested assets, primarily as a result of business and portfolio acquisitions.
Operating profit increased $104 million to $352 million in 1992 compared with
1991. Operating profit for 1992 reflected higher levels of invested assets,
primarily as a result of portfolio acquisitions.
SPECIALTY INSURANCE operating profit of $422 million in 1993 was 40% higher
than the $302 million recorded in 1992, which was 79% higher than in 1991. The
1993 increase reflected higher premium volume from bond refunding in the
financial guaranty insurance business as well as reduced claims expense in the
Page 12
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
(Continued).
creditor insurance business. The 1992 gains primarily reflected higher premium
volume and investment income at GE Capital's private mortgage and financial
guaranty insurance businesses.
SPECIALIZED FINANCING operating profit was $201 million in 1993, compared
with $121 million in 1992 and $220 million in 1991. The increase in 1993
principally reflected much lower provisions for losses on Corporate Finance
Group HLT investments and higher gains from sales of Commercial Real Estate
assets, partially offset by higher loss provisions for Commercial Real Estate
assets and expenses associated with redeployment and refurbishment of owned
aircraft. The decline in 1992 principally reflected higher loss provisions,
particularly reserves for Corporate Finance Group in-substance and owned
investments, partially offset by higher gains on the sale of assets in both
Commercial Real Estate and Corporate Finance Group. Loss provisions relating to
both the Commercial Real Estate portfolio and Corporate Finance Group HLT
investments are discussed below.
CAPITAL RESOURCES AND LIQUIDITY
The Corporation's principal source of cash is financing activities that
involve continuing rollover of short-term borrowings and appropriate addition of
long-term borrowings, with a reasonable balance of maturities. Over the past
three years, the Corporation's borrowings with maturities of 90 days or less
have increased by $10.6 billion. New borrowings of $40.2 billion having
maturities longer than 90 days were added during those years, while $25.5
billion of such longer-term borrowings were paid off. The Corporation has also
generated significant cash from operating activities, $15.5 billion during the
last three years.
The Corporation's principal use of cash has been investing in assets to
grow the business. Additions to financing receivables were $16.1 billion of the
$39.2 billion in net investments the Corporation has made over the past three
years. Other principal investments during these years were $6.9 billion to
acquire new businesses and $9.2 billion for new equipment, primarily for lease
to others.
GE Company has agreed to make payments to the Corporation, constituting
additions to pre-tax income, to the extent necessary to cause the Corporation's
consolidated ratio of earnings to fixed charges to be not less than 1.10 for
each fiscal year commencing with fiscal year 1991. Three years advance written
notice is required to terminate this agreement. No payments have been required
under this agreement. The Corporation's ratios of earnings to fixed charges for
the years 1993, 1992 and 1991, were 1.62, 1.44 and 1.34, respectively.
GE Capital's total borrowings were $78.7 billion at December 31, 1993, of
which $52.9 billion was due in 1994 and $25.8 billion was due in subsequent
years. Comparable amounts at the end of 1992 were: $70.4 billion in total; $48.5
billion due within one year; and $21.9 billion due thereafter. Composite
interest rates are discussed on page 11. Individual borrowings are structured
within overall asset/liability interest rate and currency risk management
strategies. Interest rate and currency swaps form an integral part of the
Corporation's goal of achieving the lowest borrowing costs for particular
funding strategies. Counterparty credit risk is closely
monitored -- approximately 90% of the notional amount of swaps outstanding at
December 31, 1993 was with counterparties having credit ratings of Aa/AA or
better. The Corporation's ratio of debt to equity (leverage) was 7.59 to 1 at
the end of 1993, compared with 7.91 to 1 at the end of 1992. Excluding net
unrealized gains on investment securities included in equity, the Corporation's
leverage was 7.96 to 1 at the end of 1993.
With the financial flexibility that comes with excellent credit ratings,
management believes the Corporation is well positioned to meet the global needs
of its customers for capital and continue growing its diverse asset base.
PORTFOLIO QUALITY
THE PORTFOLIO OF FINANCING RECEIVABLES, $63.9 billion and $59.4 billion at
year-ends 1993 and 1992, respectively, is the Corporation's largest asset and
its primary source of revenues. Related allowances for losses aggregated $1.7
billion at the end of 1993 (2.63% of receivables -- the same level as 1992) 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 and investments follows. Further details are included in
Notes 5 and 9.
Page 13
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
(Continued).
CONSUMER LOANS RECEIVABLE, primarily retailer and auto receivables, were
$17.3 billion and $14.8 billion at the end of 1993 and 1992, respectively. The
Corporation's investment in consumer auto finance lease receivables was $5.6
billion and $4.8 billion at the end of 1993 and 1992, respectively. Non-earning
receivables, 1.7% of total loans and leases (2.1% at the end of 1992), amounted
to $391 million at the end of 1993. The provision for losses on retailer and
auto financing receivables was $469 million in 1993, a 19% decrease from $578
million in 1992, reflecting reduced consumer delinquencies and intensified
collection efforts, particularly in Europe. Most non-earning receivables were
private label credit card receivables, the majority of which were subject to
various loss sharing arrangements that provide full or partial recourse to the
originating retailer.
COMMERCIAL REAL ESTATE LOANS classified as finance receivables by the
Commercial Real Estate business, a part of the Specialized Financing segment,
were $10.9 billion at December 31, 1993, up $0.4 billion from the end of 1992.
In addition, the investment portfolio of the Corporation's annuity business,
acquired during 1993, included $1.1 billion of commercial property loans.
Commercial real estate loans are generally secured by first mortgages. In
addition to loans, Commercial Real Estate's portfolio also included in other
assets $2.2 billion of assets that were purchased for resale from the Resolution
Trust Corporation (RTC) and other institutions and $1.4 billion of investments
in real estate joint ventures. In recent years, the Corporation has been one of
the largest purchasers of assets from RTC and others, growing its portfolio of
properties acquired for resale by $1.1 billion in 1993. To date, values realized
on these assets have met or exceeded expectations at the time of purchase.
Investments in real estate joint ventures have been made as part of original
financings and in conjunction with loan restructurings where management believes
that such investments will enhance economic returns.
Commercial Real Estate's foreclosed properties at the end of 1993 declined
to $110 million from $187 million at the end of 1992.
At December 31, 1993, Commercial Real Estate's portfolio included loans
secured by and investments in a variety of property types that were well
dispersed geographically. Property types included apartments (36%), office
buildings (32%), shopping centers (14%), mixed use (8%), industrial and other
(10%). These properties were located, principally across the United States, as
follows: Mid-Atlantic (21%), Northeast (20%), Southwest (19%), West (15%),
Southeast (12%), Central (8%), with the remainder (5%) across Canada and Europe.
Reduced and non-earning receivables declined to $272 million in 1993 from $361
million in 1992, reflecting proactive management of delinquent receivables as
well as write-offs. Loss provisions for Commercial Real Estate's investments
were $387 million in 1993 ($248 million related to receivables and $139 million
to other assets), compared with $299 million and $213 million in 1992 and 1991,
respectively, as the portfolio continued to be adversely affected by the
weakened commercial real estate market.
HIGHLY LEVERAGED TRANSACTION (HLT) PORTFOLIO is included in the Specialized
Financing segment and represents financing provided for highly leveraged
management buyouts and corporate recapitalizations. The portion of those
investments classified as financing receivables was $3.3 billion at the end of
1993 compared with $5.3 billion at the end of 1992, as substantial repayments
reduced this liquidating portfolio. The year-end balance of amounts that had
been written down to estimated fair value and carried in other assets as a
result of restructuring or in-substance repossession aggregated $544 million at
the end of 1993 and $513 million at the end of 1992 (net of allowances of $244
million and $224 million, respectively).
Non-earning and reduced earning receivables declined to $139 million at the
end of 1993 from $429 million the prior year. Loss provisions for HLT
investments were $181 million in 1993 ($80 million related to receivables and
$101 million to other assets), compared with $573 million in 1992 and $328
million in 1991. Non-earning and reduced earning receivables as well as loss
provisions were favorably affected by the stronger economic climate during 1993
as well as by the successful restructurings implemented during the past few
years.
OTHER FINANCING RECEIVABLES, approximately $26 billion, consisted primarily
of a diverse commercial, industrial and equipment loan and lease portfolio. This
portfolio grew approximately $2 billion during 1993, while non-earning and
reduced earning receivables decreased $46 million to $98 million at year end.
The Corporation has loans and leases to commercial airlines that aggregated
about $6.8 billion at the end of 1993, up from $6 billion at the end of 1992. At
year-end 1993, commercial aircraft positions included conditional commitments to
purchase aircraft at a cost of $865 million and financial guarantees
Page 14
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
(Continued).
and funding commitments amounting to $450 million. These purchase commitments
are subject to the aircraft having been placed on lease under agreements, and
with carriers, acceptable to the Corporation prior to delivery. Expenses
associated with redeployment and refurbishment of owned aircraft totaled $112
million in 1993 compared with nominal amounts in prior years. The Corporation's
increasing investment demonstrates its continued long-term commitment to the
airline industry.
ENTERING 1994, management believes that the diversity and strength of the
Corporation's assets, along with vigilant attention to risk management, position
it to deal effectively with a global and changing competitive and economic
landscape.
NEW ACCOUNTING STANDARDS
Statement of Financial Accounting Standards (SFAS) No. 114, "Accounting by
Creditors for Impairment of a Loan," modifies the accounting that applies when
it is probable that all amounts due under contractual terms of a loan will not
be collected. Management does not believe that this Statement, required to be
adopted no later than the first quarter of 1995, will have a material effect on
the Corporation's financial position or results of operations, although such
effect will depend on the facts at the time of adoption.
Page 15
18
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
General Electric Capital Corporation
We have audited the financial statements of General Electric Capital
Corporation and consolidated affiliates as listed in Item 14. In connection with
our audits of the consolidated financial statements, we also have audited the
financial statement schedules as listed in Item 14. These consolidated financial
statements and financial statement schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement schedules based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of General
Electric Capital Corporation and consolidated affiliates at December 31, 1993
and 1992, and the results of their operations and their cash flows for each of
the years in the three-year period ended December 31, 1993, in conformity with
generally accepted accounting principles. Also in our opinion, the related
financial statement schedules, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly, in all
material respects, the information set forth therein.
As discussed in Note 1 to the consolidated financial statements, the
Company adopted Statement of Financial Accounting Standards No. 115, "Accounting
for Certain Investments in Debt and Equity Securities," effective December 31,
1993.
