-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, J27JCRBbdmsix9wRDTYSJBhzgueerDetgtc8ZHYsZeJ883Mnl337fz843EtHdJER skf0NdB+kt7ZdE6nIs36Dw== 0000950123-94-000601.txt : 19940328 0000950123-94-000601.hdr.sgml : 19940328 ACCESSION NUMBER: 0000950123-94-000601 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940325 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GENERAL ELECTRIC CAPITAL CORP CENTRAL INDEX KEY: 0000040554 STANDARD INDUSTRIAL CLASSIFICATION: 6172 IRS NUMBER: 131500700 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 001-06461 FILM NUMBER: 94517959 BUSINESS ADDRESS: STREET 1: 260 LONG RIDGE RD CITY: STAMFORD STATE: CT ZIP: 06927 BUSINESS PHONE: 2033574000 FORMER COMPANY: FORMER CONFORMED NAME: GENERAL ELECTRIC CREDIT CORP DATE OF NAME CHANGE: 19871216 10-K 1 FORM 10-K, GENERAL ELECTRIC CAPITAL CORPORATION 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 10-K ------------------------ /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] FOR THE TRANSITION PERIOD FROM ------- TO ------- ------------------------ COMMISSION FILE NUMBER 1-6461 ------------------------ GENERAL ELECTRIC CAPITAL CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) NEW YORK 13-1500700 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 260 LONG RIDGE ROAD, STAMFORD, CONNECTICUT 06927 (203)357-4000 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
------------------------ SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH TITLE OF EACH CLASS EXCHANGE ON WHICH REGISTERED ------------------- ---------------------------- 7 7/8% GUARANTEED SUBORDINATED NOTES DUE DECEMBER 1, 2006 NEW YORK STOCK EXCHANGE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. /X/ AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NONAFFILIATES OF THE REGISTRANT AT MARCH 21, 1994. NONE. AT MARCH 21, 1994, 3,837,825 SHARES OF COMMON STOCK WITH A PAR VALUE OF $200 WERE OUTSTANDING. DOCUMENTS INCORPORATED BY REFERENCE THE CONSOLIDATED FINANCIAL STATEMENTS OF GENERAL ELECTRIC COMPANY, SET FORTH IN THE ANNUAL REPORT ON FORM 10-K OF GENERAL ELECTRIC COMPANY FOR THE YEAR ENDED DECEMBER 31, 1993 ARE INCORPORATED BY REFERENCE INTO PART IV HEREOF. REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION J(1)(A) AND (B) OF FORM 10-K AND IS THEREFORE FILING THIS FORM 10-K WITH THE REDUCED DISCLOSURE FORMAT. 2 TABLE OF CONTENTS
PAGE ---- PART I Item 1. Business............................................................ 1 Item 2. Properties.......................................................... 9 Item 3. Legal Proceedings................................................... 9 Item 4. Submission of Matters to a Vote of Security Holders................. 9 PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters........................................................... 10 Item 6. Selected Financial Data............................................. 10 Item 7. Management's Discussion and Analysis of Results of Operations....... 11 Item 8. Financial Statements and Supplementary Data......................... 16 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.............................................. 33 PART III Item 10. Directors and Executive Officers of the Registrant.................. 34 Item 11. Executive Compensation.............................................. 34 Item 12. Security Ownership of Certain Beneficial Owners and Management...... 34 Item 13. Certain Relationships and Related Transactions...................... 34 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.... 35
3 PART I ITEM 1. BUSINESS. GENERAL General Electric Capital Corporation (herein together with its consolidated affiliates called the "Corporation" or "GE Capital" unless the context otherwise requires) was incorporated in 1943 in the State of New York, under the provisions of the New York Banking Law relating to investment companies, as successor to General Electric Contracts Corporation, formed in 1932. Until November 1987, the name of the Corporation was General Electric Credit Corporation. All outstanding common stock of the Corporation is owned by General Electric Capital Services, Inc. ("GE Capital Services"), formerly General Electric Financial Services, Inc., which is in turn wholly owned by General Electric Company ("GE Company"). The business of the Corporation originally related principally to financing the distribution and sale of consumer and other products of GE Company. Currently, however, the type and brand of products financed and the financial services offered are significantly more diversified. Very little of the financing provided by GE Capital involves products that are manufactured by GE Company. The Corporation operates in four finance industry segments and in a specialty insurance industry segment. GE Capital's financing activities include a full range of leasing, loan, equipment management services and annuities. The Corporation's specialty insurance activities include providing private mortgage insurance, financial (primarily municipal) guarantee insurance, creditor insurance, reinsurance and, for financing customers, credit life and property and casualty insurance. The Corporation is an equity investor in a retail organization and certain other financial services organizations. GE Capital's operations are subject to a variety of regulations in their respective jurisdictions. Services of the Corporation are offered primarily in the United States, Canada and Europe. Computerized accounting and service centers, including those located in Connecticut, Ohio, Georgia and England, provide financing offices and other service locations with data processing, accounting, collection, reporting and other administrative support. The Corporation's principal executive offices are located at 260 Long Ridge Road, Stamford, Connecticut 06927 (Telephone number (203) 357-4000). At December 31, 1993 the Corporation employed approximately 27,000 persons. Industry segment operating data and identifiable assets for the years 1993, 1992 and 1991 are shown in Note 17 of the Notes to Financial Statements of General Electric Capital Corporation and Consolidated Affiliates included in Item 8 of this Annual Report. For accounting purposes, the Corporation's principal financing products are classified as time sales and loans, investment in financing leases or equipment on operating leases. The following table presents, by industry segment, these principal financing products which, together with investment securities and other assets, comprise the Corporation's total assets at December 31, 1993 and 1992. Page 1 4 ITEM 1. BUSINESS (Continued).
TOTAL ASSETS BY SEGMENT 1993 ------------------------------------------------------------------------ TIME NET ALLOW. SALES INVESTMENT FOR AND NET IN LOSSES LOANS, INVESTMENT EQUIPMENT AND NET OF IN ON ALL DEFERRED FINANCING OPERATING INVESTMENT OTHER TOTAL (IN MILLIONS) INCOME LEASES LEASES SECURITIES ASSETS ASSETS ------- ------- --------- ------- ------- -------- SPECIALIZED FINANCING Commercial Real Estate............... $10,751 $ 35 $ $ 37 $ 3,657 $ 14,480 Global Project and Structured Finance... 2,957 7,893 1,193 428 211 12,682 Corporate Finance Group................ 3,239 436 279 802 4,756 ------- ------- ------- ------- ------- -------- Total.............. 16,947 7,928 1,629 744 4,670 31,918 ------- ------- ------- ------- ------- -------- CONSUMER SERVICES Retailer Financial Services............. 14,512 52 1,052 15,616 Auto Financial Services............. 2,510 5,556 161 243 8,470 Mortgage Servicing..... 177 1 7,408 7,586 GNA.................... 1,088 11,270 981 13,339 Other.................. 155 45 535 735 ------- ------- ------- ------- ------- -------- Total.............. 18,442 5,556 161 11,368 10,219 45,746 ------- ------- ------- ------- ------- -------- MID-MARKET FINANCING Commercial Equipment Financing............ 3,030 5,877 424 12 454 9,797 Vendor Financial Services............. 847 2,404 43 137 3,431 GECC Financial -- Hawaii............... 933 65 1 8 1,007 Computer Leasing....... 146 223 225 61 655 ------- ------- ------- ------- ------- -------- Total.............. 4,956 8,569 693 12 660 14,890 ------- ------- ------- ------- ------- -------- EQUIPMENT MANAGEMENT Fleet Services......... 224 2,011 1,475 757 4,467 Genstar Container...... 417 2,416 318 296 3,447 Railcar Services....... 317 990 2 169 1,478 Polaris Aircraft....... 171 2,137 189 2,497 Transport International Pool................. 73 799 278 1,150 Satellite Telecommunications Services............. 584 584 Computer Services...... 49 107 335 491 Modular Space.......... 10 243 87 340 ------- ------- ------- ------- ------- -------- Total.............. 395 2,877 8,167 320 2,695 14,454 ------- ------- ------- ------- ------- -------- SPECIALTY INSURANCE.............. 8 7,029 2,542 9,579 CORPORATE................ 1,104 248 1,352 ------- ------- ------- ------- ------- -------- TOTAL.................... $40,748 $24,930 $10,650 $20,577 $21,034 $117,939 ------- ------- ------- ------- ------- -------- ------- ------- ------- ------- ------- --------
TOTAL ASSETS BY SEGMENT 1992 --------------------------------------------------------------- TIME NET ALLOW. SALES INVESTMENT FOR AND NET IN LOSSES LOANS, INVESTMENT EQUIPMENT AND NET OF IN ON ALL DEFERRED FINANCING OPERATING INVESTMENT OTHER TOTAL INCOME LEASES LEASES SECURITIES ASSETS ASSETS (IN MILLIONS) ------- ------- ------ --------- ------- ------- SPECIALIZED FINANCING Commercial Real Estate............... $10,476 $ 33 $ $ 51 $ 2,940 $13,500 Global Project and Structured Finance... 2,838 7,549 772 26 612 11,797 Corporate Finance Group................ 5,157 482 929 6,568 ------- ------- ------ ------- ------- ------- Total.............. 18,471 7,582 1,254 77 4,481 31,865 ------- ------- ------ ------- ------- ------- CONSUMER SERVICES Retailer Financial Services............. 12,817 6 8 721 13,552 Auto Financial Services............. 1,841 4,827 234 336 7,238 Mortgage Servicing..... 129 3,038 3,167 GNA.................... Other.................. 202 5 207 ------- ------- ------ ------- ------- ------- Total.............. 14,989 4,827 240 8 4,100 24,164 ------- ------- ------ ------- ------- ------- MID-MARKET FINANCING Commercial Equipment Financing............ 1,980 5,652 321 1 486 8,440 Vendor Financial Services............. 569 2,774 80 153 3,576 GECC Financial -- Hawaii............... 915 81 1 12 1,009 Computer Leasing....... 75 241 231 93 640 ------- ------- ------ ------- ------- ------- Total.............. 3,539 8,748 633 1 744 13,665 ------- ------- ------ ------- ------- ------- EQUIPMENT MANAGEMENT Fleet Services......... 3 2,096 1,418 956 4,473 Genstar Container...... 324 2,111 250 2,685 Railcar Services....... 264 1,033 20 196 1,513 Polaris Aircraft....... 68 1,884 1 183 2,136 Transport International Pool................. 56 493 157 706 Satellite Telecommunications Services............. 524 524 Computer Services...... 19 128 178 325 Modular Space.......... 9 201 68 278 ------- ------- ------ ------- ------- ------- Total.............. 71 2,768 7,268 21 2,512 12,640 ------- ------- ------ ------- ------- ------- SPECIALTY INSURANCE.............. 5,654 1,765 7,419 CORPORATE................ 2,170 709 2,879 ------- ------- ------ ------- ------- ------- TOTAL.................... $37,070 $23,925 $9,395 $ 7,931 $14,311 $92,632 ------- ------- ------ ------- ------- ------- ------- ------- ------ ------- ------- -------
The Corporation provides a wide variety of financing and insurance products and services, which are organized into the following industry segments: o Specialized Financing -- loans and leases for major capital assets including aircraft, industrial facilities and equipment and energy-related facilities; commercial and residential real estate loans and investments; and loans to and investments in corporate enterprises. o Consumer Services -- private label and bank credit card loans, time sales and revolving credit and inventory financing for retail merchants, auto leasing and inventory financing, mortgage servicing and annuities. o Mid-Market Financing -- loans and financing and operating leases for middle-market customers including manufacturers, distributors and end-users, for a variety of equipment, including data processing equipment, medical and diagnostic equipment, and equipment used in construction, manufacturing, office applications and telecommunications activities. Page 2 5 ITEM 1. BUSINESS (Continued). o Equipment Management -- leases, loans and asset management services for portfolios of commercial and transportation equipment including aircraft, trailers, auto fleets, modular space units, railroad rolling stock, data processing equipment, ocean-going containers and satellites. o Specialty Insurance -- financial guaranty insurance, principally on municipal bonds and structured finance issues; private mortgage insurance; creditor insurance covering international customer loan repayments; and property, casualty and life insurance. Refer to Item 7 "Management's Discussion and Analysis of Results of Operations" in this Form 10-K for discussion of the Corporation's Portfolio Quality. SPECIALIZED FINANCING Commercial Real Estate Commercial Real Estate Financing and Services (CRE) provides funds for the acquisition, refinancing or renovation of a wide range of commercial and residential properties located throughout the United States, and, to a lesser extent, in Canada, Mexico and Europe. CRE also provides selected asset management services to real estate investors. CRE has field offices located throughout the United States, as well as offices in Toronto, Canada, Mexico City, Mexico and London, England, in addition to its headquarters in Stamford, Connecticut. Lending represents a major segment of CRE's business in the form of intermediate-term senior or subordinated floating-rate loans secured by existing income-producing commercial properties such as office buildings, rental apartments, shopping centers, industrial buildings, mobile home parks and warehouses. Loans range in amount from single-property mortgages typically greater than $5 million to multi-property portfolios of several hundred million dollars, and are well dispersed geographically, covering properties located in 38 states and several foreign countries. Approximately 90% of all loans are senior mortgages. During 1993, CRE continued to broaden its investment base by acquiring certain loans and properties from both government and private institutions. CRE actively buys or provides restructuring financing for portfolios of real estate, mortgage loans, limited partnerships, REIT's, and tax-exempt bonds. CRE also offers a variety of real estate management services to outside investors, institutions, corporations and investment banks through its GE Capital Realty Group subsidiary. Services include acquisitions and dispositions, strategic asset positioning, asset restructuring, on-site property management, maintenance, and leasing and loan servicing. Global Project and Structured Finance The Corporation's Global Project and Structured Finance (GP&SF) business provides financing for major capital investments in various sectors of the economy, concentrating principally in the North American market with efforts being made toward Asia, South America and Europe. At year-end 1993, GP&SF's diversified portfolio included investments in commercial aircraft (38%), industrial facilities and equipment (24%), energy-related facilities (30%), railcar rolling stock (5%), and marine vessels (3%). GP&SF's fundings take various forms ranging from financing leases to total balance sheet recapitalizations. At December 31, 1993, GP&SF's portfolio consisted of finance leases (both direct financing and leveraged leases), operating leases, loans (both senior and subordinated) and equity investments (including collateralized, sinking fund and adjustable rate preferred stock; joint ventures; and partnerships). Fundings are adequately collateralized in the form of property liens, preferred mortgages, assignment of earnings, insurance, guarantees, cash flow streams and the financed assets. GP&SF provides lease syndication and private placement services for transactions generated by GE Capital as well as other companies. When such services are performed, GP&SF typically retains a portion of the transaction and sells off the remainder to one or more other financial institutions. In addition to its Stamford, Connecticut headquarters, GP&SF has field offices in New York City and Chicago, as well as in Canada, Mexico, England, Singapore, Hong Kong, China and India. Page 3 6 ITEM 1. BUSINESS (Continued). Corporate Finance Group The Corporate Finance Group (CFG) provides senior and subordinated loans, on both a revolving and term basis, secured by various assets, which may include accounts receivable, inventory, property, plant and equipment and intangible assets (e.g. franchise licenses). Loans range in size from $5 million to several hundred million dollars with maturities generally between 5 and 10 years. CFG is active in the loan syndication market, selling and occasionally purchasing participations in leveraged transactions. CFG also makes preferred and common stock investments and frequently receives warrants exercisable into a certain percentage of the financed entities' common stock. In addition, with the diminished market for acquisition related transactions, CFG has expanded the scope of its business into other financing opportunities, such as providing lines of credit to bankrupt companies undergoing reorganization. The portfolio is diversified with approximately 100 accounts dispersed throughout the United States and, to a lesser degree, Canada and Europe. Industry concentration is spread among cable television, commercial and industrial, retail, financial services, media, and, to a lesser extent, healthcare, food and beverage and broadcasting. CFG has offices throughout the United States in addition to its headquarters in Stamford, Connecticut. CONSUMER SERVICES Retailer Financial Services Retailer Financial Services (RFS) provides sales financing services to the distribution chain for various consumer industries. Financing plans offered vary considerably by client (including Montgomery Ward & Co., Incorporated, through a wholly-owned affiliate Montgomery Ward Credit Corporation, "MW Credit"), but fall into three major product offerings: customized private label credit card programs with retailers, bankcard programs direct with consumers and inventory financing programs with manufacturers, distributors and retailers. RFS purchases consumer revolving charge accounts from retailers in the United States, Canada and the United Kingdom, most of whom sell a variety of products of various manufacturers on a time sales basis. The terms made available for these financing plans vary by size of contract and the credit standing of the customer. Maximum maturities ordinarily do not exceed 40 months. The Corporation generally maintains a security interest in the merchandise financed. Financing is provided to consumers under contractual arrangements both with and without recourse to retailers. RFS's wide range of financial services includes private label credit cards, credit promotion and accounting services, billing (in the store's name) and customer credit and collection services. Similar services are also provided through joint ventures in Mexico and Spain. During 1993, RFS expanded into the Scandinavian market with the purchase of Finax Finans AB which provides credit card services and consumer loans in Sweden and Norway. RFS provides consumers with Visa and Mastercard products, including the new GE Rewards Credit Card, through Monogram Bank, USA. RFS is also engaged in the home equity loan business. RFS provides inventory financing for retailers primarily in the appliance and consumer electronics industries. The majority of such financing is for products manufactured by General Electric Company. The Corporation obtains a security interest in the inventory of retailers to whom financing is provided. As part of the inventory financing agreement, retailers are required to provide insurance coverage deemed adequate by RFS on the merchandise financed (with an insurer selected by the retailer). In addition, RFS usually obtains agreements from the distributor or manufacturer obligating them to repurchase inventory repossessed by RFS from defaulting retailers. Auto Financial Services Auto Financial Services (AFS) provides lease financing for automobiles of domestic and foreign manufacture through dealers, independent leasing companies and importers of new and used cars throughout the United States, Canada and the United Kingdom. Contractual terms do not exceed 66 months and have an average expected term ranging from 30 to 45 months. Property and casualty insurance is required for all leases, with the insurer selected by the lessee. Page 4 7 ITEM 1. BUSINESS (Continued). AFS also provides inventory financing programs and direct loans to segments of the automotive industry, including dealers, rental car companies and leasing companies located throughout the United States. AFS purchases auto lease and loan assets from financial institutions and services the outstanding accounts throughout the liquidation of the portfolios. AFS is active in the Asian market through equity investments in United Merchants Finance Ltd. (Hong Kong) and ASTRA Sedaya Finance (Indonesia) and expanded in 1993 with United Motor Works (Malaysia) and Government Savings Bank and General Finance and Securities (Thailand) which provide primarily automobile and vehicle financing in their respective markets. On January 1, 1993 AFS and Volvo of North America began a joint venture to provide financing for Volvo's customers. Mortgage Servicing GE Capital Mortgage Services, Inc. (GECMSI), wholly owned by GE Capital Mortgage Corporation (GECMC), is engaged in the business of servicing residential mortgage loans collateralized by one-to-four-family homes located throughout the United States. It obtains servicing through the purchase of mortgage loans and of servicing rights. GECMSI packages the loans it purchases into mortgage-backed securities which are sold to investors. GECMSI is also engaged in the home equity loan business. GECMC, through GECMSI and other wholly-owned affiliates, is among the nation's leading asset management, servicing and disposition organizations. GNA The Corporation acquired two companies during 1993 (GNA Corporation and United Pacific Life Insurance Company) which together comprise the Corporation's annuity business ("GNA"). GNA writes and markets tax-deferred annuities and sells proprietary and third party mutual funds through independent agents and financial institutions. MID-MARKET FINANCING Commercial Equipment Financing Commercial Equipment Financing (CEF) offers a broad line of financial products including loans, leases and municipal financing to middle-market customers including manufacturers, distributors, dealers and end-users. Products are designed to meet customers' unique equipment needs and tax requirements and are either held for CEF's own account or brokered to a third party for a fee. Generally, transactions range from $50 thousand dollars to several million dollars with financing terms from 36 to 120 months. CEF enhances the value of its leased equipment by maintaining an asset management operation that both redeploys off-lease equipment and monitors asset values. The portfolio includes vehicles, manufacturing equipment, corporate aircraft, construction equipment, medical diagnostic equipment, office equipment, telecommunications equipment and electronics. CEF operates from offices throughout the United States, Puerto Rico, Canada, Europe, Australia and through joint ventures in Mexico, Spain and Hong Kong. In 1993, Canadian operations were significantly expanded with the purchase of financing receivables and infrastructure of the National Bank of Canada. Vendor Financial Services Vendor Financial Services (VFS) provides captive financing services to equipment manufacturers and distributors in specific industries including office furniture, healthcare, franchise, information systems, manufacturing and office equipment worldwide. The captive financing programs are tailored to meet the individual needs of each vendor including sales force training, marketing support and customized financing products. Funding, billing, collections and other related services are provided by six highly automated service operations and sales offices located throughout the United States, Canada, Mexico, Asia and Europe. VFS's typical transaction size ranges from $6 thousand to $500 thousand. Security is generally provided by the asset being financed. Page 5 8 ITEM 1. BUSINESS (Continued). During 1993, VFS acquired Digital Equipment Corporation's financing group. Digital Financial Services, the new name for the VFS unit dedicated to Digital, provides financing for the acquisition of equipment manufactured by Digital. GECC Financial -- Hawaii GECC Financial Corporation of Hawaii (GFC) operates exclusively in the state of Hawaii. Through a network of 10 branch offices, GFC offers commercial and residential real estate loans, auto and equipment leasing, inventory financing and equity lines of credit. GFC also offers thrift investment programs and loan servicing to institutional investors. Computer Leasing GE Capital Computer Leasing Corporation(GECCL), is based in Emeryville, California and offers primarily lease financing for new and used computer equipment and peripherals of all major computer manufacturers. GECCL manages these assets during their product life cycle by offering a wide range of services including remarketing and trading of used equipment. GECCL's offering of financial services and products are tailored to provide information technology solutions to its customers. EQUIPMENT MANAGEMENT Fleet Services GE Capital Fleet Services (GECFS), is the leading corporate fleet management company in North America and Europe with 620,000 cars, trucks and specialty vehicles under lease and service management. GECFS markets finance and operating leases to several thousand customers with an average lease term of 36 months. The primary product is a Terminal Rental Adjustment Clause (TRAC) lease with the customer assuming the residual risk for the difference between market and book value at termination. In addition to the services directly associated with the lease, GECFS offers value-added fleet management services designed to reduce its customers' total fleet management costs. These include maintenance management programs, accident services, national account purchasing programs, fuel programs, title and licensing services, safety programs and many other value-added programs. GECFS' customer base is well diversified across all industries and geographic locations and includes many Fortune 500 companies. Genstar Container In 1993, Genstar Container Corporation maintained a fleet of over 1,300,000 TEU ("twenty-foot equivalent units") of dry-cargo, refrigerated and specialized containers for intermodal cargo transport on a global basis. Lessees consist primarily of shipping lines who lease on a long-term or master lease basis. Genstar is the world's largest lessor of intermodal shipping containers. Railcar Services At December 31, 1993, GE Railcar Services Corporation (GERSCO) had approximately 140,000 railcars leased to others in North America (principally operating leases). Railcar maintenance and repair services are provided by GE Railcar Repair Services Corporation, a wholly-owned affiliate of GERSCO, at its 21 repair centers in the United States and Canada. GE Railcar Wheel Services Corporation, a wholly-owned affiliate of GERSCO, provides railcar refurbishing services and also remanufactures railcar parts. Polaris Aircraft Polaris Holding Company and its subsidiaries (Polaris) provide lease financing to the commercial airline industry on a worldwide basis, primarily through short-term operating leases. At December 31, 1993, Polaris' fleet of aircraft, one of the largest such fleets in the world, consisted of 250 owned or managed aircraft on lease to 50 customers around the world. In 1994, the activities of Polaris and the commercial aircraft finance and leasing assets of the Global Project and Structured Finance business will be combined to form GE Capital Aviation Services, Inc. (GECAS). GECAS will also manage the aircraft assets of GPA Group, plc. Page 6 9 ITEM 1. BUSINESS (Continued). Transport International Pool Transport International Pool (TIP) rents, leases, sells and finances over-the-road trailers in the United States, Canada and throughout Europe from 185 locations. In June 1993, TIP acquired an extensive European network by purchasing TIP Europe plc. and its 65 branches in 10 countries. TIP also launched its trailer storage and cartage rental business by purchasing the assets of Trailerco. TIP's large diversified fleet of over 83,000 dry freight vans, refrigerated and double vans, flatbeds and specialized trailers serves the trailer needs of common and private carriers. Satellite Telecommunications Services GE American Communications (GE Americom) is a leading provider of satellite communication services (video and audio services) to the media, including the broadcast and cable TV industries, and voice, facsimile and wideband data services for various agencies of the federal government. GE Americom operates seven domestic communications satellites, which carry cable TV programming to the nation's 11,000 plus cable television systems and is also the leading satellite carrier of radio programming, serving more than 6,000 radio stations. It also maintains a supporting network of earth stations, central terminal offices, and telemetry, tracking and control facilities. Computer Services Computer Services, is a combination of four businesses (Computer Maintenance Service, Rental/Lease, Electronic Services and GE Hamilton Technology Services). Recognized for its premier service, the Computer Maintenance Service business provides comprehensive repair, maintenance and networking services for multi-vendor personal computers. The Rental/Lease business rents and leases a broad range of brand-name personal computers, workstations and test and measurement equipment. The Electronic Service business provides world-class, single-source repair and calibration services for electronic test equipment from more than 1,000 manufacturers. GE Hamilton Technology Services provides a diverse base of technology services -- computer rental, leasing, sales, support and asset management -- to customers seeking communication solutions. Modular Space GE Capital Modular Space (GECMS) maintains a fleet, at December 31, 1993, of approximately 36,000 non-residential relocatable modular structures for rental, lease and sale from over 80 facilities in the United States. GECMS' operating leases are primarily rental and short-term leases, averaging 15 months, in term and usage. SPECIALTY INSURANCE Mortgage Insurance GE Mortgage Insurance Companies (GEMICO) are engaged principally in underwriting residential mortgage guaranty insurance. Operating in 26 field locations, GEMICO is licensed in 50 states and the District of Columbia, and at December 31, 1993, was the primary insurance carrier for over 828,100 residential homes, with total insurance in force aggregating over $149 billion and total risk in force aggregating over $27 billion. When a claim is received, GEMICO proceeds by either paying a guaranteed percentage based on the specified coverage or paying the mortgage and delinquent interest, taking title to the property and arranging for its sale. Financial Guaranty Insurance FGIC Corporation (FGIC), through its wholly-owned subsidiary Financial Guaranty Insurance Company (Financial Guaranty), is an insurer of municipal bonds, including new issues and bonds traded in the secondary market, including bonds held in unit investment trusts and mutual funds. Financial Guaranty also guarantees certain structured debt issues in the taxable market. The guaranteed principal, after reinsurance, amounted to approximately $84 billion at December 31, 1993. Approximately 90% of the business written to date by Financial Guaranty has been municipal bond insurance. Page 7 10 ITEM 1. BUSINESS (Continued). Creditor Insurance Financial Insurance Group (FIG), headquartered in Enfield, Middlesex, England, is licensed to offer creditor insurance in the United Kingdom, the Republic of Ireland and Spain. The insurance, which covers loan repayments, is sold through banks, building societies and other lenders to retail borrowers. Life, Property and Casualty Insurance Employers Reassurance Corporation (ERAC), a Kansas life insurance company, formerly Puritan Life Insurance Company, was acquired by GE Capital during 1973. ERAC is licensed to offer life, annuity and accident and health coverage in the District of Columbia and all states except New York, where it is licensed only for reinsurance. Puritan Excess & Surplus Lines Insurance Company (PESLIC), a successor to the operations of Puritan Insurance Company, began operations as a subsidiary of GE Capital during 1981. PESLIC is licensed to transact property and casualty insurance in Connecticut and Missouri. The administrative office of the combined life and property and casualty insurance operation is located in Overland Park, Kansas. ERAC and PESLIC continue to provide reinsurance and credit insurance coverage to GE Capital customers. ERAC also markets all types of life and accident and health reinsurance coverage to direct writing life insurance companies. Insurance and reinsurance operations are subject to regulation by various state insurance commissions or foreign regulatory authorities, as applicable. ALLOWANCE FOR LOSSES AND LOSS EXPERIENCE ON FINANCING RECEIVABLES The Corporation maintains an allowance for losses on financing receivables at an amount which it believes is sufficient to provide adequate protection against future losses in the portfolio. For small-balance financing receivables, the allowance for losses is determined principally on the basis of actual experience during the preceding three years. Additional allowances are also recorded to reflect management's judgment of additional loss potential. For larger-balance financing receivables, the allowance for losses is determined primarily on the basis of management's judgment of net loss potential, including specific allowances for known troubled accounts. Note 6 of the Notes to Financial Statements shows the activity in the allowance for losses on financing receivables for the years 1991 through 1993. The following table sets forth the Corporation's net loss experience on total financing receivables (time sales, loans and financing lease rentals receivable) in dollars and as a percentage of average financing receivables outstanding for each of the last three years. Recoveries on accounts written off have been netted against gross credit losses.
