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UNITED STATES SECURITIES AND EXCHANGE COMMISSION FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2003 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 Delaware 13-150070 (State or other jurisdiction of incorporation or
organization) (I.R.S. Employer Identification No.) 260 Long Ridge Road, Stamford, CT 06927 (Address of principal executive offices) (Zip Code) (Registrant's telephone number, including area code)
(203) 357-4000 _______________________________________________ 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 whether the registrant is an accelerated
filer (as defined in Rule 12b-2 of the Act). Yes [ ] No [X] At October 30, 2003, 3,985,403 shares of common stock with a par
value of $4.00 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. (1) General Electric Capital Corporation Part I – Financial Information Page Item 1. Financial Statements 3 4 5 6 14 36 Part II – Other Information 36 37 Forward-Looking Statements This document includes certain "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements include, but are not limited to our plans,
objectives, expectations and intentions and other statements contained in this
report that are not historical facts as well as statements identified by words
such as "expects", "anticipates", "intends", "plans", "believes", "seeks",
"estimates" or words of similar meaning. These statements are based on our
current beliefs or expectations and are inherently subject to significant
uncertainties and changes in circumstances, many of which are beyond our
control. Actual results may differ materially from these expectations due to
changes in global political, economic, business, competitive, market and
regulatory factors. (2) Part I. Financial Information Item 1. Financial Statements Condensed Statement of Current and Retained Earnings (Unaudited) Third quarter Nine months (Dollars in millions) 2003 2002 2003 2002 Revenues from services (note 8) $ 13,229 $ 11,722 $ 37,165 $ 33,330 Securitization and certain other FIN 46 entities (note 4) 325 – 325 – Sales of goods 527 779 1,582 2,494 Total revenues 14,081 12,501 39,072 35,824 Interest 2,304 2,557 7,116 7,068 Operating and administrative 4,062 3,410 11,288 9,443 Cost of goods sold 459 673 1,361 2,237 Insurance losses and policyholder and annuity benefits 2,243 2,104 6,555 6,044 Provision for losses on financing receivables 1,023 619 2,700 2,029 Depreciation and amortization of equipment on operating 1,197 1,114 3,387 3,061 Securitization and certain other FIN 46 entities (note 4) 197 – 197 – Minority interest in net earnings of consolidated affiliates 22 24 68 73 Total costs and expenses 11,507 10,501 32,672 29,955 Earnings before income taxes and accounting changes 2,574 2,000 6,400 5,869 Provision for income taxes (573 ) (242 ) (1,177 ) (934 ) Earnings before accounting changes 2,001 1,758 5,223 4,935 Cumulative effect of accounting changes (notes 3 and 6) (339 ) – (339 ) (1,015 ) Net earnings 1,662 1,758 4,884 3,920 Dividends (1,933 ) (565 ) (2,283 ) (1,552 ) Retained earnings at beginning of period 29,896 24,729 27,024 23,554 Retained earnings at end of period $ 29,625 $ 25,922 $ 29,625 $ 25,922 See "Notes to Condensed, Consolidated Financial Statements." (3) Condensed Statement of Financial Position (Dollars in millions) September 30, 2003 December 31, 2002 (Unaudited) Cash and equivalents $ 4,930 $ 6,983 Investment securities 93,033 89,807 Financing receivables: Time sales and loans, net of deferred income 159,575 141,775 Investment in financing leases, net of deferred income 57,834 58,994 217,409 200,769 Allowance for losses on financing receivables (6,040 ) (5,447 ) Financing receivables – net 211,369 195,322 Insurance receivables 12,824 14,273 Other receivables – net 16,763 16,388 Inventories 213 208 Equipment on operating leases (at cost) including buildings
and 35,289 35,060 Intangible assets 21,518 20,916 Securitization and certain other FIN 46 entities (note 4) 30,722 – Assets held for sale (note 7) 2,870 – Other assets 60,372 60,485 Total assets $ 489,903 $ 439,442 Short-term borrowings $ 115,971 $ 122,745 Long-term borrowings Senior 155,208 137,893 Subordinated 1,083 965 Insurance liabilities, reserves and annuity benefits 99,047 99,537 Securitization and certain other FIN 46 entities (note 4) 30,047 – Liabilities associated with assets held for sale (note 7) 939 – All other liabilities 31,371 26,169 Deferred income taxes 10,292 10,546 Total liabilities 443,958 397,855 Minority interest in equity of consolidated affiliates 2,126 1,834 Accumulated gains (losses) – net(a) Investment securities 1,238 1,030 Currency translation adjustments 409 (591 ) Derivatives qualifying as hedges (1,701 ) (1,959 ) Capital stock 19 18 Additional paid-in capital 14,229 14,231 Retained earnings 29,625 27,024 Total shareowner's equity 43,819 39,753 Total liabilities and equity $ 489,903 $ 439,442 (a) The sum of accumulated gains (losses) on investment
securities, currency translation adjustments and derivatives qualifying as
hedges constitutes "Accumulated nonowner changes other than earnings," and
was $(54) million and $(1,520) million at September 30, 2003 and December
31, 2002, respectively. See "Notes to Condensed, Consolidated Financial Statements." (4) Condensed Statement of Cash Flows Nine months ended (Dollars in millions) 2003 2002 Cash Flows – Operating Activities Net earnings $ 4,884 $ 3,920 Adjustments to reconcile net earnings to cash provided from
operating activities Cumulative effect of accounting changes 339 1,015 Provision for losses on financing receivables 2,700 2,029 Depreciation and amortization of equipment on
operating leases 3,387 3,061 Increase in accounts payable 2,916 195 Increase in insurance liabilities, reserves and annuity
benefits 875 4,210 Securitization and certain other FIN 46 entities 131 – All other operating activities 1,500 1,550 Cash from operating activities 16,732 15,980 Cash Flows – Investing Activities Increase in loans to customers (164,832 ) (133,654 ) Principal collections from customers – loans 157,194 127,306 Investment in equipment for financing leases (15,050 ) (14,904 ) Principal collections from customers – financing leases 16,577 12,493 Net change in credit card receivables 1,835 (3,071 ) Equipment on operating leases (including buildings and
equipment): – additions (4,964 ) (7,193 ) – dispositions 3,919 4,614 Payments for principal businesses purchased, net of cash
acquired (9,167 ) (5,517 ) Purchases of securities by insurance and annuity businesses (29,616 ) (36,781 ) Dispositions of securities by insurance and annuity
businesses 28,122 28,275 Securitization and certain other FIN 46 entities 5,311 – All other investing activities (3,852 ) (1,924 ) Cash used for investing activities (14,523 ) (30,356 ) Cash Flows – Financing Activities Net decrease in borrowings (maturities 90 days or less) (10,602 ) (39,338 ) Newly issued debt – short-term (91-365 days) 1,162 2,115 Newly issued debt – long-term senior 43,896 75,129 Proceeds – non-recourse, leveraged lease debt 375 788 Repayments and other reductions – short-term (91-365 days) (27,813 ) (21,139 ) Repayments and other reductions – long-term senior debt (2,915 ) (3,681 ) Principal payments – non-recourse, leveraged lease debt (585 ) (286 ) Proceeds from sales of investment contracts 11,725 6,175 Cash acquired in assumption of liabilities for policyholder
benefits – 2,406 Redemption of investment contracts (11,769 ) (5,065 ) Dividends paid (2,283 ) (1,552 ) Securitization and certain other FIN 46 entities (5,442 ) – Cash from (used for) financing activities (4,251 ) 15,552 Increase (decrease) in cash and equivalents (2,042 ) 1,176 Cash and equivalents at beginning of year 6,983 6,784 Cash and equivalents at September 30 (a) $ 4,941 $ 7,960 See "Notes to Condensed, Consolidated Financial Statements." (5) Notes to Condensed, Consolidated Financial Statements (Unaudited) 1. The accompanying condensed, consolidated quarterly
financial statements represent the consolidation of General Electric Capital
Corporation and all of our affiliates (GECC) – companies that we directly or
indirectly control (consolidated affiliates). We reclassified certain prior year
amounts 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) that we considered necessary to present a fair
statement of the results of operations, financial position and cash flows. The
results reported in these condensed, consolidated quarterly financial statements
should not be regarded as necessarily indicative of results that may be expected
for the entire year. We label our quarterly information using a calendar
convention, that is, first quarter is consistently labeled as ending on March
31, second quarter as ending on June 30, and third quarter as ending on
September 30. It is our longstanding practice to establish actual interim
closing dates using a "fiscal" calendar, which requires our businesses to close
their books on a Saturday in order to normalize the potentially disruptive
effects of quarterly closings on business processes. The effects of this
practice are modest and only exist within a reporting year. The fiscal closing
calendar from 1993 through 2013 is available on our Web site, www.ge.com/en/company/investor/secreports.htm. 3. We adopted Financial Accounting Standards Board (FASB)
Interpretation No. (FIN) 46, Consolidation of Variable Interest Entities
on July 1, 2003, one quarter earlier than required, and consequently
consolidated certain entities in our financial statements for the first time.