/s/ KPMG PEAT MARWICK
Stamford, Connecticut
February 11, 1994
Page 16
19
GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES
STATEMENT OF CURRENT AND RETAINED EARNINGS
For the years ended December 31 (In millions) 1993 1992 1991
------- ------- -------
EARNED INCOME
Time sales, loan, investment and other income (Note 13)........... $ 7,558 $ 6,687 $ 6,595
Financing leases (Note 13)........................................ 2,315 2,151 1,836
Operating lease rentals (Note 13)................................. 3,267 2,444 2,205
Premium and commission income of insurance affiliates (Note 11)... 1,304 968 692
------- ------- -------
Total earned income.......................................... 14,444 12,250 11,328
------- ------- -------
EXPENSES
Interest and discount (Notes 10 & 14)............................. 3,461 3,665 4,225
Operating and administrative (Note 15)............................ 4,894 3,941 2,735
Insurance losses and policyholder and annuity benefits (Note
11)............................................................. 1,259 611 599
Provision for losses on financing receivables (Note 6)............ 987 1,056 1,102
Depreciation and amortization of buildings and equipment and
equipment on operating leases (Notes 7 & 8)..................... 1,587 1,297 1,187
Minority interest in net earnings of consolidated affiliates...... 114 14 (7)
------- ------- -------
Total expenses............................................... 12,302 10,584 9,841
------- ------- -------
Earnings before income taxes...................................... 2,142 1,666 1,487
Provision for income taxes (Note 16).............................. 664 415 362
------- ------- -------
NET EARNINGS...................................................... 1,478 1,251 1,125
Cash dividends paid (Note 12)..................................... (482) (326) (141)
Retained earnings at January 1.................................... 6,012 5,087 4,103
------- ------- -------
RETAINED EARNINGS AT DECEMBER 31.................................. $ 7,008 $ 6,012 $ 5,087
------- ------- -------
------- ------- -------
See Notes to Consolidated Financial Statements.
Page 17
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GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES
STATEMENT OF FINANCIAL POSITION
At December 31 (In millions) 1993 1992
-------- -------
ASSETS
Cash and equivalents...................................................... $ 1,049 $ 1,240
Trading securities (Note 3)............................................... -- 1,248
Investment securities (Note 4)............................................ 20,577 6,683
Financing receivables (Note 5):
Time sales and loans, net of deferred income......................... 40,748 37,070
Investment in financing leases, net of deferred income............... 24,930 23,925
-------- -------
65,678 60,995
Allowance for losses on financing receivables (Note 6)............... (1,730) (1,607)
-------- -------
Financing receivables -- net.................................... 63,948 59,388
Other receivables -- net.................................................. 4,046 3,037
Equipment on operating leases (at cost), less accumulated amortization of
$3,238 and $2,549 (Note 7).............................................. 10,650 9,395
Buildings and equipment (at cost), less accumulated depreciation of $555
and $435 (Note 8)....................................................... 910 909
Other assets (Note 9)..................................................... 16,759 10,732
-------- -------
TOTAL ASSETS.............................................................. $117,939 $92,632
-------- -------
-------- -------
LIABILITIES AND EQUITY
Notes payable within one year (Note 10)................................... $ 52,903 $48,492
Notes payable after one year (Note 10).................................... 25,809 21,879
-------- -------
Total notes payable.................................................. 78,712 70,371
Accounts and drafts payable............................................... 3,452 2,813
Insurance reserves and annuity benefits (Note 11)......................... 16,585 3,173
Other liabilities......................................................... 2,764 2,179
Deferred income taxes (Note 16)........................................... 5,630 5,081
-------- -------
Total liabilities.................................................... 107,143 83,617
-------- -------
Minority interest in equity of consolidated affiliates.................... 426 123
Variable cumulative preferred stock, $100 par value, liquidation
preference $100,000 per share (10,500 shares authorized and 8,750 shares
outstanding at December 31, 1993 and December 31, 1992)................. 1 1
Common stock, $200 par value (3,866,000 shares authorized and 3,837,825
shares outstanding at December 31, 1993 and December 31, 1992).......... 768 768
Additional paid-in capital................................................ 2,172 2,147
Retained earnings......................................................... 7,008 6,012
Other..................................................................... 421 (36)
-------- -------
Total equity (Note 12)............................................... 10,370 8,892
-------- -------
TOTAL LIABILITIES AND EQUITY.............................................. $117,939 $92,632
-------- -------
-------- -------
See Notes to Consolidated Financial Statements.
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GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES
STATEMENT OF CASH FLOWS
For the years ended December 31 (In millions) 1993 1992 1991
------- ------- -------
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings............................................... $ 1,478 $ 1,251 $ 1,125
Adjustments to reconcile net earnings to cash provided by
operating activities:
Provision for losses on financing receivables......... 987 1,056 1,102
Increase in insurance reserves and annuity benefits... 764 374 133
Increase (decrease) in deferred income taxes.......... 496 (23) 573
Depreciation and amortization of buildings and
equipment and equipment on operating leases......... 1,587 1,297 1,187
Amortization of premium and discount on debt.......... 99 197 222
Increase in accounts and drafts payable............... 624 343 354
Gain on principal business dispositions............... -- (65) (134)
Other -- net.......................................... 455 271 (232)
------- ------- -------
Cash provided by operating activities............... 6,490 4,701 4,330
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Increase in loans to customers............................. (30,002) (27,069) (25,030)
Principal collections from customers....................... 27,571 25,136 25,289
Investment in assets on financing leases................... (7,204) (7,758) (8,829)
Principal collections on financing leases.................. 6,812 5,338 3,726
Net increase in credit card receivables.................... (1,341) (330) (2,410)
Buildings and equipment and equipment on operating
leases -- additions...................................... (3,133) (3,342) (2,706)
-- dispositions................................... 1,080 1,744 937
Payments for principal businesses purchased, net of cash
acquired................................................. (2,090) (2,013) (2,836)
Proceeds from principal business dispositions.............. -- -- 277
Purchases of investment securities by insurance and annuity
affiliates............................................... (7,527) (3,059) (3,281)
Dispositions of investment securities by insurance and
annuity affiliates....................................... 5,623 2,819 2,648
Other...................................................... (3,724) (3,457) (1,061)
------- ------- -------
Cash used by investing activities................... (13,935) (11,991) (13,276)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in borrowings (less than 90-day maturities)..... 2,053 4,123 4,436
Newly issued debt -- short-term (91-365 days).............. 4,315 4,456 4,863
-- long-term senior...................... 10,885 6,699 6,317
-- long-term subordinated................ -- 450 250
Proceeds -- non-recourse, leveraged lease debt............. 53 148 1,808
Repayments and other reductions -- short-term (91-365
days).................................................... (9,008) (6,474) (6,504)
-- long-term senior........ (206) (658) (1,691)
-- long-term subordinated.. -- (76) (32)
Principal payments -- non-recourse, leveraged lease debt... (312) (272) (280)
Dividends paid............................................. (482) (326) (141)
Proceeds from sales of investment and annuity contracts.... 509 -- --
Redemptions of investment and annuity contracts............ (578) -- --
Capital contributions from parent company.................. 25 -- --
------- ------- -------
Cash provided by financing activities............... 7,254 8,070 9,026
------- ------- -------
(DECREASE) INCREASE IN CASH AND EQUIVALENTS DURING THE
YEAR..................................................... (191) 780 80
CASH AND EQUIVALENTS AT BEGINNING OF YEAR.................. 1,240 460 380
------- ------- -------
CASH AND EQUIVALENTS AT END OF YEAR........................ $ 1,049 $ 1,240 $ 460
------- ------- -------
------- ------- -------
See Notes to Consolidated Financial Statements.
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GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION -- The consolidated financial statements represent a
consolidation of General Electric Capital Corporation and all majority-owned and
controlled affiliates ("consolidated affiliates"). All significant transactions
among the parent and consolidated affiliates have been eliminated. Other
affiliates in which the Corporation and/or its consolidated affiliates own 20%
to 50% of the voting rights ("nonconsolidated affiliates") are included in other
assets, valued at the appropriate share of equity plus loans and advances.
CASH FLOWS -- For purposes of the Statement of Cash Flows, certificates and
other time deposits are treated as cash equivalents.
METHODS OF RECORDING EARNED INCOME -- Income on all loans is recognized on
the interest method. Accrual of interest income is suspended when collection of
an account becomes doubtful, generally after the account becomes 90 days
delinquent.
Financing lease income, which includes related investment tax credits and
residual values, is recorded on the interest method so as to produce a level
yield on funds not yet recovered. Unguaranteed residual values included in lease
income are based principally on independent appraisals of the values of leased
assets remaining at expiration of the lease terms.
Operating lease income is recognized on a straight-line basis over the term
of the underlying leases.
Origination, commitment and other nonrefundable fees related to fundings
are deferred and recorded in earned income on the interest method. Commitment
fees related to loans not expected to be funded and line of credit fees are
deferred and recorded in earned income on a straight-line basis over the period
to which the fees relate. Syndication fees are recorded in earned income at the
time the related services are performed unless significant contingencies exist.
See "Insurance and Annuity Businesses" below for information with respect
to earned income of these businesses.
ALLOWANCE FOR LOSSES ON FINANCING RECEIVABLES AND INVESTMENTS -- The
Corporation maintains an allowance for losses on financing receivables at an
amount which it believes is sufficient to provide adequate protection against
future losses in the portfolio. For small-balance receivables the allowance for
losses is determined principally on the basis of actual experience during the
preceding three years. Further allowances are also provided to reflect
management's judgment of additional loss potential. For other receivables,
principally the larger loans and leases, the allowance for losses is determined
primarily on the basis of management's judgment of net loss potential, including
specific allowances for known troubled accounts.
All accounts or portions thereof deemed to be uncollectible or to require
an excessive collection cost are written off to the allowance for losses.
Small-balance accounts are progressively written down (from 10% when more than
three months delinquent to 100% when nine to twelve months delinquent) to record
the balances at estimated realizable value. However, if at any time during that
period an account is judged to be uncollectible, such as in the case of a
bankruptcy, the uncollectible balance is written off. Larger-balance accounts
are reviewed at least quarterly, and those accounts which are more than three
months delinquent are written down, if necessary, to record the balances at
estimated realizable value.
When collateral is formally or substantively repossessed in satisfaction of
a loan, the receivable is written down against the allowance for losses to
estimated fair value and is transferred to other assets. Subsequent to such
transfer, these assets are carried at the lower of cost or estimated current
fair value. This accounting has been employed principally for highly leveraged
transactions (HLT) and real estate loans.
INCOME TAXES -- Statement of Financial Accounting Standards (SFAS) No. 109,
"Accounting for Income Taxes," was adopted effective January 1, 1992. The effect
of adopting SFAS No. 109 was not material. Deferred tax balances are stated at
tax rates expected to be in effect when taxes are actually paid or recovered.