YEAR ENDED DECEMBER 31, ---------------------------- (Dollar amounts in millions) 1993 1992 1991 ------ ------ ------ Specialized Financing............................... $434 $415 $394 % of average financing receivables............. 1.48% 1.37% 1.37% Consumer Services................................... $467 $535 $627 % of average financing receivables............. 2.23% 2.90% 3.72% Mid-Market Financing................................ $70 $57 $63 % of average financing receivables............. 0.49% 0.47% 0.62% Equipment Management................................ $19 $2 $5 % of average financing receivables............. 0.51% 0.06% 0.20% Total(a)............................................ $990 $1,009 $1,089 % of average financing receivables............. 1.46% 1.58% 1.87%
- --------------- (a) Write-downs of in-substance repossessions, foreclosed real estate properties and other investments aggregated $135 million, $243 million and $206 million in 1993, 1992 and 1991, respectively. All accounts or portions thereof deemed to be uncollectible or to require an excessive collection cost are written off to the allowance for losses. Small-balance accounts are progressively written down (from 10% when more than three months delinquent to 100% when nine to twelve months delinquent) to record the balances at estimated realizable value. However, if at any time during that period an account is judged to be uncollectible, such as in the case of a bankruptcy, the remaining balance is written off. Page 8 11 ITEM 1. BUSINESS (Continued). Larger-balance accounts are reviewed at least quarterly, and those accounts which are more than three months delinquent are written down, if necessary, to record the balances at estimated realizable value. RATES AND COMPETITION The Corporation's activities are subject to a variety of federal and state regulations including, at the federal level, the Consumer Credit Protection Act, the Equal Credit Opportunity Act and certain regulations issued by the Federal Trade Commission. A majority of states have ceilings on rates chargeable to customers in retail time sales transactions, installment loans and revolving credit financing. The Corporation's international operations are subject to regulation in their respective jurisdictions. To date such regulations have not had a material adverse effect on the Corporation's volume of financing operations or profitability. Common carrier services of GE Americom are subject to regulation by the Federal Communications Commission. The Corporation's charges for providing financing services are changed from time to time either on a general basis or for specific types of financing when warranted in light of competition or interest and other costs. The businesses in which the Corporation engages are highly competitive. The Corporation is subject to competition from various types of financial institutions, including banks, investment banks, credit unions, leasing companies, consumer loan companies, independent finance companies and finance companies associated with manufacturers. ITEM 2. PROPERTIES. The Corporation conducts its business from various facilities, most of which are leased. ITEM 3. LEGAL PROCEEDINGS. The Corporation is not involved in any material pending legal proceedings. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Omitted. Page 9 12 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. See Note 12 of the Notes to Financial Statements. The common stock of the Corporation is owned entirely by GE Capital Services and therefore there is no trading market in such stock. ITEM 6. SELECTED FINANCIAL DATA. The following selected financial data should be read in conjunction with the financial statements of GE Capital and consolidated affiliates and the related Notes to Financial Statements.
YEAR ENDED DECEMBER 31, ------------------------------------------------ (Dollar amounts in millions) 1993 1992 1991 1990 1989 -------- ------- ------- ------- ------- FOR THE YEAR: Financing volume.............................. $ 57,094 $51,186 $45,965 $42,853 $38,681 -------- ------- ------- ------- ------- -------- ------- ------- ------- ------- Earned income................................. $ 14,444 $12,250 $11,328 $10,121 $ 8,372 -------- ------- ------- ------- ------- Interest and discount expense................. 3,461 3,665 4,225 4,228 3,674 Operating and administrative expense (including minority interest)............... 5,008 3,955 2,728 2,373 1,709 Insurance losses and policyholder and annuity benefits.................................... 1,259 611 599 521 602 Provision for losses on financing receivables................................. 987 1,056 1,102 688 527 Depreciation and amortization of buildings and equipment and equipment on operating leases...................................... 1,587 1,297 1,187 940 698 -------- ------- ------- ------- ------- Earnings before income taxes.................. 2,142 1,666 1,487 1,371 1,162 Provision for income taxes.................... 664 415 362 350 303 -------- ------- ------- ------- ------- Net earnings................................ $ 1,478 $ 1,251 $ 1,125 $ 1,021 $ 859 -------- ------- ------- ------- ------- -------- ------- ------- ------- ------- Ratio of earnings to fixed charges............ 1.62 1.44 1.34 1.31 1.30 -------- ------- ------- ------- ------- -------- ------- ------- ------- ------- Ratio of earnings to combined fixed charges and preferred stock dividends............... 1.60 1.43 1.32 1.29 1.28 -------- ------- ------- ------- ------- -------- ------- ------- ------- ------- AT YEAR END: Financing receivables: Time sales and loans, net of deferred income................................. $ 40,748 $37,070 $36,849 $35,085 $30,142 Investment in financing leases, net of deferred income........................ 24,930 23,925 20,411 16,530 12,764 -------- ------- ------- ------- ------- Total financing receivables......... 65,678 60,995 57,260 51,615 42,906 Allowance for losses on financing receivables............................ (1,730) (1,607) (1,508) (1,360) (1,127) -------- ------- ------- ------- ------- Financing receivables -- net........ $ 63,948 $59,388 $55,752 $50,255 $41,779 -------- ------- ------- ------- ------- -------- ------- ------- ------- ------- Percent of allowance for losses on financing receivables to total financing receivables................................. 2.63% 2.63% 2.63% 2.63% 2.63% -------- ------- ------- ------- ------- -------- ------- ------- ------- ------- Equipment on operating leases -- net.......... $ 10,650 $ 9,395 $ 7,552 $ 5,557 $ 5,095 -------- ------- ------- ------- ------- -------- ------- ------- ------- ------- Total assets.................................. $117,939 $92,632 $80,528 $70,385 $58,696 -------- ------- ------- ------- ------- -------- ------- ------- ------- ------- Capitalization: Notes payable within one year................. $ 52,903 $48,492 $43,152 $36,691 $31,485 Long-term senior debt......................... 25,112 21,182 17,946 16,728 11,815 Long-term subordinated debt................... 697 697 325 112 148 Equity(a)..................................... 10,370 8,892 7,872 6,886 5,571 -------- ------- ------- ------- ------- -------- ------- ------- ------- ------- Debt to equity ratio(a)....................... 7.59 7.91 7.80 7.77 7.80 -------- ------- ------- ------- ------- -------- ------- ------- ------- -------
- ------------ (a) The Corporation adopted SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities," on December 31, 1993 resulting in the inclusion of $485 million of net unrealized gains on investment securities in equity at the end of the year. Excluding such unrealized gains on investment securities, the Corporation's equity and debt to equity ratio would have been $9,885 million and 7.96 to 1 at December 31, 1993, respectively. Page 10 13 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS. OVERVIEW The Corporation's net earnings for 1993 were $1,478 million, which, after payment of dividends on its variable cumulative preferred stock, resulted in a contribution of $1,456 million to GE Capital Services' 1993 net earnings, an increase of 19% over 1992. Net earnings for 1992 were $1,251 million, which, after payment of dividends on its variable cumulative preferred stock, resulted in a contribution to GE Capital Services' net earnings of $1,225 million, an increase of 13% over 1991. Earnings of the Corporation's lending, leasing and equipment management businesses are significantly influenced by the level of invested assets and the financing spread on those assets, the excess of yield (rates earned) over interest rates on borrowings. In 1993, the level of invested assets increased and lower rates on borrowings resulted in improved spreads. For 1992, the level of invested assets increased and lower rates on borrowings more than offset lower yields on assets, also resulting in improved spreads. In both years, these increases were partially offset by higher administrative expenses related to the asset growth. As a result of improved asset quality, portfolio loss provisions were lower in 1993, compared with 1992, which had been higher than in 1991. In both 1993 and 1992, earnings of the Corporation's Specialty Insurance businesses were up sharply. 1993's improvement reflected strong performances by the financial guaranty insurance and creditor insurance businesses. 1992's increase was primarily the result of growth in both the private mortgage insurance and financial guaranty insurance businesses. OPERATING RESULTS EARNED INCOME from all sources increased 18% in 1993, following an 8% increase in 1992. Asset growth in each of the Corporation's financing segments, through acquisitions of businesses and portfolios as well as origination volume, was the primary reason for increased income from time sales, loans, financing leases and operating lease rentals in both 1993 and 1992. Yields on related assets were essentially flat in 1993 compared with 1992, following a decline from 1991. Earned income in 1993 from the Corporation's annuity business, formed through two current year acquisitions, was $571 million. Gains on sales of warrants and other equity interests obtained in connection with certain loans, fee income associated with syndication activities, and sales of certain assets, including real estate investments, contributed $647 million to pre-tax income in 1993, compared with $438 million in 1992 and $261 million in 1991. In addition, pre-tax income in 1992 included $65 million of gains from the disposition of partial interests in several affiliates while pre-tax income in 1991 included a $134 million gain from the disposition of a significant portion of the Corporation's auto auction affiliate. Earned income of the Corporation's Specialty Insurance segment in 1993 was 20% higher than in 1992, which in turn was 35% higher than in 1991. The 1993 increase was primarily the result of growth in premium income in the private mortgage, life reinsurance and financial guaranty insurance businesses and reflected the full year impact of the creditor insurance business which was consolidated at the end of the second quarter of 1992 when an existing equity position was converted to a controlling interest. The 1992 increase was primarily the result of growth in premium and investment income in the private mortgage and financial guaranty insurance businesses and reflected revenue from the creditor insurance business for the second half of the year. INTEREST AND DISCOUNT EXPENSE in 1993 totaled $3.5 billion, 6% lower than in 1992, which was 13% lower than in 1991. Both decreases reflected substantially lower composite interest rates which more than offset the effect of higher average borrowings required to finance the significantly higher level of invested assets. The Corporation's 1993 composite interest rate of 4.97% was 87 basis points lower than the 1992 rate, which in turn was 167 basis points lower than the 1991 rate. OPERATING AND ADMINISTRATIVE EXPENSES increased 24% to $4,894 million in 1993, compared with a 44% increase to $3,941 million in 1992, primarily reflecting operating costs associated with businesses and portfolios acquired during the past two years. Overall, provisions for losses on investments that were charged to operating and administrative expense decreased in 1993, following an increase in 1992. These Page 11 14 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS (Continued). provisions principally related to the Commercial Real Estate and highly leveraged transaction (HLT) portfolios and, in 1993, to commercial aircraft as well. INSURANCE LOSSES AND POLICYHOLDER AND ANNUITY BENEFITS increased $648 million to $1,259 million in 1993, compared with a $12 million increase to $611 million in 1992. The 1993 increase largely reflected annuity benefits credited to customers following the current year annuity business acquisitions. The remainder of the 1993 increase represented higher losses on increased volume in the life reinsurance and private mortgage insurance businesses, partially offset by reduced losses in the creditor insurance business. In 1992, lower losses in the life reinsurance business were more than offset by higher losses on increased volume in the private mortgage insurance business and the effects of the creditor insurance business for the second half of the year. PROVISION FOR LOSSES ON FINANCING RECEIVABLES decreased $69 million to $987 million in 1993, compared with a $46 million decrease to $1,056 million in 1992. These provisions principally related to the Consumer Services, Commercial Real Estate and HLT portfolios discussed below. DEPRECIATION AND AMORTIZATION OF BUILDINGS AND EQUIPMENT AND EQUIPMENT ON OPERATING LEASES increased 22% to $1.6 billion in 1993, compared with a 9% increase to $1.3 billion in 1992. Increases in both years were primarily a result of additions to equipment on operating leases through business and portfolio acquisitions. INCOME TAX PROVISION was $664 million in 1993 (an effective tax rate of 31.0%), compared with $415 million in 1992 (24.9%) and $362 million (24.3%) in 1991. The increased provision for income taxes in both 1993 and 1992 reflected the effects of additional income before taxes and, in 1993, the 1% increase in the U.S. Federal income tax rate. The higher rate in 1993 compared with 1992 reflected the 1% increase in the U.S. Federal income tax rate and a lower proportion of tax-exempt income. These items were partially offset by the effects of certain unrelated financing transactions that will result in future cash savings and reduced the Corporation's obligation for previously accrued deferred taxes. The higher rate in 1992 compared with 1991 reflected a relatively lower proportion of tax-exempt income and a 1991 adjustment for tax-deductible claims reserves of the property insurance affiliates, for which there was no 1992 counterpart. OPERATING PROFIT BY INDUSTRY SEGMENT Operating profit (pre-tax income) of the Corporation, by industry segment, is summarized in Note 17 and discussed below: CONSUMER SERVICES operating profit of $695 million in 1993 was 32% higher than that of 1992. This increase reflected lower provisions for receivable losses in Retailer Financial Services resulting from declines in consumer delinquency as well as strong asset growth and interest rate favorability in both Auto Financial Services and Retailer Financial Services. Operating profit of $525 million in 1992 was 53% higher than that of 1991 (excluding the impact in 1991 of the $134 million gain on the disposition of a significant portion of GE Capital's auto auction affiliate). This increase reflected higher financing spreads in Retailer Financial Services and increased asset levels in Auto Financial Services. EQUIPMENT MANAGEMENT operating profit increased $9 million to $377 million in 1993. This increase reflected higher volume in most businesses, largely the result of portfolio and business acquisitions, and improved trailer and railcar utilization, offset by lower average rental rates in Fleet Services and Computer Services, and the effects of lower utilization and pricing pressures at Genstar Container. Operating profit decreased $13 million to $368 million in 1992 due to lower utilization in the Railcar Services and Genstar Container businesses, partially offset by operating profit generated as a result of Fleet Services' acquisition of the fleet leasing operations of Avis-Europe. MID-MARKET FINANCING operating profit of $454 million in 1993 was 29% higher than that of 1992 and reflected higher spreads and higher levels of invested assets, primarily as a result of business and portfolio acquisitions. Operating profit increased $104 million to $352 million in 1992 compared with 1991. Operating profit for 1992 reflected higher levels of invested assets, primarily as a result of portfolio acquisitions. SPECIALTY INSURANCE operating profit of $422 million in 1993 was 40% higher than the $302 million recorded in 1992, which was 79% higher than in 1991. The 1993 increase reflected higher premium volume from bond refunding in the financial guaranty insurance business as well as reduced claims expense in the Page 12 15 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS (Continued). creditor insurance business. The 1992 gains primarily reflected higher premium volume and investment income at GE Capital's private mortgage and financial guaranty insurance businesses. SPECIALIZED FINANCING operating profit was $201 million in 1993, compared with $121 million in 1992 and $220 million in 1991. The increase in 1993 principally reflected much lower provisions for losses on Corporate Finance Group HLT investments and higher gains from sales of Commercial Real Estate assets, partially offset by higher loss provisions for Commercial Real Estate assets and expenses associated with redeployment and refurbishment of owned aircraft. The decline in 1992 principally reflected higher loss provisions, particularly reserves for Corporate Finance Group in-substance and owned investments, partially offset by higher gains on the sale of assets in both Commercial Real Estate and Corporate Finance Group. Loss provisions relating to both the Commercial Real Estate portfolio and Corporate Finance Group HLT investments are discussed below. CAPITAL RESOURCES AND LIQUIDITY The Corporation's principal source of cash is financing activities that involve continuing rollover of short-term borrowings and appropriate addition of long-term borrowings, with a reasonable balance of maturities. Over the past three years, the Corporation's borrowings with maturities of 90 days or less have increased by $10.6 billion. New borrowings of $40.2 billion having maturities longer than 90 days were added during those years, while $25.5 billion of such longer-term borrowings were paid off. The Corporation has also generated significant cash from operating activities, $15.5 billion during the last three years. The Corporation's principal use of cash has been investing in assets to grow the business. Additions to financing receivables were $16.1 billion of the $39.2 billion in net investments the Corporation has made over the past three years. Other principal investments during these years were $6.9 billion to acquire new businesses and $9.2 billion for new equipment, primarily for lease to others. GE Company has agreed to make payments to the Corporation, constituting additions to pre-tax income, to the extent necessary to cause the Corporation's consolidated ratio of earnings to fixed charges to be not less than 1.10 for each fiscal year commencing with fiscal year 1991. Three years advance written notice is required to terminate this agreement. No payments have been required under this agreement. The Corporation's ratios of earnings to fixed charges for the years 1993, 1992 and 1991, were 1.62, 1.44 and 1.34, respectively. GE Capital's total borrowings were $78.7 billion at December 31, 1993, of which $52.9 billion was due in 1994 and $25.8 billion was due in subsequent years. Comparable amounts at the end of 1992 were: $70.4 billion in total; $48.5 billion due within one year; and $21.9 billion due thereafter. Composite interest rates are discussed on page 11. Individual borrowings are structured within overall asset/liability interest rate and currency risk management strategies. Interest rate and currency swaps form an integral part of the Corporation's goal of achieving the lowest borrowing costs for particular funding strategies. Counterparty credit risk is closely monitored -- approximately 90% of the notional amount of swaps outstanding at December 31, 1993 was with counterparties having credit ratings of Aa/AA or better. The Corporation's ratio of debt to equity (leverage) was 7.59 to 1 at the end of 1993, compared with 7.91 to 1 at the end of 1992. Excluding net unrealized gains on investment securities included in equity, the Corporation's leverage was 7.96 to 1 at the end of 1993. With the financial flexibility that comes with excellent credit ratings, management believes the Corporation is well positioned to meet the global needs of its customers for capital and continue growing its diverse asset base. PORTFOLIO QUALITY THE PORTFOLIO OF FINANCING RECEIVABLES, $63.9 billion and $59.4 billion at year-ends 1993 and 1992, respectively, is the Corporation's largest asset and its primary source of revenues. Related allowances for losses aggregated $1.7 billion at the end of 1993 (2.63% of receivables -- the same level as 1992) and are, in management's judgment, appropriate given the risk profile of the portfolio. A discussion about the quality of certain elements of the portfolio of financing receivables and investments follows. Further details are included in Notes 5 and 9. Page 13 16 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS (Continued). CONSUMER LOANS RECEIVABLE, primarily retailer and auto receivables, were $17.3 billion and $14.8 billion at the end of 1993 and 1992, respectively. The Corporation's investment in consumer auto finance lease receivables was $5.6 billion and $4.8 billion at the end of 1993 and 1992, respectively. Non-earning receivables, 1.7% of total loans and leases (2.1% at the end of 1992), amounted to $391 million at the end of 1993. The provision for losses on retailer and auto financing receivables was $469 million in 1993, a 19% decrease from $578 million in 1992, reflecting reduced consumer delinquencies and intensified collection efforts, particularly in Europe. Most non-earning receivables were private label credit card receivables, the majority of which were subject to various loss sharing arrangements that provide full or partial recourse to the originating retailer. COMMERCIAL REAL ESTATE LOANS classified as finance receivables by the Commercial Real Estate business, a part of the Specialized Financing segment, were $10.9 billion at December 31, 1993, up $0.4 billion from the end of 1992. In addition, the investment portfolio of the Corporation's annuity business, acquired during 1993, included $1.1 billion of commercial property loans. Commercial real estate loans are generally secured by first mortgages. In addition to loans, Commercial Real Estate's portfolio also included in other assets $2.2 billion of assets that were purchased for resale from the Resolution Trust Corporation (RTC) and other institutions and $1.4 billion of investments in real estate joint ventures. In recent years, the Corporation has been one of the largest purchasers of assets from RTC and others, growing its portfolio of properties acquired for resale by $1.1 billion in 1993. To date, values realized on these assets have met or exceeded expectations at the time of purchase. Investments in real estate joint ventures have been made as part of original financings and in conjunction with loan restructurings where management believes that such investments will enhance economic returns. Commercial Real Estate's foreclosed properties at the end of 1993 declined to $110 million from $187 million at the end of 1992. At December 31, 1993, Commercial Real Estate's portfolio included loans secured by and investments in a variety of property types that were well dispersed geographically. Property types included apartments (36%), office buildings (32%), shopping centers (14%), mixed use (8%), industrial and other (10%). These properties were located, principally across the United States, as follows: Mid-Atlantic (21%), Northeast (20%), Southwest (19%), West (15%), Southeast (12%), Central (8%), with the remainder (5%) across Canada and Europe. Reduced and non-earning receivables declined to $272 million in 1993 from $361 million in 1992, reflecting proactive management of delinquent receivables as well as write-offs. Loss provisions for Commercial Real Estate's investments were $387 million in 1993 ($248 million related to receivables and $139 million to other assets), compared with $299 million and $213 million in 1992 and 1991, respectively, as the portfolio continued to be adversely affected by the weakened commercial real estate market. HIGHLY LEVERAGED TRANSACTION (HLT) PORTFOLIO is included in the Specialized Financing segment and represents financing provided for highly leveraged management buyouts and corporate recapitalizations. The portion of those investments classified as financing receivables was $3.3 billion at the end of 1993 compared with $5.3 billion at the end of 1992, as substantial repayments reduced this liquidating portfolio. The year-end balance of amounts that had been written down to estimated fair value and carried in other assets as a result of restructuring or in-substance repossession aggregated $544 million at the end of 1993 and $513 million at the end of 1992 (net of allowances of $244 million and $224 million, respectively). Non-earning and reduced earning receivables declined to $139 million at the end of 1993 from $429 million the prior year. Loss provisions for HLT investments were $181 million in 1993 ($80 million related to receivables and $101 million to other assets), compared with $573 million in 1992 and $328 million in 1991. Non-earning and reduced earning receivables as well as loss provisions were favorably affected by the stronger economic climate during 1993 as well as by the successful restructurings implemented during the past few years. OTHER FINANCING RECEIVABLES, approximately $26 billion, consisted primarily of a diverse commercial, industrial and equipment loan and lease portfolio. This portfolio grew approximately $2 billion during 1993, while non-earning and reduced earning receivables decreased $46 million to $98 million at year end. The Corporation has loans and leases to commercial airlines that aggregated about $6.8 billion at the end of 1993, up from $6 billion at the end of 1992. At year-end 1993, commercial aircraft positions included conditional commitments to purchase aircraft at a cost of $865 million and financial guarantees Page 14 17 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS (Continued). and funding commitments amounting to $450 million. These purchase commitments are subject to the aircraft having been placed on lease under agreements, and with carriers, acceptable to the Corporation prior to delivery. Expenses associated with redeployment and refurbishment of owned aircraft totaled $112 million in 1993 compared with nominal amounts in prior years. The Corporation's increasing investment demonstrates its continued long-term commitment to the airline industry. ENTERING 1994, management believes that the diversity and strength of the Corporation's assets, along with vigilant attention to risk management, position it to deal effectively with a global and changing competitive and economic landscape. NEW ACCOUNTING STANDARDS Statement of Financial Accounting Standards (SFAS) No. 114, "Accounting by Creditors for Impairment of a Loan," modifies the accounting that applies when it is probable that all amounts due under contractual terms of a loan will not be collected. Management does not believe that this Statement, required to be adopted no later than the first quarter of 1995, will have a material effect on the Corporation's financial position or results of operations, although such effect will depend on the facts at the time of adoption. Page 15 18 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. INDEPENDENT AUDITORS' REPORT To the Board of Directors General Electric Capital Corporation We have audited the financial statements of General Electric Capital Corporation and consolidated affiliates as listed in Item 14. In connection with our audits of the consolidated financial statements, we also have audited the financial statement schedules as listed in Item 14. These consolidated financial statements and financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedules based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of General Electric Capital Corporation and consolidated affiliates at December 31, 1993 and 1992, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1993, in conformity with generally accepted accounting principles. Also in our opinion, the related financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein. As discussed in Note 1 to the consolidated financial statements, the Company adopted Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities," effective December 31, 1993. /s/ KPMG PEAT MARWICK Stamford, Connecticut February 11, 1994 Page 16 19 GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES STATEMENT OF CURRENT AND RETAINED EARNINGS
For the years ended December 31 (In millions) 1993 1992 1991 ------- ------- ------- EARNED INCOME Time sales, loan, investment and other income (Note 13)........... $ 7,558 $ 6,687 $ 6,595 Financing leases (Note 13)........................................ 2,315 2,151 1,836 Operating lease rentals (Note 13)................................. 3,267 2,444 2,205 Premium and commission income of insurance affiliates (Note 11)... 1,304 968 692 ------- ------- ------- Total earned income.......................................... 14,444 12,250 11,328 ------- ------- ------- EXPENSES Interest and discount (Notes 10 & 14)............................. 3,461 3,665 4,225 Operating and administrative (Note 15)............................ 4,894 3,941 2,735 Insurance losses and policyholder and annuity benefits (Note 11)............................................................. 1,259 611 599 Provision for losses on financing receivables (Note 6)............ 987 1,056 1,102 Depreciation and amortization of buildings and equipment and equipment on operating leases (Notes 7 & 8)..................... 1,587 1,297 1,187 Minority interest in net earnings of consolidated affiliates...... 114 14 (7) ------- ------- ------- Total expenses............................................... 12,302 10,584 9,841 ------- ------- ------- Earnings before income taxes...................................... 2,142 1,666 1,487 Provision for income taxes (Note 16).............................. 664 415 362 ------- ------- ------- NET EARNINGS...................................................... 1,478 1,251 1,125 Cash dividends paid (Note 12)..................................... (482) (326) (141) Retained earnings at January 1.................................... 6,012 5,087 4,103 ------- ------- ------- RETAINED EARNINGS AT DECEMBER 31.................................. $ 7,008 $ 6,012 $ 5,087 ------- ------- ------- ------- ------- -------
See Notes to Consolidated Financial Statements. Page 17 20 GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES STATEMENT OF FINANCIAL POSITION
At December 31 (In millions) 1993 1992 -------- ------- ASSETS Cash and equivalents...................................................... $ 1,049 $ 1,240 Trading securities (Note 3)............................................... -- 1,248 Investment securities (Note 4)............................................ 20,577 6,683 Financing receivables (Note 5): Time sales and loans, net of deferred income......................... 40,748 37,070 Investment in financing leases, net of deferred income............... 24,930 23,925 -------- ------- 65,678 60,995 Allowance for losses on financing receivables (Note 6)............... (1,730) (1,607) -------- ------- Financing receivables -- net.................................... 63,948 59,388 Other receivables -- net.................................................. 4,046 3,037 Equipment on operating leases (at cost), less accumulated amortization of $3,238 and $2,549 (Note 7).............................................. 10,650 9,395 Buildings and equipment (at cost), less accumulated depreciation of $555 and $435 (Note 8)....................................................... 910 909 Other assets (Note 9)..................................................... 16,759 10,732 -------- ------- TOTAL ASSETS.............................................................. $117,939 $92,632 -------- ------- -------- ------- LIABILITIES AND EQUITY Notes payable within one year (Note 10)................................... $ 52,903 $48,492 Notes payable after one year (Note 10).................................... 25,809 21,879 -------- ------- Total notes payable.................................................. 78,712 70,371 Accounts and drafts payable............................................... 3,452 2,813 Insurance reserves and annuity benefits (Note 11)......................... 16,585 3,173 Other liabilities......................................................... 2,764 2,179 Deferred income taxes (Note 16)........................................... 5,630 5,081 -------- ------- Total liabilities.................................................... 107,143 83,617 -------- ------- Minority interest in equity of consolidated affiliates.................... 426 123 Variable cumulative preferred stock, $100 par value, liquidation preference $100,000 per share (10,500 shares authorized and 8,750 shares outstanding at December 31, 1993 and December 31, 1992)................. 1 1 Common stock, $200 par value (3,866,000 shares authorized and 3,837,825 shares outstanding at December 31, 1993 and December 31, 1992).......... 768 768 Additional paid-in capital................................................ 2,172 2,147 Retained earnings......................................................... 7,008 6,012 Other..................................................................... 421 (36) -------- ------- Total equity (Note 12)............................................... 10,370 8,892 -------- ------- TOTAL LIABILITIES AND EQUITY.............................................. $117,939 $92,632 -------- ------- -------- -------
See Notes to Consolidated Financial Statements. Page 18 21 GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES STATEMENT OF CASH FLOWS
For the years ended December 31 (In millions) 1993 1992 1991 ------- ------- ------- CASH FLOWS FROM OPERATING ACTIVITIES Net earnings............................................... $ 1,478 $ 1,251 $ 1,125 Adjustments to reconcile net earnings to cash provided by operating activities: Provision for losses on financing receivables......... 987 1,056 1,102 Increase in insurance reserves and annuity benefits... 764 374 133 Increase (decrease) in deferred income taxes.......... 496 (23) 573 Depreciation and amortization of buildings and equipment and equipment on operating leases......... 1,587 1,297 1,187 Amortization of premium and discount on debt.......... 99 197 222 Increase in accounts and drafts payable............... 624 343 354 Gain on principal business dispositions............... -- (65) (134) Other -- net.......................................... 455 271 (232) ------- ------- ------- Cash provided by operating activities............... 6,490 4,701 4,330 ------- ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES Increase in loans to customers............................. (30,002) (27,069) (25,030) Principal collections from customers....................... 27,571 25,136 25,289 Investment in assets on financing leases................... (7,204) (7,758) (8,829) Principal collections on financing leases.................. 6,812 5,338 3,726 Net increase in credit card receivables.................... (1,341) (330) (2,410) Buildings and equipment and equipment on operating leases -- additions...................................... (3,133) (3,342) (2,706) -- dispositions................................... 1,080 1,744 937 Payments for principal businesses purchased, net of cash acquired................................................. (2,090) (2,013) (2,836) Proceeds from principal business dispositions.............. -- -- 277 Purchases of investment securities by insurance and annuity affiliates............................................... (7,527) (3,059) (3,281) Dispositions of investment securities by insurance and annuity affiliates....................................... 5,623 2,819 2,648 Other...................................................... (3,724) (3,457) (1,061) ------- ------- ------- Cash used by investing activities................... (13,935) (11,991) (13,276) ------- ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES Net change in borrowings (less than 90-day maturities)..... 2,053 4,123 4,436 Newly issued debt -- short-term (91-365 days).............. 4,315 4,456 4,863 -- long-term senior...................... 10,885 6,699 6,317 -- long-term subordinated................ -- 450 250 Proceeds -- non-recourse, leveraged lease debt............. 53 148 1,808 Repayments and other reductions -- short-term (91-365 days).................................................... (9,008) (6,474) (6,504) -- long-term senior........ (206) (658) (1,691) -- long-term subordinated.. -- (76) (32) Principal payments -- non-recourse, leveraged lease debt... (312) (272) (280) Dividends paid............................................. (482) (326) (141) Proceeds from sales of investment and annuity contracts.... 509 -- -- Redemptions of investment and annuity contracts............ (578) -- -- Capital contributions from parent company.................. 25 -- -- ------- ------- ------- Cash provided by financing activities............... 7,254 8,070 9,026 ------- ------- ------- (DECREASE) INCREASE IN CASH AND EQUIVALENTS DURING THE YEAR..................................................... (191) 780 80 CASH AND EQUIVALENTS AT BEGINNING OF YEAR.................. 1,240 460 380 ------- ------- ------- CASH AND EQUIVALENTS AT END OF YEAR........................ $ 1,049 $ 1,240 $ 460 ------- ------- ------- ------- ------- -------
See Notes to Consolidated Financial Statements. Page 19 22 GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONSOLIDATION -- The consolidated financial statements represent a consolidation of General Electric Capital Corporation and all majority-owned and controlled affiliates ("consolidated affiliates"). All significant transactions among the parent and consolidated affiliates have been eliminated. Other affiliates in which the Corporation and/or its consolidated affiliates own 20% to 50% of the voting rights ("nonconsolidated affiliates") are included in other assets, valued at the appropriate share of equity plus loans and advances. CASH FLOWS -- For purposes of the Statement of Cash Flows, certificates and other time deposits are treated as cash equivalents. METHODS OF RECORDING EARNED INCOME -- Income on all loans is recognized on the interest method. Accrual of interest income is suspended when collection of an account becomes doubtful, generally after the account becomes 90 days delinquent. Financing lease income, which includes related investment tax credits and residual values, is recorded on the interest method so as to produce a level yield on funds not yet recovered. Unguaranteed residual values included in lease income are based principally on independent appraisals of the values of leased assets remaining at expiration of the lease terms. Operating lease income is recognized on a straight-line basis over the term of the underlying leases. Origination, commitment and other nonrefundable fees related to fundings are deferred and recorded in earned income on the interest method. Commitment fees related to loans not expected to be funded and line of credit fees are deferred and recorded in earned income on a straight-line basis over the period to which the fees relate. Syndication fees are recorded in earned income at the time the related services are performed unless significant contingencies exist. See "Insurance and Annuity Businesses" below for information with respect to earned income of these businesses. ALLOWANCE FOR LOSSES ON FINANCING RECEIVABLES AND INVESTMENTS -- The Corporation maintains an allowance for losses on financing receivables at an amount which it believes is sufficient to provide adequate protection against future losses in the portfolio. For small-balance receivables the allowance for losses is determined principally on the basis of actual experience during the preceding three years. Further allowances are also provided to reflect management's judgment of additional loss potential. For other receivables, principally the larger loans and leases, the allowance for losses is determined primarily on the basis of management's judgment of net loss potential, including specific allowances for known troubled accounts. All accounts or portions thereof deemed to be uncollectible or to require an excessive collection cost are written off to the allowance for losses. Small-balance accounts are progressively written down (from 10% when more than three months delinquent to 100% when nine to twelve months delinquent) to record the balances at estimated realizable value. However, if at any time during that period an account is judged to be uncollectible, such as in the case of a bankruptcy, the uncollectible balance is written off. Larger-balance accounts are reviewed at least quarterly, and those accounts which are more than three months delinquent are written down, if necessary, to record the balances at estimated realizable value. When collateral is formally or substantively repossessed in satisfaction of a loan, the receivable is written down against the allowance for losses to estimated fair value and is transferred to other assets. Subsequent to such transfer, these assets are carried at the lower of cost or estimated current fair value. This accounting has been employed principally for highly leveraged transactions (HLT) and real estate loans. INCOME TAXES -- Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes," was adopted effective January 1, 1992. The effect of adopting SFAS No. 109 was not material. Deferred tax balances are stated at tax rates expected to be in effect when taxes are actually paid or recovered. INVESTMENT AND TRADING SECURITIES -- On December 31, 1993, the Corporation adopted SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities," which requires that Page 20 23 investments in debt securities and marketable equity securities be designated as trading, held-to-maturity or available-for-sale. Trading securities are reported at fair value, with changes in fair value included in earnings. Investment securities include both available-for-sale and held-to-maturity securities. Available-for-sale securities are reported at fair value, with net unrealized gains and losses included in equity. Held-to-maturity debt securities are reported at amortized cost. See notes 3 and 4 for a discussion of the classification and reporting of these securities at December 31, 1992. For all investment securities, unrealized losses that are other than temporary are recognized in earnings. EQUIPMENT ON OPERATING LEASES -- Equipment is amortized, principally on a straight-line basis, to estimated net salvage value over the lease term or the estimated economic life of the equipment. BUILDINGS AND EQUIPMENT -- The Corporation records depreciation principally on a sum-of-the-year's-digits basis over the lives of the assets. OTHER ASSETS -- Goodwill is amortized on a straight-line basis over periods not exceeding 30 years. FOREIGN OPERATIONS -- Assets and liabilities of foreign affiliates are translated into U.S. dollars at the year-end exchange rates while operating results are translated at rates prevailing during the year. Such adjustments are accumulated and reported as a separate component of equity. INSURANCE AND ANNUITY BUSINESSES -- Premiums on short-duration insurance contracts are reported as earned income over the terms of the related reinsurance treaties or insurance policies. In general, earned premiums are calculated on a pro-rata basis or are determined based on reports received from reinsureds. Premium adjustments under retrospectively rated assumed reinsurance contracts are recorded based on estimated losses and loss expenses, including both case and incurred-but-not-reported reserves. Premiums on long-duration insurance products are recognized as earned when due. Premiums received under annuity contracts are not reported as revenues but as annuity benefits -- a liability -- and are adjusted according to the terms of the respective policies. The estimated liability for insurance losses and loss expenses consist of both case and incurred-but-not-reported reserves. Where experience is not sufficient, industry averages are used. Estimated amounts of salvage and subrogation recoverable on paid and unpaid losses are deducted from outstanding losses. The liability for future policyholder benefits of the life insurance affiliates has been computed mainly by a net-level-premium method based on assumptions for investment yields, mortality and terminations that were appropriate at date of purchase or at the time the policies were developed, including provisions for adverse deviations. Deferred insurance acquisition costs for the property and casualty businesses are amortized pro-rata over the contract periods in which the related premiums are earned. For the life insurance business, these costs are amortized over the premium-paying periods of the contracts in proportion either to anticipated premium income or to gross profit, as appropriate. For certain annuity contracts, such costs are amortized on the basis of anticipated gross profits. For other lines of business, acquisition costs are amortized over the life of the related insurance contracts. Deferred insurance acquisition costs are reviewed for recoverability; for short-duration contracts, anticipated investment income is considered in making recoverability evaluations. NOTE 2. ACQUISITIONS The Corporation has acquired two individually non-significant entities (collectively "the Acquisitions"). The acquisition of GNA Corporation ("GNA") from Weyerhaeuser Company and Weyerhaeuser Financial Services, Inc. occurred on April 1, 1993, while the acquisition of United Pacific Life Insurance Company ("UPL") from Reliance Insurance Company and its parent company, Reliance Group Holdings, Inc. occurred on July 14, 1993. The acquisitions, accounted for as purchases, have been reflected in the accompanying consolidated financial statements of the Corporation since the respective acquisition dates. The acquired companies had assets of approximately $12.8 billion, principally investment securities. The aggregate estimated purchase price was $1,113 million and is subject to certain post-closing adjustments. Page 21 24 Unaudited pro forma condensed results of operations of the Corporation for each of the years ended December 31, 1993 and 1992 as if the Acquisitions had occurred on January 1, 1993 and January 1, 1992, respectively, are as follows:
1993 1992 ---- ---- (In millions) Earned Income......................................................... $ 14,848 $ 13,375 Net earnings.......................................................... 1,507 1,299
The pro forma data have been prepared based on assumptions management deems appropriate and the results are not necessarily indicative of those that might have occurred had the transactions become effective at the beginning of the respective years, primarily due to changes in investment and other business strategies of the acquired companies. The aggregate effect of several other business acquisitions completed during 1993 was not material. NOTE 3. TRADING SECURITIES The Corporation's trading securities at December 31, 1992, included investments in equity securities held by insurance affiliates at a fair value of $812 million, with unrealized pretax gains of $30 million (net of unrealized pretax losses of $11 million) included in equity and $436 million of preferred stock issued by affiliated companies. At December 31, 1993, such securities were classified as investment securities (see note 4). NOTE 4. INVESTMENT SECURITIES At December 31, 1993, investment securities were classified as available-for-sale and reported at fair value, including net unrealized gains of $760 million before taxes. At December 31, 1992, investment securities of $5,641 million were classified as available-for-sale and were reported at the lower of aggregate amortized cost or fair value. The balance of the 1992 investment securities portfolio was carried at amortized cost. A summary of investment securities follows.
