0000040554-01-500050.txt : 20011107
0000040554-01-500050.hdr.sgml : 20011107
ACCESSION NUMBER: 0000040554-01-500050
CONFORMED SUBMISSION TYPE: 10-Q
PUBLIC DOCUMENT COUNT: 2
CONFORMED PERIOD OF REPORT: 20010929
FILED AS OF DATE: 20011102
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: GENERAL ELECTRIC CAPITAL CORP
CENTRAL INDEX KEY: 0000040554
STANDARD INDUSTRIAL CLASSIFICATION: PERSONAL CREDIT INSTITUTIONS [6141]
IRS NUMBER: 131500700
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-Q
SEC ACT: 1934 Act
SEC FILE NUMBER: 333-22265
FILM NUMBER: 1774003
BUSINESS ADDRESS:
STREET 1: 260 LONG RIDGE RD
CITY: STAMFORD
STATE: CT
ZIP: 06927
BUSINESS PHONE: 2033574000
MAIL ADDRESS:
STREET 1: 260 LONG RIDGE ROAD
CITY: STAMFORD
STATE: CT
ZIP: 06927
FORMER COMPANY:
FORMER CONFORMED NAME: GENERAL ELECTRIC CREDIT CORP
DATE OF NAME CHANGE: 19871216
10-Q
1
gecc3q01.txt
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM 10-Q
--------------------------
------
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
------
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 29, 2001
------------------
OR
------
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
------
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
-------------
Commission file number 1-6461
General Electric Capital Corporation
(Exact name of registrant as specified in its charter)
Delaware 13-1500700
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
260 Long Ridge Road, Stamford, Connecticut 06927
(Address of principal executive offices) (Zip Code)
(203) 357-4000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes |X| No
At October 30, 2001, 3,837,825 shares of common stock with a par value of $0.01
were outstanding.
REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(a) AND (b)
OF FORM 10-Q AND IS THEREFORE FILING THIS FORM 10-Q WITH THE REDUCED DISCLOSURE
FORMAT.
TABLE OF CONTENTS
Page
-----------
PART I - FINANCIAL INFORMATION.
Item 1. Financial Statements .......................................................... 1
Item 2. Management's Discussion and Analysis of Results of Operations ................. 7
Exhibit 12. Computation of Ratio of Earnings to Fixed Charges and Computation of
Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends ..... 10
PART II - OTHER INFORMATION.
Item 6. Exhibits and Reports on Form 8-K .............................................. 11
Signatures .................................................................................. 12
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES
Condensed Statement of Current and Retained Earnings
(Unaudited)
Three Months Ended Nine Months Ended
------------------------------------ -----------------------------------
September 29, September 30, September 29, September 30,
(In millions) 2001 2000 2001 2000
----------------- ----------------- ----------------- ----------------
Revenues
Revenues from services .......................... $ 10,844 $ 11,322 $ 32,572 $ 33,721
Sales of goods .................................. 778 2,392 2,806 7,030
----------------- ----------------- ----------------- ----------------
11,622 13,714 35,378 40,751
----------------- ----------------- ----------------- ----------------
Expenses
Interest ........................................ 2,358 2,592 7,614 7,676
Operating and administrative .................... 2,992 3,649 9,571 11,695
Cost of goods sold .............................. 692 2,207 2,519 6,515
Insurance losses and policyholder and annuity
benefits ..................................... 1,961 2,123 6,014 5,817
Provision for losses on financing receivables ... 521 448 1,428 1,362
Depreciation and amortization of buildings and
equipment and equipment on operating leases ... 917 785 2,495 2,387
Minority interest in net earnings of consolidated
affiliates .................................... 15 22 62 62
----------------- ----------------- ----------------- ----------------
9,456 11,826 29,703 35,514
----------------- ----------------- ----------------- ----------------
Earnings
Earnings before income taxes and cumulative
effect of changes in accounting principle .. 2,166 1,888 5,675 5,237
Provision for income taxes ...................... (495) (568) (1,238) (1,508)
----------------- ----------------- ----------------- ----------------
Earnings before cumulative effect of changes
in accounting principle.................... 1,671 1,320 4,437 3,729
Cumulative effect of changes in accounting
principle................................... - - (158) -
----------------- ----------------- ----------------- ----------------
Net Earnings .................................... 1,671 1,320 4,279 3,729
Dividends ....................................... (467) (540) (1,527) (1,485)
Retained earnings at beginning of period ........ 21,242 18,475 19,694 17,011
----------------- ----------------- ----------------- ----------------
Retained earnings at end of period .............. $ 22,446 $ 19,255 $ 22,446 $ 19,255
================= ================= ================= ================
See Notes to Condensed, Consolidated Financial Statements.
GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES
Condensed Statement of Financial Position
September 29, December 31,
(In millions) 2001 2000
----------------- -----------------
(Unaudited)
Assets
Cash and equivalents .......................................................... $ 6,393 $ 5,819
Investment securities ......................................................... 76,416 70,282
Financing receivables:
Time sales and loans, net of deferred income ............................... 99,650 93,540
Investment in financing leases, net of deferred income ..................... 51,202 50,930
----------------- -----------------
150,852 144,470
Allowance for losses on financing receivables .............................. (4,071) (3,970)
----------------- -----------------
Financing receivables - net ............................................ 146,781 140,500
Insurance receivables - net.................................................... 10,381 12,060
Other receivables - net ....................................................... 14,898 14,308
Inventories ................................................................... 292 666
Equipment on operating leases (at cost), less accumulated
amortization of $9,046 and $7,900 .......................................... 25,674 24,145
Intangible assets ............................................................. 13,519 13,216
Other assets .................................................................. 52,220 51,640
----------------- -----------------
Total assets .......................................................... $ 346,574 $ 332,636
================= =================
Liabilities and share owners' equity
Short-term borrowings ......................................................... $ 127,338 $ 117,482
Long-term borrowings:
Senior ..................................................................... 77,007 78,078
Subordinated ............................................................... 698 698
Insurance liabilities, reserves and annuity benefits .......................... 80,474 79,933
Other liabilities ............................................................. 23,433 20,764
Deferred income taxes ......................................................... 8,480 8,264
----------------- -----------------
Total liabilities ..................................................... 317,430 305,219
----------------- -----------------
Minority interest in equity of consolidated affiliates ........................ 1,301 1,344
----------------- -----------------
Accumulated gains/(losses) - net:
Investment securities....................................................... 212 (139)
Currency translation adjustments ........................................... (608) (600)
Derivatives qualifying as hedges............................................ (1,325) -
----------------- -----------------
Accumulated non-owner changes in share owners' equity ........................ (1,721) (739)
Capital stock ................................................................. 4 4
Additional paid-in capital .................................................... 7,114 7,114
Retained earnings ............................................................. 22,446 19,694
----------------- -----------------
Total share owners' equity ............................................ 27,843 26,073
----------------- -----------------
Total liabilities and share owners' equity ............................ $ 346,574 $ 332,636
================= =================
See Notes to Condensed, Consolidated Financial Statements.
GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES
Condensed Statement of Cash Flows
(Unaudited)
Nine Months Ended
-------------------------------------
September 29, September 30,
(In millions) 2001 2000
----------------- -----------------
Cash Flows From Operating Activities
Net earnings ..................................................................... $ 4,279 $ 3,729
Adjustments to reconcile net earnings to cash provided from
Operating activities:
Cumulative effect of changes in accounting principle......................... 158 -
Provision for losses on financing receivables ............................... 1,428 1,362
Depreciation and amortization of buildings and equipment and
equipment on operating leases ............................................. 2,495 2,387
Other - net ................................................................. 4,298 (3,617)
----------------- -----------------
Cash from operating activities ........................................... 12,658 3,861
----------------- -----------------
Cash Flows From Investing Activities
Increase in loans to customers ................................................... (92,898) (73,843)
Principal collections from customers - loans ..................................... 87,467 69,212
Investment in equipment for financing leases ..................................... (11,267) (14,411)
Principal collections from customers - financing leases .......................... 11,954 11,041
Net change in credit card receivables ............................................ 1,772 (381)
Buildings and equipment and equipment on operating leases:
- additions ................................................................. (9,458) (7,641)
- dispositions .............................................................. 5,627 4,877
Payments for principal businesses purchased, net of cash acquired ................ (6,100) (403)
Purchases of securities by insurance and annuity businesses ...................... (24,545) (16,917)
Dispositions and maturities of securities by insurance and
annuity businesses ............................................................ 17,885 8,928
Other - net ...................................................................... 597 (1,620)
----------------- -----------------
Cash used for investing activities ....................................... (18,966) (21,158)
----------------- -----------------
Cash Flows From Financing Activities
Net change in borrowings (maturities 90 days or less) ............................ 134 6,382
Newly issued debt - short-term (maturities 91-365 days) ........................ 3,717 5,160
- long-term (longer than one year) ........................... 13,333 20,091
Proceeds - non-recourse, leveraged lease debt .................................... 1,321 1,112
Repayments and other reductions:
- short-term (maturities 91-365 days) ........................ (5,951) (24,878)
- long-term (longer than one year) ........................... (4,222) (1,667)
Principal payments - non-recourse, leveraged lease debt .......................... (206) (154)
Proceeds from sales of investment contracts ...................................... 5,471 6,821
Cash received upon assumption of Toho Mutual Life Insurance Company
Insurance liabilities.......................................................... - 13,177
Redemption of investment contracts ............................................... (5,188) (7,077)
Dividends paid ................................................................... (1,527) (1,485)
----------------- -----------------
Cash from financing activities ........................................... 6,882 17,482
----------------- -----------------
Increase (Decrease) in Cash and Equivalents ...................................... 574 185
Cash and Equivalents at Beginning of Period ...................................... 5,819 6,505
----------------- -----------------
Cash and Equivalents at End of Period ............................................ $ 6,393 $ 6,690
================= =================
See Notes to Condensed, Consolidated Financial Statements.
GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES
Notes to Condensed, Consolidated Financial Statements
(Unaudited)
1. The accompanying condensed quarterly financial statements represent the
consolidation of General Electric Capital Corporation and all
majority-owned and controlled affiliates (collectively, "GECC"). On July 2,
2001, GECC changed its state of incorporation to Delaware. Refer to the
current report on Form 8-K filed July 3, 2001 for further details regarding
the Reincorporation. In connection with the Reincorporation, the par value
of the common stock decreased from $200 per share to $0.01 per share. The
condensed, consolidated financial statements contained herein have been
restated to give retroactive effect to the Reincorporation.
All significant transactions among the parent and consolidated affiliates
have been eliminated. Certain prior period data have been reclassified to
conform to the current period presentation.
2. The condensed, consolidated quarterly financial statements are unaudited.
These statements include all adjustments (consisting of normal recurring
accruals) considered necessary by management to present a fair statement of
the results of operations, financial position and cash flows. The results
reported in these condensed, consolidated financial statements should not
be regarded as necessarily indicative of results that may be expected for
the entire year.
3. The Financial Accounting Standards Board ("FASB") issued, then subsequently
amended, Statement of Financial Accounting Standards ("SFAS") No. 133,
Accounting for Derivative Instruments and Hedging Activities, which became
effective for GECC on January 1, 2001. Under SFAS No. 133, as amended, all
derivative instruments (including certain derivative instruments embedded
in other contracts) are recognized in the balance sheet at their fair
values and changes in fair value are recognized immediately in earnings,
unless the derivatives qualify as hedges of future cash flows. For
derivatives qualifying as hedges of future cash flows, the effective
portion of changes in fair value is recorded temporarily in equity, then
recognized in earnings along with the related effects of the hedged items.
Any ineffective portion of a hedge is reported in earnings as it occurs.
The nature of GECC business activities necessarily involve the management
of various financial and market risks, including those related to changes
in interest rates, equity prices, currency exchange rates, and commodity
prices. As discussed more fully in notes 1, 10 and 20 of the 2000 Form
10-K, management uses derivative financial instruments to mitigate or
eliminate certain of those risks. The January 1, 2001, accounting change
described above affected only the pattern and timing of non-cash accounting
recognition.