Several factors that distinguish these entities from others included in our
consolidated statements follow: New balance sheet captions, "Securitization and certain
other FIN 46 entities," included $36.3 billion of assets and $35.8 billion of
liabilities at transition. Because we have stopped transferring assets to these
entities, balances will decrease as the assets repay. Also, investment
securities and other receivables included an additional $14.1 billion and $1.0
billion, respectively, at transition for investment securities related to
guaranteed investment contracts (GICs) issued by Trinity, a group of sponsored
special purpose entities. We plan to continue issuing GICs from Trinity;
therefore, we have displayed these investment securities and related GIC
liabilities in investment securities and insurance liabilities, reserves and
annuity benefits, consistent with the display of assets and liabilities
associated with GICs issued by certain of our Insurance businesses. Accrued
interest on these investment securities of $0.7 billion is reported in other
receivables. (6) Our July 1, 2003, consolidation of FIN 46 entities resulted
in a $339 million after-tax accounting charge to our third quarter net earnings.
This charge resulted from several factors. For FIN 46 entities consolidated
based on carrying amounts, the effect of changes in interest rates resulted in
transition losses on interest rate swaps that did not qualify for hedge
accounting before transition. Losses also arose from the FIN 46 requirement to
record carrying amounts of assets in certain FIN 46 entities as if those
entities had always been consolidated, requiring us to eliminate certain
previously recognized income. For certain other FIN 46 entities that we first
consolidated at their July 1, 2003, fair values, we recognized a loss on
consolidation because: (i) declines in market interest rates caused a decline in
the fair value of certain interest rate swaps (swaps that successfully converted
commercial paper to the equivalent of fixed rate debt), and (ii) the fair value
of commercial paper plus minority interests exceeded independently appraised
fair values of related assets. We believe that cash flows from the income-producing assets
will be sufficient to repay the related debt and other obligations in all FIN 46
entities. We do not expect that the consolidation of FIN 46 entities will have
significant effects on future results of operations. See note 4. FIN 46 has been the subject of significant continuing
interpretation by the FASB, and changes to its complex requirements appear
likely before the end of 2003. In addition, the FASB is proposing to amend
certain requirements of Statement of Financial Accounting Standards (SFAS) 140,
Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities, and those changes may be retroactive, having
the effect of reversing certain prior securitization transactions. No exposure
drafts related to these proposals have been issued, and it is not possible to
conclude whether such changes would be likely to affect the amounts we have
recorded. In November 2002, the FASB issued FIN 45, Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others. Among other things, FIN 45 requires
guarantors to recognize, at fair value, their obligations to stand ready to
perform under certain guarantees. FIN 45 became effective for guarantees issued
or modified on or after January 1, 2003 and had an inconsequential effect on our
financial position as of September 30, 2003, and our results of operations for
the third quarter and nine months ended September 30, 2003. (7) 4. The following tables provide
supplemental information about revenues, expenses,
assets, liabilities and cash flows associated with entities that were newly
consolidated under FIN 46 in the balance sheet captions "Securitization and
certain other FIN 46 entities." (Dollars in millions) Third quarter and Revenues Interest on time sales and loans $ 211 Financing leases 86 Other 28 Total $ 325 Expenses Interest $ 197 Total $ 197 (Dollars in millions) At Assets Cash $ 623 Investment securities 1,648 Financing receivables(a) 25,879 Other 2,572 Total $ 30,722 Liabilities Commercial paper $ 29,115 Other 932 Total $ 30,047 (a) (Dollars in millions) Nine months ended Cash Flows – Investing activities Collections $ 5,311 Total $ 5,311 Cash Flows – Financing activities Newly issued debt $ 89,915 Repayments and other reductions (95,357 ) Total $ (5,442 ) (8) 5. At September 30, 2003, assets in entities that were
either sponsored by us or to which we provided financial support amounted to
$33.6 billion, compared with $40.5 billion at December 31, 2002. Of that amount,
at September 30, 2003, the balance sheet caption "Securitization and certain
other FIN 46 entities" contained $30.7 billion of these assets; another $2.9
billion remained off-balance sheet. In addition, we engage in transactions with
unconsolidated entities that we neither sponsor nor support. These include
transactions with master trusts and other entities used for term
securitizations, as well as transactions with commercial paper issuers
(conduits) sponsored by third parties. At December 31, 2002, assets in these
entities, nearly all of which were qualifying special purpose entities, amounted
to $9.0 billion. We will continue to engage in transactions that involve both
third party conduits and public market term securitizations. The most meaningful analysis of securitization activity
before FIN 46 adoption (primarily conducted through sponsored and supported
entities) and activity subsequent to that adoption, is a comparison of total
securitized assets, as follows: (Dollars in millions) At At Receivables secured by: Equipment $ 15,260 $ 13,926 Commercial real estate 15,199 12,482 Other assets 9,304 12,000 Credit card receivables 7,976 10,466 Trade receivables 94 693 Total securitized assets $ 47,833 $ 49,567 Assets in securitization and certain other FIN 46 entities $ 30,722 $ – Off-balance sheet (a) Sponsored and supported 2,916 40,536 Other 14,195 9,031 Total securitized assets (b) $ 47,833 $ 49,567 (a) (b) In addition to the foregoing, we retain mortgage servicing
rights related to an amortizing pool of mortgages associated with a business
that we decided to exit in 2000. We have not added new volume since the decision
to exit and our exposure to these mortgages is limited to the net carrying value
of our servicing assets, $134 million as of September 30, 2003. (9) 6. SFAS 142, Goodwill and Other Intangible Assets, became
effective for us in 2002. Under SFAS 142, goodwill is no longer amortized but is
tested for impairment using a fair value methodology. We stopped amortizing
goodwill effective January 1, 2002. Under SFAS 142, we were required to test all existing
goodwill for impairment as of January 1, 2002, on a "reporting unit" basis. A
reporting unit is the operating segment unless, at businesses one level below
that operating segment (the "component" level), discrete financial information
is prepared and regularly reviewed by management, in which case such component
is the reporting unit. A fair value approach is used to test goodwill for
impairment. An impairment charge is recognized for the amount, if any, by which
the carrying amount of goodwill exceeds its fair value. We established fair
values using discounted cash flows. When available and as appropriate, we use
comparative market multiples to corroborate discounted cash flow results. The result of testing goodwill impairment in accordance
with SFAS 142, as of January 1, 2002, was a non-cash charge of $1,204 million
($1,015 million after tax), which is reported in the caption "Cumulative effect
of accounting changes." Substantially all of the charge relates to the IT
Solutions business and the GE Auto and Home business, a direct subsidiary of GE
Financial Assurance, which was divested in 2003. Factors contributing to the
impairment charge were the difficult economic environment in the information
technology sector and heightened price competition in the auto insurance
industry. No impairment charge had been required under our previous goodwill
impairment policy, which was based on undiscounted cash flows. Goodwill Goodwill balances follow: (Dollars in millions) Commercial Consumer Equipment Insurance All Other Total Balance, December 31, 2002 $ 7,987 $ 5,562 $ 1,242 $ 4,176 $ (1,568 ) $ 17,399 Acquisitions/purchase 107 1,237 – – – 1,344 Foreign exchange and other 40 378 (60 ) (152 ) (31 ) 175 Balance, September 30, 2003 $ 8,134 $ 7,177 $ 1,182 $ 4,024 $ (1,599 ) $ 18,918 The amount of goodwill related to new acquisitions recorded
during 2003 was $1,179 million, the largest of which was First National Bank
($680 million) by Consumer Finance. The amount of goodwill related to purchase accounting
adjustments during 2003 was $165 million, primarily associated with the 2002
acquisitions of Australian Guarantee Corporation at Consumer Finance and
Security Capital Group at Commercial Finance. Upon closing an acquisition, we
estimate the fair values of assets and liabilities acquired and consolidate the
acquisition as quickly as possible. Given the time it takes to obtain pertinent
information to finalize the acquired company's balance sheet (frequently with
(10) implications for the price of the acquisition), then to adjust
the acquired company's policies, procedures, books and records to our standards,
it is often several quarters before we are able to finalize those initial fair