INVESTMENT AND TRADING SECURITIES -- On December 31, 1993, the Corporation
adopted SFAS No. 115, "Accounting for Certain Investments in Debt and Equity
Securities," which requires that
Page 20
23
investments in debt securities and marketable equity securities be designated as
trading, held-to-maturity or available-for-sale. Trading securities are reported
at fair value, with changes in fair value included in earnings. Investment
securities include both available-for-sale and held-to-maturity securities.
Available-for-sale securities are reported at fair value, with net unrealized
gains and losses included in equity. Held-to-maturity debt securities are
reported at amortized cost. See notes 3 and 4 for a discussion of the
classification and reporting of these securities at December 31, 1992. For all
investment securities, unrealized losses that are other than temporary are
recognized in earnings.
EQUIPMENT ON OPERATING LEASES -- Equipment is amortized, principally on a
straight-line basis, to estimated net salvage value over the lease term or the
estimated economic life of the equipment.
BUILDINGS AND EQUIPMENT -- The Corporation records depreciation principally
on a sum-of-the-year's-digits basis over the lives of the assets.
OTHER ASSETS -- Goodwill is amortized on a straight-line basis over periods
not exceeding 30 years.
FOREIGN OPERATIONS -- Assets and liabilities of foreign affiliates are
translated into U.S. dollars at the year-end exchange rates while operating
results are translated at rates prevailing during the year. Such adjustments are
accumulated and reported as a separate component of equity.
INSURANCE AND ANNUITY BUSINESSES -- Premiums on short-duration insurance
contracts are reported as earned income over the terms of the related
reinsurance treaties or insurance policies. In general, earned premiums are
calculated on a pro-rata basis or are determined based on reports received from
reinsureds. Premium adjustments under retrospectively rated assumed reinsurance
contracts are recorded based on estimated losses and loss expenses, including
both case and incurred-but-not-reported reserves. Premiums on long-duration
insurance products are recognized as earned when due. Premiums received under
annuity contracts are not reported as revenues but as annuity benefits -- a
liability -- and are adjusted according to the terms of the respective policies.
The estimated liability for insurance losses and loss expenses consist of
both case and incurred-but-not-reported reserves. Where experience is not
sufficient, industry averages are used. Estimated amounts of salvage and
subrogation recoverable on paid and unpaid losses are deducted from outstanding
losses.
The liability for future policyholder benefits of the life insurance
affiliates has been computed mainly by a net-level-premium method based on
assumptions for investment yields, mortality and terminations that were
appropriate at date of purchase or at the time the policies were developed,
including provisions for adverse deviations.
Deferred insurance acquisition costs for the property and casualty
businesses are amortized pro-rata over the contract periods in which the related
premiums are earned. For the life insurance business, these costs are amortized
over the premium-paying periods of the contracts in proportion either to
anticipated premium income or to gross profit, as appropriate. For certain
annuity contracts, such costs are amortized on the basis of anticipated gross
profits. For other lines of business, acquisition costs are amortized over the
life of the related insurance contracts. Deferred insurance acquisition costs
are reviewed for recoverability; for short-duration contracts, anticipated
investment income is considered in making recoverability evaluations.
NOTE 2. ACQUISITIONS
The Corporation has acquired two individually non-significant entities
(collectively "the Acquisitions"). The acquisition of GNA Corporation ("GNA")
from Weyerhaeuser Company and Weyerhaeuser Financial Services, Inc. occurred on
April 1, 1993, while the acquisition of United Pacific Life Insurance Company
("UPL") from Reliance Insurance Company and its parent company, Reliance Group
Holdings, Inc. occurred on July 14, 1993. The acquisitions, accounted for as
purchases, have been reflected in the accompanying consolidated financial
statements of the Corporation since the respective acquisition dates.
The acquired companies had assets of approximately $12.8 billion,
principally investment securities. The aggregate estimated purchase price was
$1,113 million and is subject to certain post-closing adjustments.
Page 21
24
Unaudited pro forma condensed results of operations of the Corporation for
each of the years ended December 31, 1993 and 1992 as if the Acquisitions had
occurred on January 1, 1993 and January 1, 1992, respectively, are as follows:
1993 1992
---- ----
(In millions)
Earned Income......................................................... $ 14,848 $ 13,375
Net earnings.......................................................... 1,507 1,299
The pro forma data have been prepared based on assumptions management deems
appropriate and the results are not necessarily indicative of those that might
have occurred had the transactions become effective at the beginning of the
respective years, primarily due to changes in investment and other business
strategies of the acquired companies. The aggregate effect of several other
business acquisitions completed during 1993 was not material.
NOTE 3. TRADING SECURITIES
The Corporation's trading securities at December 31, 1992, included investments
in equity securities held by insurance affiliates at a fair value of $812
million, with unrealized pretax gains of $30 million (net of unrealized pretax
losses of $11 million) included in equity and $436 million of preferred stock
issued by affiliated companies. At December 31, 1993, such securities were
classified as investment securities (see note 4).
NOTE 4. INVESTMENT SECURITIES
At December 31, 1993, investment securities were classified as
available-for-sale and reported at fair value, including net unrealized gains of
$760 million before taxes. At December 31, 1992, investment securities of $5,641
million were classified as available-for-sale and were reported at the lower of
aggregate amortized cost or fair value. The balance of the 1992 investment
securities portfolio was carried at amortized cost.
A summary of investment securities follows.
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
(In millions) COST GAINS(A) LOSSES(A) VALUE
--------- ---------- ---------- ---------
DECEMBER 31, 1993
Corporate and non-U.S. ............................... $10,490 $145 $ (59) $10,576
State and municipal................................... 4,646 396 (5) 5,037
Mortgage-backed....................................... 2,487 31 (11) 2,507
U.S. government and federal agency.................... 1,217 14 (7) 1,224
Equity................................................ 977 299 (43) 1,233
------- ---- ------ -------
$19,817 $885 $ (125) $20,577
------- ---- ------ -------
------- ---- ------ -------
DECEMBER 31, 1992
Corporate and non-U.S. ............................... $ 3,091 $ 42 $ -- $ 3,133
State and municipal................................... 3,095 180 (8) 3,267
Mortgage-backed....................................... 246 7 (1) 252
U.S. government and federal agency.................... 251 10 (1) 260
------- ---- ------ -------
$ 6,683 $239 $ (10) $ 6,912
------- ---- ------ -------
- ---------------
(a) December 31, 1992 amounts include gross unrealized gains of $24 million and
there were no unrealized losses on investment securities carried at
amortized cost.
Contractual maturities of debt securities, other than mortgage-backed
securities, at December 31, 1993, are shown below.
ESTIMATED
AMORTIZED FAIR
(In millions) COST VALUE
--------- ---------
Due in:
1994......................................................... $ 2,432 $ 2,460
1995 - 1998.................................................. 3,779 3,888
1999 - 2003.................................................. 3,895 3,975
2004 and later............................................... 6,247 6,514
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It is expected that actual maturities will differ from contractual
maturities because some borrowers have the right to call or prepay obligations
with or without call or prepayment penalties. Proceeds from the sales of debt
securities were $4,922 million in 1993, $1,249 million in 1992 and $1,078
million in 1991. Gross realized gains were $129 million in 1993, $60 million in
1992 and $36 million in 1991. Gross realized losses were $31 million in 1993, $1
million in 1992 and $8 million in 1991.
NOTE 5. FINANCING RECEIVABLES
Financing receivables at December 31, 1993 and 1992 by principal category are
shown below.
AMOUNT
-------------------
(In millions) 1993 1992
------- -------
Time sales and loans:
Retailer and auto financing........................................... $17,242 $14,847
Commercial real estate financing...................................... 11,887 10,526
Commercial and industrial loans....................................... 6,781 8,270
Equipment sales financing............................................. 5,514 3,951
Other................................................................. 398 421
------- -------
41,822 38,015
Deferred income....................................................... (1,074) (945)
------- -------
Time sales and loans -- net of deferred income........................ 40,748 37,070
------- -------
Investment in financing leases:
Direct financing leases............................................... 22,063 20,890
Leveraged leases...................................................... 2,867 3,035
------- -------
24,930 23,925
------- -------
Total financing receivables................................................ $65,678 $60,995
------- -------
------- -------
Financing receivables classified as time sales and loans represent transactions
with customers in a variety of forms, including time sales, revolving charge and
credit, mortgages, installment loans, intermediate-term loans and revolving
loans secured by business assets. The portfolio includes time sales and loans
carried at the principal amount on which finance charges are billed
periodically, and time sales and loans acquired on a discount basis carried at
gross book value, which includes finance charges. At year-ends 1993 and 1992,
commercial and industrial loans included $3,293 million and $5,262 million,
respectively, for highly leveraged transactions. Note 7 contains information on
commercial airline loans and leases.
The financing lease operations consist of direct financing and leveraged
leases of aircraft, railroad rolling stock, automobiles and other transportation
equipment, data processing equipment, medical equipment, and other
manufacturing, power generation, mining and commercial equipment and facilities.
As the sole owner of assets under direct financing leases and as the equity
participant in leveraged leases, the Corporation is taxed on total lease
payments received and is entitled to tax deductions based on the cost of leased
assets and tax deductions for interest paid to third-party participants. The
Corporation is also entitled generally to any investment tax credit on leased
equipment and to any residual value of leased assets.
Investments in direct financing and leveraged leases represent unpaid
rentals and estimated unguaranteed residual values of leased equipment, less
related deferred income. Because the Corporation has no general obligation on
notes and other instruments representing third-party participation related to
leveraged leases, such notes and other instruments have not been included in
liabilities but have been offset against the related rentals receivable.
The Corporation's share of rentals receivable is subordinate to the share
of such other participants who also have a security interest in the leased
equipment.
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The Corporation's investment in financing leases at December 31, 1993 and
1992 is shown below.
DIRECT TOTAL
FINANCING LEASES LEVERAGED LEASES FINANCING LEASES
------------------ ------------------- -------------------
(In millions) 1993 1992 1993 1992 1993 1992
-------- -------- -------- -------- -------- --------
Total minimum lease payments
receivable........................... $26,584 $25,390 $11,496 $12,782 $38,080 $38,172
Less principal and interest on
third-party nonrecourse debt......... -- -- (8,398) (9,446) (8,398) (9,446)
-------- -------- -------- -------- -------- --------
Rentals receivable................ 26,584 25,390 3,098 3,336 29,682 28,726
Estimated unguaranteed residual value
of leased assets..................... 3,323 3,115 1,167 1,237 4,490 4,352
Less: Deferred income(a)............... (7,844) (7,615) (1,398) (1,538) (9,242) (9,153)
-------- -------- -------- -------- -------- --------
Investment in financing leases... 22,063 20,890 2,867 3,035 24,930 23,925
Less: Allowance for losses............. (464) (481) (74) (79) (538) (560)
Deferred taxes arising from
financing leases................ (2,157) (1,986) (2,760) (2,567) (4,917) (4,553)
-------- -------- -------- -------- -------- --------
Net investment in financing leases..... $19,442 $18,423 $ 33 $ 389 $19,475 $18,812
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
- ------------
(a) Total financing lease deferred income is net of deferred initial direct
costs of $83 million and $73 million for 1993 and 1992, respectively.