The January 1, 2001, cumulative effect of adopting this accounting change
follows:
(In millions) Earnings Equity
------------- -----------
Adjustment to fair value of derivatives (a) .... $ (60) $ (1,315)
Income tax effects ............................. 22 505
------------- -----------
Total .......................................... $ (38) $ (810)
============= ===========
(a) For earnings effect, amount shown is net of adjustment to hedged item.
A reconciliation of current period changes for the first nine months of
2001, net of applicable income taxes, in the separate component of share
owners' equity labeled "derivatives qualifying as hedges" follows.
(In millions)
Transition adjustment as of January 1, 2001 ... $ (810)
Declines in fair value - net .................. (670)
Reclassifications to earnings - net ........... 155
-----------------------
Balance at September 29, 2001 ................. $ (1,325)
=======================
The cumulative effect on share owners' equity was primarily attributable to
marking to market forward and swap contracts used to hedge variable-rate
borrowings. Decreases in the fair values of these instruments were
attributable to declines in interest rates since inception of the hedging
arrangements. As a matter of policy, management ensures that funding,
including the effect of derivatives, of its lending and other financing
asset positions are substantially matched in character (e.g., fixed vs.
floating) and duration. As a result, declines in the fair values of these
effective derivatives are offset by unrecognized gains on the related
financing assets and hedged items, and future net earnings will not be
subject to volatility arising from interest rate changes.
4. In November 2000, the Emerging Issues Task Force of the FASB reached a
consensus on impairment accounting for retained beneficial interests ("EITF
99-20"). Under this consensus, impairment on certain beneficial interests
in securitized assets must be recognized when (1) the asset's fair value is
below its carrying value, and (2) there has been an adverse change in
estimated cash flows. Previously, impairment on such assets was recognized
when the asset's carrying value exceeded estimated cash flows discounted at
a risk free rate of return. The effect of adopting EITF 99-20 at January 1,
2001, was a one-time reduction of net earnings of $120 million, net of
income taxes of $64 million. This accounting change did not involve cash,
and management expects that it will have no more than a modest effect on
future results.
5. Statement of Financial Accounting Standards ("SFAS") No. 141, Business
Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets,
modify the accounting for business combinations, goodwill and identifiable
intangible assets. All business combinations initiated after June 30, 2001,
must be accounted for by the purchase method. Goodwill in such acquisitions
will not be amortized, but will be written down when specified tests
indicate that the goodwill is impaired, that is, fair value is lower than
carrying value. Certain intangible assets will be required to be recognized
separately from goodwill and will be amortized over their useful lives. As
of January 1, 2002, all goodwill must be tested for impairment and a
transition adjustment recognized at that time. Goodwill amortization will
also cease at that date, and thereafter, all goodwill will be tested at
least annually for impairment. If these rules had applied to goodwill for
2001, management believes that full year 2001 net earnings would have
increased by approximately $480 million. Management has not yet determined
the extent of impaired goodwill, if any, that will be recognized as of
January 1, 2002.
SFAS No. 143, Accounting for Asset Retirement Obligations, requires
recognition of the fair value of liabilities associated with the retirement
of long-lived assets when a legal obligation to incur such costs arises as
a result of the acquisition, construction, development and/or the normal
operation of a long-lived asset. Upon recognition of the liability, a
corresponding asset is recorded and depreciated over the remaining life of
the long-lived asset. The Statement defines a legal obligation as one that
a party is required to settle as a result of an existing or enacted law,
statute, ordinance, or written or oral contract or by legal construction of
a contract under the doctrine of promissory estoppel. SFAS 143 is effective
for fiscal years beginning after December 15, 2002. Management has not yet
determined the total likely effects of adopting this Statement on the
financial position or results of operations.
6. A summary of increases/(decreases) in share owners' equity that do not
result directly from transactions with share owners, net of income taxes,
is provided below.