value estimates. Accordingly, it is not uncommon for our initial estimates to be
subsequently revised. Intangibles Subject To Amortization At At Gross Gross Accumulated Present value of future profits (PVFP) $ 4,085 $ (2,803 ) $ 1,282 $ 4,754 $ (2,676 ) $ 2,078 Capitalized software 1,297 (613 ) 684 1,269 (499 ) 770 Servicing assets (a) 3,531 (3,368 ) 163 3,580 (3,238 ) 342 Patents, licenses and other 1,031 (560 ) 471 826 (499 ) 327 Total $ 9,944 $ (7,344 ) $ 2,600 $ 10,429 $ (6,912 ) $ 3,517 Amortization expense related to amortizable intangible
assets for the third quarters ended September 30, 2003 and 2002, was $201
million and $506 million, respectively. Amortization expense related to
amortizable intangible assets for the first nine months ended September 30, 2003
and 2002, was $628 million and $1,195 million, respectively. The decrease in
2003 amortization expense reflected the planned run down of a liquidating
servicing portfolio. PVFP The net PVFP balances follow: Nine months (Dollars in millions) 2003 2002 Balance, January 1 $ 2,078 $ 2,033 Acquisitions – 265 Dispositions (574 ) – Accrued interest (a) 46 52 Amortization (221 ) (239 ) Other (47 ) 21 Balance, September 30 $ 1,282 $ 2,132 (a) (11) Recoverability of PVFP is evaluated periodically by comparing
the current estimate of expected future gross profits to the unamortized asset
balance. If such comparison indicates that the expected gross profits will not
be sufficient to recover PVFP, the difference is charged to expense. No such
expense was recorded in the nine months ended September 30, 2003 and 2002. The estimated percentage of the December 31, 2002, net PVFP
balance (adjusted for divested businesses) to be amortized over each of the next
five years follows. 2003 2004 2005 2006 2007 8.1 % 7.8 % 7.4 % 6.9 % 6.4 % Amortization expense for PVFP in future periods will be
affected by acquisitions, realized capital gains/losses and other factors
affecting the ultimate amount of gross profits realized from certain lines of
business. Similarly, future amortization expense for other intangibles will
depend on acquisition activity and other business transactions. 7. In August 2003, we completed the previously announced
sale of our Tokyo-based GE Edison Life Insurance Company (GE Edison Life) and
the U.S. Auto and Home businesses to American International Group, Inc. for
approximately $2,150 million in cash following a pre-closing dividend. Before
taxes and transaction costs, we realized a gain of $641million ($260 million
after taxes and transaction costs) on the sale of GE Edison Life, reported in
the Insurance segment, and a gain of $54 million ($12 million after taxes and
transaction costs) on the sale of the U.S. Auto and Home business, reported in
All Other GECS. These gains are reported in revenues from services, other income; see note 8. On August 4, 2003, we announced a definitive agreement to
sell a controlling interest in Financial Guaranty Insurance Company (FGIC) for
cash of $1,600 million following a pre-closing dividend. After the sale, we will
hold $235 million as the sole investor in FGIC convertible preferred stock as
well as $65 million in FGIC common stock, about 4.5% of outstanding common
shares. The transaction should close in the fourth quarter, subject to
regulatory approvals. At September 30, 2003, we reported FGIC as "held for sale"
as follows: FGIC assets, almost entirely investment securities, amounted to
$2,870 million (net of provision for losses); FGIC liabilities, mostly insurance
reserves, amounted to $939 million; and equity, substantially all unrealized
gains on investment securities, amounted to approximately $31 million. Our
estimated loss, $182 million before tax, is reported in revenues from services, other income; see note
8. (12) 8. GECC revenues from services are summarized in the
following table: Third quarter Nine months (Dollars in millions) 2003 2002 2003 2002 Revenues from services Premiums earned by insurance businesses $ 2,143 $ 2,246 $ 6,757 $ 6,362 Interest on time sales and loans 4,351 3,839 12,497 10,628 Operating lease rentals 1,741 1,792 5,220 5,045 Investment income 1,300 1,024 3,661 3,182 Financing leases 991 1,075 2,985 3,199 Fees 601 736 2,030 1,743 Other income 2,102 1,010 4,015 3,171 Total $ 13,229 $ 11,722 $ 37,165 $ 33,330 9. A summary of increases/(decreases) in shareowner's
equity that did not result directly from transactions with shareowners, net of
income taxes, follows: Third quarter Nine months (Dollars in millions) 2003 2002 2003 2002 Net earnings $ 1,662 $ 1,758 $ 4,884 $ 3,920 Investment securities – net changes in value (2,541 ) 1,181 208 1,696 Currency translation adjustments – net 304 154 1,000 46 Derivatives qualifying as hedges – net changes in value 1,191 (632 ) 258 (1,048 ) Total $ 616 $ 2,461 $ 6,350 $ 4,614 (13) Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition Overview In the accompanying analysis of financial information, we
sometimes refer to information extracted from consolidated financial information
but not required by generally accepted accounting principles (GAAP) to be
presented in financial statements. Certain of this information is considered
"non-GAAP financial measures" under Securities and Exchange Commission rules;
those rules require the supplemental explanation and reconciliation provided in
Exhibit 99 to this Form 10-Q report. A. Results of Operations – Third Quarter of 2003 Compared with
Third Quarter of 2002 Earnings before accounting changes (discussed in note 3 to
the condensed, consolidated financial statements) for the third quarter of 2003
were $2,001 million, a $243 million (14%) increase over the third quarter of
2002. Consumer Finance achieved a double-digit earnings growth rate during the
third quarter of 2003. Acquisitions contributed $79 million to earnings in the
third quarter of 2003, compared with approximately $83 million in the comparable
2002 period. For purposes of this discussion, only earnings during the first 12
months following the quarter in which the acquisition is completed are
considered to be related to acquired companies. Total revenues increased $1,580 million (13%) to $14,081
million for the third quarter of 2003, compared with $12,501 million for the
third quarter of 2002. The increase resulted primarily from gains on sale of GE
Edison Life and the U.S. Auto and Home business, and the Home Depot
private-label credit card receivables. Also contributing to the increase were
the net effects of foreign currency translation, acquisitions primarily at
Consumer Finance and Commercial Finance, and the effects of the adoption of FIN
46. These increases were partially offset by product line and geographic market
exits at IT Solutions and lower securitization gains at Consumer Finance and
Commercial Finance. Interest expense on borrowings for the third quarter of
2003, was $2,304 million, 10% lower than third quarter of 2002. The decrease
reflected the effects of lower interest rates partially offset by the effects
of higher average borrowings used to finance asset growth. The average composite
interest rate on our borrowings for the third quarter of 2003 was 3.43% compared
with 4.19% in the third quarter of 2002. Over the last three years, market interest rates have been
more volatile than our average composite effective interest rates, principally
because of the mix of effectively fixed rate borrowings in our financing
structure. Yields on our portfolio of fixed and floating-rate financial products
have behaved similarly; consequently, financing spreads have remained relatively
flat over the three-year period. Provision for income taxes was $573 million for the third
quarter of 2003, (an effective tax rate of 22.3%), compared with $242 million
for the third quarter of 2002 (an effective tax rate of 12.1%). The higher
effective tax rate primarily reflected the effects of the sale of the GE Edison
Life and the U.S. Auto and Home business and the absence of a current year
counterpart to the 2002 tax settlement with the Internal Revenue Service
regarding the treatment of certain reserves for obligations to policyholders on
life insurance contracts. (14) Operating Segments Following is a summary of segment results for General
Electric Capital Services, Inc. (GECS), the sole owner of the common stock of
GECC, with a reconciliation to the GECC-only results, for the third quarters
ended September 30, 2003 and 2002. The most significant component of these
reconciliations is the exclusion from the Insurance segment at the GECC level of
the results of GE Global Insurance Holding (principally Employers Reinsurance
Corporation – ERC), which is not a subsidiary of GECC but is a direct
subsidiary of GECS. Third quarter (Dollars in millions) 2003 2002 Revenues Commercial Finance $ 4,750 $ 4,522 Consumer Finance 3,499 2,701 Equipment Management 1,136 1,207 Insurance 6,824 6,197 All Other GECS 798 488 Total revenues 17,007 15,115 Revenues not included in GECC (2,926 ) (2,614 ) Total revenues as reported in GECC $ 14,081 $ 12,501 Net earnings Commercial Finance $ 1,001 $ 879 Consumer Finance 595 467 Equipment Management 48 83 Insurance 604 327 All Other GECS (41 ) (205 ) Total earnings before accounting changes 2,207 1,551 Earnings not included in GECC (206 ) 207 Total earnings in GECC before accounting changes 2,001 1,758 Cumulative effect of accounting changes (339 ) – Total net earnings as reported in GECC $ 1,662 $ 1,758 Following is a discussion of revenues and net earnings