At December 31, 1993, contractual maturities for time sales and loans over
the next five years and after are: $16,287 million in 1994; $6,286 million in
1995; $4,350 million in 1996; $4,104 million in 1997; $3,112 million in 1998;
and $7,683 million in 1999 and later -- aggregating $41,822 million. At December
31, 1993, contractual maturities for finance lease rentals receivable over the
next five years and after are: $6,417 million in 1994; $5,426 million in 1995;
$3,919 million in 1996; $2,570 million in 1997; $1,720 million in 1998; and
$9,630 million in 1999 and later -- aggregating $29,682 million.
Experience of the Corporation has shown that a portion of receivables will
be paid prior to contractual maturity. Accordingly, the contractual maturities
of time sales and loans and of rentals receivable shown above are not to be
regarded as forecasts of future cash collections.
The Corporation is a party to financial instruments with off-balance sheet
risk in the normal course of business to meet the financing needs of its
customers. These financial instruments include financial guarantees and letters
of credit. The Corporation's exposure to credit loss in the event of
nonperformance by the other party to financial guarantees is represented by the
contractual amount of those instruments. The Corporation uses the same credit
policies and the same collateral requirements in making commitments and
conditional obligations as it does for financing transactions. In addition, the
Corporation is involved in the sales of receivables for which it is contingently
liable for credit losses for a percentage of the initial face amount sold. At
December 31, 1993 and 1992, the aggregate amount of such financial guarantees
were $1,863 million and $1,693 million, respectively, excluding those related to
commercial aircraft (see note 7). In connection with the sales of financing
receivables, the Corporation received proceeds of $1,105 million in 1993, $1,097
million in 1992 and $2,316 million in 1991. At December 31, 1993 and 1992,
$3,045 million and $3,473 million, respectively, of such receivables were
outstanding.
Under arrangements with customers, the Corporation had committed to lend
funds of $2,131 million and $1,794 million at December 31, 1993 and 1992,
respectively, excluding those related to commercial aircraft (see note 7).
Additionally, at December 31, 1993 and 1992, the Corporation was conditionally
obligated to advance $2,244 million and $2,236 million, respectively,
principally under performance-based standby lending commitments. The Corporation
also was obligated for $2,946 million and $2,147 million at year-ends 1993 and
1992, respectively, under standby liquidity facilities related to third-party
commercial paper programs, although management believes that the prospects of
being required to fund under such standby facilities are remote. Note 11
discusses financial guarantees of insurance affiliates.
Nonearning consumer time sales and loans, primarily private-label credit
card receivables, amounted to $391 million and $444 million at December 31, 1993
and 1992, respectively. A majority of these receivables was subject to various
loss-sharing arrangements that provide full or partial recourse to the
originating private-label entity. Nonearning and reduced earning receivables
other than consumer time sales and loans were $509 million and $934 million at
year-ends 1993 and 1992, respectively.
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Earnings of $11 million and $30 million realized in 1993 and 1992,
respectively, were $41 million and $75 million lower than would have been
reported had these receivables earned income in accordance with their original
terms.
Additional information regarding financing receivables is included in
Management's Discussion of the Corporation's Portfolio Quality on page 13.
NOTE 6. ALLOWANCE FOR LOSSES ON FINANCING RECEIVABLES
The allowance for losses on financing receivables represented 2.63% of total
financing receivables at both year-ends 1993 and 1992. The table below shows the
activity in the allowance for losses on financing receivables during 1991
through 1993:
(In millions) 1993 1992 1991
------ ------- -------
Balance at January 1.............................. $1,607 $ 1,508 $ 1,360
Additions charged to operations................... 987 1,056 1,102
Net transfers related to companies acquired or
sold............................................ 126 52 135
Amounts written off -- net........................ (990) (1,009) (1,089)
------ ------- -------
Balance at December 31............................ $1,730 $ 1,607 $ 1,508
------ ------- -------
------ ------- -------
Amounts written off in 1993 were approximately 1.46% of average financing
receivables outstanding during the year, compared with 1.58% and 1.87% of
average financing receivables outstanding during 1992 and 1991, respectively.
NOTE 7. EQUIPMENT ON OPERATING LEASES
Equipment on operating leases by type of equipment and accumulated amortization
at December 31, 1993 and 1992 are shown in the following table:
(In millions) 1993 1992
------- -------
Cost -- aircraft.................................................. $ 3,677 $ 2,850
-- vehicles................................................. 3,568 2,274
-- marine shipping containers............................... 2,985 2,584
-- railroad rolling stock................................... 1,498 1,478
-- other.................................................... 2,160 2,758
------- -------
13,888 11,944
Accumulated amortization.......................................... (3,238) (2,549)
------- -------
$10,650 $ 9,395
------- -------
------- -------
Amortization of equipment on operating leases was $1,395 million in 1993,
$1,133 million in 1992 and $1,055 million in 1991.
The Corporation acts as a lender and lessor to commercial enterprises in
the airline industry; at December 31, 1993 and 1992, the aggregate amount of
such loans, leases and equipment leased to others were $6,776 million and $5,978
million, respectively. In addition, the Corporation had issued financial
guarantees and funding commitments of $450 million at December 31, 1993 ($645
million at year-end 1992) and had conditional commitments to purchase aircraft
at a cost of $865 million. These purchase commitments are subject to the
aircraft having been placed on lease under agreements, and with carriers,
acceptable to the Corporation prior to delivery. Included in the Corporation's
equipment leased to others at year-end 1993 is $244 million of commercial
aircraft off-lease ($94 million in 1992).
NOTE 8. BUILDINGS AND EQUIPMENT
Buildings and equipment include office buildings, satellite communications
equipment, data processing equipment, vehicles, furniture and office equipment
used at the Corporation's offices throughout the world. Depreciation expense was
$192 million for 1993, $164 million for 1992 and $132 million for 1991.
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NOTE 9. OTHER ASSETS
Other assets at December 31, 1993 and 1992 are shown in the table below.
(In millions) 1993 1992
------- -------
Assets acquired for resale......................................... $ 8,141 $ 3,388
Investments in and advances to nonconsolidated affiliates, at
equity........................................................... 2,079 1,720
Other intangibles.................................................. 1,637 921
Miscellaneous investments.......................................... 1,541 1,983
Goodwill........................................................... 1,537 1,197
Deferred insurance acquisition costs............................... 847 598
Foreclosed real estate properties.................................. 213 304
Other.............................................................. 764 621
------- -------
$16,759 $10,732
------- -------
------- -------
Accumulated amortization of goodwill and other intangibles was $261 million
and $229 million, respectively, at December 31, 1993 and $204 million and $94
million, respectively, at December 31, 1992.
Miscellaneous investments included $75 million and $275 million at December
31, 1993 and 1992, respectively, of in-substance repossessions at the lower of
cost or estimated fair value previously included in financing receivables.
Investments in and advances to nonconsolidated affiliates include advances of
$1,159 million and $687 million at December 31, 1993 and 1992, respectively.
The Corporation's mortgage servicing activities include the purchase and
resale of mortgages. It had open commitments to purchase mortgages totaling
$5,935 million and $2,963 million at December 31, 1993 and 1992, respectively.
Additionally, the Corporation had open commitments to sell mortgages totaling
$6,426 million and $1,777 million, at year-ends 1993 and 1992, respectively. At
December 31, 1993 and 1992, mortgages sold with full or partial recourse to the
Corporation aggregated $2,526 million and $3,876 million, respectively.
NOTE 10. NOTES PAYABLE
Notes payable at December 31, 1993 totaled $78,712 million, consisting of
$78,015 million of senior debt and $697 million of subordinated debt. The
composite interest rate during 1993 was 4.97% compared with 5.84% for 1992 and
7.51% for 1991. Total short-term notes payable at December 31, 1993 and 1992
consisted of the following:
(In millions) 1993 1992
------- -------
Commercial paper................................................... $43,958 $40,179
Current portion of long-term debt.................................. 6,420 4,298
Notes with trust departments of banks.............................. 1,882 1,659
Banks.............................................................. 198 1,816
Other.............................................................. 445 540
------- -------
$52,903 $48,492
------- -------
------- -------
The average daily balance of short-term debt, excluding the current portion
of long-term debt, during 1993 was $41,450 million compared with $38,319 million
for 1992 and $35,487 million for 1991. The December 31, 1993 balance of $52,903
million was the maximum balance during 1993. The December 31, 1992 balance of
$48,492 million was the maximum balance during 1992. The December 27, 1991
balance of $44,412 million was the maximum balance during 1991. The average
short-term interest rate, excluding the current portion of long-term debt, for
the year 1993 was 3.27%, representing short-term interest expense divided by the
average daily balance, compared with 3.91% for 1992 and 6.32% for 1991. On
December 31, 1993, 1992 and 1991, average interest rates were 3.39%, 3.57% and
5.13%, respectively, for commercial paper and 3.10%, 3.54% and 4.90%,
respectively, for notes with trust departments of banks.
Page 26
29
Outstanding balances in notes payable after one year at December 31, 1993
and 1992 are shown below.
WEIGHTED
AVERAGE 1993 1992
(Dollars in millions) INTEREST RATE MATURITIES AMOUNT AMOUNT
------------- ---------- ------- -------
Senior notes
Notes(a)(b).................................. 6.03% 1995-2012 $22,028 $18,072
Zero coupon/deep discount notes.............. 13.72 1995-2001 1,407 1,578
Reset or remarketed notes(c)................. 8.39 2007-2018 1,500 1,500
Floating rate notes(d)....................... 1995-2053 521 496
Less unamortized discount/premium............ (344) (464)
------- -------
Total senior notes...................... 25,112 21,182
------- -------
Subordinated notes(e)............................. 7.39 2006-2012 697 697
------- -------
$25,809 $21,879
------- -------
------- -------
- ---------------
(a) At December 31, 1993 and 1992, the Corporation had agreed to exchange
currencies and related interest payments on principal amounts equivalent to
U.S. $8,101 million and $6,499 million, respectively. At December 31, 1993
and 1992, the Corporation also had entered into interest rate swaps related
to interest on $11,624 million and $8,549 million, respectively. To
minimize borrowing costs, the Corporation has entered into multiple
currency and interest rate agreements for certain notes.
(b) At December 31, 1993 and 1992, counterparties held options under which the
Corporation can be caused to execute interest rate swaps associated with
interest payments through 1999 on $500 million and $625 million,
respectively.
(c) The Corporation will reset interest rates at the end of the initial and
each subsequent interest period. At each interest rate-reset date, the
Corporation may redeem notes in whole or in part at its option. Current
interest periods range from March 1994 to May 1996.