GROSS GROSS ESTIMATED AMORTIZED UNREALIZED UNREALIZED FAIR (In millions) COST GAINS(A) LOSSES(A) VALUE --------- ---------- ---------- --------- DECEMBER 31, 1993 Corporate and non-U.S. ............................... $10,490 $145 $ (59) $10,576 State and municipal................................... 4,646 396 (5) 5,037 Mortgage-backed....................................... 2,487 31 (11) 2,507 U.S. government and federal agency.................... 1,217 14 (7) 1,224 Equity................................................ 977 299 (43) 1,233 ------- ---- ------ ------- $19,817 $885 $ (125) $20,577 ------- ---- ------ ------- ------- ---- ------ ------- DECEMBER 31, 1992 Corporate and non-U.S. ............................... $ 3,091 $ 42 $ -- $ 3,133 State and municipal................................... 3,095 180 (8) 3,267 Mortgage-backed....................................... 246 7 (1) 252 U.S. government and federal agency.................... 251 10 (1) 260 ------- ---- ------ ------- $ 6,683 $239 $ (10) $ 6,912 ------- ---- ------ -------
- --------------- (a) December 31, 1992 amounts include gross unrealized gains of $24 million and there were no unrealized losses on investment securities carried at amortized cost. Contractual maturities of debt securities, other than mortgage-backed securities, at December 31, 1993, are shown below.
ESTIMATED AMORTIZED FAIR (In millions) COST VALUE --------- --------- Due in: 1994......................................................... $ 2,432 $ 2,460 1995 - 1998.................................................. 3,779 3,888 1999 - 2003.................................................. 3,895 3,975 2004 and later............................................... 6,247 6,514
Page 22 25 It is expected that actual maturities will differ from contractual maturities because some borrowers have the right to call or prepay obligations with or without call or prepayment penalties. Proceeds from the sales of debt securities were $4,922 million in 1993, $1,249 million in 1992 and $1,078 million in 1991. Gross realized gains were $129 million in 1993, $60 million in 1992 and $36 million in 1991. Gross realized losses were $31 million in 1993, $1 million in 1992 and $8 million in 1991. NOTE 5. FINANCING RECEIVABLES Financing receivables at December 31, 1993 and 1992 by principal category are shown below.
AMOUNT ------------------- (In millions) 1993 1992 ------- ------- Time sales and loans: Retailer and auto financing........................................... $17,242 $14,847 Commercial real estate financing...................................... 11,887 10,526 Commercial and industrial loans....................................... 6,781 8,270 Equipment sales financing............................................. 5,514 3,951 Other................................................................. 398 421 ------- ------- 41,822 38,015 Deferred income....................................................... (1,074) (945) ------- ------- Time sales and loans -- net of deferred income........................ 40,748 37,070 ------- ------- Investment in financing leases: Direct financing leases............................................... 22,063 20,890 Leveraged leases...................................................... 2,867 3,035 ------- ------- 24,930 23,925 ------- ------- Total financing receivables................................................ $65,678 $60,995 ------- ------- ------- -------
Financing receivables classified as time sales and loans represent transactions with customers in a variety of forms, including time sales, revolving charge and credit, mortgages, installment loans, intermediate-term loans and revolving loans secured by business assets. The portfolio includes time sales and loans carried at the principal amount on which finance charges are billed periodically, and time sales and loans acquired on a discount basis carried at gross book value, which includes finance charges. At year-ends 1993 and 1992, commercial and industrial loans included $3,293 million and $5,262 million, respectively, for highly leveraged transactions. Note 7 contains information on commercial airline loans and leases. The financing lease operations consist of direct financing and leveraged leases of aircraft, railroad rolling stock, automobiles and other transportation equipment, data processing equipment, medical equipment, and other manufacturing, power generation, mining and commercial equipment and facilities. As the sole owner of assets under direct financing leases and as the equity participant in leveraged leases, the Corporation is taxed on total lease payments received and is entitled to tax deductions based on the cost of leased assets and tax deductions for interest paid to third-party participants. The Corporation is also entitled generally to any investment tax credit on leased equipment and to any residual value of leased assets. Investments in direct financing and leveraged leases represent unpaid rentals and estimated unguaranteed residual values of leased equipment, less related deferred income. Because the Corporation has no general obligation on notes and other instruments representing third-party participation related to leveraged leases, such notes and other instruments have not been included in liabilities but have been offset against the related rentals receivable. The Corporation's share of rentals receivable is subordinate to the share of such other participants who also have a security interest in the leased equipment. Page 23 26 The Corporation's investment in financing leases at December 31, 1993 and 1992 is shown below.
DIRECT TOTAL FINANCING LEASES LEVERAGED LEASES FINANCING LEASES ------------------ ------------------- ------------------- (In millions) 1993 1992 1993 1992 1993 1992 -------- -------- -------- -------- -------- -------- Total minimum lease payments receivable........................... $26,584 $25,390 $11,496 $12,782 $38,080 $38,172 Less principal and interest on third-party nonrecourse debt......... -- -- (8,398) (9,446) (8,398) (9,446) -------- -------- -------- -------- -------- -------- Rentals receivable................ 26,584 25,390 3,098 3,336 29,682 28,726 Estimated unguaranteed residual value of leased assets..................... 3,323 3,115 1,167 1,237 4,490 4,352 Less: Deferred income(a)............... (7,844) (7,615) (1,398) (1,538) (9,242) (9,153) -------- -------- -------- -------- -------- -------- Investment in financing leases... 22,063 20,890 2,867 3,035 24,930 23,925 Less: Allowance for losses............. (464) (481) (74) (79) (538) (560) Deferred taxes arising from financing leases................ (2,157) (1,986) (2,760) (2,567) (4,917) (4,553) -------- -------- -------- -------- -------- -------- Net investment in financing leases..... $19,442 $18,423 $ 33 $ 389 $19,475 $18,812 -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
- ------------ (a) Total financing lease deferred income is net of deferred initial direct costs of $83 million and $73 million for 1993 and 1992, respectively. At December 31, 1993, contractual maturities for time sales and loans over the next five years and after are: $16,287 million in 1994; $6,286 million in 1995; $4,350 million in 1996; $4,104 million in 1997; $3,112 million in 1998; and $7,683 million in 1999 and later -- aggregating $41,822 million. At December 31, 1993, contractual maturities for finance lease rentals receivable over the next five years and after are: $6,417 million in 1994; $5,426 million in 1995; $3,919 million in 1996; $2,570 million in 1997; $1,720 million in 1998; and $9,630 million in 1999 and later -- aggregating $29,682 million. Experience of the Corporation has shown that a portion of receivables will be paid prior to contractual maturity. Accordingly, the contractual maturities of time sales and loans and of rentals receivable shown above are not to be regarded as forecasts of future cash collections. The Corporation is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include financial guarantees and letters of credit. The Corporation's exposure to credit loss in the event of nonperformance by the other party to financial guarantees is represented by the contractual amount of those instruments. The Corporation uses the same credit policies and the same collateral requirements in making commitments and conditional obligations as it does for financing transactions. In addition, the Corporation is involved in the sales of receivables for which it is contingently liable for credit losses for a percentage of the initial face amount sold. At December 31, 1993 and 1992, the aggregate amount of such financial guarantees were $1,863 million and $1,693 million, respectively, excluding those related to commercial aircraft (see note 7). In connection with the sales of financing receivables, the Corporation received proceeds of $1,105 million in 1993, $1,097 million in 1992 and $2,316 million in 1991. At December 31, 1993 and 1992, $3,045 million and $3,473 million, respectively, of such receivables were outstanding. Under arrangements with customers, the Corporation had committed to lend funds of $2,131 million and $1,794 million at December 31, 1993 and 1992, respectively, excluding those related to commercial aircraft (see note 7). Additionally, at December 31, 1993 and 1992, the Corporation was conditionally obligated to advance $2,244 million and $2,236 million, respectively, principally under performance-based standby lending commitments. The Corporation also was obligated for $2,946 million and $2,147 million at year-ends 1993 and 1992, respectively, under standby liquidity facilities related to third-party commercial paper programs, although management believes that the prospects of being required to fund under such standby facilities are remote. Note 11 discusses financial guarantees of insurance affiliates. Nonearning consumer time sales and loans, primarily private-label credit card receivables, amounted to $391 million and $444 million at December 31, 1993 and 1992, respectively. A majority of these receivables was subject to various loss-sharing arrangements that provide full or partial recourse to the originating private-label entity. Nonearning and reduced earning receivables other than consumer time sales and loans were $509 million and $934 million at year-ends 1993 and 1992, respectively. Page 24 27 Earnings of $11 million and $30 million realized in 1993 and 1992, respectively, were $41 million and $75 million lower than would have been reported had these receivables earned income in accordance with their original terms. Additional information regarding financing receivables is included in Management's Discussion of the Corporation's Portfolio Quality on page 13. NOTE 6. ALLOWANCE FOR LOSSES ON FINANCING RECEIVABLES The allowance for losses on financing receivables represented 2.63% of total financing receivables at both year-ends 1993 and 1992. The table below shows the activity in the allowance for losses on financing receivables during 1991 through 1993:
(In millions) 1993 1992 1991 ------ ------- ------- Balance at January 1.............................. $1,607 $ 1,508 $ 1,360 Additions charged to operations................... 987 1,056 1,102 Net transfers related to companies acquired or sold............................................ 126 52 135 Amounts written off -- net........................ (990) (1,009) (1,089) ------ ------- ------- Balance at December 31............................ $1,730 $ 1,607 $ 1,508 ------ ------- ------- ------ ------- -------
Amounts written off in 1993 were approximately 1.46% of average financing receivables outstanding during the year, compared with 1.58% and 1.87% of average financing receivables outstanding during 1992 and 1991, respectively. NOTE 7. EQUIPMENT ON OPERATING LEASES Equipment on operating leases by type of equipment and accumulated amortization at December 31, 1993 and 1992 are shown in the following table:
(In millions) 1993 1992 ------- ------- Cost -- aircraft.................................................. $ 3,677 $ 2,850 -- vehicles................................................. 3,568 2,274 -- marine shipping containers............................... 2,985 2,584 -- railroad rolling stock................................... 1,498 1,478 -- other.................................................... 2,160 2,758 ------- ------- 13,888 11,944 Accumulated amortization.......................................... (3,238) (2,549) ------- ------- $10,650 $ 9,395 ------- ------- ------- -------
Amortization of equipment on operating leases was $1,395 million in 1993, $1,133 million in 1992 and $1,055 million in 1991. The Corporation acts as a lender and lessor to commercial enterprises in the airline industry; at December 31, 1993 and 1992, the aggregate amount of such loans, leases and equipment leased to others were $6,776 million and $5,978 million, respectively. In addition, the Corporation had issued financial guarantees and funding commitments of $450 million at December 31, 1993 ($645 million at year-end 1992) and had conditional commitments to purchase aircraft at a cost of $865 million. These purchase commitments are subject to the aircraft having been placed on lease under agreements, and with carriers, acceptable to the Corporation prior to delivery. Included in the Corporation's equipment leased to others at year-end 1993 is $244 million of commercial aircraft off-lease ($94 million in 1992). NOTE 8. BUILDINGS AND EQUIPMENT Buildings and equipment include office buildings, satellite communications equipment, data processing equipment, vehicles, furniture and office equipment used at the Corporation's offices throughout the world. Depreciation expense was $192 million for 1993, $164 million for 1992 and $132 million for 1991. Page 25 28 NOTE 9. OTHER ASSETS Other assets at December 31, 1993 and 1992 are shown in the table below.
(In millions) 1993 1992 ------- ------- Assets acquired for resale......................................... $ 8,141 $ 3,388 Investments in and advances to nonconsolidated affiliates, at equity........................................................... 2,079 1,720 Other intangibles.................................................. 1,637 921 Miscellaneous investments.......................................... 1,541 1,983 Goodwill........................................................... 1,537 1,197 Deferred insurance acquisition costs............................... 847 598 Foreclosed real estate properties.................................. 213 304 Other.............................................................. 764 621 ------- ------- $16,759 $10,732 ------- ------- ------- -------
Accumulated amortization of goodwill and other intangibles was $261 million and $229 million, respectively, at December 31, 1993 and $204 million and $94 million, respectively, at December 31, 1992. Miscellaneous investments included $75 million and $275 million at December 31, 1993 and 1992, respectively, of in-substance repossessions at the lower of cost or estimated fair value previously included in financing receivables. Investments in and advances to nonconsolidated affiliates include advances of $1,159 million and $687 million at December 31, 1993 and 1992, respectively. The Corporation's mortgage servicing activities include the purchase and resale of mortgages. It had open commitments to purchase mortgages totaling $5,935 million and $2,963 million at December 31, 1993 and 1992, respectively. Additionally, the Corporation had open commitments to sell mortgages totaling $6,426 million and $1,777 million, at year-ends 1993 and 1992, respectively. At December 31, 1993 and 1992, mortgages sold with full or partial recourse to the Corporation aggregated $2,526 million and $3,876 million, respectively. NOTE 10. NOTES PAYABLE Notes payable at December 31, 1993 totaled $78,712 million, consisting of $78,015 million of senior debt and $697 million of subordinated debt. The composite interest rate during 1993 was 4.97% compared with 5.84% for 1992 and 7.51% for 1991. Total short-term notes payable at December 31, 1993 and 1992 consisted of the following:
(In millions) 1993 1992 ------- ------- Commercial paper................................................... $43,958 $40,179 Current portion of long-term debt.................................. 6,420 4,298 Notes with trust departments of banks.............................. 1,882 1,659 Banks.............................................................. 198 1,816 Other.............................................................. 445 540 ------- ------- $52,903 $48,492 ------- ------- ------- -------
The average daily balance of short-term debt, excluding the current portion of long-term debt, during 1993 was $41,450 million compared with $38,319 million for 1992 and $35,487 million for 1991. The December 31, 1993 balance of $52,903 million was the maximum balance during 1993. The December 31, 1992 balance of $48,492 million was the maximum balance during 1992. The December 27, 1991 balance of $44,412 million was the maximum balance during 1991. The average short-term interest rate, excluding the current portion of long-term debt, for the year 1993 was 3.27%, representing short-term interest expense divided by the average daily balance, compared with 3.91% for 1992 and 6.32% for 1991. On December 31, 1993, 1992 and 1991, average interest rates were 3.39%, 3.57% and 5.13%, respectively, for commercial paper and 3.10%, 3.54% and 4.90%, respectively, for notes with trust departments of banks. Page 26 29 Outstanding balances in notes payable after one year at December 31, 1993 and 1992 are shown below.
WEIGHTED AVERAGE 1993 1992 (Dollars in millions) INTEREST RATE MATURITIES AMOUNT AMOUNT ------------- ---------- ------- ------- Senior notes Notes(a)(b).................................. 6.03% 1995-2012 $22,028 $18,072 Zero coupon/deep discount notes.............. 13.72 1995-2001 1,407 1,578 Reset or remarketed notes(c)................. 8.39 2007-2018 1,500 1,500 Floating rate notes(d)....................... 1995-2053 521 496 Less unamortized discount/premium............ (344) (464) ------- ------- Total senior notes...................... 25,112 21,182 ------- ------- Subordinated notes(e)............................. 7.39 2006-2012 697 697 ------- ------- $25,809 $21,879 ------- ------- ------- -------
- --------------- (a) At December 31, 1993 and 1992, the Corporation had agreed to exchange currencies and related interest payments on principal amounts equivalent to U.S. $8,101 million and $6,499 million, respectively. At December 31, 1993 and 1992, the Corporation also had entered into interest rate swaps related to interest on $11,624 million and $8,549 million, respectively. To minimize borrowing costs, the Corporation has entered into multiple currency and interest rate agreements for certain notes. (b) At December 31, 1993 and 1992, counterparties held options under which the Corporation can be caused to execute interest rate swaps associated with interest payments through 1999 on $500 million and $625 million, respectively. (c) The Corporation will reset interest rates at the end of the initial and each subsequent interest period. At each interest rate-reset date, the Corporation may redeem notes in whole or in part at its option. Current interest periods range from March 1994 to May 1996. (d) The rate of interest payable on each note is a variable rate based on the commercial paper rate each month. Interest is payable at the option of the Corporation either monthly or semiannually. (e) At December 31, 1993 and 1992, subordinated notes in the amount of $697 million were guaranteed by GE Company. Long-term borrowing maturities during the next five years, including the current portion of notes payable after one year are: 1994, $6,420 million; 1995, $6,202 million; 1996, $4,805 million; 1997, $2,969 million; and 1998, $3,563 million. At December 31, 1993 the Corporation had committed lines of credit aggregating $19,045 million with 134 banks, including $6,005 million of revolving credit agreements with 69 banks pursuant to which the Corporation has the right to borrow funds for periods exceeding one year. A total of $4,627 million of these lines were also available for use by GE Capital Services. In addition, at December 31, 1993, approximately $105 million of committed lines of credit were directly available to a foreign affiliate. Also, at December 31, 1993, approximately $3,045 million of GE Company's credit lines were available for use by the Corporation. During 1993 the Corporation did not borrow under any of these credit lines. The Corporation compensates banks for credit facilities in the form of fees which were immaterial for the past three years. NOTE 11. INSURANCE RESERVES AND ANNUITY BENEFITS The Corporation adopted SFAS No. 113, "Accounting and Reporting for Reinsurance of Short-Duration and Long-Duration Contracts," during 1993. The principal effect of this Statement was to report reinsurance receivables and prepaid reinsurance premiums, a total of $1,012 million at December 31, 1993, as assets. Such amounts were reported as reductions of insurance reserves at the end of 1992. Page 27 30 Insurance reserves and annuity benefits represents policyholders' benefits, unearned premiums and provisions for policy losses and benefits relating to insurance and annuity businesses. The related balances at December 31, 1993 and 1992 are as follows:
(In millions) 1993 1992 -------- ------- Insurance reserves and annuity benefits: Annuity benefits.......................................................... $ 8,894 $ -- Other policyholder benefits............................................... 5,259 1,231 Financial and mortgage guarantee reserves................................. 607 412 Property and casualty reserves............................................ 440 442 Unearned premiums......................................................... 1,385 1,088 -------- ------- $ 16,585 $ 3,173 -------- ------- -------- -------
Financial guarantees, principally FGIC's guarantees on municipal bonds and structured debt issued, amounted to approximately $101.4 billion and $81.3 billion at year-end 1993 and 1992, respectively, before reinsurance of $17.3 billion and $13.7 billion, respectively. Related unearned premiums amounted to $803 million and $571 million at December 31, 1993 and 1992, respectively. As of December 31, 1993 and 1992, reserves for losses and loss adjustment expenses were $96 million and $40 million, respectively. The Corporation's mortgage insurance operations underwrite residential mortgage guarantee insurance. Total risk in force aggregated $27.0 billion and $21.3 billion at December 31, 1993 and 1992, respectively; related unearned premiums amounted to $276 million at December 31, 1993 and $236 million at December 31, 1992. Case basis loss reserves and loss adjustment expense reserves are provided in an amount sufficient to pay all estimated losses in the portfolio, including those incurred but not reported. As of December 31, 1993 and 1992, reserves for losses and loss adjustment expenses were $511 million and $372 million, respectively. Interest rates credited to annuity contracts in 1993 ranged from 3.7% to 9.7%. For most annuities, interest rates to be credited are redetermined by management on an annual basis. The Corporation's Specialty Insurance businesses are involved significantly in the reinsurance business, ceding reinsurance on both a pro-rata and an excess basis. The maximum amount of individual life insurance retained on any one life is $500,000. When the Corporation cedes business to third parties, it is not relieved of its primary obligation to policyholders and reinsureds. Consequently, the Corporation establishes allowances for amounts deemed uncollectible due to the failure of reinsurers to honor their obligations. The Corporation monitors both the financial condition of individual reinsurers and risk concentrations arising from similar geographic regions, activities and economic characteristics of reinsurers. The effects of reinsurance on premiums written and earned during 1993, 1992 and 1991 were as follows:
WRITTEN PREMIUMS EARNED PREMIUMS -------------------------- ------------------------ 1993 1992 1991 1993 1992 1991 ------ ------ ---- ------ ---- ---- Direct...................................... $1,312 $1,051 $551 $1,161 $888 $459 Assumed..................................... 266 221 387 268 222 389 Ceded....................................... (125) (142) (163) (125) (142) (156) ------ ------ ---- ------ ---- ---- Net Premiums................................ $1,453 $1,130 $775 $1,304 $968 $692 ------ ------ ---- ------ ---- ---- ------ ------ ---- ------ ---- ----
Reinsurance recoveries recognized as a reduction of insurance losses and policyholder and annuity benefits amounted to $163 million, $169 million and $225 million for the period ended December 31, 1993, 1992 and 1991, respectively. NOTE 12. EQUITY CAPITAL All Common Stock is owned by GE Capital Services, which is in turn wholly owned by GE Company. In 1993, GE Capital Services contributed the minority interest in Financial Insurance Group to the Corporation. In 1992, GE Company contributed to GE Capital Services the assets of GE Computer Services. GE Capital Services in turn contributed the GE Computer Services assets to the Corporation. These contributions were reflected as additions to the Corporation's additional paid-in capital of $25 million and $134 million in 1993 and 1992, respectively. Cash dividends paid on the Common Stock were $460 million in 1993, $300 million in 1992 and $100 million in 1991. Page 28 31 Other equity at December 31, 1993 and 1992 consisted of:
(In millions) 1993 1992 ---- ---- Foreign currency translation adjustments........................................ $(64) $(30) Unrealized gains and (losses) on investment securities -- net................... 485 (6) ---- ---- $421 $(36) ---- ---- ---- ----
Dividend rates on the Corporation's variable cumulative preferred stock ranged from 2.33% to 2.79% during 1993, 2.44% to 3.49% during 1992. Dividends paid on such variable cumulative preferred stock were $22 million in 1993, $26 million in 1992 and $41 million in 1991. NOTE 13. EARNED INCOME Included in earned income from financing leases were gains on the sale of equipment at lease completion of $145 million in 1993, $126 million in 1992 and $147 million in 1991. Noncancelable future rentals due from customers for equipment on operating leases as of December 31, 1993 totaled $6,133 million and are due as follows: 1994, $2,036 million; 1995, $1,455 million; 1996, $879 million; 1997, $458 million; 1998, $316 million and $989 million thereafter. Amortization of deferred investment tax credit was $29 million, $26 million and $25 million in 1993, 1992 and 1991, respectively. Time sales, loan and investment and other income includes the Corporation's share of earnings from equity investees of $106 million, $72 million and $84 million for 1993, 1992 and 1991, respectively. NOTE 14. INTEREST AND DISCOUNT EXPENSES Interest and discount expenses reported in the Statement of Current and Retained Earnings are net of interest income on temporary investments of excess funds of $38 million for 1993, $42 million for 1992, and $47 million for 1991, and net of capitalized interest of $5 million for 1993, $6 million for 1992 and $8 million for 1991. For purposes of computing the ratio of earnings to fixed charges (the "ratio") in accordance with applicable Securities and Exchange Commission instructions, earnings consist of net earnings adjusted for the provision for income taxes, minority interest and fixed charges. Fixed charges consist of interest on all indebtedness and one-third of annual rentals, which the Corporation believes is a reasonable approximation of the interest factor of such rentals. The ratio was 1.62 for 1993, compared with 1.44 for 1992 and 1.34 for 1991. NOTE 15. OPERATING AND ADMINISTRATIVE EXPENSES Employees and retirees of the Corporation and its affiliates are covered under a number of pension, health and life insurance plans. The principal pension plan is the GE Company pension plan, a defined benefit plan, while employees of certain affiliates are covered under separate plans. The Corporation provides health and life insurance benefits to certain of its retired employees, principally through GE Company's benefit program. The annual cost to the Corporation of providing these benefits is not material and the net transition obligation arising from the 1991 adoption of the new accounting standard, SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pension," was not separately determinable. GE Company adopted SFAS No. 112, "Employers' Accounting for Postemployment Benefits," in the second quarter of 1993. The Corporation adopted this standard in conjunction with its ultimate parent. This Statement requires that employers expense the costs of postemployment benefits (as distinct from postretirement pension, medical and life insurance benefits) over the working lives of their employees. This change principally affects the Corporation's accounting for severance benefits, which previously were expensed when the severance event occurred. The net transition obligation related to the Corporation's employees covered under GE Company postemployment benefit plans is not separately determinable from the GE Company plans as a whole; accordingly, there is no financial statement impact on the Corporation. The net transition obligation for employees covered under separate plans is not material. Rental expense for 1993 aggregating $413 million, compared with $272 million for 1992 and $103 million for 1991, was principally for the rental of office space, data processing equipment and railcars. Page 29 32 Minimum future rental commitments under noncancelable leases are: 1994, $356 million; 1995, $336 million; 1996, $317 million; 1997, $302 million; 1998, $284 million and $1,802 million thereafter. The Corporation, as a lessee, has no material lease agreements classified as capital leases. NOTE 16. INCOME TAXES The income tax provision is summarized in the following table:
(In millions) 1993 1992 1991 ---- ---- ----- Estimated taxes payable (recoverable).................................. $175 $291 $(230) Effect of temporary differences........................................ 496 129 573 Investment tax credit deferred (amortized) -- net...................... (7) (5) 19 ---- ---- ----- $664 $415 $ 362 ---- ---- ----- ---- ---- -----
GE Company files a consolidated Federal income tax return which includes GE Capital. The provisions for estimated taxes payable (recoverable) include the effect of the Corporation and its affiliates on the consolidated tax and the effect of tax transfer leases. Estimated income taxes payable were $15 million and $7 million at December 31, 1993 and 1992, respectively. A reconciliation of the Corporation's actual income tax rate to the U.S. Federal statutory rate is shown in the following table:
(In millions) 1993 1992 1991 ---- ---- ---- Statutory U.S. Federal income tax rate.................................... 35.0% 34.0% 34.0% Tax effect of: Rate increase -- deferred taxes......................................... 5.6 -- -- Tax-exempt income....................................................... (5.0) (6.1) (6.6) Change in tax-rate assumptions for leveraged leases..................... (1.6) (2.6) (2.7) Other -- net............................................................ (3.0) (0.4) (0.4) ---- ---- ---- Actual income tax rate.................................................... 31.0% 24.9% 24.3% ---- ---- ---- ---- ---- ----
The tax effects of principal temporary differences are shown in the following table:
(In millions) 1993 1992 ------- ------- Assets Provision for losses..................................................... $ (825) $ (715) Insurance reserves....................................................... (69) (103) AMT credit carry forwards................................................ -- (200) Other.................................................................... (817) (456) ------- ------- Total deferred tax assets.................................................. (1,711) (1,474) Liabilities Financing leases......................................................... 4,917 4,553 Operating leases......................................................... 966 811 Tax transfer leases...................................................... 340 329 Net unrealized gains on investment securities............................ 261 -- Other.................................................................... 857 862 ------- ------- Total deferred tax liability............................................... 7,341 6,555 ------- ------- Net deferred tax liability................................................. $ 5,630 $ 5,081 ------- ------- ------- -------
Page 30 33 NOTE 17. INDUSTRY SEGMENT DATA Industry segment operating data and identifiable assets for the years 1993, 1992 and 1991 are shown below.