from operating segments for the third quarters of 2003 and 2002. (15) Third quarter (Dollars in millions) 2003 2002 Revenues Commercial Equipment Financing $ 1,093 $ 1,147 Real Estate 710 543 Corporate Financial Services(a) 634 615 Structured Finance 340 323 Aviation Services 711 741 Vendor Financial Services 1,084 974 Healthcare Financial Services 179 170 Other Commercial Finance (1 ) 9 Total revenues 4,750 4,522 Commercial Finance not included in GECC (95 ) (10 ) Total revenues in GECC $ 4,655 $ 4,512 GECC net revenues Total revenues $ 4,655 $ 4,512 Interest expense 1,343 1,483 Total net revenues $ 3,312 $ 3,029 Net earnings Commercial Equipment Financing $ 197 $ 166 Real Estate 255 187 Corporate Financial Services 185 208 Structured Finance 163 124 Aviation Services 97 133 Vendor Financial Services 122 87 Healthcare Financial Services 38 31 Other Commercial Finance (56 ) (57 ) Total net earnings 1,001 879 Commercial Finance not included in GECC (44 ) 14 Total net earnings in GECC $ 957 $ 893
(a) The Commercial Finance or CF business until we
renamed it on January 1, 2003. (16) At 9/30/03 9/30/02 12/31/02 Total assets Commercial Equipment Financing $ 50,879 $ 49,782 $ 51,757 Real Estate 27,336 29,273 29,522 Corporate Financial Services 28,502 26,188 26,897 Structured Finance 20,106 17,514 19,293 Aviation Services 32,399 28,741 30,512 Vendor Financial Services 24,522 22,272 25,518 Healthcare Financial Services 8,502 7,324 7,905 Other Commercial Finance 1,308 2,260 2,841 Total assets 193,554 183,354 194,245 Commercial Finance not included in GECC (35 ) (690 ) (985 ) Total assets in GECC $ 193,519 $ 182,664 $ 193,260 GECC financing receivables $ 125,353 $ 117,866 $ 126,147 Commercial Finance revenues and net earnings increased 5% and
14%, respectively, compared with the third quarter of 2002. The increase in
revenues resulted primarily from acquisitions at Vendor Financial Services and
higher investment gains at Real Estate, partially offset by lower
securitization gains at Commercial Equipment Financing. The increase in net
earnings resulted primarily from higher investment gains at Real Estate,
acquisitions at Vendor Financial Services and growth in lower taxed earnings
from international operations, partially offset by lower securitization gains
at Commercial Equipment Financing and commercial aircraft impairments at
Aviation Services. (17) Third quarter (Dollars in millions) 2003 2002 Revenues Global Consumer Finance $ 2,208 $ 1,789 Card Services 1,291 912 Total revenues 3,499 2,701 Consumer Finance not included in GECC (127 ) (53 ) Total revenues in GECC $ 3,372 $ 2,648 GECC net revenues Total revenues $ 3,372 $ 2,648 Interest expense 683 569 Total net revenues $ 2,689 $ 2,079 Net earnings Global Consumer Finance $ 354 $ 343 Card Services 266 148 Other Consumer Finance (25 ) (24 ) Total net earnings 595 467 Consumer Finance not included in GECC (64 ) (6 ) Total net earnings in GECC $ 531 $ 461 At 9/30/03 9/30/02 12/31/02 Total assets Global Consumer Finance $ 78,614 $ 54,968 $ 58,310 Card Services 18,023 17,759 18,655 Total assets 96,637 72,727 76,965 Consumer Finance not included in GECC (845 ) (333 ) (1,080 ) Total assets in GECC $ 95,792 $ 72,394 $ 75,885 GECC financing receivables – net $ 81,001 $ 60,118 $ 62,646 Consumer Finance revenues and net earnings increased 30% and
27%, respectively, compared with the third quarter of 2002. The increase in
revenues resulted primarily from acquisitions, the gain on sale of Home Depot
private label credit card receivables, the net effects of foreign currency
translation and origination growth. The increase in net earnings resulted from
the gain on sale of Home Depot private label credit card receivables and
acquisitions, partially offset by lower securitization gains at Card Services
and increased reserve requirements. (18) Third quarter (Dollars in millions) 2003 2002 Revenues Equipment Management total revenues $ 1,136 $ 1,207 Equipment Management not included in GECC 2 (14 ) Total revenues in GECC $ 1,138 $ 1,193 GECC net revenues Total revenues $ 1,138 $ 1,193 Interest expense 173 201 Total net revenues $ 965 $ 992 Net earnings Equipment Management total net earnings $ 48 $ 83 Equipment Management not included in GECC – 2 Total net earnings in GECC $ 48 $ 85 At 9/30/03 9/30/02 12/31/02 Total assets Equipment Management total assets $ 23,802 $ 24,923 $ 25,222 Equipment Management not included in GECC 150 55 57 Total assets in GECC $ 23,952 $ 24,978 $ 25,279 Equipment leased to others $ 10,997 $ 11,026 $ 11,285 Equipment Management revenues and net earnings decreased 6%
and 42%, respectively, compared with the third quarter of 2002. The decrease
in revenues was primarily attributable to lower asset utilization, lower price
and lower gains on asset sales related to continued defleeting activities,
partially offset by the net effects of foreign currency translation. The
decrease in net earnings was primarily attributable to lower asset
utilization, lower price and lower gains on asset sales, partially offset by
lower taxes. (19) Third quarter (Dollars in millions) 2003 2002 Revenues GE Financial Assurance $ 3,753 $ 3,209 Mortgage Insurance 317 265 GE Global Insurance Holding (ERC) 2,886 2,585 Other Insurance (132 ) 138 Total revenues 6,824 6,197 Insurance not included in GECC (2,878 ) (2,554 ) Total revenues in GECC $ 3,946 $ 3,643 Net earnings GE Financial Assurance $ 376 $ 260 Mortgage Insurance 127 142 GE Global Insurance Holding (ERC) 120 (143 ) Other Insurance (19 ) 68 Total net earnings 604 327 Insurance not included in GECC (136 ) 132 Total net earnings in GECC $ 468 $ 459 Insurance revenues and net earnings increased 10% and 85%,
respectively, compared with the third quarter of 2002. The increase in
revenues resulted primarily from the gain on sale of GE Edison Life at GE
Financial Assurance, the net effects of foreign currency translation and
growth in premium revenues. ERC's growth in premium revenues associated with
price increases was partially offset by volume declines associated with the
more restrictive underwriting. The increase in net earnings resulted primarily
from lower adverse development at ERC, the gain on sale of GE Edison Life, the
net effects of foreign currency translation and growth in premium revenues.
The net earnings comparison was also affected by the favorable 2002 tax
settlement with the Internal Revenue Service for treatment of certain reserves
for obligations to policyholders on life insurance contracts. The increase in
revenues and net earnings was also partially offset by an impairment charge
resulting from the planned sale of FGIC. (20) Third quarter (Dollars in millions) 2003 2002 Revenues IT Solutions $ 124 $ 501 GE Equity (2 ) (206 ) Other – All Other GECS 676 193 Total revenues 798 488 All Other GECS not included in GECC 172 17 Total revenues in GECC $ 970 $ 505 Net earnings IT Solutions $ (2 ) $ (8 ) GE Equity (20 ) (166 ) Other – All Other GECS (19 ) (31 ) Total net earnings (41 ) (205 ) All Other GECS not included in GECC 38 65 Total net earnings in GECC $ (3 ) $ (140 ) All Other GECS includes our activities and businesses that we
do not measure within one of the other financial services segments. Three factors explain these results: (21) B. Results of Operations – First Nine Months of 2003 Compared
with First Nine Months of 2002 Earnings before accounting changes (discussed in notes 3
and 6 to the condensed, consolidated financial statements) for the first nine
months of 2003 were $5,223 million, a $288 million (6%) increase over the first
nine months of 2002. Two of our four businesses – Commercial Finance and
Consumer Finance – achieved double-digit earnings growth rates. Acquisitions contributed $228 million to earnings in the
first nine months of 2003, compared with approximately $400 million in the
comparable 2002 period. For purposes of this discussion, only earnings during
the first 12 months following the quarter in which the acquisition is completed
are considered to be related to acquired companies. Total revenues increased $3,248 million (9%) to $39,072
million for the first nine months of 2003, compared with $35,824 million for the
first nine months of 2002. The increase resulted primarily from the net effects
of foreign currency translation and from acquisitions, primarily at Consumer
Finance and Commercial Finance. Also contributing to the increase was Insurance
(higher premium growth in gain in sales GE Edison Life and the U.S. Auto and
Home business); gain on sale of the Home Depot
private-label credit card receivables; and the
effects of adopting FIN 46. These increases were partially offset by product
line and geographic market exits at IT Solutions and lower securitization gains
at Consumer Finance. Interest expense on borrowings for the first nine months of
2003, was $7,116 million, 1% higher than the first nine months of 2002. The
increase reflected the effects of higher average borrowings used to finance
asset growth, partially offset by the effects of lower market interest rates.
The average composite interest rate on our borrowings for the first nine months
of 2003 was 3.57% down from 4.08% in the first nine months of 2002. Over the last three years, market interest rates have been
more volatile than our average composite effective interest rates, principally
because of the mix of effectively fixed rate borrowings in our financing
structure. Yields on our portfolio of fixed and floating-rate financial products
have behaved similarly; consequently, financing spreads have remained relatively
flat over the three-year period.