Three Months Ended
--------------------------------------------
(In millions) September 29, 2001 September 30, 2000
--------------------- ---------------------
Net earnings ..................................................... $ 1,671 $ 1,320
Investing securities .............................................. 418 253
Currency translation adjustments .................................. (131) (111)
Derivatives qualifying as hedges................................... (460) -
--------------------- ---------------------
Total ............................................................. $ 1,498 $ 1,462
===================== =====================
Nine Months Ended
--------------------------------------------
September 29, 2001 September 30, 2000
--------------------- ---------------------
Net earnings ..................................................... $ 4,279 $ 3,729
Investing securities .............................................. 351 (442)
Currency translation adjustments .................................. (8) (216)
Derivatives qualifying as hedges................................... (515) -
Cumulative effect on share owners' equity of adopting FAS 133..... (810) -
--------------------- ---------------------
Total ............................................................. $ 3,297 $ 3,071
===================== =====================
7. Revenues and net earnings before accounting changes, by operating segment,
for the three and nine months ended September 29, 2001, and September 30,
2000, can be found in the table on page 8 of this report.
Item 2. Management's Discussion and Analysis of Results of Operations.
Overview
Net earnings before cumulative effect of changes in accounting principle
(discussed in notes 3 and 4 to the condensed, consolidated financial statements)
for the first nine months of 2001 were $4,437 million, a $708 million (19%)
increase over the first nine months of 2000. The results reflected the
globalization and diversity of GECC businesses, with strong double-digit
increases in the Consumer Services, Equipment Management and Specialty Insurance
segments.
Operating Results
Total revenues decreased $5,373 million (13%) to $35,378 million for the first
nine months of 2001, compared with $40,751 million for the first nine months of
2000. This decrease primarily resulted from volume declines in the information
technology products and services businesses, the deconsolidation of Montgomery
Wards, LLC ("Wards"), reduced asset gains at GE Equity, the planned transition
of restructured insurance policies from Toho Mutual Life Insurance Company
("Toho") in the consumer savings and insurance business and the prior year
inclusion of pretax gains from GECC's holdings of the common stock of
PaineWebber Group, Inc. These factors were partially offset by growth in
origination volume in the Mid-Market Financing, Specialized Financing and
Specialty Insurance segments and acquisition-related growth in the Consumer
Services and Mid-Market Financing segments.
Interest expense on borrowings for the first nine months of 2001 was $7,614
million, 1% lower than for the first nine months of 2000. The decrease reflected
the effects of lower average interest rates, partially offset by the effects of
higher average borrowings used to finance asset growth. The average composite
interest rate on GECC's borrowings for the first nine months of 2001 was 5.37%
compared with 5.77% in the first nine months of 2000.
Operating and administrative expenses were $9,571 million for the first nine
months of 2001, an 18% decrease from the first nine months of 2000. The decrease
primarily reflected productivity gains in the Consumer Services and Equipment
Management segments, and the deconsolidation of Wards.
Cost of goods sold is associated with activities of the computer equipment
distribution business and former retail operations. This cost amounted to $2,519
million for the first nine months of 2001, compared with $6,515 million for the
first nine months of 2000. The decrease primarily reflected volume declines at
the information technology products and services businesses and the
deconsolidation of Wards.
Insurance losses and policyholder and annuity benefits increased $197 million to
$6,014 million for the first nine months of 2001, compared with the first nine
months of 2000. The increase primarily reflected the effects of growth in
premium volume throughout the period and business acquisitions, partially offset
by the planned transition of restructured insurance policies from Toho.
Provision for losses on financing receivables was $1,428 million for the first
nine months of 2001 compared with $1,362 million for the first nine months of
2000. This provision principally related to credit cards and personal loans in
the Consumer Services segment, which are discussed below under Portfolio
Quality.
Depreciation and amortization of buildings and equipment and equipment on
operating leases increased to $2,495 million for the first nine months of 2001
compared with $2,387 million for the first nine months of 2000. The increase was
principally the result of higher shorter-lived levels of equipment on operating
leases, primarily reflecting acquisition growth.