(In millions) 1993 1992 1991 -------- ------- ------- Earned Income: Consumer Services............................................. $ 4,062 $ 3,315 $ 3,373 Equipment Management.......................................... 3,601 2,756 2,331 Mid-Market Financing.......................................... 1,652 1,499 1,440 Specialty Insurance........................................... 2,002 1,663 1,231 Specialized Financing......................................... 3,084 2,974 2,925 -------- ------- ------- 14,401 12,207 11,300 Corporate..................................................... 43 43 28 -------- ------- ------- Total earned income............................................. $ 14,444 $12,250 $11,328 -------- ------- ------- -------- ------- ------- Segment operating profit: Consumer Services............................................. $ 695 $ 525 $ 478 Equipment Management.......................................... 377 368 381 Mid-Market Financing.......................................... 454 352 248 Specialty Insurance........................................... 422 302 169 Specialized Financing......................................... 201 121 220 Total segment operating profit.................................. 2,149 1,668 1,496 Corporate..................................................... (7) (2) (9) -------- ------- ------- Earnings before taxes........................................... 2,142 1,666 1,487 Income tax provision............................................ 664 415 362 -------- ------- ------- Net earnings.................................................... $ 1,478 $ 1,251 $ 1,125 -------- ------- ------- -------- ------- ------- Identifiable assets at December 31: Consumer Services............................................. $ 45,746 $24,164 $21,914 Equipment Management.......................................... 14,454 12,640 9,848 Mid-Market Financing.......................................... 14,890 13,665 11,414 Specialty Insurance........................................... 9,579 7,419 5,152 Specialized Financing......................................... 31,918 31,865 31,591 Corporate..................................................... 1,352 2,879 609 -------- ------- ------- Total assets.................................................... $117,939 $92,632 $80,528 -------- ------- ------- -------- ------- -------
NOTE 18. QUARTERLY FINANCIAL DATA (UNAUDITED) Summarized quarterly financial data for 1993 and 1992 are as follows:
THREE MONTHS ENDED ----------------------------------------------------------------------------------- MARCH JUNE SEPTEMBER DECEMBER ----------------- ----------------- ----------------- ----------------- (In millions) 1993 1992 1993 1992 1993 1992 1993 1992 ------ ------ ------ ------ ------ ------ ------ ------ Earned income.............................. $3,131 $2,845 $3,354 $2,896 $3,668 $3,201 $4,291 $3,308 Expenses: Interest and discount.................. 779 925 865 908 871 900 946 932 Operating and administrative (including minority interest)................... 1,063 797 1,098 852 1,152 1,098 1,695 1,208 Insurance losses and policyholder and annuity benefits..................... 169 143 272 204 381 213 437 51 Provision for losses on financing receivables.......................... 255 251 292 313 200 176 240 316 Depreciation and amortization of buildings and equipment and equipment on operating leases................................... 340 290 364 243 375 379 508 385 ------ ------ ------ ------ ------ ------ ------ ------ Earnings before income taxes............... 525 439 463 376 689 435 465 416 Provision for income taxes................. 154 112 128 96 291 104 91 103 ------ ------ ------ ------ ------ ------ ------ ------ Net earnings............................... $ 371 $ 327 $ 335 $ 280 $ 398 $ 331 $ 374 $ 313 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
NOTE 19. RESTRICTED NET ASSETS OF AFFILIATES Various state and foreign regulations require that the Corporation's investment in certain affiliates, without regard to net unrealized after-tax gains on investment securities which were $336 million at December 31, 1993, be maintained at specified minimum levels to provide additional protection for insurance customers, investment certificate holders and passbook savings depositors. At December 31, 1993, such minimum investment levels aggregated approximately $4,600 million. Page 31 34 NOTE 20. SUPPLEMENTAL CASH FLOW INFORMATION Cash used or provided in 1993, 1992 and 1991 included interest paid by the Corporation of $3,298 million, $3,570 million and $4,460 million, respectively, and income taxes (paid) recovered by the Corporation of $(133) million, $(42) million and $51 million, respectively. NOTE 21. FAIR VALUES OF FINANCIAL INSTRUMENTS As required under generally accepted accounting principles, financial instruments are presented in the accompanying financial statements -- generally at either cost or fair value, based on both the characteristics of and management intentions regarding the instruments. Management believes that the financial statement presentation is the most useful for displaying the Corporation's results. However, SFAS No. 107, "Disclosure About Fair Value of Financial Instruments," requires disclosure of an estimate of the fair value of certain financial instruments. These disclosures disregard management intentions regarding the instruments, and therefore, management believes that this information may be of limited usefulness. Apart from the Corporation's own borrowings and certain marketable securities, relatively few of the Corporation's financial instruments are actively traded. Thus, fair values must often be determined by using one or more models that indicate value based on estimates of quantifiable characteristics as of a particular date. Because this undertaking is, by nature, difficult and highly judgmental, for a limited number of instruments, alternative valuation techniques indicate values sufficiently diverse that the only practicable disclosure is a range of values. Users of the following data are cautioned that limitations in the estimation techniques may have produced disclosed values different from those that could have been realized at December 31, 1993 or 1992. Moreover, the disclosed values are representative of fair values only as of the dates indicated, inasmuch as interest rates, performance of the economy, tax policies and other variables significantly impact fair valuations. Cash and cash equivalents, trading securities and other receivables have been excluded as their carrying amounts and fair values are the same, or approximately the same. Values were estimated as follows: INVESTMENT SECURITIES. Based on quoted market prices or dealer quotes for actively traded securities. Value of other such securities was estimated using quoted market prices for similar securities. TIME SALES, LOANS AND RELATED PARTICIPATIONS. Based on quoted market prices, recent transactions, market comparables and/or discounted future cash flows, using rates at which similar loans would have been made to similar borrowers. INVESTMENTS IN AND ADVANCES TO NON-CONSOLIDATED AFFILIATES. Based on market comparables, recent transactions and/or discounted future cash flows. These equity interests were generally acquired in connection with financing transactions and, for purposes of this disclosure, fair values were estimated. OTHER FINANCIAL INSTRUMENTS. Based on recent comparable transactions, market comparables, discounted future cash flows, quoted market prices, and/or estimates of the cost to terminate or otherwise settle obligations to counterparties. BORROWINGS. Based on quoted market prices or market comparables. Fair values of interest rate and currency swaps on borrowings are based on quoted market prices and include the effects of counterparty creditworthiness. ANNUITY BENEFITS. Based on expected future cash flows, discounted at currently offered discount rates for immediate annuity contracts or cash surrender value for single premium deferred annuities. FINANCIAL GUARANTIES OF INSURANCE AFFILIATES. Based on future cash flows, considering expected renewal premiums, claims, refunds and servicing costs, discounted at a market rate. Page 32 35 The carrying amounts and estimated fair values of the Corporation's financial instruments at December 31, 1993 and 1992 are as follows: ASSETS (LIABILITIES)
1993 1992 -------------------------- -------------------------- CARRYING ESTIMATED CARRYING ESTIMATED (In millions) AMOUNT FAIR VALUE AMOUNT FAIR VALUE -------- ------------- -------- ------------- Investment securities..................... $20,577 $20,577 $ 6,683 $6,912 Time sales, loans and related participations.......................... 39,678 41,410-40,685 36,131 37,420-36,240 Investments in and advances to non- consolidated affiliates................. 2,079 2,830-2,635 1,720 2,295-2,180 Other financial instruments............... 6,356 6,442-6,315 2,940 3,105-2,970 Annuity benefits.......................... (8,894) (8,660) -- -- Borrowings(a)(b).......................... (78,712) (79,742) (70,371) (71,631) Financial guaranties of insurance affiliates.............................. (1,299) (123)-(204) (1,023) 210-70
- --------------- (a) Swap contracts are integral to the Corporation's goal of achieving the lowest borrowing costs for particular funding strategies. The above fair values of borrowings include fair values of associated interest rates and currency swaps. At December 31, 1993, the approximate settlement values of the Corporation's swaps were $260 million. Without such swaps, estimated fair values of the Corporation's borrowings would have been $79,482 million. Approximately 90% of the notional amount of swaps outstanding at December 31, 1993, was with counterparties having credit ratings of Aa/AA or better. (b) Proceeds from borrowings are invested in a variety of activities, including both financial instruments shown in the preceding tables, as well as leases, for which fair value disclosures are not required. When evaluating the extent to which estimated fair value of borrowings exceeds the related carrying amount, users should consider that the fair value of the fixed payment stream for long-term leases would increase as well. NOTE 22. GEOGRAPHIC SEGMENT INFORMATION Geographic segment operating data and total assets for the years 1993, 1992 and 1991 are as follows:
EARNED INCOME OPERATING PROFIT ---------------------------- ------------------------ (In millions) 1993 1992 1991 1993 1992 1991 -------- ------- ------- ------ ------ ------ United States.............................. $ 12,419 $10,627 $10,102 $2,028 $1,524 $1,304 Other areas of the world................... 2,025 1,623 1,226 114 142 183 -------- ------- ------- ------ ------ ------ Total.................................... $ 14,444 $12,250 $11,328 $2,142 $1,666 $1,487 -------- ------- ------- ------ ------ ------ -------- ------- ------- ------ ------ ------
TOTAL ASSETS ---------------------------- (In millions) 1993 1992 1991 -------- ------- ------- United States.............................. $108,228 $84,928 $72,418 Other areas of the world................... 9,711 7,704 8,110 -------- ------- ------- Total.................................... $117,939 $92,632 $80,528 -------- ------- ------- -------- ------- -------
U.S. amounts were derived from the Corporation's operations located in the U.S. The Corporation manages its exposure to currency movements by committing to future exchanges of currencies at specified prices and dates. Commitments outstanding at December 31, 1993 and 1992, were $1,650 million and $1,884 million, respectively. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. Not applicable Page 33 36 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. Omitted ITEM 11. EXECUTIVE COMPENSATION. Omitted ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. Omitted ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. Omitted Page 34 37 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. (a) 1. FINANCIAL STATEMENTS Included in Part II of this report: Independent Auditors' Report Statement of Current and Retained Earnings for each of the years in the three-year period ended December 31, 1993 Statement of Financial Position at December 31, 1993 and 1992 Statement of Cash Flows for each of the years in the three-year period ended December 31, 1993 Notes to Financial Statements Incorporated by reference: The consolidated financial statements, of General Electric Company, set forth in the Annual Report on Form 10-K of General Electric Company for the year ending December 31, 1993 (pages F-1 through F-46) and Exhibit 12 (Ratio of Earnings to Fixed Charges) of General Electric Company. (a) 2. FINANCIAL STATEMENT SCHEDULES III. Condensed financial information of registrant All other schedules are omitted because of the absence of conditions under which they are required or because the required information is shown in the financial statements or notes thereto. (a) 3. EXHIBIT INDEX The exhibits listed below, as part of Form 10-K, are numbered in conformity with the numbering used in Item 601 of Regulation S-K of the Securities and Exchange Commission.
EXHIBIT NUMBER DESCRIPTION ------- -------------------------------------------------------------------------- 3(i) A complete copy of the Organization Certificate of the Corporation as last amended on December 6, 1990 and currently in effect. 3(ii) A complete copy of the By-Laws of the Corporation as last amended on March 11, 1993 and currently in effect. 4(iii) Agreement to furnish to the Securities and Exchange Commission upon request a copy of instruments defining the rights of holders of certain long-term debt of the registrant and all subsidiaries for which consolidated or unconsolidated financial statements are required to be filed. 12(a) Computation of ratio of earnings to fixed charges. 12(b) Computation of ratio of earnings to combined fixed charges and preferred stock dividends. 23(ii) Consent of KPMG Peat Marwick. 24 Power of Attorney. 99(a) Income Maintenance Agreement dated March 28, 1991 between General Electric Company and the Corporation. (Incorporated by reference to Exhibit 28(a) of the Corporation's Form 10-K Report for the year ended December 31, 1992.) 99(b) The consolidated financial statements, of General Electric Company, set forth in the Annual Report on Form 10-K of General Electric Company for the year ending December 31, 1993 (pages F-1 through F-46) and Exhibit 12 (Ratio of Earnings to Fixed Charges) of General Electric Company.
(b) REPORTS ON FORM 8-K None. Page 35 38 GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES SCHEDULE III -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT GENERAL ELECTRIC CAPITAL CORPORATION CONDENSED STATEMENT OF FINANCIAL POSITION
DECEMBER 31, ------------------- (In millions) 1993 1992 ------- ------- ASSETS Cash and equivalents....................................................... $ 85 $ 601 Investment securities...................................................... 1,959 2,314 Financing receivables: Time sales and loans.................................................. 22,576 23,961 Investment in financing leases........................................ 9,802 10,032 ------- ------- 32,378 33,993 Allowance for losses on financing receivables......................... (874) (928) ------- ------- Financing receivables -- net..................................... 31,504 33,065 Investments in and advances to consolidated affiliates, at equity.......... 52,223 37,757 Equipment on operating leases (at cost), less accumulated amortization of $245 and $185............................................................ 1,106 1,029 Other assets............................................................... 5,138 5,461 ------- ------- Total assets............................................................... $92,015 $80,227 ------- ------- ------- ------- LIABILITIES AND EQUITY Notes payable: Due within one year................................................... $51,265 $44,749 Long-term (including notes payable to consolidated affiliates of $971 and $1,237).......................................................... 24,145 20,996 Other liabilities (including payables to consolidated affiliates of $4 and $12)..................................................................... 4,258 3,259 Deferred income taxes...................................................... 1,977 2,331 ------- ------- Total liabilities................................................ 81,645 71,335 ------- ------- Capital stock.............................................................. 769 769 Additional paid-in capital................................................. 2,172 2,147 Retained earnings.......................................................... 7,008 6,012 Other...................................................................... 421 (36) ------- ------- Total equity..................................................... 10,370 8,892 ------- ------- Total liabilities and equity............................................... $92,015 $80,227 ------- ------- ------- -------
See Notes to Condensed Financial Statements. Page 36 39 GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES SCHEDULE III -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT -- (CONTINUED) GENERAL ELECTRIC CAPITAL CORPORATION CONDENSED STATEMENT OF CURRENT AND RETAINED EARNINGS
YEARS ENDED DECEMBER 31, ---------------------------- (In millions) 1993 1992 1991 ------ ------ ------ Earned income....................................................... $3,782 $4,012 $3,947 ------ ------ ------ Expenses: Interest and discount -- net................................... 1,925 2,219 2,809 Operating and administrative................................... 1,340 1,592 997 Provision for losses on financing receivables.................. 382 443 570 Depreciation and amortization.................................. 209 183 85 ------ ------ ------ 3,856 4,437 4,461 ------ ------ ------ Loss before equity in earnings from operations of consolidated affiliates and income taxes....................................... (74) (425) (514) Income tax (provision) benefit...................................... (72) 205 215 Net earnings from operations of consolidated affiliates............. 1,624 1,471 1,424 ------ ------ ------ Net earnings........................................................ 1,478 1,251 1,125 Cash dividends paid................................................. (482) (326) (141) Retained earnings at January 1...................................... 6,012 5,087 4,103 ------ ------ ------ Retained earnings at December 31.................................... $7,008 $6,012 $5,087 ------ ------ ------ ------ ------ ------
See Notes to Condensed Financial Statements. Page 37 40 GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES SCHEDULE III -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT -- (CONTINUED) GENERAL ELECTRIC CAPITAL CORPORATION CONDENSED STATEMENT OF CASH FLOWS
YEARS ENDED DECEMBER 31, ------------------------------ (In millions) 1993 1992 1991 -------- -------- -------- CASH PROVIDED BY OPERATING ACTIVITIES............................. $ 1,117 $ 1,958 $ 692 -------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Increase in loans to customers.................................... (27,112) (24,993) (22,877) Principal collections from customers.............................. 27,237 23,028 23,288 Investment in assets on financing leases.......................... (1,271) (2,042) (3,225) Principal collections on financing leases......................... 1,728 1,796 244 Net change in credit card receivables............................. 299 (66) 100 Buildings, equipment and equipment on operating leases --additions.................................................. (610) (254) (220) --dispositions............................................... 365 87 380 Payments for principal businesses purchased, net of cash acquired........................................................ (2,090) (780) (2,830) Proceeds from principal business dispositions..................... -- -- 277 Change in investment in and advances to affiliates................ (10,296) 226 (4,983) Other............................................................. 1,093 (4,998) 557 -------- -------- -------- CASH USED BY INVESTING ACTIVITIES................................. (10,657) (7,996) (9,289) -------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Net change in borrowings (less than 90-day maturities)............ 3,969 1,894 4,508 Newly issued debt --short-term (91-365 days)................................... 4,315 4,456 4,863 --long-term senior........................................... 10,188 6,582 6,086 --long-term subordinated..................................... -- 450 250 Proceeds--non-recourse, leveraged lease debt...................... -- 118 965 Repayments and other reductions --short-term................................................. (8,636) (6,197) (6,504) --long-term senior........................................... (157) (395) (1,361) --long-term subordinated..................................... -- (50) (17) Principal payments -- non-recourse, leveraged lease debt.......... (198) (127) (180) Cash dividends paid............................................... (482) (326) (141) Contributions to additional paid-in-capital....................... 25 -- -- -------- -------- -------- CASH PROVIDED BY FINANCING ACTIVITIES............................. 9,024 6,405 8,469 -------- -------- -------- INCREASE (DECREASE) IN CASH AND EQUIVALENTS DURING THE YEAR....... (516) 367 (128) CASH AND EQUIVALENTS AT BEGINNING OF YEAR......................... 601 234 362 -------- -------- -------- CASH AND EQUIVALENTS AT END OF YEAR............................... $ 85 $ 601 $ 234 -------- -------- -------- -------- -------- --------
See Notes to Condensed Financial Statements. Page 38 41 GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES SCHEDULE III -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT -- (CONCLUDED) GENERAL ELECTRIC CAPITAL CORPORATION NOTES TO CONDENSED FINANCIAL STATEMENTS NOTES PAYABLE -- Outstanding balances in notes payable after one year at December 31, 1993 and 1992 are shown below.