WASHINGTON, D.C. 20549
(Exact name of registrant as specified in its charter)
(Former name, former address and former fiscal year,
if changed since last report)
General Electric Capital Corporation and consolidated affiliates
ended September 30
ended September 30
leases (including buildings and equipment)
General Electric Capital Corporation and consolidated affiliates
equipment, less accumulated amortization of $14,662 and $13,407
General Electric Capital Corporation and consolidated affiliates
September 30 (Unaudited)
(including buildings and equipment)
(a) Cash and equivalents at September 30, 2003 includes $11 million of
cash classified as assets held for sale in the Condensed Statement of
Financial Position (see note 7).
nine months ended
September 30, 2003
September 30, 2003
September 30, 2003
September 30, 2003
December 31, 2002
Finance
Finance
Management
GECS and
eliminations
accounting adjustments
September 30, 2003
December 31, 2002
(Dollars in millions)
carrying
amount
Accumulated
amortization
Net
carrying
amount
amortization
Net
(a) Servicing assets, net of
accumulated amortization, are associated primarily with serviced
residential mortgage loans amounting to $17 billion and $33 billion at
September 30, 2003 and December 31, 2002, respectively.
ended September 30
ended September 30
ended September 30
ended September 30
ended September 30
ended September 30
ended September 30
ended September 30
ended September 30
ended September 30
ended September 30
(22)
Operating Segments
Following is a summary of segment results for General Electric Capital Services, Inc. (GECS), the sole owner of the common stock of GECC, with a reconciliation to the GECC-only results, for the nine months ended September 30, 2003 and 2002. The most significant component of these reconciliations is the exclusion from the Insurance segment at the GECC level of the results of GE Global Insurance Holding (principally Employers Reinsurance Corporation – ERC), which is not a subsidiary of GECC but is a direct subsidiary of GECS.
Nine months |
||||||
|
||||||
(Dollars in millions) |
2003 |
2002 |
||||
|
|
|||||
Revenues |
||||||
Commercial Finance |
$ |
13,824 |
$ |
12,942 |
||
Consumer Finance |
9,304 |
7,536 |
||||
Equipment Management |
3,407 |
3,531 |
||||
Insurance |
19,984 |
17,228 |
||||
All Other GECS |
1,242 |
1,872 |
||||
|
|
|||||
Total revenues |
47,761 |
43,109 |
||||
Revenues not included in GECC |
(8,689 |
) |
(7,285 |
) |
||
|
|
|||||
Total revenues as reported in GECC |
$ |
39,072 |
$ |
35,824 |
||
|
|
|||||
Net earnings |
||||||
Commercial Finance |
$ |
2,632 |
$ |
2,334 |
||
Consumer Finance |
1,655 |
1,431 |
||||
Equipment Management |
131 |
225 |
||||
Insurance |
1,624 |
938 |
||||
All Other GECS |
(563 |
) |
(393 |
) |
||
|
|
|||||
Total earnings before accounting changes |
5,479 |
4,535 |
||||
Earnings not included in GECC |
(256 |
) |
400 |
|||
|
|
|||||
Total earnings in GECC before accounting changes |
5,223 |
4,935 |
||||
Cumulative effect of accounting changes |
(339 |
) |
(1,015 |
) |
||
|
|
|||||
Total net earnings as reported in GECC |
$ |
4,884 |
$ |
3,920 |
||
|
|
Following is a discussion of revenues and net earnings from operating segments for the first nine months of 2003 and 2002.
(23)
Nine months |
|||||||||
|
|||||||||
(Dollars in millions) |
2003 |
2002 |
|||||||
|
|
||||||||
Revenues |
|||||||||
Commercial Equipment Financing |
$ |
3,259 |
$ |
3,209 |
|||||
Real Estate |
1,912 |
1,536 |
|||||||
Corporate Financial Services(a) |
1,760 |
1,779 |
|||||||
Structured Finance |
961 |
915 |
|||||||
Aviation Services |
2,135 |
1,992 |
|||||||
Vendor Financial Services |
3,246 |
3,008 |
|||||||
Healthcare Financial Services |
543 |
471 |
|||||||
Other Commercial Finance |
8 |
32 |
|||||||
|
|
||||||||
Total revenues |
13,824 |
12,942 |
|||||||
Commercial Finance not included in GECC |
(237 |
) |
(114 |
) |
|||||
|
|
||||||||
Total revenues in GECC |
$ |
13,587 |
$ |
12,828 |
|||||
|
|
||||||||
GECC net revenues |
|||||||||
Total revenues |
$ |
13,587 |
$ |
12,828 |
|||||
Interest expense |
4,162 |
4,232 |
|||||||
|
|
||||||||
Total net revenues |
$ |
9,425 |
$ |
8,596 |
|||||
|
|
||||||||
Net earnings |
|||||||||
Commercial Equipment Financing |
$ |
515 |
$ |
473 |
|||||
Real Estate |
719 |
495 |
|||||||
Corporate Financial Services |
465 |
459 |
|||||||
Structured Finance |
380 |
382 |
|||||||
Aviation Services |
358 |
352 |
|||||||
Vendor Financial Services |
279 |
237 |
|||||||
Healthcare Financial Services |
106 |
88 |
|||||||
Other Commercial Finance |
(190 |
) |
(152 |
) |
|||||
|
|
||||||||
Total net earnings |
2,632 |
2,334 |
|||||||
Commercial Finance not included in GECC |
(75 |
) |
(19 |
) |
|||||
|
|
||||||||
Total net earnings in GECC |
$ |
2,557 |
$ |
2,315 |
|||||
|
|
||||||||
(a) The Commercial Finance or CF business until we renamed it on January 1, 2003. |
(24)
At |
|||||||||
|
|||||||||
9/30/03 |
9/30/02 |
12/31/02 |
|||||||
Total assets |
|
|
|
||||||
Commercial Equipment Financing |
$ |
50,879 |
$ |
49,782 |
$ |
51,757 |
|||
Real Estate |
27,336 |
29,273 |
29,522 |
||||||
Corporate Financial Services |
28,502 |
26,188 |
26,897 |
||||||
Structured Finance |
20,106 |
17,514 |
19,293 |
||||||
Aviation Services |
32,399 |
28,741 |
30,512 |
||||||
Vendor Financial Services |
24,522 |
22,272 |
25,518 |
||||||
Healthcare Financial Services |
8,502 |
7,324 |
7,905 |
||||||
Other Commercial Finance |
1,308 |
2,260 |
2,841 |
||||||
|
|
|
|
||||||
Total assets |
193,554 |
183,354 |
194,245 |
||||||
Commercial Finance not included in GECC |
(35 |
) |
(690 |
) |
(985 |
) |
|||
|
|
|
|||||||
Total assets in GECC |
$ |
193,519 |
$ |
182,664 |
$ |
193,260 |
|||
|
|
|
|||||||
GECC financing receivables – net |
$ |
125,353 |
$ |
117,866 |
$ |
126,147 |
|||
|
|
|
|||||||
|
Commercial Finance revenues and net earnings increased 7% and 13%, respectively, compared with the first nine months of 2002. The increase in revenues resulted primarily from acquisitions across substantially all businesses, higher investment gains primarily at Real Estate, and origination growth. The increase in net earnings resulted primarily from acquisitions across substantially all businesses, origination growth, higher investment gains primarily at Real Estate and growth in lower taxed earnings from international operations, partially offset by commercial aircraft impairments at Aviation Services.
(25)
Nine months |
|||||||||
|
|||||||||
(Dollars in millions) |
2003 |
2002 |
|||||||
|
|
||||||||
Revenues |
|||||||||
Global Consumer Finance |
$ |
6,125 |
$ |
4,759 |
|||||
Card Services |
3,179 |
2,777 |
|||||||
|
|
||||||||
Total revenues |
9,304 |
7,536 |
|||||||
Consumer Finance not included in GECC |
(46) |
(276 |
) |
||||||
|
|
||||||||
Total revenues in GECC |
$ |
9,258 |
$ |
7,260 |
|||||
|
|
||||||||
GECC net revenues |
|||||||||
Total revenues |
$ |
9,258 |
$ |
7,260 |
|||||
Interest expense |
1,925 |
1,527 |
|||||||
|
|
||||||||
Total net revenues |
$ |
7,333 |
$ |
5,733 |
|||||
|
|
||||||||
Net earnings |
|||||||||
Global Consumer Finance |
$ |
1,110 |
$ |
971 |
|||||
Card Services |
619 |
532 |
|||||||
Other Consumer Finance |
(74 |
) |
(72 |
) |
|||||
|
|
||||||||
Total net earnings |
1,655 |
1,431 |
|||||||
Consumer Finance not included in GECC |
54 |
(62 |
) |
||||||
|
|
||||||||
Total net earnings in GECC |
$ |
1,709 |
$ |
1,369 |
|||||
|
|
||||||||
|
|||||||||
At |
|||||||||
|
|||||||||
9/30/03 |
9/30/02 |
12/31/02 |
|||||||
|
|
|
|||||||
Total assets |
|||||||||
Global Consumer Finance |
$ |
78,614 |
$ |
54,968 |
$ |
58,310 |
|||
Card Services |
18,023 |
17,759 |
18,655 |
||||||
|
|
|
|||||||
Total assets |
96,637 |
72,727 |
76,965 |
||||||
Consumer Finance not included in GECC |
(845 |
) |
(333 |
) |
(1,080 |
) |
|||
|
|
|
|||||||
Total assets in GECC |
$ |
95,792 |
$ |
72,394 |
$ |
75,885 |
|||
|
|
|
|||||||
GECC financing receivables – net |
$ |
81,001 |
$ |
60,118 |
$ |
62,646 |
|||
|
|
|
Consumer Finance revenues and net earnings increased 23% and 16%, respectively, compared with the first nine months of 2002. The increase in revenues resulted primarily from acquisitions, the net effects of foreign currency translation, origination growth and the gain on sale of Home Depot private label credit card receivables, partially offset by lower securitization activity at Card Services. The increase in net earnings resulted from growth in lower taxed earnings from international operations, the gain on sale of Home Depot private label credit card receivables, acquisitions, the net effects of foreign currency translation and origination growth. These increases were partially offset by lower securitization activity at Card Services and increased reserve requirements.