(d) The rate of interest payable on each note is a variable rate based on the
commercial paper rate each month. Interest is payable at the option of the
Corporation either monthly or semiannually.
(e) At December 31, 1993 and 1992, subordinated notes in the amount of $697
million were guaranteed by GE Company.
Long-term borrowing maturities during the next five years, including the
current portion of notes payable after one year are: 1994, $6,420 million; 1995,
$6,202 million; 1996, $4,805 million; 1997, $2,969 million; and 1998, $3,563
million.
At December 31, 1993 the Corporation had committed lines of credit
aggregating $19,045 million with 134 banks, including $6,005 million of
revolving credit agreements with 69 banks pursuant to which the Corporation has
the right to borrow funds for periods exceeding one year. A total of $4,627
million of these lines were also available for use by GE Capital Services. In
addition, at December 31, 1993, approximately $105 million of committed lines of
credit were directly available to a foreign affiliate. Also, at December 31,
1993, approximately $3,045 million of GE Company's credit lines were available
for use by the Corporation. During 1993 the Corporation did not borrow under any
of these credit lines.
The Corporation compensates banks for credit facilities in the form of fees
which were immaterial for the past three years.
NOTE 11. INSURANCE RESERVES AND ANNUITY BENEFITS
The Corporation adopted SFAS No. 113, "Accounting and Reporting for Reinsurance
of Short-Duration and Long-Duration Contracts," during 1993. The principal
effect of this Statement was to report reinsurance receivables and prepaid
reinsurance premiums, a total of $1,012 million at December 31, 1993, as assets.
Such amounts were reported as reductions of insurance reserves at the end of
1992.
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30
Insurance reserves and annuity benefits represents policyholders' benefits,
unearned premiums and provisions for policy losses and benefits relating to
insurance and annuity businesses. The related balances at December 31, 1993 and
1992 are as follows:
(In millions) 1993 1992
-------- -------
Insurance reserves and annuity benefits:
Annuity benefits.......................................................... $ 8,894 $ --
Other policyholder benefits............................................... 5,259 1,231
Financial and mortgage guarantee reserves................................. 607 412
Property and casualty reserves............................................ 440 442
Unearned premiums......................................................... 1,385 1,088
-------- -------
$ 16,585 $ 3,173
-------- -------
-------- -------
Financial guarantees, principally FGIC's guarantees on municipal bonds and
structured debt issued, amounted to approximately $101.4 billion and $81.3
billion at year-end 1993 and 1992, respectively, before reinsurance of $17.3
billion and $13.7 billion, respectively. Related unearned premiums amounted to
$803 million and $571 million at December 31, 1993 and 1992, respectively. As of
December 31, 1993 and 1992, reserves for losses and loss adjustment expenses
were $96 million and $40 million, respectively.
The Corporation's mortgage insurance operations underwrite residential
mortgage guarantee insurance. Total risk in force aggregated $27.0 billion and
$21.3 billion at December 31, 1993 and 1992, respectively; related unearned
premiums amounted to $276 million at December 31, 1993 and $236 million at
December 31, 1992. Case basis loss reserves and loss adjustment expense reserves
are provided in an amount sufficient to pay all estimated losses in the
portfolio, including those incurred but not reported. As of December 31, 1993
and 1992, reserves for losses and loss adjustment expenses were $511 million and
$372 million, respectively.
Interest rates credited to annuity contracts in 1993 ranged from 3.7% to
9.7%. For most annuities, interest rates to be credited are redetermined by
management on an annual basis.
The Corporation's Specialty Insurance businesses are involved significantly
in the reinsurance business, ceding reinsurance on both a pro-rata and an excess
basis. The maximum amount of individual life insurance retained on any one life
is $500,000.
When the Corporation cedes business to third parties, it is not relieved of
its primary obligation to policyholders and reinsureds. Consequently, the
Corporation establishes allowances for amounts deemed uncollectible due to the
failure of reinsurers to honor their obligations. The Corporation monitors both
the financial condition of individual reinsurers and risk concentrations arising
from similar geographic regions, activities and economic characteristics of
reinsurers.
The effects of reinsurance on premiums written and earned during 1993, 1992
and 1991 were as follows:
WRITTEN PREMIUMS EARNED PREMIUMS
-------------------------- ------------------------
1993 1992 1991 1993 1992 1991
------ ------ ---- ------ ---- ----
Direct...................................... $1,312 $1,051 $551 $1,161 $888 $459
Assumed..................................... 266 221 387 268 222 389
Ceded....................................... (125) (142) (163) (125) (142) (156)
------ ------ ---- ------ ---- ----
Net Premiums................................ $1,453 $1,130 $775 $1,304 $968 $692
------ ------ ---- ------ ---- ----
------ ------ ---- ------ ---- ----
Reinsurance recoveries recognized as a reduction of insurance losses and
policyholder and annuity benefits amounted to $163 million, $169 million and
$225 million for the period ended December 31, 1993, 1992 and 1991,
respectively.
NOTE 12. EQUITY CAPITAL
All Common Stock is owned by GE Capital Services, which is in turn wholly owned
by GE Company. In 1993, GE Capital Services contributed the minority interest in
Financial Insurance Group to the Corporation. In 1992, GE Company contributed to
GE Capital Services the assets of GE Computer Services. GE Capital Services in
turn contributed the GE Computer Services assets to the Corporation. These
contributions were reflected as additions to the Corporation's additional
paid-in capital of $25 million and $134 million in 1993 and 1992, respectively.
Cash dividends paid on the Common Stock were $460 million in 1993, $300 million
in 1992 and $100 million in 1991.
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31
Other equity at December 31, 1993 and 1992 consisted of:
(In millions) 1993 1992
---- ----
Foreign currency translation adjustments........................................ $(64) $(30)
Unrealized gains and (losses) on investment securities -- net................... 485 (6)
---- ----
$421 $(36)
---- ----
---- ----
Dividend rates on the Corporation's variable cumulative preferred stock
ranged from 2.33% to 2.79% during 1993, 2.44% to 3.49% during 1992. Dividends
paid on such variable cumulative preferred stock were $22 million in 1993, $26
million in 1992 and $41 million in 1991.
NOTE 13. EARNED INCOME
Included in earned income from financing leases were gains on the sale of
equipment at lease completion of $145 million in 1993, $126 million in 1992 and
$147 million in 1991.
Noncancelable future rentals due from customers for equipment on operating
leases as of December 31, 1993 totaled $6,133 million and are due as follows:
1994, $2,036 million; 1995, $1,455 million; 1996, $879 million; 1997, $458
million; 1998, $316 million and $989 million thereafter.
Amortization of deferred investment tax credit was $29 million, $26 million
and $25 million in 1993, 1992 and 1991, respectively.
Time sales, loan and investment and other income includes the Corporation's
share of earnings from equity investees of $106 million, $72 million and $84
million for 1993, 1992 and 1991, respectively.
NOTE 14. INTEREST AND DISCOUNT EXPENSES
Interest and discount expenses reported in the Statement of Current and Retained
Earnings are net of interest income on temporary investments of excess funds of
$38 million for 1993, $42 million for 1992, and $47 million for 1991, and net of
capitalized interest of $5 million for 1993, $6 million for 1992 and $8 million
for 1991.
For purposes of computing the ratio of earnings to fixed charges (the
"ratio") in accordance with applicable Securities and Exchange Commission
instructions, earnings consist of net earnings adjusted for the provision for
income taxes, minority interest and fixed charges. Fixed charges consist of
interest on all indebtedness and one-third of annual rentals, which the
Corporation believes is a reasonable approximation of the interest factor of
such rentals. The ratio was 1.62 for 1993, compared with 1.44 for 1992 and 1.34
for 1991.
NOTE 15. OPERATING AND ADMINISTRATIVE EXPENSES
Employees and retirees of the Corporation and its affiliates are covered under a
number of pension, health and life insurance plans. The principal pension plan
is the GE Company pension plan, a defined benefit plan, while employees of
certain affiliates are covered under separate plans. The Corporation provides
health and life insurance benefits to certain of its retired employees,
principally through GE Company's benefit program. The annual cost to the
Corporation of providing these benefits is not material and the net transition
obligation arising from the 1991 adoption of the new accounting standard, SFAS
No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pension,"
was not separately determinable.
GE Company adopted SFAS No. 112, "Employers' Accounting for Postemployment
Benefits," in the second quarter of 1993. The Corporation adopted this standard
in conjunction with its ultimate parent. This Statement requires that employers
expense the costs of postemployment benefits (as distinct from postretirement
pension, medical and life insurance benefits) over the working lives of their
employees. This change principally affects the Corporation's accounting for
severance benefits, which previously were expensed when the severance event
occurred. The net transition obligation related to the Corporation's employees
covered under GE Company postemployment benefit plans is not separately
determinable from the GE Company plans as a whole; accordingly, there is no
financial statement impact on the Corporation. The net transition obligation for
employees covered under separate plans is not material.
Rental expense for 1993 aggregating $413 million, compared with $272
million for 1992 and $103 million for 1991, was principally for the rental of
office space, data processing equipment and railcars.
Page 29
32
Minimum future rental commitments under noncancelable leases are: 1994,
$356 million; 1995, $336 million; 1996, $317 million; 1997, $302 million; 1998,
$284 million and $1,802 million thereafter. The Corporation, as a lessee, has no
material lease agreements classified as capital leases.
NOTE 16. INCOME TAXES
The income tax provision is summarized in the following table:
(In millions) 1993 1992 1991
---- ---- -----
Estimated taxes payable (recoverable).................................. $175 $291 $(230)
Effect of temporary differences........................................ 496 129 573
Investment tax credit deferred (amortized) -- net...................... (7) (5) 19
---- ---- -----
$664 $415 $ 362
---- ---- -----
---- ---- -----
GE Company files a consolidated Federal income tax return which includes GE
Capital. The provisions for estimated taxes payable (recoverable) include the
effect of the Corporation and its affiliates on the consolidated tax and the
effect of tax transfer leases. Estimated income taxes payable were $15 million
and $7 million at December 31, 1993 and 1992, respectively.
A reconciliation of the Corporation's actual income tax rate to the U.S.