WEIGHTED AVERAGE INTEREST 1993 1992 (DOLLARS IN MILLIONS) RATE MATURITIES AMOUNT AMOUNT ------------ ------------ ------------ ------------ Senior notes Notes(a)(b)................................... 5.84% 1995-2012 $ 20,181 $ 16,795 Zero Coupon/Deep discount notes............... 15.15 1995-2001 424 424 Reset or remarketed notes(c).................. 8.39 2007-2018 1,500 1,500 Floating rate notes(d)........................ 1995-2053 521 496 Less unamortized discount/premium............. (149) (153) ---------- ---------- Total senior notes.................... 22,477 19,062 ---------- ---------- Subordinated notes(e)........................... 8.03 2006-2012 697 697 Intercompany.................................... 1995-1996 971 1,237 ---------- ---------- $ 24,145 $ 20,996 ---------- ---------- ---------- ----------
- --------------- (a) At December 31, 1993 and 1992, the Corporation had agreed to exchange foreign currencies on principal amounts equivalent to U.S. $8,101 million and $6,499 million, respectively, and related interest. At December 31, 1993 and 1992, the Corporation also had entered into interest rate swaps related to interest on $11,624 million and $8,549 million, respectively. To minimize borrowing costs, the Corporation has entered into multiple currency and interest rate agreements for certain notes. (b) At December 31, 1993 and 1992, counterparties held options under which the Corporation can be caused to execute interest rate swaps associated with interest payments through 1999 on $500 million and $625 million, respectively. (c) The Corporation will reset interest rates at the end of the initial and each subsequent interest period. At each interest rate-reset date, the Corporation may redeem notes in whole or in part at its option. Current interest periods range from March 1994 to May 1996. (d) The rate of interest payable on each note is a variable rate based on the commercial paper rate each month. Interest is payable at the option of the Corporation either monthly or semiannually. (e) At December 31, 1993 and 1992, subordinated notes in the amount of $697 million were guaranteed by GE Company. Long-term borrowing maturities during the next five years, including the current portion of notes payable after one year, are: 1994, $5,823 million; 1995, $4,620 million; 1996, $3,023 million; 1997, $3,253 million; and 1998, $872 million. Interest and discount expense on the Condensed Statement of Current and Retained Earnings is net of interest income on loans and advances to majority owned affiliates of $1,335 million, $1,223 million and $1,187 million for 1993, 1992 and 1991, respectively. Page 39 42 EXHIBIT 4 (iii) March 22, 1994 Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 Subject: General Electric Capital Corporation Annual Report on Form 10-K for the fiscal year ended December 31, 1993 -- File No. 1-6461 Dear Sirs: Neither General Electric Capital Corporation (the "Corporation") nor any of its subsidiaries has outstanding any instrument with respect to its long-term debt under which the total amount of securities authorized exceeds 10% of the total assets of the registrant and its subsidiaries on a consolidated basis. In accordance with paragraph (b) (4) (iii) of Item 601 of Regulation S-K (17 CFR sec.229.601), the Corporation hereby agrees to furnish to the Securities and Exchange Commission, upon request, a copy of each instrument which defines the rights of holders of such long-term debt. Very truly yours, GENERAL ELECTRIC CAPITAL CORPORATION By: /s/ J. A. PARKE --------------------------------- J. A. Parke, Senior Vice President, Finance Page 40 43 EXHIBIT 12(a) GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
YEAR ENDED DECEMBER 31, ------------------------------------------ (Dollar amounts in millions) 1993 1992 1991 1990 1989 ------ ------ ------ ------ ------ Net earnings............................................. $1,478 $1,251 $1,125 $1,021 $ 859 Provision for income taxes............................... 664 415 362 350 303 Minority interest........................................ 114 14 (7) 4 9 ------ ------ ------ ------ ------ Earnings before income taxes and minority interest....... 2,256 1,680 1,480 1,375 1,171 ------ ------ ------ ------ ------ Fixed charges: Interest and discount............................... 3,503 3,713 4,280 4,334 3,816 One-third of rentals................................ 138 90 34 33 25 ------ ------ ------ ------ ------ Total fixed charges...................................... 3,641 3,803 4,314 4,367 3,841 ------ ------ ------ ------ ------ Less interest capitalized, net of amortization........... 4 6 7 19 11 ------ ------ ------ ------ ------ Earnings before income taxes and minority interest plus fixed charges.......................................... $5,893 $5,477 $5,787 $5,723 $5,001 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ Ratio of earnings to fixed charges....................... 1.62 1.44 1.34 1.31 1.30 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Page 41 44 EXHIBIT 12(b) GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
YEAR ENDED DECEMBER 31, ------------------------------------------ (Dollar amounts in millions) 1993 1992 1991 1990 1989 ------ ------ ------ ------ ------ Net earnings............................................. $1,478 $1,251 $1,125 $1,021 $ 859 Provision for income taxes............................... 664 415 362 350 303 Minority interest........................................ 114 14 (7) 4 9 ------ ------ ------ ------ ------ Earnings before income taxes and minority interest....... 2,256 1,680 1,480 1,375 1,171 ------ ------ ------ ------ ------ Fixed charges: Interest and discount............................... 3,503 3,713 4,280 4,334 3,816 One-third of rentals................................ 138 90 34 33 25 ------ ------ ------ ------ ------ Total fixed charges...................................... 3,641 3,803 4,314 4,367 3,841 ------ ------ ------ ------ ------ Less interest capitalized, net of amortization........... 4 6 7 19 11 ------ ------ ------ ------ ------ Earnings before income taxes and minority interest plus fixed charges.......................................... $5,893 $5,477 $5,787 $5,723 $5,001 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ Preferred stock dividend requirements.................... $ 22 $ 26 $ 41 $ 42 $ 49 Ratio of earnings before provision for income taxes to net earnings........................................... 145% 134% 132% 135% 136% Preferred stock dividend factor on pre-tax basis......... 32 35 54 57 67 Fixed charges............................................ 3,641 3,803 4,314 4,367 3,841 ------ ------ ------ ------ ------ Total fixed charges and preferred stock dividend requirements........................................... $3,673 $3,838 $4,368 $4,424 $3,908 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ Ratio of earnings to combined fixed charges and preferred stock dividends........................................ 1.60 1.43 1.32 1.29 1.28 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Page 42 45 EXHIBIT 23(ii) To the Board of Directors General Electric Capital Corporation We consent to incorporation by reference in the Registration Statements on Form S-3 (Nos. 33-22974, 33-24667, 33-36601, 33-37156, 33-39376, 33-43081, 33-43420, 33-39596, 33-58506, 33-50909, 33-58508 and 33-50899) of General Electric Capital Corporation of our report dated February 11, 1994, relating to the statement of financial position of General Electric Capital Corporation and consolidated affiliates as of December 31, 1993 and 1992 and the related statements of current and retained earnings and cash flows and related schedules for each of the years in the three-year period ended December 31, 1993, which report appears in the December 31, 1993 annual report on Form 10-K of General Electric Capital Corporation. Our report refers to a change in 1993 in the method of accounting for certain investments in securities. /s/ KPMG PEAT MARWICK Stamford, Connecticut March 23, 1994 Page 43 46 EXHIBIT 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned, being directors and/or officers of General Electric Capital Corporation, a New York corporation (the "Corporation"), hereby constitutes and appoints Gary C. Wendt, James A. Parke, John P. Malfettone and Burton J. Kloster, Jr., and each of them, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead in any and all capacities, to sign one or more Annual Reports for the Corporation's fiscal year ended December 31, 1993, on Form 10-K under the Securities Exchange Act of 1934, as amended, or such other form as such attorney-in-fact may deem necessary or desirable, any amendments thereto, and all additional amendments thereto in such form as they or any one of them may approve, and to file the same with all exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done to the end that such Annual Report or Annual Reports shall comply with the Securities Exchange Act of 1934, as amended, and the applicable Rules and Regulations of the Securities and Exchange Commission adopted or issued pursuant thereto, as fully and to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them or their or his substitute or resubstitute, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, each of the undersigned has hereunto set his hand this 23rd day of March, 1994. /s/ GARY C. WENDT /s/ JAMES A. PARKE - --------------------------------------------------- --------------------------------------------------- Gary C. Wendt, James A. Parke, Chairman of the Board, Director and Senior Vice President, Finance President and Chief Executive Officer (Principal Financial Officer) (Principal Executive Officer)
/s/ JOHN P. MALFETTONE --------------------------------------------- John P. Malfettone, Vice President and Comptroller (Principal Accounting Officer) /s/ NIGEL D. T. ANDREWS /s/ BURTON J. KLOSTER, JR. - --------------------------------------------------- --------------------------------------------------- Nigel D. T. Andrews, Director Burton J. Kloster, Jr., Director /s/ JAMES R. BUNT /s/ HUGH J. MURPHY - --------------------------------------------------- --------------------------------------------------- James R. Bunt, Director Hugh J. Murphy, Director /s/ DENIS J. NAYDEN - --------------------------------------------------- --------------------------------------------------- Michael A. Carpenter, Director Denis J. Nayden, Director /s/ DENNIS D. DAMMERMAN /s/ JOHN M. SAMUELS - --------------------------------------------------- --------------------------------------------------- Dennis D. Dammerman, Director John M. Samuels, Director /s/ PAOLO FRESCO /s/ EDWARD D. STEWART - --------------------------------------------------- --------------------------------------------------- Paolo Fresco, Director Edward D. Stewart, Director /s/ BENJAMIN W. HEINEMAN, JR. /s/ JOHN F. WELCH, JR. - --------------------------------------------------- --------------------------------------------------- Benjamin W. Heineman, Jr., Director John F. Welch, Jr., Director A MAJORITY OF THE BOARD OF DIRECTORS
Page 44 47 SIGNATURES PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED. GENERAL ELECTRIC CAPITAL CORPORATION March 23, 1994 By: /s/ GARY C. WENDT --------------------------------- (GARY C. WENDT) President
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND ON THE DATE INDICATED.
Signature Title Date - ------------------------------------ --------------------------------- ---------------- /s/ GARY C. WENDT Chairman of the Board, President March 23, 1994 - ------------------------------------ and Chief Executive Officer (GARY C. WENDT) (Principal Executive Officer) /s/ JAMES A. PARKE Director and March 23, 1994 - ------------------------------------ Senior Vice President, Finance (JAMES A. PARKE) (Principal Financial Officer) /s/ JOHN P. MALFETTONE Vice President and Comptroller March 23, 1994 - ------------------------------------ (Principal Accounting Officer) (JOHN P. MALFETTONE) NIGEL D. T. ANDREWS Director JAMES R. BUNT Director DENNIS D. DAMMERMAN Director PAOLO FRESCO Director BENJAMIN W. HEINEMAN, JR. Director BURTON J. KLOSTER, JR. Director /s/ JOHN P. MALFETTONE -------------------------- HUGH J. MURPHY Director (JOHN P. MALFETTONE) Attorney-in-fact DENIS J. NAYDEN Director March 23, 1994 JOHN M. SAMUELS Director EDWARD D. STEWART Director JOHN F. WELCH, JR. Director
A majority of the Board of Directors Page 45 48 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION ------- -------------------------------------------------------------------------- 3(i) A complete copy of the Organization Certificate of the Corporation as last amended on December 6, 1990 and currently in effect. 3(ii) A complete copy of the By-Laws of the Corporation as last amended on March 11, 1993 and currently in effect. 4(iii) Agreement to furnish to the Securities and Exchange Commission upon request a copy of instruments defining the rights of holders of certain long-term debt of the registrant and all subsidiaries for which consolidated or unconsolidated financial statements are required to be filed. 12(a) Computation of ratio of earnings to fixed charges. 12(b) Computation of ratio of earnings to combined fixed charges and preferred stock dividends. 23(ii) Consent of KPMG Peat Marwick. 24 Power of Attorney. 99(a) Income Maintenance Agreement dated March 28, 1991 between General Electric Company and the Corporation. (Incorporated by reference to Exhibit 28(a) of the Corporation's Form 10-K Report for the year ended December 31, 1992.) 99(b) The consolidated financial statements, of General Electric Company, set forth in the Annual Report on Form 10-K of General Electric Company for the year ending December 31, 1993 (pages F-1 through F-46) and Exhibit 12 (Ratio of Earnings to Fixed Charges) of General Electric Company.
EX-3.I 2 ORGANIZATION CERTIFICATE OF THE CORPORATION 1 State of New York Banking Department I, Roy A. Parchment, Deputy Superintendent of Banks of the State of New York, DO HEREBY APPROVE the annexed Certificate entitled, "Restated Organization Certificate of General Electric Capital Corporation under Section 8007 of the Banking Law" dated November 16, 1988. Witness, my hand and official seal of the Banking Department at the City of New York, this 28th day of November in the Year of our Lord one thousand nine hundred and eighty-eight /s/ ROY A. PARCHMENT ______________________________ Deputy Superintendent of Banks. 2 RESTATED ORGANIZATION CERTIFICATE OF GENERAL ELECTRIC CAPITAL CORPORATION UNDER SECTION 8007 OF THE BANKING LAW We, the undersigned, Leo A. Halloran and Burton J. Kloster, Jr., being respectively a Vice President and the Secretary of General Electric Capital Corporation, do hereby certify and set forth: 1. The name of this corporation is General Elec- tric Capital Corporation. The name under which the corpora- tion was formed was General Electric Credit Corporation. 2. The Organization Certificate of General Elec- tric Capital Corporation was filed by the Superintendent of Banks of the State of New York on the 6th day of October, 1943, and in the office of the Clerk of New York County on the 21st day of October, 1943. A Restated Organization Cer- tificate was filed by the Superintendent of Banks of the State of New York on the 27th day of June, 1988, a Certi- ficate of Amendment, amending the provisions with respect to the capital stock of this corporation, was filed by the Superintendent of Banks of the State of New York on the 7th day of July, 1988, a Certificate of Amendment, amending the provisions with respect to the capital stock of this corporation, was filed by the Superintendent of Banks of the State of New York on the 28th day of July, 1988, and a Certificate of Amendment, amending the provisions with respect to the capital stock of this corporation, was filed by the Superintendent of Banks of the State of New York on the 15th day of September, 1988. 3. The Organization Certificate of General Electric Capital Corporation, as amended heretofore, is hereby restated to read as herein set forth in full: First: The name by which the corporation is to be known is General Electric Capital Corporation. Second: The place where its business is to be transacted is 570 Lexington Avenue, New York, New York. Third: The amount of the capital stock of the corporation is Eight Hundred Seventy Three Million Nine Hundred Thousand Dollars ($873,900,000) and the number of 3 Hundred Thousand Dollars ($873,900,000) and the number of shares into which such capital stock shall be divided is Four Million Three Hundred Seventy-three Thousand (4,373,000) shares, of which Five Hundred Thousand (500,000) shares shall be Preferred Stock of the par value of Two Hundred Dollars ($200) each, Seven Thousand (7,000) shares shall be Preferred Stock of the par value of One Hundred Dollars ($100) each, and Three Million Eight Hundred Sixty- Six Thousand (3,866,000) shares shall be Common Stock of the par value of Two Hundred Dollars ($200) each. The designations, preferences, privileges and voting powers or restrictions or qualifications of the shares of each class are as follows: (a) The holders of the Common Stock shall have the right to vote on all questions to the exclusion of all other stockholders, except as may be provided in the Certificate of Amendment respecting a particular class or series of the Preferred Stock or except as may be required by law. (b) Five Hundred Thousand (500,000) shares of Preferred Stock of the par value of Two Hundred Dollars ($200) each shall be a class designated the Cumulative Preferred Stock, with designations, preferences, privi- leges and voting powers or restrictions or qualifica- tions as follows: The holders of the Cumulative Preferred Stock shall be entitled to dividends when and as declar- ed by the Board of Directors, at the rate of 7- 1/2% per annum on the par value thereof, and no more, payable annually on such dates as may be determined by the Board of Directors, out of funds legally available therefor. The dividends on the Cumulative Preferred Stock shall be cumulative and shall be payable before any dividend on the Common Stock shall be paid or set apart for payment so that if in any year such dividends shall not have been paid or set apart for payment on the Cumula- tive Preferred Stock outstanding, the deficiency shall be paid or set apart before any dividend shall be paid, set apart or made on the Common Stock. Dividends on the Cumulative Preferred Stock shall accrue from the day following date of issue. -2- 4 Whenever all cumulative dividends on the Cum- ulative Preferred Stock outstanding shall have been paid the Board of Directors may declare divi- dends on the Common Stock, payable then or there- after, out of funds legally available therefor, and no holders of any shares of the Cumulative Preferred Stock, as such, shall be entitled to share therein. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the corporation, the holders of the Cumulative Pre- ferred Stock shall be entitled to be paid the full par value of each share of Cumulative Preferred Stock and in every case, the unpaid dividends accrued thereon, whether or not declared, before any distribution is made to the holders of the Common Stock; but the holders of the Cumulative Preferred Stock shall be entitled to no further participation in such distribution. If the assets distributable on such liquidation, dissolution or winding up shall be insufficient to permit the payment to holders of the Cumulative Preferred Stock of the full par value thereof and accrued dividends as aforesaid, the said assets shall be distributed pro rata among the holders thereof. After all payments are made as aforesaid, the remaining assets shall be divided among and paid to the holders of the Common Stock pro rata ac- cording to their respective shares. The merger or consolidation of the corporation into or with any other corporation shall not be or be deemed to be a distribution of assets or a dissolution, liqui- dation or winding up for the purposes of this paragraph. At the option of the Board of Directors, upon thirty (30) days' notice by mail to the holders of record thereof, the Cumulative Preferred Stock shall be subject to redemption, in whole or in part, at 100% of the par value thereof, plus accrued dividends thereon to the date fixed for such redemption. Any redemption hereunder shall be made at such time and in such manner as the Board of Directors may determine. The holders of the Cumulative Preferred Stock shall not have any voting power whatsoever, except as may be required by law. -3- 5 (c) The Board of Directors (or any committee to which it may duly delegate the authority granted in this paragraph), in accordance with Section 5002 of the Banking Law of the State of New York, is hereby em- powered to authorize the issuance from time to time of Seven Thousand (7,000) shares of Preferred Stock of the par value of One Hundred Dollars ($100) each, which shall be designated the Variable Cumulative Preferred Stock, issuable in one or more series, in the case of each such series, (i) in such number of shares and with such designations, relative rights, preferences or limitations, including, without limitation, dividend rights, dissolution rights, conversion rights, exchange rights, and redemption rights, as shall be stated and expressed in a resolution or resolutions adopted by the Board of Directors (or such committee thereof) pro- viding for the issuance of such series of Variable Cumulative Preferred Stock and (ii) except as otherwise set forth in such resolution or resolutions, having all such rights, preferences and limitations as are set forth in the following Sections One through Twelve of this subparagraph (c): SECTION ONE. Definitions As used in this subparagraph (c) of this paragraph Third, the following terms shall have the following mean- ings, unless the context otherwise requires: 1. "Affiliate" shall mean any Person known to the Trust Company to be controlled by, in control of, or under common control with, the corporation. 2. "Agent Member" shall mean the member of the Auction Stock Depository that will act on behalf of Bidder and is identified as such in such Bidder's Master Purchaser's Letter. 3. "Applicable Determining Rate" shall mean with respect to a Dividend Period from one (1) day to five (5) days, the greater of the Effective Composite Commer- cial Paper Rate for a period of five (5) days and the Federal Funds Rate; with respect to a Dividend Period of six (6) days to eighty-nine (89) days, the Effective Composite Commercial Paper Rate; with respect to a Divi- dend Period of ninety (90) days to three hundred sixty- four (364) days, the Effective LIBOR Rate; with respect to a Dividend Period of two (2) years to ten (10) years, -4- 6 the U.S. Treasury Note Rate; and with respect to a Divi- dend Period in excess of ten (10) years, the U.S. Treasury Bond Rate. 4. "Auction" shall mean the periodic implementa- tion of the Auction Procedures. 5. "Auction Date" shall mean the Business Day immediately preceding the first day of a Dividend Period for Auction Stock. 6. "Auction Method" shall mean the method of de- termining Dividend Periods and Dividend Rates for the shares of Variable Cumulative Preferred Stock described in Subsection D of Section Four. 7. "Auction Procedures" shall mean the procedures for conducting Auctions set forth in Section Five here- of. 8. "Auction Stock" shall mean the shares of Vari- able Cumulative Preferred Stock for which the Dividend Period and Dividend Rate are determined pursuant to the Auction Method. 9. "Auction Stock Depository" shall mean The Depo- sitory Trust Company and its successors or any other securities depository selected by the corporation which agrees to follow the procedures required to be followed by such securities depository in connection with shares of Auction Stock. 10. "Available Auction Stock" shall have the mean- ing specified in Subsection (C)(1)(a) of Section Five hereof. 11. "Bid" and "Bids" shall have the respective meanings specified in Subsection (A)(1)(b) of Section Five hereof. 12. "Bidder" and "Bidders" shall have the respec- tive meanings specified in Subsection (A)(1)(b) of Sec- tion Five hereof. 13. "Board of Directors" shall mean the Board of Directors of the corporation. 14. "Broker-Dealer" shall mean any broker-dealer, or other entity permitted by law to perform the function -5- 7 required of a Broker-Dealer in the Auction Procedures, that is a member of, or a participant in, the Auction Stock Depository, and that has been selected by the corporation and has entered into a Broker-Dealer Agree- ment with the Trust Company that remains effective. 15. "Broker-Dealer Agreement" shall mean an agree- ment between the Trust Company and a Broker-Dealer pur- suant to which such Broker-Dealer agrees to follow the Auction Procedures. 16. "Business Day" shall mean a day on which the New York Stock Exchange, Inc., is open for trading and which is neither a Saturday, Sunday nor other day on which banks in The City of New York, New York, are au- thorized by law to close. 17. "Converted Remarketed Stock" shall mean shares of Variable Cumulative Preferred Stock which, by reason of an election by the corporation of a different Dividend Determination Method, will become Auction Stock at the end of the then-current Dividend Period applicable thereto. 18. "Date of Original Issue" shall mean, as to any share of Variable Cumulative Preferred Stock, the date on which the corporation initially issues such share. 19. "Dividend Determination Method" or "Method" shall mean either the Auction Method or the Remarketing Method. 