(26)
Nine months |
|||||||||
|
|||||||||
(Dollars in millions) |
2003 |
2002 |
|||||||
|
|
||||||||
Revenues |
|||||||||
Equipment Management total revenues |
$ |
3,407 |
$ |
3,531 |
|||||
Equipment Management not included in GECC |
2 |
(42 |
) |
||||||
|
|
||||||||
Total revenues in GECC |
$ |
3,409 |
$ |
3,489 |
|||||
|
|
||||||||
GECC net revenues |
|||||||||
Total revenues |
$ |
3,409 |
$ |
3,489 |
|||||
Interest expense |
557 |
611 |
|||||||
|
|
||||||||
Total net revenues |
$ |
2,852 |
$ |
2,878 |
|||||
|
|
||||||||
Net earnings |
|||||||||
Equipment Management total net earnings |
$ |
131 |
$ |
225 |
|||||
Equipment Management not included in GECC |
– |
7 |
|||||||
|
|
||||||||
Total net earnings in GECC |
$ |
131 |
$ |
232 |
|||||
|
|
||||||||
|
|||||||||
At |
|||||||||
|
|||||||||
9/30/03 |
9/30/02 |
12/31/02 |
|||||||
|
|
|
|||||||
Total assets |
|||||||||
Equipment Management total assets |
$ |
23,802 |
$ |
24,923 |
$ |
25,222 |
|||
Equipment Management not included in GECC |
150 |
55 |
57 |
||||||
|
|
|
|||||||
Total assets in GECC |
$ |
23,952 |
$ |
24,978 |
$ |
25,279 |
|||
|
|
|
|||||||
GECC equipment leased to others |
$ |
10,997 |
$ |
11,026 |
$ |
11,285 |
|||
|
|
|
Equipment Management revenues and net earnings decreased 4% and 42%, respectively, compared with the first nine months of 2002. The decrease in revenues resulted primarily from lower asset utilization, lower price and lower gains on asset sales related to continued defleeting activities, partially offset by the net effects of foreign currency translation. The decrease in net earnings resulted primarily from lower asset utilization, lower price and lower gains on asset sales, partially offset by lower taxes.
(27)
Nine months |
||||||
|
||||||
(Dollars in millions) |
2003 |
2002 |
||||
|
|
|||||
Revenues |
||||||
GE Financial Assurance |
$ |
10,340 |
$ |
9,009 |
||
Mortgage Insurance |
889 |
801 |
||||
GE Global Insurance Holding (ERC) |
8,644 |
7,068 |
||||
Other Insurance |
111 |
350 |
||||
|
|
|||||
Total revenues |
19,984 |
17,228 |
||||
Insurance not included in GECC |
(8,599 |
) |
(6,926 |
) |
||
|
|
|||||
Total revenues in GECC |
$ |
11,385 |
$ |
10,302 |
||
|
|
|||||
Net earnings |
||||||
GE Financial Assurance |
$ |
780 |
$ |
632 |
||
Mortgage Insurance |
376 |
413 |
||||
GE Global Insurance Holding (ERC) |
360 |
(285 |
) |
|||
Other Insurance |
108 |
178 |
||||
|
|
|||||
Total net earnings |
1,624 |
938 |
||||
Insurance not included in GECC |
(353 |
) |
286 |
|||
|
|
|||||
Total net earnings in GECC |
$ |
1,271 |
$ |
1,224 |
||
|
|
Insurance revenues and net earnings increased 16% and 73%, respectively, compared with the first nine months of 2002. The increase in revenues resulted primarily from adjustments in 2002 to estimates of prior-year loss events at ERC, the gain on sale of GE Edison Life at GE Financial Assurance, growth in premium revenues, the net effects of foreign currency translation and higher investment gains. The growth in premium revenues was primarily attributable to the combination of price increases at ERC, origination volume at GE Financial Assurance and post acquisition revenues from acquired businesses, partially offset by a decrease in premium volume resulting from the more restrictive underwriting at ERC. The higher investment gains primarily attributable to other-than-temporary impairments recognized in 2002, primarily related to WorldCom, Inc. bonds. The increase in net earnings resulted primarily from 2002 adjustments to estimates of prior-year loss events and lower adverse development at ERC, the gain on sale of GE Edison Life, growth in premium revenues, the net effects of foreign currency translation and higher investment gains. The increase in net earnings was partially offset by the absence of a current year counterpart to the favorable 2002 tax settlement with the Internal Revenue Service regarding treatment of certain reserves for obligations to policyholders on life insurance contracts. The increase in revenues and net earnings was also partially offset by an impairment charge resulting from the planned sale of FGIC.
(28)
Nine months |
||||||
|
||||||
(Dollars in millions) |
2003 |
2002 |
||||
|
|
|||||
Revenues |
||||||
IT Solutions |
$ |
368 |
$ |
1,469 |
||
GE Equity |
(175 |
) |
(348 |
) |
||
Other – All Other GECS |
1,049 |
751 |
||||
|
|
|||||
Total revenues |
1,242 |
1,872 |
||||
All Other GECS not included in GECC |
191 |
73 |
||||
|
|
|||||
Total revenues in GECC |
$ |
1,433 |
$ |
1,945 |
||
|
|
|||||
Net earnings |
||||||
IT Solutions |
$ |
(43 |
) |
$ |
(20 |
) |
GE Equity |
(167 |
) |
(320 |
) |
||
Other – All Other GECS |
(353 |
) |
(53 |
) |
||
|
|
|||||
Total net earnings |
(563 |
) |
(393 |
) |
||
All Other GECS not included in GECC |
118 |
188 |
||||
|
|
|||||
Total net earnings in GECC |
$ |
(445 |
) |
$ |
(205 |
) |
|
|
All Other GECS includes our activities and businesses that we do not measure within one of the other financial services segments.
Three factors explain these results:
(29)
C. Statement of Financial Position
Following is an analysis of the principle changes in our financial position at September 30, 2003.
Investment securities comprise mainly investment-grade debt securities held by Insurance in support of obligations to annuitants and policyholders. Investment securities were $93.0 billion at September 30, 2003, compared with $89.8 billion at December 31, 2002. The increase of $3.2 billion was primarily the result of $13.9 billion of investment securities held by Trinity, a group of sponsored special purpose entities. The increase was also attributable to the investment of premiums received, reinvestment of investment income and the positive performance of the equity and debt markets, net of impairments and losses, partially offset by the sale of GE Edison Life and the U.S. Auto and Home business, and the reclassification of $2.8 billion of investments to assets held for sale related to FGIC.
We regularly review investment securities for impairment based on criteria that include the extent to which cost exceeds market value, the duration of that market decline and the financial health and specific prospects for the issuer. Of securities with unrealized losses at the end of the third quarter of 2003, approximately $105 million of portfolio value is at risk of being charged to earnings in the next 12 months. Impairment losses recognized for the first nine months of 2003 were $351 million.
Gross unrealized gains and losses were $3.8 billion and $1.4 billion, respectively, at September 30, 2003 compared with $3.8 billion and $2.1 billion, respectively, at December 31, 2002, reflecting broad market improvement in 2003. We estimate that available gains, net of resulting impairment of insurance intangible assets, could be as much as $1.5 billion. The market values we use in determining unrealized gains and losses is defined by relevant accounting standards and should not be viewed as a forecast of gains or losses.