Federal statutory rate is shown in the following table:
(In millions) 1993 1992 1991
---- ---- ----
Statutory U.S. Federal income tax rate.................................... 35.0% 34.0% 34.0%
Tax effect of:
Rate increase -- deferred taxes......................................... 5.6 -- --
Tax-exempt income....................................................... (5.0) (6.1) (6.6)
Change in tax-rate assumptions for leveraged leases..................... (1.6) (2.6) (2.7)
Other -- net............................................................ (3.0) (0.4) (0.4)
---- ---- ----
Actual income tax rate.................................................... 31.0% 24.9% 24.3%
---- ---- ----
---- ---- ----
The tax effects of principal temporary differences are shown in the
following table:
(In millions) 1993 1992
------- -------
Assets
Provision for losses..................................................... $ (825) $ (715)
Insurance reserves....................................................... (69) (103)
AMT credit carry forwards................................................ -- (200)
Other.................................................................... (817) (456)
------- -------
Total deferred tax assets.................................................. (1,711) (1,474)
Liabilities
Financing leases......................................................... 4,917 4,553
Operating leases......................................................... 966 811
Tax transfer leases...................................................... 340 329
Net unrealized gains on investment securities............................ 261 --
Other.................................................................... 857 862
------- -------
Total deferred tax liability............................................... 7,341 6,555
------- -------
Net deferred tax liability................................................. $ 5,630 $ 5,081
------- -------
------- -------
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33
NOTE 17. INDUSTRY SEGMENT DATA
Industry segment operating data and identifiable assets for the years 1993, 1992
and 1991 are shown below.
(In millions) 1993 1992 1991
-------- ------- -------
Earned Income:
Consumer Services............................................. $ 4,062 $ 3,315 $ 3,373
Equipment Management.......................................... 3,601 2,756 2,331
Mid-Market Financing.......................................... 1,652 1,499 1,440
Specialty Insurance........................................... 2,002 1,663 1,231
Specialized Financing......................................... 3,084 2,974 2,925
-------- ------- -------
14,401 12,207 11,300
Corporate..................................................... 43 43 28
-------- ------- -------
Total earned income............................................. $ 14,444 $12,250 $11,328
-------- ------- -------
-------- ------- -------
Segment operating profit:
Consumer Services............................................. $ 695 $ 525 $ 478
Equipment Management.......................................... 377 368 381
Mid-Market Financing.......................................... 454 352 248
Specialty Insurance........................................... 422 302 169
Specialized Financing......................................... 201 121 220
Total segment operating profit.................................. 2,149 1,668 1,496
Corporate..................................................... (7) (2) (9)
-------- ------- -------
Earnings before taxes........................................... 2,142 1,666 1,487
Income tax provision............................................ 664 415 362
-------- ------- -------
Net earnings.................................................... $ 1,478 $ 1,251 $ 1,125
-------- ------- -------
-------- ------- -------
Identifiable assets at December 31:
Consumer Services............................................. $ 45,746 $24,164 $21,914
Equipment Management.......................................... 14,454 12,640 9,848
Mid-Market Financing.......................................... 14,890 13,665 11,414
Specialty Insurance........................................... 9,579 7,419 5,152
Specialized Financing......................................... 31,918 31,865 31,591
Corporate..................................................... 1,352 2,879 609
-------- ------- -------
Total assets.................................................... $117,939 $92,632 $80,528
-------- ------- -------
-------- ------- -------
NOTE 18. QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data for 1993 and 1992 are as follows:
THREE MONTHS ENDED
-----------------------------------------------------------------------------------
MARCH JUNE SEPTEMBER DECEMBER
----------------- ----------------- ----------------- -----------------
(In millions) 1993 1992 1993 1992 1993 1992 1993 1992
------ ------ ------ ------ ------ ------ ------ ------
Earned income.............................. $3,131 $2,845 $3,354 $2,896 $3,668 $3,201 $4,291 $3,308
Expenses:
Interest and discount.................. 779 925 865 908 871 900 946 932
Operating and administrative (including
minority interest)................... 1,063 797 1,098 852 1,152 1,098 1,695 1,208
Insurance losses and policyholder and
annuity benefits..................... 169 143 272 204 381 213 437 51
Provision for losses on financing
receivables.......................... 255 251 292 313 200 176 240 316
Depreciation and amortization of buildings
and equipment and equipment on operating
leases................................... 340 290 364 243 375 379 508 385
------ ------ ------ ------ ------ ------ ------ ------
Earnings before income taxes............... 525 439 463 376 689 435 465 416
Provision for income taxes................. 154 112 128 96 291 104 91 103
------ ------ ------ ------ ------ ------ ------ ------
Net earnings............................... $ 371 $ 327 $ 335 $ 280 $ 398 $ 331 $ 374 $ 313
------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------
NOTE 19. RESTRICTED NET ASSETS OF AFFILIATES
Various state and foreign regulations require that the Corporation's investment
in certain affiliates, without regard to net unrealized after-tax gains on
investment securities which were $336 million at December 31, 1993, be
maintained at specified minimum levels to provide additional protection for
insurance customers, investment certificate holders and passbook savings
depositors. At December 31, 1993, such minimum investment levels aggregated
approximately $4,600 million.
Page 31
34
NOTE 20. SUPPLEMENTAL CASH FLOW INFORMATION
Cash used or provided in 1993, 1992 and 1991 included interest paid by the
Corporation of $3,298 million, $3,570 million and $4,460 million, respectively,
and income taxes (paid) recovered by the Corporation of $(133) million, $(42)
million and $51 million, respectively.
NOTE 21. FAIR VALUES OF FINANCIAL INSTRUMENTS
As required under generally accepted accounting principles, financial
instruments are presented in the accompanying financial statements -- generally
at either cost or fair value, based on both the characteristics of and
management intentions regarding the instruments. Management believes that the
financial statement presentation is the most useful for displaying the
Corporation's results. However, SFAS No. 107, "Disclosure About Fair Value of
Financial Instruments," requires disclosure of an estimate of the fair value of
certain financial instruments. These disclosures disregard management intentions
regarding the instruments, and therefore, management believes that this
information may be of limited usefulness.
Apart from the Corporation's own borrowings and certain marketable
securities, relatively few of the Corporation's financial instruments are
actively traded. Thus, fair values must often be determined by using one or more
models that indicate value based on estimates of quantifiable characteristics as
of a particular date. Because this undertaking is, by nature, difficult and
highly judgmental, for a limited number of instruments, alternative valuation
techniques indicate values sufficiently diverse that the only practicable
disclosure is a range of values. Users of the following data are cautioned that
limitations in the estimation techniques may have produced disclosed values
different from those that could have been realized at December 31, 1993 or 1992.
Moreover, the disclosed values are representative of fair values only as of the
dates indicated, inasmuch as interest rates, performance of the economy, tax
policies and other variables significantly impact fair valuations. Cash and cash
equivalents, trading securities and other receivables have been excluded as
their carrying amounts and fair values are the same, or approximately the same.
Values were estimated as follows:
INVESTMENT SECURITIES. Based on quoted market prices or dealer quotes for
actively traded securities. Value of other such securities was estimated using
quoted market prices for similar securities.
TIME SALES, LOANS AND RELATED PARTICIPATIONS. Based on quoted market prices,
recent transactions, market comparables and/or discounted future cash flows,
using rates at which similar loans would have been made to similar borrowers.
INVESTMENTS IN AND ADVANCES TO NON-CONSOLIDATED AFFILIATES. Based on market
comparables, recent transactions and/or discounted future cash flows. These
equity interests were generally acquired in connection with financing
transactions and, for purposes of this disclosure, fair values were estimated.
OTHER FINANCIAL INSTRUMENTS. Based on recent comparable transactions, market
comparables, discounted future cash flows, quoted market prices, and/or
estimates of the cost to terminate or otherwise settle obligations to
counterparties.
BORROWINGS. Based on quoted market prices or market comparables. Fair values of
interest rate and currency swaps on borrowings are based on quoted market prices
and include the effects of counterparty creditworthiness.
ANNUITY BENEFITS. Based on expected future cash flows, discounted at currently
offered discount rates for immediate annuity contracts or cash surrender value
for single premium deferred annuities.
FINANCIAL GUARANTIES OF INSURANCE AFFILIATES. Based on future cash flows,
considering expected renewal premiums, claims, refunds and servicing costs,
discounted at a market rate.
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35
The carrying amounts and estimated fair values of the Corporation's
financial instruments at December 31, 1993 and 1992 are as follows:
ASSETS (LIABILITIES)
1993 1992
-------------------------- --------------------------
CARRYING ESTIMATED CARRYING ESTIMATED
(In millions) AMOUNT FAIR VALUE AMOUNT FAIR VALUE
-------- ------------- -------- -------------
Investment securities..................... $20,577 $20,577 $ 6,683 $6,912
Time sales, loans and related
participations.......................... 39,678 41,410-40,685 36,131 37,420-36,240
Investments in and advances to non-
consolidated affiliates................. 2,079 2,830-2,635 1,720 2,295-2,180
Other financial instruments............... 6,356 6,442-6,315 2,940 3,105-2,970
Annuity benefits.......................... (8,894) (8,660) -- --
Borrowings(a)(b).......................... (78,712) (79,742) (70,371) (71,631)
Financial guaranties of insurance
affiliates.............................. (1,299) (123)-(204) (1,023) 210-70
- ---------------
(a) Swap contracts are integral to the Corporation's goal of achieving the
lowest borrowing costs for particular funding strategies. The above fair
values of borrowings include fair values of associated interest rates and
currency swaps. At December 31, 1993, the approximate settlement values of
the Corporation's swaps were $260 million. Without such swaps, estimated
fair values of the Corporation's borrowings would have been $79,482 million.
Approximately 90% of the notional amount of swaps outstanding at December
31, 1993, was with counterparties having credit ratings of Aa/AA or better.
(b) Proceeds from borrowings are invested in a variety of activities, including
both financial instruments shown in the preceding tables, as well as leases,
for which fair value disclosures are not required. When evaluating the
extent to which estimated fair value of borrowings exceeds the related
carrying amount, users should consider that the fair value of the fixed
payment stream for long-term leases would increase as well.
NOTE 22. GEOGRAPHIC SEGMENT INFORMATION
Geographic segment operating data and total assets for the years 1993, 1992 and
1991 are as follows:
EARNED INCOME OPERATING PROFIT
---------------------------- ------------------------
(In millions) 1993 1992 1991 1993 1992 1991
-------- ------- ------- ------ ------ ------
United States.............................. $ 12,419 $10,627 $10,102 $2,028 $1,524 $1,304
Other areas of the world................... 2,025 1,623 1,226 114 142 183
-------- ------- ------- ------ ------ ------
Total.................................... $ 14,444 $12,250 $11,328 $2,142 $1,666 $1,487
-------- ------- ------- ------ ------ ------
-------- ------- ------- ------ ------ ------
TOTAL ASSETS
----------------------------
(In millions) 1993 1992 1991
-------- ------- -------
United States.............................. $108,228 $84,928 $72,418
Other areas of the world................... 9,711 7,704 8,110
-------- ------- -------
Total.................................... $117,939 $92,632 $80,528
-------- ------- -------
-------- ------- -------
U.S. amounts were derived from the Corporation's operations located in the
U.S. The Corporation manages its exposure to currency movements by committing to
future exchanges of currencies at specified prices and dates. Commitments
outstanding at December 31, 1993 and 1992, were $1,650 million and $1,884
million, respectively.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable
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36
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Omitted
ITEM 11. EXECUTIVE COMPENSATION.