Provision for income taxes was $1,238 million for the first nine months of 2001
(an effective tax rate of 21.8%), compared with $1,508 million for the first
nine months of 2000 (an effective tax rate of 28.8%). The lower effective tax
rate primarily reflected one-time tax benefits with respect to the Equipment
Management segment and increased low tax earnings from international operations.
Operating Segments
Revenues and net earnings before cumulative effect of changes in accounting
principle, by operating segment, for the three and nine months ended September
29, 2001, and September 30, 2000, are summarized and discussed below.
Three Months Ended Nine Months Ended
-------------------------------- --------------------------------
September 29, September 30, September 29, September 30,
(In millions) 2001 2000 2001 2000
--------------- --------------- --------------- ---------------
Revenues
Consumer Services ................................ $ 5,575 $ 6,019 $ 17,012 $ 17,594
Equipment Management ............................. 2,703 3,595 8,652 10,965
Mid-Market Financing ............................. 1,808 1,396 4,738 3,959
Specialized Financing ............................ 1,146 1,356 3,554 4,405
Specialty Insurance .............................. 478 396 1,383 1,231
All other ........................................ (88) 952 39 2,597
--------------- --------------- --------------- ---------------
Total revenues ................................... $ 11,622 $ 13,714 $ 35,378 $ 40,751
=============== =============== =============== ===============
Net earnings before accounting changes
Consumer Services ................................ $ 554 $ 467 $ 1,644 $ 1,076
Equipment Management ............................. 259 245 836 563
Mid-Market Financing ............................. 258 222 569 521
Specialized Financing ............................ 320 376 772 1,374
Specialty Insurance .............................. 170 110 427 353
All other ........................................ 110 (100) 189 (158)
--------------- --------------- --------------- ---------------
Total net earnings ............................... $ 1,671 $ 1,320 $ 4,437 $ 3,729
=============== =============== =============== ===============
Consumer Services revenues decreased 3% while net earnings increased 53% for the
first nine months of 2001 compared with the first nine months of 2000. Revenues
decreased primarily as a result of the planned transition of restructured
insurance policies from Toho, the divestiture of the Mortgage Services business,
and the planned run-off of the U.S. auto finance business portfolio, offset by a
combination of volume growth in the U.S. consumer credit card business as well
as acquisition-related growth in the consumer savings and insurance business and
non-U.S. consumer finance businesses. The increase in net earnings was led by
volume growth in the U.S. consumer credit card and non-U.S. consumer finance
businesses, reduced residual losses in the U.S. auto finance business, and the
divestiture of the Mortgage Services business, which had experienced losses in
2000.
Equipment Management revenues decreased 21% for the first nine months of 2001 as
a result of volume declines in the information technology products and services
businesses, partially offset by revenues generated from volume growth in the
aviation services business. Net earnings increased 48% for the first nine months
of 2001 on improved performance in the information technology products and
services businesses and tax benefits at Penske and the satellite service
business.
Mid-Market Financing revenues grew 20% in the first nine months of 2001
reflecting the combination of origination growth, acquisitions, and increased
asset gains. Net earnings increased 9% in the first nine months of 2001 from a
combination of increased asset gains and acquisition-related growth.
Specialized Financing revenues decreased 19% and net earnings decreased 44% in
the first nine months of 2001 as growth at Commercial Real Estate, Structured
Finance Group and Commercial Finance was more than offset by reduced asset gains
on equity investments at GE Equity.
Specialty Insurance revenues increased 12% in the first nine months of 2001,
compared with the corresponding period in 2000 as a result of increased premium
income. Net earnings increased 21% in the first nine months of 2001, compared
with the corresponding period in 2000 reflecting the effects of increased
premium income, investment income and loss favorability.
All Other decline in revenues and increase in net earnings in the first nine
months of 2001, were primarily the result of the deconsolidation of Wards.