Financing Receivables is our largest category of assets and represents one of our primary sources of revenues. The portfolio of financing receivables, before allowance for losses increased to $217.4 billion at September 30, 2003, from $200.8 billion at December 31, 2002, as discussed in the following paragraphs. The related allowance for losses amounted to $6.0 billion at September 30, 2003, compared with $5.4 billion at December 31, 2002, representing our best estimate of probable losses inherent in the portfolio.
A discussion of the quality of certain elements of the financing receivables portfolio follows. For purposes of that discussion, "delinquent" receivables are those that are 30 days or more past due, "nonearning" receivables are those that are 90 days or more past due (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.
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Commercial Finance financing receivables before allowance for losses totaled $127.7 billion at September 30, 2003, compared with $128.7 billion at December 31, 2002, and consisted of loans and leases to the equipment, commercial and industrial, real estate and commercial aircraft industries. This portfolio of receivables decreased primarily as a result of securitizations and sales, partially offset by the net effects of foreign currency translation, portfolio acquisitions and origination growth. Related nonearning and reduced-earning receivables were $1.9 billion and $2.1 billion, about 1.5% and 1.7% of outstanding receivables at September 30, 2003 and December 31, 2002, respectively. Commercial Finance financing receivables are generally backed by assets and there is a broad spread of geographic and credit risk in the portfolio. Gross write-offs were consistent at $0.9 billion for the first nine months of 2003 and 2002. Recoveries relating to those write-offs were consistent at $61 million for the first nine months of 2003 and 2002.
Consumer Finance financing receivables before allowance for losses, primarily installment loans, auto loans and leases, and residential mortgages, were $84.6 billion at September 30, 2003, compared with $65.4 billion at December 31, 2002. This portfolio of receivables increased as a result of acquisitions, the net effects of foreign currency translation and origination growth, partially offset by the termination of the Home Depot private label credit card contract. Nonearning consumer receivables at September 30, 2003, were $2.3 billion, about 2.7% of outstanding receivables, compared with $1.6 billion, about 2.4% of outstanding receivables at December 31, 2002. Gross write-offs for the first nine months of 2003 were $2.1 billion compared with $1.6 billion for the first nine months of 2002. Recoveries relating to those write-offs for the first nine months of 2003 improved to $482 million compared with $381 million for the first nine months of 2002, reflecting the effects of improved collection and underwriting efforts and growth in the portfolio.
Financing receivables in Other, principally Equipment Management amounted to $5.1 billion and $6.7 billion at September 30, 2003, and December 31, 2002, respectively, before the allowance for losses. Nonearning receivables were consistent at $0.1 billion, about 1.4% and 1.3% of outstanding receivables at September 30, 2003 and at December 31, 2002, respectively. Gross write-offs for the first nine months of 2003 were $60 million compared with $68 million for the first nine months of 2002, and 2003 recoveries were $9 million compared with $13 million for the first nine months of 2002.
Delinquency rates on managed Consumer Finance financing receivables were 5.62% at September 30, 2003, and 5.58% at December 31, 2002. Delinquency rates on managed Commercial Finance equipment loans and leases were 1.82% at September 30, 2003 and 1.71% at December 31, 2002.
Assets in securitization and certain other FIN 46 entities were $30.7 billion at September 30, 2003, as a result of our adopting FIN 46 on July 1, 2003. Because we have stopped transferring assets to these entities, balances will decrease as the assets repay. For more information on securitization and other FIN 46 entities see note 3.
Other Assets include investments in associated companies. At September 30, 2003, approximately $1.9 billion of investment in associated companies related to SES Global a leading satellite company, whose carrying amount exceeded the $1.4 billion market value of our shares (based on publicly-traded share price on two European exchanges). SES Global has been profitable, and consistently has achieved positive margins and operating cash flows. The share price is near its historic low and is not widely traded. We and two other shareowners hold a majority of the outstanding equity. We intend, and are able, to hold this investment indefinitely, and we believe that it is probable that the carrying amount of our investment can be recovered from results of SES Global's operations. Thus, we believe that this investment is not other than temporarily impaired.
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Liabilities in securitization and certain other FIN 46 entities were $30.0 billion at September 30, 2003, as a result of adopting FIN 46 on July 1, 2003. For more information on securitization and other FIN 46 entities refer to note 3.
Insurance liabilities, reserves and annuity benefits were $99.0 billion at September 30, 2003, compared with $99.5 billion at December 31, 2002. The decrease of $0.5 billion resulted primarily from the sale of GE Edison Life and the U.S. Auto and Home business ($18.0 billion), partially offset by $14.0 billion of GICs issued by Trinity and increased premium volume at GE Financial Assurance. These GICs are supported by cash flows from investment securities held by Trinity and were required to be consolidated as a result of the adoption of FIN 46. The related investment securities are reported in investment securities.
D. Additional Considerations
Commercial Airlines
Commercial aviation is an industry in which we have a significant ongoing interest. As has been widely reported, this industry has been under pressure, but has undertaken steps to reduce unused capacity and align costs. Consequently, major U.S. and European airlines, achieved moderate improvements in third quarter operations including traffic, revenues and load factors.
At September 30, 2003, we had the following positions related to the global commercial aviation business, principally in our Commercial Finance segment:
UAL Corp and Air Canada, the parent companies of two of our major airline customers are experiencing significant financial difficulties and both filed for reorganization in bankruptcy. UAL Corp filed for bankruptcy protection in 2002 and Air Canada filed in Canada on April 1, 2003. At the end of the third quarter of 2003, our exposure related to these airlines amounted to $3.9 billion, including loans, leases, investment securities, and
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commitments. Various Boeing, Airbus and Bombardier aircraft secure substantially all of these financial exposures. Included in this exposure is a $700 million debtor-in-possession financing commitment to Air Canada. Another major airline customer, US Airways Group, parent of US Airways, filed for reorganization in bankruptcy in 2002 but emerged from bankruptcy on March 31, 2003. Our financial statements include provisions for probable losses based on our best estimates of such losses.
Commercial Finance tests the recoverability of its commercial aircraft operating lease portfolio at least annually in accordance with SFAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets. Additionally, quarterly tests are performed whenever events or changes in circumstances indicate that an aircraft's carrying amount may not be recoverable, for example, when aircraft are released or current lease terms have changed. If an aircraft is deemed to be impaired as the expected future cash flows do not meet the recoverability requirement, Commercial Finance will write the asset down to the aircraft's current fair market value as provided by independent aircraft appraisers. This impairment loss is recorded in the depreciation expense line in the statement of earnings. Commercial Finance recognized SFAS 144 impairment losses of $212 million and $98 million during the nine months ended September 30, 2003 and 2002, respectively.
Other Matters
In August 2003, we completed the previously announced sale of our Tokyo-based GE Edison Life and U.S. Auto and Home businesses to American International Group, Inc. for approximately $2,150 million in cash following a pre-closing dividend. Before taxes and transaction costs, we realized a gain of $641 million ($260 million after taxes and transaction costs) on the sale of GE Edison Life, reported in the Insurance segment, and a gain of $54 million ($12 million after taxes and transaction costs) on the sale of the U.S. Auto and Home business, reported in All Other GECS. These gains are reported in revenues from services, other income; see note 8.
On August 4, 2003, we announced a definitive agreement to sell a controlling interest in FGIC for cash of $1,600 million following a pre-closing dividend. After the sale, we will hold $235 million as the sole investor in FGIC convertible preferred stock as well as $65 million in FGIC common stock, about 4.5% of outstanding common shares. The transaction should close in the fourth quarter subject to regulatory approvals. At September 30, 2003, we reported FGIC as "held for sale" as follows: FGIC assets, almost entirely investment securities, amounted to $2,870 million (net of provision for losses); FGIC liabilities, mostly insurance reserves, amounted to $939 million; and equity, substantially all unrealized gains on investment securities, amounted to approximately $31 million. Our estimated loss, $182 million before tax, is reported in revenues from services, other income; see note 8.
During the quarter ended September 30, 2003, rating agencies revised their financial strength ratings and counterparty credit ratings for GE Mortgage Insurance Corp. from AAA / Aaa to AA /Aa2. We do not believe that these actions will materially affect our liquidity or capital resources or our ability to write future business.
E. Liquidity
The major debt-rating agencies evaluate our financial condition. Factors that are important to our rating include the following: cash generating ability – including cash generated from operating activities; earnings quality – including revenue growth and the breadth and diversity of sources of income; leverage ratios – such as debt to total capital and interest coverage; asset utilization, including return on assets and asset turnover ratios; and support
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from General Electric Company (GE). Considering those factors the major rating agencies continue to give the highest ratings to our debt (long term credit rating AAA/Aaa; short-term credit rating A-1+/P-1).
One of our strategic objectives is to maintain these ratings on debt issued by us. Our Triple-A rating lowers our cost of borrowings and facilitates access to a variety of lenders. We manage our businesses in a manner consistent with maintaining these Triple-A ratings. To support our rating, at the end of 2002, GE was contractually committed to maintain our ratios of earnings to fixed charges at a specified level.