Omitted
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Omitted
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Omitted
Page 34
37
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) 1. FINANCIAL STATEMENTS
Included in Part II of this report:
Independent Auditors' Report
Statement of Current and Retained Earnings for each of the years in
the three-year period ended December 31, 1993
Statement of Financial Position at December 31, 1993 and 1992
Statement of Cash Flows for each of the years in the three-year
period ended December 31, 1993
Notes to Financial Statements
Incorporated by reference:
The consolidated financial statements, of General Electric Company,
set forth in the Annual Report on Form 10-K of General Electric
Company for the year ending December 31, 1993 (pages F-1 through
F-46) and Exhibit 12 (Ratio of Earnings to Fixed Charges) of
General Electric Company.
(a) 2. FINANCIAL STATEMENT SCHEDULES
III. Condensed financial information of registrant
All other schedules are omitted because of the absence of conditions
under which they are required or because the required information is
shown in the financial statements or notes thereto.
(a) 3. EXHIBIT INDEX
The exhibits listed below, as part of Form 10-K, are numbered in
conformity with the numbering used in Item 601 of Regulation S-K of
the Securities and Exchange Commission.
EXHIBIT
NUMBER DESCRIPTION
------- --------------------------------------------------------------------------
3(i) A complete copy of the Organization Certificate of the Corporation as last
amended on December 6, 1990 and currently in effect.
3(ii) A complete copy of the By-Laws of the Corporation as last amended on March
11, 1993 and currently in effect.
4(iii) Agreement to furnish to the Securities and Exchange Commission upon
request a copy of instruments defining the rights of holders of certain
long-term debt of the registrant and all subsidiaries for which
consolidated or unconsolidated financial statements are required to be
filed.
12(a) Computation of ratio of earnings to fixed charges.
12(b) Computation of ratio of earnings to combined fixed charges and preferred
stock dividends.
23(ii) Consent of KPMG Peat Marwick.
24 Power of Attorney.
99(a) Income Maintenance Agreement dated March 28, 1991 between General Electric
Company and the Corporation. (Incorporated by reference to Exhibit 28(a)
of the Corporation's Form 10-K Report for the year ended December 31,
1992.)
99(b) The consolidated financial statements, of General Electric Company, set
forth in the Annual Report on Form 10-K of General Electric Company for
the year ending December 31, 1993 (pages F-1 through F-46) and Exhibit
12 (Ratio of Earnings to Fixed Charges) of General Electric Company.
(b) REPORTS ON FORM 8-K
None.
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38
GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES
SCHEDULE III -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT
GENERAL ELECTRIC CAPITAL CORPORATION
CONDENSED STATEMENT OF FINANCIAL POSITION
DECEMBER 31,
-------------------
(In millions) 1993 1992
------- -------
ASSETS
Cash and equivalents....................................................... $ 85 $ 601
Investment securities...................................................... 1,959 2,314
Financing receivables:
Time sales and loans.................................................. 22,576 23,961
Investment in financing leases........................................ 9,802 10,032
------- -------
32,378 33,993
Allowance for losses on financing receivables......................... (874) (928)
------- -------
Financing receivables -- net..................................... 31,504 33,065
Investments in and advances to consolidated affiliates, at equity.......... 52,223 37,757
Equipment on operating leases (at cost), less accumulated amortization of
$245 and $185............................................................ 1,106 1,029
Other assets............................................................... 5,138 5,461
------- -------
Total assets............................................................... $92,015 $80,227
------- -------
------- -------
LIABILITIES AND EQUITY
Notes payable:
Due within one year................................................... $51,265 $44,749
Long-term (including notes payable to consolidated affiliates of $971
and $1,237).......................................................... 24,145 20,996
Other liabilities (including payables to consolidated affiliates of $4 and
$12)..................................................................... 4,258 3,259
Deferred income taxes...................................................... 1,977 2,331
------- -------
Total liabilities................................................ 81,645 71,335
------- -------
Capital stock.............................................................. 769 769
Additional paid-in capital................................................. 2,172 2,147
Retained earnings.......................................................... 7,008 6,012
Other...................................................................... 421 (36)
------- -------
Total equity..................................................... 10,370 8,892
------- -------
Total liabilities and equity............................................... $92,015 $80,227
------- -------
------- -------
See Notes to Condensed Financial Statements.
Page 36
39
GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES
SCHEDULE III -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT -- (CONTINUED)
GENERAL ELECTRIC CAPITAL CORPORATION
CONDENSED STATEMENT OF CURRENT AND RETAINED EARNINGS
YEARS ENDED DECEMBER 31,
----------------------------
(In millions) 1993 1992 1991
------ ------ ------
Earned income....................................................... $3,782 $4,012 $3,947
------ ------ ------
Expenses:
Interest and discount -- net................................... 1,925 2,219 2,809
Operating and administrative................................... 1,340 1,592 997
Provision for losses on financing receivables.................. 382 443 570
Depreciation and amortization.................................. 209 183 85
------ ------ ------
3,856 4,437 4,461
------ ------ ------
Loss before equity in earnings from operations of consolidated
affiliates and income taxes....................................... (74) (425) (514)
Income tax (provision) benefit...................................... (72) 205 215
Net earnings from operations of consolidated affiliates............. 1,624 1,471 1,424
------ ------ ------
Net earnings........................................................ 1,478 1,251 1,125
Cash dividends paid................................................. (482) (326) (141)
Retained earnings at January 1...................................... 6,012 5,087 4,103
------ ------ ------
Retained earnings at December 31.................................... $7,008 $6,012 $5,087
------ ------ ------
------ ------ ------
See Notes to Condensed Financial Statements.
Page 37
40
GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES
SCHEDULE III -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT -- (CONTINUED)
GENERAL ELECTRIC CAPITAL CORPORATION
CONDENSED STATEMENT OF CASH FLOWS
YEARS ENDED DECEMBER 31,
------------------------------
(In millions) 1993 1992 1991
-------- -------- --------
CASH PROVIDED BY OPERATING ACTIVITIES............................. $ 1,117 $ 1,958 $ 692
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Increase in loans to customers.................................... (27,112) (24,993) (22,877)
Principal collections from customers.............................. 27,237 23,028 23,288
Investment in assets on financing leases.......................... (1,271) (2,042) (3,225)
Principal collections on financing leases......................... 1,728 1,796 244
Net change in credit card receivables............................. 299 (66) 100
Buildings, equipment and equipment on operating leases
--additions.................................................. (610) (254) (220)
--dispositions............................................... 365 87 380
Payments for principal businesses purchased, net of cash
acquired........................................................ (2,090) (780) (2,830)
Proceeds from principal business dispositions..................... -- -- 277
Change in investment in and advances to affiliates................ (10,296) 226 (4,983)
Other............................................................. 1,093 (4,998) 557
-------- -------- --------
CASH USED BY INVESTING ACTIVITIES................................. (10,657) (7,996) (9,289)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in borrowings (less than 90-day maturities)............ 3,969 1,894 4,508
Newly issued debt
--short-term (91-365 days)................................... 4,315 4,456 4,863
--long-term senior........................................... 10,188 6,582 6,086
--long-term subordinated..................................... -- 450 250
Proceeds--non-recourse, leveraged lease debt...................... -- 118 965
Repayments and other reductions
--short-term................................................. (8,636) (6,197) (6,504)
--long-term senior........................................... (157) (395) (1,361)
--long-term subordinated..................................... -- (50) (17)
Principal payments -- non-recourse, leveraged lease debt.......... (198) (127) (180)
Cash dividends paid............................................... (482) (326) (141)
Contributions to additional paid-in-capital....................... 25 -- --
-------- -------- --------
CASH PROVIDED BY FINANCING ACTIVITIES............................. 9,024 6,405 8,469
-------- -------- --------
INCREASE (DECREASE) IN CASH AND EQUIVALENTS DURING THE YEAR....... (516) 367 (128)
CASH AND EQUIVALENTS AT BEGINNING OF YEAR......................... 601 234 362
-------- -------- --------
CASH AND EQUIVALENTS AT END OF YEAR............................... $ 85 $ 601 $ 234
-------- -------- --------
-------- -------- --------
See Notes to Condensed Financial Statements.
Page 38
41
GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES
SCHEDULE III -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT -- (CONCLUDED)
GENERAL ELECTRIC CAPITAL CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
NOTES PAYABLE -- Outstanding balances in notes payable after one year at
December 31, 1993 and 1992 are shown below.
WEIGHTED
AVERAGE
INTEREST 1993 1992
(DOLLARS IN MILLIONS) RATE MATURITIES AMOUNT AMOUNT
------------ ------------ ------------ ------------
Senior notes
Notes(a)(b)................................... 5.84% 1995-2012 $ 20,181 $ 16,795
Zero Coupon/Deep discount notes............... 15.15 1995-2001 424 424
Reset or remarketed notes(c).................. 8.39 2007-2018 1,500 1,500
Floating rate notes(d)........................ 1995-2053 521 496
Less unamortized discount/premium............. (149) (153)
---------- ----------
Total senior notes.................... 22,477 19,062
---------- ----------
Subordinated notes(e)........................... 8.03 2006-2012 697 697
Intercompany.................................... 1995-1996 971 1,237
---------- ----------
$ 24,145 $ 20,996
---------- ----------
---------- ----------
- ---------------
(a) At December 31, 1993 and 1992, the Corporation had agreed to exchange
foreign currencies on principal amounts equivalent to U.S. $8,101 million
and $6,499 million, respectively, and related interest. At December 31,
1993 and 1992, the Corporation also had entered into interest rate swaps
related to interest on $11,624 million and $8,549 million, respectively. To
minimize borrowing costs, the Corporation has entered into multiple
currency and interest rate agreements for certain notes.
(b) At December 31, 1993 and 1992, counterparties held options under which the
Corporation can be caused to execute interest rate swaps associated with
interest payments through 1999 on $500 million and $625 million,
respectively.
(c) The Corporation will reset interest rates at the end of the initial and
each subsequent interest period. At each interest rate-reset date, the
Corporation may redeem notes in whole or in part at its option. Current
interest periods range from March 1994 to May 1996.
(d) The rate of interest payable on each note is a variable rate based on the
commercial paper rate each month. Interest is payable at the option of the
Corporation either monthly or semiannually.
(e) At December 31, 1993 and 1992, subordinated notes in the amount of $697
million were guaranteed by GE Company.
Long-term borrowing maturities during the next five years, including the
current portion of notes payable after one year, are: 1994, $5,823 million;
1995, $4,620 million; 1996, $3,023 million; 1997, $3,253 million; and 1998, $872
million.