Portfolio Quality
Financing receivables are the financing businesses' largest asset and their
primary source of revenues. The portfolio of financing receivables, before
allowance for losses, increased to $150.9 billion at September 29, 2001, from
$144.5 billion at the end of 2000, primarily reflecting the effects of higher
origination volume and acquisition growth, partially offset by securitizations
and the liquidating U.S. auto finance business portfolio. The related allowance
for losses at September 29, 2001, amounted to $4.1 billion ($4.0 billion at the
end of 2000) and represents management's best estimate of probable losses
inherent in the portfolio. A discussion about the quality of certain elements of
the portfolio of financing receivables follows. "Nonearning" receivables are
those that are 90 days or more delinquent (or for which collection has otherwise
become doubtful) and "reduced-earning" receivables are commercial receivables
whose terms have been restructured to a below-market yield.
Consumer financing receivables, primarily credit card and personal loans and
auto loans and leases, were $49.3 billion at September 29, 2001, an increase of
$2.5 billion from year-end 2000. Nonearning consumer receivables at September
29, 2001, were $1.4 billion, about 2.8% of outstandings, compared with $1.0
billion, about 2.3% of outstanding receivables at December 31, 2000. This
increase reflects nonearning consumer receivables related to the second quarter
acquisition of igroup Limited, a subprime mortgage lender in the United Kingdom.
Excluding igroup Limited, nonearning consumer receivables at September 29, 2001,
were $1.2 billion, about 2.6% of outstanding receivables. Write-offs of consumer
receivables increased to $1.2 billion for the first nine months of 2001 compared
with $1.0 billion for the first nine months of 2000 reflecting increased
delinquencies in the liquidating Wards credit card portfolio and the maturation
of recently acquired private label credit card portfolios, consistent with
management's expectations.
Other financing receivables, which totaled $101.6 billion at September 29, 2001
($97.7 billion at December 31, 2000), consisted of a diverse commercial,
industrial and equipment loan and lease portfolio. Related nonearning and
reduced-earning receivables were $1.6 billion, about 1.6% of outstandings at
September 29, 2001, compared with $0.9 billion, about 1.0% of outstandings at
year-end 2000. The increase is primarily the result of several large
bankruptcies and restructurings, events that have been considered in
establishing the allowance for losses.
Other
In light of John F. Welch, Jr.'s retirement from the General Electric Company,
the Board of Directors of GECC has accepted Mr. Welch's resignation as a
Director of GECC and as a member of the Executive Committee of the Board of
Directors, effective September 7, 2001.
Forward Looking Statements
This document includes certain "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995. These statements are
based on management's current expectations and are subject to uncertainty and
changes in circumstances. Actual results may differ materially from these
expectations due to changes in global economic, business, competitive market and
regulatory factors.
EXHIBIT 12
GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES
Computation of Ratio of Earnings to Fixed Charges
and
Computation of Ratio of Earnings to Combined Fixed Charges
and Preferred Stock Dividends
Nine Months Ended September 29, 2001
(Unaudited)
Ratio of
Earnings to
Combined
Fixed
Charges and
Ratio of Preferred
Earnings to Stock
Fixed Charges Dividends
(Dollar amounts in millions)
-------------- --------------
Net earnings .................................................................. $ 4,279 $ 4,279
Provision for income taxes .................................................... 1,238 1,238
Minority interest in net earnings of consolidated affiliates .................. 62 62
-------------- --------------
Earnings before provision for income taxes and minority interest .............. 5,579 5,579
-------------- --------------
Fixed charges:
Interest ................................................................... 7,802 7,802
One-third of rentals ....................................................... 225 225
-------------- --------------
Total fixed charges ........................................................... 8,027 8,027
-------------- --------------
Less interest capitalized, net of amortization ................................ (75) (75)
-------------- --------------
Earnings before provision for income taxes and minority interest, plus
fixed charges ............................................................... $ 13,531 $ 13,531
============== ==============
Ratio of earnings to fixed charges ............................................ 1.69
==============
Preferred stock dividend requirements ......................................... 64
Ratio of earnings before provision for income taxes to net earnings ........... 1.29
Preferred stock dividend factor on pre-tax basis .............................. 83
Fixed charges ................................................................. 8,027
--------------
Total fixed charges and preferred stock dividend requirements ................. $ 8,110
==============
Ratio of earnings to combined fixed charges and preferred stock dividends ..... 1.67
==============
For purposes of computing the ratios, fixed charges consist of interest on all
indebtedness and one-third of rentals, which management believes is a reasonable
approximation of the interest factor of such rentals.