20. "Dividend Payment Date" shall mean, with re- spect to each share of Variable Cumulative Preferred Stock, the last day of each Dividend Period applicable thereto, regardless of its length, and, in addition, (i) in the case of Dividend Periods of more than ninety-nine (99) days, on the following additional dates: (a) if such Dividend Period is from one hundred (100) to one hundred ninety (190) days, on the ninety-first (91st) day; (b) if such Dividend Period is from one hundred ninety-one (191) to two hundred eighty-one (281) days, on the ninety-first (91st) and one hundred eighty-second (182nd) days; (c) if such Dividend Period is from two hundred eighty-two (282) to three hundred sixty-four (364) days, on the ninety-first (91st), one hundred eighty-second (182nd) and two hundred seventy-third (273rd) days; and (d) if such Dividend Period is from two (2) to thirty (30) years, on January 15, April 15, -6- 8 July 15 and October 15 of each year, provided, that in all such cases, if such date is not a Business Day, the Dividend Payment Date shall be the Business Day next succeeding such date. However, so long as the Auction Stock Depository shall make payments to participants and members in next-day funds, if a day that otherwise would be a Dividend Payment Date for shares of Auction Stock is succeeded by a day which is not a Business Day then the Dividend Payment Date will be the next succeeding Business Day that is immediately succeeded by a Business Day. 21. "Dividend Period" and "Dividend Periods" shall mean, as to each share of Variable Cumulative Preferred Stock, each period with respect to which dividends on such share shall accumulate and be payable, each such dividend period to be determined pursuant to Section Four. 22. "Dividend Rate" shall mean, as to each share of Variable Cumulative Preferred Stock, each rate at which a dividend shall be payable on such share, such dividend rate to be determined pursuant to Section Four. 23. "Effective Composite Commercial Paper Rate" shall mean, on any date, (i) the Money Market Yield of the rate on commercial paper placed on behalf of issu- ers whose corporate bonds are rated "AA" by Standard & Poor's or "Aa" by Moody's or the equivalent of such rating by another nationally recognized rating agency, for a maturity that equals the duration of the relevant Dividend Period as such rate is made available on a discount basis or otherwise by the Federal Reserve Bank of New York on such date, or (ii) in the event that the Federal Reserve Bank of New York does not make avail- able such a rate by 2:00 P.M., New York City time, on such date, the Money Market Yield of the arithmetic mean of the rates on commercial paper of such maturity placed on behalf of such issuers, as quoted on a dis- count basis or otherwise by Merrill Lynch, Pierce, Fenner & Smith Incorporated, Goldman Sachs & Co., and Shearson Lehman Commercial Paper Incorporated, or, in lieu of any thereof, their respective affiliates or successors that are commercial paper dealers (the "Commercial Paper Dealers"), to the Trust Company or the Tender Agent, as the case may be, for the close of business on the Business Day immediately preceding such date. In the event that the Federal Reserve Bank of New York does not make available such a rate and if any -7- 9 Commercial Paper Dealer does not quote a rate required to determine the Effective Composite Commercial Paper Rate, the Effective Composite Commercial Paper Rate shall be determined on the basis of the quotation or quotations furnished by the remaining Commercial Paper Dealer or Commercial Paper Dealers and any Substitute Commercial Paper Dealer or Substitute Commercial Paper Dealers selected by the corporation to provide such rate or rates not being supplied by any Commercial Paper Dealer or Commercial Paper Dealers, as the case may be, or, if the corporation does not select any such Substitute Commercial Paper Dealer or Substitute Com- mercial Paper Dealers, by the remaining Commercial Paper Dealer or Commercial Paper Dealers. "Substitute Commercial Paper Dealers" shall mean The First Boston Corporation or Morgan Stanley & Co. Incorporated or, in lieu of either thereof, their respective affiliates or successors that are commercial paper dealers. In the event that no quoted rates are available for a maturity that equals the duration of the relevant Dividend Peri- od, then the rate will be the higher of the quoted rates for the maturity immediately shorter or immediately longer than the duration of the relevant Dividend Period. 24. "Effective LIBOR Rate" shall mean, on any date, the offered rates for deposits in dollars for a period of the same duration as the relevant Dividend Period, which appear on the Reuters Screen LIBO Page as of 11:00 A.M., London time, on such date. If at least two such offered rates appear on the Reuters Screen LIBO Page, the Effective LIBOR Rate in respect of such date will be the arithmetic mean of such offered rates. If fewer than two offered rates appear, the Effective LIBOR Rate in respect of such date will be determined on the basis of the rates quoted to the Trust Company or the Tender Agent, as the case may be, at which deposits in dollars are offered by the Reference Banks (as hereinafter defined) at approximately 11:00 A.M., London time, on the day that is the Business Day preceding such date to prime banks in the London interbank market for a period of the same duration as the relevant Dividend Period. The corporation shall request the principal London office of each of the Reference Banks to provide a quotation of such rate to the Trust Company or the Tender Agent, as the case may be. If at least two such quotations are provided, the Effective LIBOR Rate in respect of such date will be the arithmetic mean of the quotations. If fewer than -8- 10 two quotations are provided as requested, the Effective LIBOR Rate in respect of such date will be the arithmetic mean of the rates quoted to the Trust Company or Tender Agent, as the case may be, by major banks in New York City, selected by the corporation, at approximately 11:00 A.M., New York City time, on such date for loans in dollars to leading European banks for a period of the same duration as the relevant Dividend Period. "Reference Banks" means four major banks in the London market, selected by the corporation. In the event that no quoted rates are available for a maturity that equals the duration of the relevant Dividend Period, then the rate will be the higher of the quoted rates for the maturity immediately shorter or immediately longer than the duration of the relevant Dividend Period. 25. "Existing Holder" shall mean, when used with respect to shares of Auction Stock, a Person who has signed a Master Purchaser's Letter and is listed as the beneficial owner of such shares of Auction Stock in the records of the Trust Company and will in all events include Holders of Converted Remarketed Stock. 26. "Federal Funds Rate" shall mean, on any date, (i) the overnight Federal funds rate as such rate is made available by the Federal Reserve Bank of New York or (ii) in the event that the Federal Reserve Bank of New York does not make available such a rate by 2:00 P.M., New York City time, on any day, then the arith- metic mean of the rates for each of the last transaction in overnight Federal funds arranged by three leading brokers of Federal funds transactions in New York City as selected by the corporation prior to 9:00 A.M., New York City time, on that day. 27. "Hold Order" and "Hold Orders" shall have the respective meanings specified in Subsection (A)(1)(b), of Section Five hereof. 28. "Holder" shall mean the holder of record of shares of Variable Cumulative Preferred Stock, as the same appears on the record of stockholders of the cor- poration. 29. "Initial Dividend Period" shall have the meaning specified in Subsection B of Section Four here- of. -9- 11 30. "Junior Stock" shall mean all stock of the corporation now or hereafter authorized, except (i) Variable Cumulative Preferred Stock, (ii) Cumulative Preferred Stock and (iii) any future class of stock ranking prior to or on a parity with Variable Cumula- tive Preferred Stock as to dividends or assets. 31. "Master Purchaser's Letter" shall mean a let- ter addressed to the corporation, the Trust Company and an Agent Member in which a Person agrees that if such Person should offer to purchase, purchase, offer to sell and/or sell shares a series of the Stock, such Person will be bound by the Auction Procedures. 32. "Maximum Rate" shall mean, on any date with respect to any share of Variable Cumulative Preferred Stock, a percentage (determined as set forth below based on the prevailing rating of such share of Vari- able Cumulative Preferred Stock in effect at the close of business on the Business Day immediately preceding such date and on the duration of the relevant Dividend Period) of the Applicable Determining Rate for such share on such date, provided that during the continu- ance of a Payment Failure the applicable percentage shall be 200%:
Percentage For Dividend For Dividend Periods of Less Periods of Two Prevailing Rating Than One Year Years of More AA/"aa" or above 110% 125% A/"a" 125% 140% BBB/"baa" 150% 175% Below BBB/"baa" 200% 225%
For purposes of this definition, the "prevailing rating" of such series shall be (i) AA/"aa" or above, if such series has a rating of AA- or better by Standard & Poor's and "aa3" or better by Moody's, or the equivalent of both of such ratings by a substitute rating agency or agencies selected as provided below, (ii) if not AA/"aa" or above, then A/"a" if such series has a rating of A- or better by Standard & Poor's and "a3" or better by -10- 12 Moody's or the equivalent of both of such ratings by a substitute rating agency or agencies selected as provided below, (iii) if not AA/"aa" or above or A/"a", then BBB/"baa" if such series has a rating of BBB- or better by Standard & Poor's and "baa3" or better by Moody's or the equivalent of both of such ratings by a substitute rating agency or agencies selected as pro- vided below, and (iv) if not AA/"aa" or above, A/"a" or BBB/"baa", then below BBB/"baa". The corporation will take all reasonable action necessary to enable Standard & Poor's and Moody's to provide a rating for the Vari- able Cumulative Preferred Stock of each series. If neither Standard & Poor's nor Moody's makes such a rating available, the corporation or its duly authorized agent will select one or two nationally recognized secu- rities rating agencies to act as a substitute rating agency or agencies, as the case may be. 33. "Money Market Yield" shall mean, with respect to any rate which is quoted on a bank discount basis, a yield (expressed as a percentage) calculated in accor- dance with the following formula: D x 360 Money Market Yield = --------------- x 100 360 - (D x M) where "D" refers to the per annum rate, quoted on a bank discount basis and expressed as a decimal; and "M" refers to the number of days for which such bank dis- count rate is quoted. 34. "Moody's" shall mean Moody's Investors Service, Inc. and its successors. 35. "Order" and "Orders" shall have the respec- tive meanings specified in Subsection (A)(1)(b) of Section Five hereof. 36. "Outstanding" shall mean, as of any date, shares of a series theretofore issued by the corpora- tion except (i) any shares of such series theretofore cancelled or delivered for cancellation or redeemed by the corporation, or as to which a notice of redemption shall have been given by the corporation, (ii) any shares of such series as to which the corporation or any Affiliate thereof shall be an owner (except that any shares acquired by an Affiliate which is a broker- dealer and which acquired such shares in the normal course of its business shall be deemed to be Outstand- -11- 13 ing), or (iii) any shares of such series represented by any certificate in lieu of which a new certificate has been executed and delivered by the corporation. 37. "Paying Agent" shall mean a bank or trust company duly appointed as such. 38. "Payment Failure" shall mean that the corpo- ration shall fail to pay: (i) all dividends in respect of any share of Variable Cumulative Preferred Stock which have accumulated during any Dividend Period applicable to such share by no later than the third Business Day following the last day of such Dividend Period or (ii) the redemption price in respect of shares of Variable Cumulative Preferred Stock called for redemption on the date when due if, in each such case, such failure shall continue unremedied. 39. "Person" shall mean and include an individu- al, a partnership, a corporation, a trust, an unincor- porated association, a joint venture or other entity or a government or any agency or political subdivision thereof. 40. "Potential Holder" shall mean any Person, in- cluding any Existing Holder, (i) who shall have exe- cuted a Master Purchaser's Letter and (ii) who may be interested in acquiring shares of Subject Auction Stock (or, in the case of an Existing Holder, additional shares of Subject Auction Stock of such series). 41. "Remarketed Stock" shall mean the shares of Variable Cumulative Preferred Stock for which the Divi- dend Rate and Dividend Period are determined pursuant to the Remarketing Method. 42. "Remarketing Agent" shall mean, at any time for any share of Remarketed Stock, the entity or enti- ties appointed by the corporation to act on its behalf in establishing Dividend Rates and Dividend Periods for such share and to act on behalf of Holders in remarket- ing such share as provided in the Remarketing Proce- dures. 43. "Remarketing Depository" shall mean any depo- sitory selected by the corporation which agrees to follow the procedures required to be followed by such depository in connection with the shares of Remarketed Stock. -12- 14 44. "Remarketing Method" shall mean the method of determining Dividend Periods and Dividend Rates for the shares of Variable Cumulative Preferred Stock described in Subsection E of Section Four hereof. 45. "Remarketing Procedures" shall mean the pro- cedures for determining Dividend Rates and Dividend Periods for Remarketed Stock set forth in Section Six hereof. 46. "Sell Order" and "Sell Orders" shall have the respective meanings specified in Subsection (A)(1)(b) of Section Five hereof. 47. "Standard & Poor's" shall mean Standard & Poor's Corporation and its successors. 48. "Subject Auction Stock" shall mean, with respect to any Auction Date, the shares of Auction Stock subject to Auction on such date. 49. "Submission Deadline" shall mean 1:00 P.M., New York City time, on any Auction Date or such other time on any Auction Date by which Broker-Dealers are required to submit Orders to the Trust Company as spe- cified by the Trust Company from time to time. 50. "Submitted Bid" and "Submitted Bids" shall have the respective meanings specified in Subsection (C)(1) of Section Five hereof. 51. "Submitted Hold Order" and "Submitted Hold Orders" shall have the respective meanings specified in Subsection (C)(1) of Section Five hereof. 52. "Submitted Order" and "Submitted Orders" shall have the respective meanings specified in Subsec- tion (C)(1) of Section Five hereof. 53. "Submitted Sell Order" and "Submitted Sell Orders" shall have the respective meanings specified in Subsection (C)(1) of Section Five hereof. 54. "Subsequent Dividend Period" and "Subsequent Dividend Periods" shall mean, for each share of Varia- ble Cumulative Preferred Stock, each Dividend Period applicable thereto other than the Initial Dividend Period applicable thereto. -13- 15 55. "Sufficient Clearing Bids" shall have the meaning specified in Subsection (C)(1)(b) of Section Five hereof. 56. "Trust Company" shall mean a bank or trust company duly appointed as such. 57. "U.S. Treasury Bond Rate" shall mean, on any date, (i) the yield as calculated by reference to the bid price quotation of the actively traded, current coupon Treasury Bond with a remaining maturity most nearly comparable to 30 years from such date, as such bid price quotation is published on the Business Day immediately preceding such date by the Federal Reserve Bank of New York in its Composite 3:30 P.M. Quotations for U.S. Government Securities report for such Business Day, or (ii) if such yield as so calculated is not available, the Alternate Treasury Bond Rate on such date. "Alternate Treasury Bond Rate" on any date means the yield as calculated by reference to the arithmetic average of the bid price quotations of the actively traded, current coupon Treasury Bond with a remaining maturity most nearly comparable to 30 years from such date, as determined by bid price quotations as of any time on the Business Day immediately preceding such date, obtained by the Trust Company or the Tender Agent, as the case may be, from at least three recog- nized primary U.S. Government securities dealers selected by the corporation. 58. "U.S. Treasury Note Rate" shall mean, on any date, (i) the yield as calculated by reference to the bid price quotation of the actively traded, current coupon Treasury Note with a maturity most nearly com- parable to the length of the related Dividend Period, as such bid price quotation is published on the Busi- ness Day immediately preceding such date by the Federal Reserve Bank of New York in its Composite 3:30 P.M. Quotations for U.S. Government Securities report for such Business Day, or (ii) if such yield as so calcu- lated is not available, the Alternate Treasury Note Rate on such date. "Alternate Treasury Note Rate" on any date means the yield as calculated by reference to the arithmetic average of the bid price quotations of the actively traded, current coupon Treasury Note with a maturity most nearly comparable to the length of the related Dividend Period, as determined by bid price quotations as of any time on the Business Day imme- diately preceding such date, obtained by the Trust -14- 16 Company or the Tender Agent, as the case may be, from at least three recognized primary U.S. Government secu- rities dealers selected by the corporation. 59. "Winning Bid Rate" shall have the meaning specified in Subsection (C)(1)(c) of Section Five here- of. SECTION TWO. Parity All shares of all series of Variable Cumulative Preferred Stock, and all shares of Cumulative Preferred Stock, shall rank equally with respect to payments of divi- dends and distributions upon liquidation. SECTION THREE. Authorized Shares in Series Each series of Variable Cumulative Preferred Stock shall consist of such number of shares as shall be fixed in the resolution of the Board of Directors (or any committee to which it may duly delegate the authority granted in this subparagraph (c)) authorizing the series. At any given time all shares of a series of Variable Cumulative Preferred Stock shall be either all Auction Stock or all Remarketed Stock. SECTION FOUR. Dividends and Dividend Periods A. The Holders shall be entitled to receive, when and as declared by the Board of Directors of the corporation (or any committee to which it may duly delegate the auth- ority granted in this subparagraph (c)), out of funds legally available therefor, cumulative cash preferential dividends at the rates, on the dates, for the periods and otherwise in the manner provided in this Section. Such preferential dividends shall be declared and paid or set apart for payment in full for all previous Dividend Periods before the declaration, payment or setting apart of any funds or assets for payment of any dividends on, or the making of, or the setting apart of, any funds or assets for any distribution with respect to, any class of Junior Stock, and before any purchase, redemption, or other acquisition of any class of Junior Stock, or the setting apart of any funds or assets for such purchase, redemption or acquisition. Each share of Variable Cumulative Preferred Stock shall rank on a parity with each share of Cumulative Preferred Stock -15- 17 and with each other share of Variable Cumulative Preferred Stock, irrespective of series, with respect to the preferential dividends at the respective rates fixed for such share, and no preferential dividend shall be declared or paid or set apart for payment on any shares of Variable Cumulative Preferred Stock for any current dividend period if dividends on any other shares of Variable Cumulative Preferred Stock or Cumulative Preferred Stock are accumulated and unpaid for any prior dividend period or, in case of payment of dividend arrearages on Variable Cumulative Preferred Stock or Cumulative Preferred Stock, unless at the same time the corporation shall also declare or pay or set apart for payment, as the case may be, such amounts with respect to all such dividend arrearages on all Variable Cumulative Preferred Stock and Cumulative Preferred Stock so that all such shares shall share ratably in such payment in accordance with the sums which would be payable on all such shares if all dividends (including all accumulations, if any) were declared and paid in full. For purposes hereof, dividend accumulations and arrearages do not include any dividends which have not yet become payable or as to which there has not occurred a Dividend Payment Date, as the case may be. B. Dividends on shares of Variable Cumulative Preferred Stock shall accumulate from the Date of Original Issue thereof and shall be payable on each Dividend Payment Date with respect thereto. The duration of the initial Dividend Period for each series of Variable Cumulative Pre- ferred Stock (for each series, the "Initial Dividend Peri- od") and the Dividend Rate for such series for such Initial Dividend Period shall be fixed in the resolution of the Board of Directors (or any committee to which it may duly delegate its authority) authorizing such series, provided that the duration of any Initial Dividend Period shall not exceed thirty (30) years. Thereafter, the determination of the duration of each Subsequent Dividend Period with respect to shares of Variable Cumulative Preferred Stock and the Dividend Rate for each such Subsequent Dividend Period shall be determined by either the Auction Method or the Remarket- ing Method. Subject to the limitations set forth below, either Dividend Determination Method may be selected by the corporation for any Subsequent Dividend Period with respect to all the shares of Variable Cumulative Preferred Stock of a series. The corporation shall make such selection by giving notice to Holders, sent by first class mail, postage prepaid, to the address of each such Holder appearing on the record of stockholders of the corporation not less than seven (7) days prior to the first day of such Subsequent -16- 18 Dividend Period. Any Dividend Determination Method so selected by the corporation for a series shall continue in effect for such series until the corporation selects the other Method in the aforesaid manner. No defect in the notice or in the mailing thereof shall affect the validity of any change in the Dividend Determination Method. Not- withstanding the foregoing, the corporation shall not be entitled to elect that a Dividend Determination Method other than the Dividend Determination Method then applicable to a series shall apply to such series if (i) at the time of an election that the Remarketing Method apply to a series, the corporation has not appointed a Remarketing Agent, a Tender Agent and a Remarketing Depository, (ii) at the time of an election that the Auction Method apply to a series, the corporation has not appointed a Trust Company and at least one Broker-Dealer for such series or such election would result in more than one Dividend Period for the Auction Stock of such series or (iii) a Payment Failure has occurred and is continuing. For purposes of the foregoing sentence, the Auction Method shall be deemed to be the Dividend Determination Method applicable to a series during the Initial Dividend Period therefor unless otherwise indicated by the corporation. Once the corporation shall have selected a Dividend Determination Method for a series for a Subsequent Dividend Period in the aforesaid manner, such se- lection shall become effective on the last day of the Dividend Period(s) then applicable to shares of such series notwithstanding any Payment Failure which may occur after the delivery of the selection notice by the corporation, the failure to remarket tendered shares of Remarketed Stock of such series, in the case of the selection of the Remarketing Method, or the lack of Sufficient Clearing Bids in the Auction for such series, in the case of the selection of the Auction Method. C. Each Dividend Period for shares of Variable Cumulative Preferred Stock shall be measured in either days (but not more than three hundred sixty-four (364)) or in full years (but not less than two (2) or more than thirty (30)), provided that the minimum Dividend Period for (i) Auction Stock shall be seven (7) days and (ii) Remarketed Stock shall be one (1) Business Day. Each Dividend Period shall end on a Dividend Payment Date. D. Except as otherwise provided in the resolution authorizing Variable Cumulative Preferred Stock of a series, each Subsequent Dividend Period with respect to Auction Stock of such series shall be 49 days in duration, provided, that the corporation may establish the duration of any Sub- -17- 19 sequent Dividend Period subject to the limitations set forth in Subsection C of this Section Four by a notice sent by the corporation to all Holders of shares of Auction Stock of such series, by first-class mail, postage prepaid, to the address of each such Holder appearing on the record of stockholders of the corporation, not less than seven (7) days nor more than sixty (60) days prior to any Auction Date for such Subsequent Dividend Period, which notice shall specify the determination by the corporation of (i) the length of the next succeeding Dividend Period, (ii) in the case of any Dividend Period in excess of ninety-nine (99) days in duration, any Dividend Payment Date or Dates other than the last day of such Dividend Period and (iii) in the case of any Dividend Period equal to or in excess of two (2) years in duration, any dates on which shares of Auction Stock may be redeemed and the corresponding redemption prices. In the absence of any such notice with respect to a Subsequent Dividend Period, such period shall have a dura- tion of forty-nine (49) days. In addition, in the event the corporation has elected a duration of more than forty-nine (49) days for a Subsequent Dividend Period, it may withdraw such election by a notice sent by the corporation to all Holders of shares of Auction Stock of such series by hand delivery or telecopier to the address of each such Holder appearing on the record of stockholders of the corporation by no later than 3:00 P.M., New York City time, on the Business Day immediately preceding the relevant Auction Date, and in such event such Subsequent Dividend Period will have a duration of forty-nine (49) days. No defect in the notice or in the mailing thereof shall affect the validity of the change in the Dividend Period for shares of Auction Stock. Notwithstanding the foregoing, in the event that Sufficient Clearing Bids have not been made, so the Dividend Rate for the next Dividend Period for a series of Auction Stock is equal to the Maximum Rate, then the duration of the Subsequent Dividend Period in respect of such series of Auction Stock shall be the lesser of (i) the length of such Dividend Period as specified by the corporation in a notice given pursuant to the preceding paragraph, or (ii) 49 days, and the Maximum Rate shall be determined based upon the duration of the Dividend Period determined pursuant to the foregoing clause (i) or (ii). Except as provided in Subsection G of this Section Four, the Dividend Rate on the shares of Auction Stock of a series for each Subsequent Dividend Period shall be the rate per annum that results from an Auction for such series. -18- 20 E. Except as otherwise provided in Subsections F and G, of this Section Four, each Subsequent Dividend Period for each share of Remarketed Stock and the Dividend Rate for each such Subsequent Dividend Period shall be established by the Remarketing Agent for such shares pursuant to the Remar- keting Procedures, such determination to be conclusive and