Interest and discount expense on the Condensed Statement of Current and
Retained Earnings is net of interest income on loans and advances to majority
owned affiliates of $1,335 million, $1,223 million and $1,187 million for 1993,
1992 and 1991, respectively.
Page 39
42
EXHIBIT 4 (iii)
March 22, 1994
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Subject: General Electric Capital Corporation Annual Report on Form 10-K
for the fiscal year ended December 31, 1993 -- File No. 1-6461
Dear Sirs:
Neither General Electric Capital Corporation (the "Corporation") nor any of
its subsidiaries has outstanding any instrument with respect to its long-term
debt under which the total amount of securities authorized exceeds 10% of the
total assets of the registrant and its subsidiaries on a consolidated basis. In
accordance with paragraph (b) (4) (iii) of Item 601 of Regulation S-K (17 CFR
sec.229.601), the Corporation hereby agrees to furnish to the Securities and
Exchange Commission, upon request, a copy of each instrument which defines the
rights of holders of such long-term debt.
Very truly yours,
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ J. A. PARKE
---------------------------------
J. A. Parke,
Senior Vice President, Finance
Page 40
43
EXHIBIT 12(a)
GENERAL ELECTRIC CAPITAL CORPORATION
AND CONSOLIDATED AFFILIATES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
YEAR ENDED DECEMBER 31,
------------------------------------------
(Dollar amounts in millions) 1993 1992 1991 1990 1989
------ ------ ------ ------ ------
Net earnings............................................. $1,478 $1,251 $1,125 $1,021 $ 859
Provision for income taxes............................... 664 415 362 350 303
Minority interest........................................ 114 14 (7) 4 9
------ ------ ------ ------ ------
Earnings before income taxes and minority interest....... 2,256 1,680 1,480 1,375 1,171
------ ------ ------ ------ ------
Fixed charges:
Interest and discount............................... 3,503 3,713 4,280 4,334 3,816
One-third of rentals................................ 138 90 34 33 25
------ ------ ------ ------ ------
Total fixed charges...................................... 3,641 3,803 4,314 4,367 3,841
------ ------ ------ ------ ------
Less interest capitalized, net of amortization........... 4 6 7 19 11
------ ------ ------ ------ ------
Earnings before income taxes and minority interest plus
fixed charges.......................................... $5,893 $5,477 $5,787 $5,723 $5,001
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Ratio of earnings to fixed charges....................... 1.62 1.44 1.34 1.31 1.30
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Page 41
44
EXHIBIT 12(b)
GENERAL ELECTRIC CAPITAL CORPORATION
AND CONSOLIDATED AFFILIATES
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK
DIVIDENDS
YEAR ENDED DECEMBER 31,
------------------------------------------
(Dollar amounts in millions) 1993 1992 1991 1990 1989
------ ------ ------ ------ ------
Net earnings............................................. $1,478 $1,251 $1,125 $1,021 $ 859
Provision for income taxes............................... 664 415 362 350 303
Minority interest........................................ 114 14 (7) 4 9
------ ------ ------ ------ ------
Earnings before income taxes and minority interest....... 2,256 1,680 1,480 1,375 1,171
------ ------ ------ ------ ------
Fixed charges:
Interest and discount............................... 3,503 3,713 4,280 4,334 3,816
One-third of rentals................................ 138 90 34 33 25
------ ------ ------ ------ ------
Total fixed charges...................................... 3,641 3,803 4,314 4,367 3,841
------ ------ ------ ------ ------
Less interest capitalized, net of amortization........... 4 6 7 19 11
------ ------ ------ ------ ------
Earnings before income taxes and minority interest plus
fixed charges.......................................... $5,893 $5,477 $5,787 $5,723 $5,001
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Preferred stock dividend requirements.................... $ 22 $ 26 $ 41 $ 42 $ 49
Ratio of earnings before provision for income taxes to
net earnings........................................... 145% 134% 132% 135% 136%
Preferred stock dividend factor on pre-tax basis......... 32 35 54 57 67
Fixed charges............................................ 3,641 3,803 4,314 4,367 3,841
------ ------ ------ ------ ------
Total fixed charges and preferred stock dividend
requirements........................................... $3,673 $3,838 $4,368 $4,424 $3,908
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Ratio of earnings to combined fixed charges and preferred
stock dividends........................................ 1.60 1.43 1.32 1.29 1.28
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Page 42
45
EXHIBIT 23(ii)
To the Board of Directors
General Electric Capital Corporation
We consent to incorporation by reference in the Registration Statements on
Form S-3 (Nos. 33-22974, 33-24667, 33-36601, 33-37156, 33-39376, 33-43081,
33-43420, 33-39596, 33-58506, 33-50909, 33-58508 and 33-50899) of General
Electric Capital Corporation of our report dated February 11, 1994, relating to
the statement of financial position of General Electric Capital Corporation and
consolidated affiliates as of December 31, 1993 and 1992 and the related
statements of current and retained earnings and cash flows and related schedules
for each of the years in the three-year period ended December 31, 1993, which
report appears in the December 31, 1993 annual report on Form 10-K of General
Electric Capital Corporation. Our report refers to a change in 1993 in the
method of accounting for certain investments in securities.
/s/ KPMG PEAT MARWICK
Stamford, Connecticut
March 23, 1994
Page 43
46
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned, being
directors and/or officers of General Electric Capital Corporation, a New York
corporation (the "Corporation"), hereby constitutes and appoints Gary C. Wendt,
James A. Parke, John P. Malfettone and Burton J. Kloster, Jr., and each of them,
his true and lawful attorney-in-fact and agent, with full power of substitution
and resubstitution, for him and in his name, place and stead in any and all
capacities, to sign one or more Annual Reports for the Corporation's fiscal year
ended December 31, 1993, on Form 10-K under the Securities Exchange Act of 1934,
as amended, or such other form as such attorney-in-fact may deem necessary or
desirable, any amendments thereto, and all additional amendments thereto in such
form as they or any one of them may approve, and to file the same with all
exhibits thereto and other documents in connection therewith with the Securities
and Exchange Commission, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done to the end that such Annual Report or
Annual Reports shall comply with the Securities Exchange Act of 1934, as
amended, and the applicable Rules and Regulations of the Securities and Exchange
Commission adopted or issued pursuant thereto, as fully and to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them or their or his
substitute or resubstitute, may lawfully do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, each of the undersigned has hereunto set his hand this
23rd day of March, 1994.
/s/ GARY C. WENDT /s/ JAMES A. PARKE
- --------------------------------------------------- ---------------------------------------------------
Gary C. Wendt, James A. Parke,
Chairman of the Board, Director and Senior Vice President, Finance
President and Chief Executive Officer (Principal Financial Officer)
(Principal Executive Officer)
/s/ JOHN P. MALFETTONE
---------------------------------------------
John P. Malfettone,
Vice President and Comptroller
(Principal Accounting Officer)
/s/ NIGEL D. T. ANDREWS /s/ BURTON J. KLOSTER, JR.
- --------------------------------------------------- ---------------------------------------------------
Nigel D. T. Andrews, Director Burton J. Kloster, Jr., Director
/s/ JAMES R. BUNT /s/ HUGH J. MURPHY
- --------------------------------------------------- ---------------------------------------------------
James R. Bunt, Director Hugh J. Murphy, Director
/s/ DENIS J. NAYDEN
- --------------------------------------------------- ---------------------------------------------------
Michael A. Carpenter, Director Denis J. Nayden, Director
/s/ DENNIS D. DAMMERMAN /s/ JOHN M. SAMUELS
- --------------------------------------------------- ---------------------------------------------------
Dennis D. Dammerman, Director John M. Samuels, Director
/s/ PAOLO FRESCO /s/ EDWARD D. STEWART
- --------------------------------------------------- ---------------------------------------------------
Paolo Fresco, Director Edward D. Stewart, Director
/s/ BENJAMIN W. HEINEMAN, JR. /s/ JOHN F. WELCH, JR.
- --------------------------------------------------- ---------------------------------------------------
Benjamin W. Heineman, Jr., Director John F. Welch, Jr., Director
A MAJORITY OF THE BOARD OF DIRECTORS
Page 44
47
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.
GENERAL ELECTRIC CAPITAL CORPORATION
March 23, 1994 By: /s/ GARY C. WENDT
---------------------------------
(GARY C. WENDT)
President
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 Title Date
- ------------------------------------ --------------------------------- ----------------
/s/ GARY C. WENDT Chairman of the Board, President March 23, 1994
- ------------------------------------ and Chief Executive Officer
(GARY C. WENDT) (Principal Executive Officer)
/s/ JAMES A. PARKE Director and March 23, 1994
- ------------------------------------ Senior Vice President, Finance
(JAMES A. PARKE) (Principal Financial Officer)
/s/ JOHN P. MALFETTONE Vice President and Comptroller March 23, 1994
- ------------------------------------ (Principal Accounting Officer)
(JOHN P. MALFETTONE)
NIGEL D. T. ANDREWS Director
JAMES R. BUNT Director
DENNIS D. DAMMERMAN Director
PAOLO FRESCO Director
BENJAMIN W. HEINEMAN, JR. Director
BURTON J. KLOSTER, JR. Director /s/ JOHN P. MALFETTONE
--------------------------
HUGH J. MURPHY Director (JOHN P. MALFETTONE)
Attorney-in-fact
DENIS J. NAYDEN Director March 23, 1994
JOHN M. SAMUELS Director
EDWARD D. STEWART Director
JOHN F. WELCH, JR. Director
A majority of the Board of Directors
Page 45
48
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------- --------------------------------------------------------------------------
3(i) A complete copy of the Organization Certificate of the Corporation as last
amended on December 6, 1990 and currently in effect.
3(ii) A complete copy of the By-Laws of the Corporation as last amended on March
11, 1993 and currently in effect.
4(iii) Agreement to furnish to the Securities and Exchange Commission upon
request a copy of instruments defining the rights of holders of certain
long-term debt of the registrant and all subsidiaries for which
consolidated or unconsolidated financial statements are required to be
filed.
12(a) Computation of ratio of earnings to fixed charges.
12(b) Computation of ratio of earnings to combined fixed charges and preferred
stock dividends.
23(ii) Consent of KPMG Peat Marwick.
24 Power of Attorney.
99(a) Income Maintenance Agreement dated March 28, 1991 between General Electric
Company and the Corporation. (Incorporated by reference to Exhibit 28(a)
of the Corporation's Form 10-K Report for the year ended December 31,
1992.)
99(b) The consolidated financial statements, of General Electric Company, set
forth in the Annual Report on Form 10-K of General Electric Company for
the year ending December 31, 1993 (pages F-1 through F-46) and Exhibit
12 (Ratio of Earnings to Fixed Charges) of General Electric Company.