PART II--OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
a. Exhibits.
Exhibit 12. Computation of ratio of earnings to fixed charges and
computation of ratio of earnings to combined fixed charges and
preferred stock dividends.
b. Reports on Form 8-K.
A current report on Form 8-K was filed on July 3, 2001, under Item 5
to disclose that, the Registrant was reincorporated as a Delaware
business corporation (the "Reincorporation"). The Reincorporation was
effected by means of the merger (the "Merger") of the Registrant's
existing New York corporation ("GE Capital-NY") with and into a
newly-formed corporation organized under the Delaware General
Corporation Law ("GE Capital-DE"). GE Capital-DE was the surviving
corporation in the Merger and upon consummation of the Merger, changed
its name to "General Electric Capital Corporation." As a result of the
Merger, GE Capital-DE succeeded to and assumed all rights and
obligations of GE Capital-NY, and immediately after the Merger GE
Capital-DE had the same assets and liabilities as GE Capital-NY had
immediately prior to the Merger. The directors and officers of GE
Capital-NY immediately prior to the Merger became the directors and
officers of GE Capital-DE upon consummation of the Merger.
Apart from the change in its state of incorporation, the Merger had no
effect on GE Capital-NY's business, management, employees, fiscal
year, assets or liabilities, or location of its facilities (including
corporate headquarters), and did not result in any relocation of
management or other employees. In addition, pursuant to the Merger, GE
Capital-NY's obligations under its contracts, agreements, and
guarantees were assumed by GE Capital-DE.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GENERAL ELECTRIC CAPITAL CORPORATION
------------------------------------
(Registrant)
Date: October 31, 2001 By: /s/ J.A. Parke
--------------------------------------------------
J.A. Parke,
Vice Chairman and Chief Financial Officer
(Principal Financial Officer)
Date: October 31, 2001 By: /s/ J.C. Amble
--------------------------------------------------
J.C. Amble,
Vice President and Controller
(Principal Accounting Officer)
EX-12
3
gecc3q01ex12.txt
EXHIBIT 12
GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES
Computation of Ratio of Earnings to Fixed Charges
and
Computation of Ratio of Earnings to Combined Fixed Charges
and Preferred Stock Dividends
Nine Months Ended September 29, 2001
(Unaudited)
Ratio of
Earnings to
Combined
Fixed
Charges and
Ratio of Preferred
Earnings to Stock
Fixed Charges Dividends
(Dollar amounts in millions)
-------------- --------------
Net earnings ..................................................................... $ 4,279 $ 4,279
Provision for income taxes ....................................................... 1,238 1,238
Minority interest in net earnings of consolidated affiliates ..................... 62 62
-------------- --------------
Earnings before provision for income taxes and minority interest ................. 5,579 5,579
-------------- --------------
Fixed charges:
Interest ...................................................................... 7,802 7,802
One-third of rentals .......................................................... 225 225
-------------- --------------
Total fixed charges .............................................................. 8,027 8,027
-------------- --------------
Less interest capitalized, net of amortization ................................... (75) (75)
-------------- --------------
Earnings before provision for income taxes and minority interest, plus
fixed charges .................................................................. $ 13,531 $ 13,531
============== ==============
Ratio of earnings to fixed charges ............................................... 1.69
==============
Preferred stock dividend requirements ............................................ 64
Ratio of earnings before provision for income taxes to net earnings .............. 1.29
Preferred stock dividend factor on pre-tax basis ................................. 83
Fixed charges .................................................................... 8,027
--------------
Total fixed charges and preferred stock dividend requirements .................... $ 8,110
==============
Ratio of earnings to combined fixed charges and preferred stock dividends ........ 1.67
==============
For purposes of computing the ratios, fixed charges consist of interest on all
indebtedness and one-third of rentals, which management believes is a reasonable
approximation of the interest factor of such rentals.