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)