As of January 1, 2003, we extended the business-specific, market based leverage to the performance measurement of each of our financial services businesses, and consequently to the definition of segment profit. As a result, $12.5 billion of debt previously allocated to the segments was allocated to the All Other GECS segment. Our plans are to reduce the level of debt and increase equity in financial services, targeting the elimination of the non-business related debt allocated to All Other GECS by the end of 2005. Accordingly, our Board of Directors:
Proceeds from the disposition of GE Edison Life and the U.S. Auto and Home business amounted to approximately $2,150 million. Such proceeds and the pre-closing dividend of approximately $440 million were used to (i) reduce approximately $760 million of indebtedness assigned to the assets sold, (ii) reduce approximately $940 million of debt allocated to All Other GECS and (iii) dividend approximately $710 million to GE through GECS. GECS expects to dividend to GE an additional $230 million during the fourth quarter relating to the disposition of GE Edison Life and the U.S. Auto and Home business. Proceeds from further strategic dispositions will be evaluated when and if they are received, but we anticipate using at least some of those proceeds to reduce financial services debt.
The following table compares financial services debt composition:
At |
At |
||||||
|
|
||||||
Senior Notes |
57 |
% |
53 |
% |
|||
Commercial Paper |
24 |
29 |
|||||
Other – principally current portion of long-term debt |
19 |
18 |
|||||
|
|
||||||
Total |
100 |
% |
100 |
% |
|||
|
|
During the first nine months of 2003, we issued approximately $40 billion of long-term debt in U.S. and international markets. These funds were used primarily to fund maturing long-term debt, reduce the amount of commercial paper outstanding and fund new asset growth. We target a ratio for commercial paper of 25% to 35% of outstanding debt based on the anticipated composition of our assets. GE Capital is the most widely-held name in
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those global commercial paper markets. We anticipate issuing approximately $10 billion to $15 billion of additional long-term debt using both U.S. and international markets during the remainder of 2003. The proceeds from such issuances will be used to fund maturing long-term debt, additional acquisitions and asset growth. The ultimate amount of debt issuances will depend on the growth in assets, acquisition activity, availability of markets and movements in interest rates.
We believe that alternative sources of liquidity are sufficient to permit an orderly transition from commercial paper in the unlikely event of impaired access to those markets. Funding sources on which we would rely would depend on the nature of such a hypothetical event, but include $56 billion of contractually committed lending agreements with highly-rated global banks and investment banks, as well as other sources of liquidity, including medium and long-term funding, monetization, asset securitization, cash receipts from our lending and leasing activities, short-term secured funding on global assets and asset sales.
F. Off-Balance Sheet Arrangements
We use off-balance sheet arrangements in the ordinary course of business to improve shareowner returns. One of the most common forms of off-balance sheet arrangements is asset securitization. The securitization transactions we engage in are similar to those used by many financial institutions. Beyond improved returns, these transactions serve as funding sources for a variety of diversified lending and securities transactions. They transfer selected credit risk and improve cash flows while enhancing the ability to provide a full range of competitive products for customers. Historically, we have used both sponsored and third-party entities to execute securitization transactions funded in the commercial paper and term markets. With our adoption of FIN 46 on July 1, 2003, we consolidated $36.3 billion of assets in sponsored entities and no new securitization transactions have been executed with those entities. We will continue to engage in securitization transactions with both third party conduits as well as public market term securitizations.
Assets held by off-balance sheet securitization entities include: receivables secured by equipment, commercial real estate and other assets; credit card receivables; and trade receivables. In addition to being of high credit quality, these assets are diversified. Examples of these assets include loans and leases on manufacturing and transportation equipment, loans on commercial property, commercial loans and balances of high credit quality accounts from sales of a broad range of products and services to a diversified customer base. Off-balance sheet assets securitized totaled $17.1 billion and $49.6 billion at September 30, 2003 and December 31, 2002, respectively. For further information about these arrangements, see note 5.
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Item 4. Controls and Procedures
As of September 30, 2003, under direction of our Chairman of the Board (serving as the principal executive officer) and Chief Financial Officer, we evaluated the effectiveness of our disclosure controls and procedures and internal controls over financial reporting and concluded that (i) our disclosure controls and procedures were effective as of September 30, 2003, and (ii) no changes occurred during the quarter ended September 30, 2003, that materially affected, or are reasonably likely to materially affect, such internal controls.
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
a. |
Exhibits |
|
Exhibit 12 |
Computation of Ratio of Earnings to Fixed Charges and Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends |
|
Exhibit 31.1 |
Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
Exhibit 31.2 |
Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
Exhibit 32 |
Certifications Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
|
Exhibit 99 |
Reconciliation of Non-GAAP Financial Measures |
|
b. |
Reports on Form 8-K during the quarter ended September 30, 2003. |
|
No reports on Form 8-K were filed during the quarter ended September 30, 2003. |
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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
|
||
October 31, 2003 |
/s/ Philip D. Ameen |
|
|
|
|
Date |
Philip D. Ameen |
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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 30, 2003
(Unaudited)
(Dollars in millions) |
Ratio of |
Ratio of |
|||||||
|
|
||||||||
Net earnings |
$ |
4,884 |
$ |
4,884 |
|||||
Provision for income taxes |
1,177 |
1,177 |
|||||||
Minority interest in net earnings of consolidated affiliates |
68 |
68 |
|||||||
|
|
|
|||||||
Earnings before provision for income taxes and minority interest |
6,129 |
6,129 |
|||||||
Fixed charges: |
|
|
|||||||
Interest |
7,204 |
7,204 |
|||||||
One-third of rentals |
220 |
220 |
|||||||
|
|
|
|||||||
Total fixed charges |
7,424 |
7,424 |
|||||||
|
|
|
|||||||
Less interest capitalized, net of amortization |
(22 |
) |
(22 |
) |
|||||
|
|
|
|||||||
Earnings before provision for income taxes and minority
interest, |
$ |
13,531 |
$ |
13,531 |
|||||
|
|
|
|||||||
Ratio of earnings to fixed charges |
1.82 |
||||||||
|
|
||||||||
Preferred stock dividend requirements |
$ |
27 |
|||||||
Ratio of earnings before provision for income taxes to net earnings |
1.24 |
||||||||
|
|||||||||
Preferred stock dividend factor on pre-tax basis |
34 |
||||||||
Fixed charges |
7,424 |
||||||||
|
|
||||||||
Total fixed charges and preferred stock dividend requirements |
$ |
7,458 |
|||||||
|
|
||||||||
Ratio of earnings to combined fixed charges and preferred stock dividends |
1.81 |
||||||||
|
|||||||||
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. |
Exhibit 31.1
CERTIFICATIONS
I, Dennis D. Dammerman, certify that:
1. |
I have reviewed this quarterly report on Form 10-Q of General Electric Capital Corporation; |
|
|
||
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
|
||
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
|
||
4. |
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: |
|
|
||
(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
|
||
(b) |
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
|
||
(c) |
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
|
|
||
5. |
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
|
|
||
(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
|
|
||
(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: October 31, 2003
/s/ Dennis D. Dammerman |
|
Dennis D. Dammerman |
(1)
Exhibit 31.2
CERTIFICATIONS
I, James A. Parke, certify that:
1. |
I have reviewed this quarterly report on Form 10-Q of General Electric Capital Corporation; |
|
|
||
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
|
||
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
|
||
4. |
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: |
|
|
||
(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
|
||
(b) |
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
|
||
(c) |
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
|
|
||
5. |
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
|
|
||
(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
|
|
||
(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: October 31, 2003
/s/ James A. Parke |
|
James A. Parke |
(1)
Exhibit 32
GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of General Electric Capital Corporation, (the "registrant") on Form 10-Q for the period ending September 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "report"), we, Dennis D. Dammerman and James A. Parke, Chairman of the Board and Vice Chairman and Chief Financial Officer, respectively, of the registrant, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to our knowledge:
(1) |
The report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
|
|
(2) |
The information contained in the report fairly presents, in all material respects, the financial condition and result of operations of the registrant. |
October 31, 2003
/s/ Dennis D. Dammerman |
|
Dennis D. Dammerman |
|
/s/ James A. Parke |
|
James A. Parke |
(1)
Exhibit 99
Reconciliation of Non-GAAP Financial Measures
Our quarterly report on Form 10-Q for the third quarter of 2003
includes "non-GAAP financial measures" as defined by SEC rules. Specifically, in
Item 2, "Management's Discussion and Analysis of Results of Operations and
Financial Condition," (MD&A) we refer to net revenues (revenues from services
less interest and other financial charges) of the Commercial Finance, Consumer
Finance and Equipment Management segments.
We provided reconciliations of net revenues to reported revenues.
Because net revenues is a common industry measure of margin, those disclosures
will enable investors to compare the results of our businesses to others in the
same industry.
(1)