binding on the corporation and the Holder. If for any rea- son a share of Remarketed Stock is not remarketed on the day of its tender, such share shall have successive Dividend Periods of one (1) Business Day with a Dividend Rate equal to the Maximum Rate until such share is remarketed. F. Notwithstanding the provisions of Subsections D and E of this Section Four, the Dividend Rate which results from the application of the Auction Procedures or the Remarketing Procedures for any Subsequent Dividend Peri- od for any share of Variable Cumulative Preferred Stock shall not be greater than the Maximum Rate for such share on the first day of the applicable Dividend Period. G. Notwithstanding the foregoing provisions of this Section Four, the application of the Auction Procedures and the Remarketing Procedures shall be suspended during the continuance of a Payment Failure and during such continuance dividends will accumulate on the shares of Variable Cumula- tive Preferred Stock for Dividend Periods commencing on and after the date such Payment Failure first occurred at two hundred per cent (200%) of the Applicable Determining Rate for Dividend Periods of one (1) Business Day, in the case of shares of Remarketed Stock, and forty-nine (49) days, in the case of shares of Auction Stock. In no event shall the Dividend Rate on any share of Variable Cumulative Preferred Stock be adjusted prior to the end of a Dividend Period for such share. If no Payment Failure continues to exist at the end of a Dividend Period, the application of the Auction Procedures and the Remarketing Procedures shall be resumed. H. The corporation shall pay to the Paying Agent not later than (i) in the case of Dividend Periods of one (1) Business Day, 4:00 P.M., New York City time, and (ii) in the case of all other Dividend Periods, 12:00 noon, New York City time, in each case, on the Business Day next preceding each Dividend Payment Date for shares of Variable Cumulative Preferred Stock, an aggregate amount of funds available on the next Business Day in The City of New York, New York, equal to the dividends to be paid to all Holders of shares of such Variable Cumulative Preferred Stock on such Dividend Payment Date. All such moneys shall be held in trust for -19- 21 the payment of such dividends by the Paying Agent for the benefit of the Holders. I. Each dividend shall be paid to the Holders whose names appear on the record of stockholders of the corporation on the Business Day next preceding the Dividend Payment Date; provided that if the Dividend Rate with re- spect to the shares of Variable Cumulative Preferred Stock in respect of which a dividend is being paid is two hundred per cent (200%) of the Applicable Determining Rate as a result of the occurrence of a Payment Failure, such dividend shall be paid to the Holders as their names appear on the record of stockholders of the corporation on such date, not exceeding fifteen (15) days preceding the payment date thereof, as may be fixed by the Board of Directors or a duly authorized committee thereof. Dividends in arrears for any past Dividend Period may be declared and paid at any time, without reference to any regular Dividend Payment Date. J. The amount of dividends per share accumulated on each share of Variable Cumulative Preferred Stock during any Dividend Period less than one (1) year shall be computed by multiplying the Dividend Rate for such Dividend Period by a fraction, the numerator of which shall be the number of days in such Dividend Period (calculated by counting the first day thereof but excluding the last day thereof) and the denominator of which shall be three hundred sixty (360), and multiplying One Hundred Thousand Dollars ($100,000) by the rate obtained. During any Dividend Period of two years or longer, the amount of dividends per share accumulated on each share of Variable Cumulative Preferred Stock shall be computed on the basis of a year consisting of twelve (12) thirty (30) day months. K. At any time after all preferential dividends on the Variable Cumulative Preferred Stock of all series for all previous Dividend Periods shall have been declared and paid or set apart for payment, the Board of Directors may, after or concurrently with, but not before the declaration of full preferential dividends on the Variable Cumulative Preferred Stock of all series for the current Dividend Peri- od, declare dividends (payable in cash, property or stock) on outstanding shares of Junior Stock (subject to the ob- servance of any applicable priorities as between classes of Junior Stock), out of any funds or assets legally available for that purpose. The declaration, payment, and setting apart of dividends upon any Junior Stock shall also be sub- ject to any terms and provisions of each series of the Vari- able Cumulative Preferred Stock fixed for such series. -20- 22 SECTION FIVE. Auction Procedures A. Orders by Existing Holders and Potential Hold- ers. (1) On or prior to the Submission Deadline for each Auction Date for a series: (a) each Existing Holder may submit to a Broker-Dealer information as to: (i) the number of Outstanding shares of Subject Auction Stock, if any, held by such Existing Holder which such Existing Holder desires to continue to hold without regard to the rate determined by the Auction Procedures for the next succeeding Dividend Period; (ii) the number of Outstanding shares of Subject Auction Stock, if any, that such Existing Holder desires to continue to hold if the rate determined by the Auction Proce- dures for the next succeeding Dividend Period shall not be less than the rate per annum specified by such Existing Holder; and/or (iii) the number of Outstanding shares of Subject Auction Stock, if any, held by such Existing Holder which such Existing Holder offers to sell without regard to the rate determined by the Auction Procedures for the next succeeding Dividend Period; and (b) one or more Broker-Dealers shall in good faith, for the purpose of conducting a competitive Auction in a commercially reasonable manner, con- tact Potential Holders, including Persons that are not Existing Holders, by telephone or otherwise to determine the number of shares of Subject Auction Stock, if any, which each such Potential Holder offers to purchase, provided that the rate deter- mined by the Auction Procedures for the next suc- ceeding Dividend Period shall not be less than the rate per annum specified by such Potential Holder. For the purposes hereof, the communication to a Broker-Dealer of information referred to in Sub- paragraph (a)(i), (a)(ii), or (a)(iii) or (b) of this paragraph 1 is hereinafter referred to as an "Order" and collectively as "Orders" and each -21- 23 Existing Holder and each Potential Holder placing an Order is hereafter referred to as a "Bidder" and collectively as "Bidders"; an Order containing the information referred to in Subparagraph (a)(i) of this paragraph 1 is hereinafter referred to as a "Hold Order" and collectively as "Hold Orders"; an Order containing the information referred to in Subparagraph (a)(ii) or (b) of this paragraph 1 is hereinafter referred to as a "Bid" and collective- ly as "Bids"; and an Order containing the informa- tion referred to in Subparagraph (a)(iii) of this paragraph 1 is hereinafter referred to as a "Sell Order" and collectively as "Sell Orders." (c) a Bid by an Existing Holder shall con- stitute an irrevocable offer to sell: (i) the number of Outstanding shares of Subject Auction Stock specified in such Bid if the rate determined by the Auction Procedures on such Auction Date shall be less than the rate specified therein; or (ii) such number or a lesser number of Outstanding shares of Subject Auction Stock to be determined as set forth in Subsection (D)(1)(d) of this Section Five if the rate determined by the Auction Procedures on such Auction Date shall be equal to the rate spe- cified therein; or (iii) such number or a lesser number of Outstanding shares of Subject Auction Stock to be determined as set forth in Subsection (D)(2)(c) of this Section Five if the rate specified therein shall be higher than the Maximum Rate and Sufficient Clearing Bids do not exist. (d) a Sell Order by an Existing Holder shall constitute an irrevocable offer to sell: (i) the number of Outstanding shares of Subject Auction Stock specified in such Sell Order, or (ii) such number or a lesser number of Outstanding shares of Subject Auction Stock as set forth in Subsection (D)(2)(c) of this -22- 24 Section Five if Sufficient Clearing Bids do not exist. (e) a Bid by a Potential Holder shall cons- titute an irrevocable offer to purchase: (i) the number of Outstanding shares of Subject Auction Stock specified in such Bid if the rate determined by the Auction Procedures on such Auction Date shall be higher than the rate specified therein; or (ii) such number or a lesser number of Outstanding shares of Subject Auction Stock as set forth in Subsection (D)(1)(e) of this Section Five if the rate determined by the Auction Procedures on such Auction Date shall be equal to the rate specified therein. B. Submission of Orders by Broker-Dealers to Trust Company. (1) Each Broker-Dealer shall submit in writing to the Trust Company prior to the Submission Deadline on each Auction Date all Orders obtained by such Broker-Dealer and specify with respect to each Order: (a) the name of the Bidder placing such Order; (b) the aggregate number of shares of Sub- ject Auction Stock that are the subject of such Order; (c) to the extent that such Bidder is an Existing Holder: (i) the number of shares of Subject Auction Stock, if any, subject to any Hold Order placed by such Existing Holder; (ii) the number of shares of Subject Auction Stock, if any, subject to any Bid placed by such Existing Holder and the rate specified in such Bid; and (iii) the number of shares of Subject Auction Stock, if any, subject to any Sell Order placed by such Existing Holder; and -23- 25 (d) to the extent such Bidder is a Potential Holder, the rate specified in such Potential Hold- er's Bid. (2) If any rate specified in any Bid contains more than three figures to the right of the decimal point, the Trust Company shall round such rate up to the next highest one thousandth (.001) of 1%. (3) If an Order or Orders covering all of the Outstanding shares of Subject Auction Stock held by any Existing Holder is or are not submitted for any reason to the Trust Company prior to the Submission Deadline, the Trust Company shall deem a Hold Order to have been submitted on behalf of such Existing Holder covering the number of Outstanding shares of Subject Auction Stock held by such Existing Holder and not subject to Orders submitted to the Trust Company, except that (i) a Sell Order will be deemed to have been submitted on behalf of an Existing Holder if an Order is not submitted on behalf of such Existing Holder in the case of an Auction for a Dividend Period which differs in duration by more than seven (7) days from the preceding Dividend Period or an Auction for a Dividend Period of two (2) years or more and (ii) a Sell Order will be deemed to have been submitted on behalf of a holder of Converted Remarketed Stock if an Order is not submitted on behalf of such holder or if such holder has not delivered a Master Purchaser's Letter to the Trust Company by no later than 3:00 P.M., New York City time, on the Business Day immediately preceding the relevant Auction Date. (4) If one or more Orders covering in the aggre- gate more than the number of Outstanding shares of Subject Auction Stock held by any Existing Holder are submitted to the Trust Company, such Orders shall be considered valid as follows and in the following order of priority: (a) all Hold Orders shall be considered valid, but only up to and including in the aggre- gate the number of shares of Subject Auction Stock held by such Existing Holder, and, if the number of shares of Subject Auction Stock subject to such Hold Orders exceeds the number of shares of Sub- ject Auction Stock held by such Existing Holder, the number of shares of Subject Auction Stock subject to each such Hold Order shall be reduced -24- 26 pro rata to cover the number of shares of Subject Auction Stock held by such Existing Holder; (b) (i) any Bid shall be considered valid up to and including the excess of the number of Outstanding shares of Subject Auction Stock held by such Existing Holder over the number of shares of Subject Auction Stock subject to any Hold Order referred to in sub- paragraph (a) above, (ii) subject to clause (i), if more than one Bid with the same rate is submitted on behalf of such Existing Holder and the number of shares of Subject Auction Stock subject to such Bids is greater than such excess, such Bids shall be considered valid up to the amount of such excess, and the number of shares of Subject Auction Stock subject to each Bid with the same rate shall be reduced pro rata to cover the number of shares equal to such excess, (iii) subject to clause (i), if more than one Bid with different rates is submitted on behalf of such Existing Holder, such Bids shall be considered valid in the ascending order of their respective rates up to the amount of such excess, and (iv) in any such event the number, if any, of such shares of Subject Auction Stock subject to Bids not valid under this Subpara- graph (b) shall be treated as the subject of a Bid by a Potential Holder; and (c) all Sell Orders shall be considered valid but only up to and including in the aggre- gate the excess of the number of Outstanding shares of Subject Auction Stock held by such Existing Holder over the sum of the shares of Subject Auction Stock subject to Hold Orders re- ferred to in Subparagraph (a) and valid Bids by Existing Holders referred to in Subparagraph (b) above. (5) If more than one bid is submitted on behalf of any Potential Holder, each Bid submitted shall be a separate Bid with the rate therein specified. -25- 27 (6) If on any Auction Date two or more series of Variable Cumulative Preferred Stock with Dividend Peri- ods of the same length will be auctioned, then a single Auction shall be held with respect to all of such ser- ies, and all references to Subject Auction Stock in this Section Five with respect to such Auction shall be deemed to be references to the Subject Auction Stock of all of such series, collectively. C. Determination of Sufficient Clearing Bids, Winning Bid Rate and Dividend Rate. (1) Not earlier than the Submission Deadline on each Auction Date, the Trust Company shall assemble all Orders submitted or deemed submitted to it by Broker-Dealers (each such Order as submitted or deemed submitted by a Broker- Dealer being hereinafter referred to individually as a "Submitted Hold Order," a "Submitted Bid" or a "Sub- mitted Sell Order," as the case may be, or as a "Sub- mitted Order" and collectively as "Submitted Hold Orders," "Submitted Bids" or "Submitted Sell Orders," as the case may be, or as "Submitted Orders") and shall determine: (a) the excess of the total number of Out- standing shares of Subject Auction Stock over the number of Outstanding shares of Subject Auction Stock that are the subject of Submitted Hold Orders (such excess being hereinafter referred to as the "Available Auction Stock"); (b) from the Submitted Orders whether: the number of Outstanding shares of Subject Auction Stock that are the subject of Submitted Bids by Potential Holders specifying one or more rates equal to or lower than the Maximum Rate exceeds or is equal to the sum of: (i) the number of Outstanding shares of Subject Auction Stock that are the subject of Submitted Bids by Existing Holders specifying one or more rates higher than the Maximum Rate, and (ii) the number of Outstanding shares of Subject Auction Stock that are subject to Submitted Sell Orders (in the event of such excess or such equality other than because the number of shares in Subparagraphs -26- 28 (b)(i) and (b)(ii) above is zero because all of the Outstanding shares of Subject Auction Stock are the subject of Submitted Hold Orders, such Submitted Bids in this Subparagraph (b) being hereinafter referred to collectively as "Sufficient Clearing Bids"), and (c) if Sufficient Clearing Bids exist, the lowest rate specified in the Submitted Bids (the "Winning Bid Rate") which if: (i) (A) each Submitted Bid from Exist- ing Holders specifying such lowest rate and (B) all other Submitted Bids from Existing Holders specifying lower rates were accepted, thus entitling such Existing Holders to con- tinue to hold the shares of Subject Auction Stock that are the subject of such Submitted Bids, and (ii) (A) each Submitted Bid from Poten- tial Holders specifying such lowest rate and (B) all other Submitted Bids from Potential Holders specifying lower rates were accepted, thus entitling the Potential Holders to pur- chase the shares of Subject Auction Stock that are the subject of those Submitted Bids, would result in such Existing Holders described in clause (i) continuing to hold an aggregate number of Outstanding shares of Subject Auction Stock which, when added to the number of Outstanding shares of Subject Auction Stock to be purchased by such Potential Holders described in this clause (ii) would equal not less than the Available Auc- tion Stock. (2) Promptly after the Trust Company has made the determinations pursuant to paragraph (1) of this Sec- tion (C), the Trust Company shall advise the corpo- ration of the Applicable Determining Rate and the Maxi- mum Rate and, based on such determinations, the Divi- dend Rate for the next succeeding Dividend Period as follows: (a) if Sufficient Clearing Bids exist, the Dividend Rate for the next succeeding Dividend Period shall be equal to the Winning Bid Rate so determined; -27- 29 (b) if Sufficient Clearing Bids do not exist (other than because all of the Outstanding shares of Subject Auction Stock are the subject of Sub- mitted Hold Orders), the Dividend Rate for the next succeeding Dividend Period shall be equal to the Maximum Rate; or (c) if all of the Outstanding shares of Subject Auction Stock are the subject of Submitted Hold Orders, the Dividend Rate for the next suc- ceeding Dividend Period shall be equal to 58% of the Applicable Determining Rate. D. Acceptance and Rejection of Submitted Bids and Submitted Sell Orders and Allocation of Shares. Based on the determinations made pursuant to Subsection (C)(1), the Submitted Bids and the Submitted Sell Orders shall be accepted or rejected and the Trust Company shall take such other actions as set forth below: (1) If Sufficient Clearing Bids have been made, subject to the provisions of paragraphs 3 and 4 of this Subsection D, Submitted Bids and Submitted Sell Orders shall be accepted or rejected as follows in the follow- ing order of priority and all other Submitted Bids shall be rejected: (a) the Submitted Sell Orders of Existing Holders shall be accepted and the Submitted Bids of each of the Existing Holders specifying any rate that is higher than the Winning Bid Rate shall be rejected, thus requiring each such Exist- ing Holder to sell the shares that are the subject of such Submitted Bids; (b) the Submitted Bids of each of the Exist- ing Holders specifying any rate that is lower than the Winning Bid Rate shall be accepted, thus enti- tling each such Existing Holder to continue to hold the shares that are the subject of such Sub- mitted Bids; (c) the Submitted Bids of each of the Poten- tial Holders specifying any rate that is lower than the Winning Bid Rate shall be accepted; (d) the Submitted Bids of each of the Exist- ing Holders specifying a rate that is equal to the -28- 30 Winning Bid Rate shall be accepted, thus entitling each such Existing Holder to continue to hold the shares that are the subject of such Submitted Bids, unless the number of Outstanding shares of Subject Auction Stock subject to all such Submit- ted Bids shall be greater than the number of shares ("Remaining Shares") equal to the excess of the Available Auction Stock over the number of shares of Subject Auction Stock subject to Submit- ted Bids described in Subparagraphs (b) and (c) of this paragraph 1, in which event the Submitted Bids of each such Existing Holder shall be re- jected, and each such Existing Holder shall be required to sell shares of Subject Auction Stock, but only in an amount equal to the difference between (x) the number of Outstanding shares of Subject Auction Stock then held by such Existing Holder subject to such Submitted Bids and (y) the number of shares obtained by multiplying the num- ber of Remaining Shares by a fraction, the numera- tor of which shall be the number of Outstanding shares of Subject Auction Stock held by such Existing Holder subject to such Submitted Bids, and the denominator of which shall be the sum of the number of Outstanding shares of Subject Auction Stock subject to such Submitted Bids made by all such Existing Holders that specified a rate equal to the Winning Bid Rate; and (e) the Submitted Bids of each of the Poten- tial Holders specifying a rate that is equal to the Winning Bid Rate shall be accepted but only in an amount equal to the number of shares obtained by multiplying the difference between the Avail- able Auction Stock and the number of shares of Subject Auction Stock subject to Submitted Bids described in Subparagraphs (b), (c) and (d) of this paragraph (1) by a fraction, the numerator of which shall be the number of Outstanding shares of Subject Auction Stock subject to such Submitted Bids, and the denominator of which shall be the sum of the number of Outstanding shares of Subject Auction Stock subject to such Submitted Bids made by all such Potential Holders that specified a rate equal to the Winning Bid Rate. (2) If Sufficient Clearing Bids have not been made (other than because all of the Outstanding shares of Subject Auction Stock are subject to Submitted Hold -29- 31 Orders), subject to the provisions of paragraphs 3 and 4 of this Subsection D, Submitted Orders shall be ac- cepted or rejected as follows in the following order of priority and all other Submitted Bids shall be re- jected: (a) the Submitted Bids of each Existing Holder specifying any rate that is equal to or lower than the Maximum Rate shall be accepted, thus entitling such Existing Holder to continue to hold the shares of Subject Auction Stock that are the subject of such Submitted Bids; (b) the Submitted Bids of each Potential Holder specifying any rate that is equal to or lower than the Maximum Rate shall be accepted; and (c) the Submitted Bids of each Existing Holder specifying any rate that is higher than the Maximum Rate shall be rejected and the Submitted Sell Orders of each Existing Holder shall be ac- cepted, in both cases only in an amount equal to the difference between (A) the number of Out- standing shares of Subject Auction Stock then held by such Existing Holder subject to such Submitted Bids or Submitted Sell Orders and (B) the number of shares obtained by multiplying the difference between the Available Auction Stock and the aggre- gate number of shares of Subject Auction Stock subject to Submitted Bids described in Subpara- graphs (a) and (b) of this paragraph 2 by a frac- tion, the numerator of which shall be the number of Outstanding shares of Subject Auction Stock held by such Existing Holder subject to such Sub- mitted Bids or Submitted Sell Orders, and the denominator of which shall be the number of Out- standing shares of Subject Auction Stock subject to all such Submitted Bids and Submitted Sell Orders. (3) If as a result of the procedures described in paragraph 1 or 2 of this Subsection D, any Existing Holder would be entitled or required to sell, or any Potential Holder would be entitled or required to pur- chase, a fraction of a share of Subject Auction Stock on any Auction Date, the Trust Company shall, in such manner as, in its sole discretion it shall determine, round up or down the number of shares to be purchased or sold by any Existing Holder or Potential Holder on -30- 32 such Auction Date so that the number of shares pur- chased or sold by each Existing Holder or Potential Holder on such Auction Date shall be whole shares. (4) If, as a result of the procedures described in paragraph 1 of this Subsection D, any Potential Holder would be entitled or required to purchase less than a whole share of Subject Auction Stock on any Auction Date, the Trust Company shall, in such manner as, in its sole discretion it shall determine, allocate shares for purchase among Potential Holders so that only whole shares are purchased on such Auction Date by any Potential Holder, even if such allocation results in one or more of such Potential Holders not purchasing shares on such Auction Date. SECTION SIX. Remarketing Procedures A. Determination of Dividend Periods and Rates for Remarketed Stock. Subject to Subsections F and G of Section Four hereof, the Remarketing Agent for each share of Remarketed Stock shall establish (i) that Dividend Period for such share of Remarketed Stock which it shall determine will result in the lowest overall cost of capital to the corporation in respect of all of the shares of Remarketed Stock for which it shall be acting as Remarketing Agent (taking into account the cost of administering such shares) and (ii) that Dividend Rate (which shall not exceed the Maximum Rate) for each Dividend Period for such share of Remarketed Stock which it shall determine would be the rate, but no higher than the rate, which would permit such share to be remarketed at One Hundred Thousand Dollars ($100,000). In establishing each Dividend Period and Dividend Rate, each Remarketing Agent shall take into account the following factors ("Remarketing Conditions"): (i) short-term and long-term market rates and indices of such short-term and long-term rates, (ii) market supply and demand for short- term and long-term securities, (iii) yield curves for short-term and long-term securities comparable to the shares, (iv) industry and financial conditions which may affect the shares, (v) the number of shares to be remar- keted, (vi) the number of potential purchasers, and (vii) the Dividend Periods and Dividend Rates at which current and potential Holders would remain or become Holders. B. Remarketing; Tender for Remarketing. The following procedures shall be applicable to each Remarketed Share: -31- 33 (1) The Remarketing Agent. The corporation shall take all reasonable action necessary so that, at all times, one or more investment banks, brokers, dealers or other organizations qualified to remarket shares of Remarketed Stock and to establish Dividend Periods and Dividend Rates as herein provided shall act as Remarketing Agent for each share of Remarketed Stock. On the first day of each Dividend Period for each share of Remar- keted Stock tendered for remarketing on such day, the relevant Remarketing Agent shall use its best efforts to remarket such share for the Holder thereof, without charge to such Holder, provided, such Remarketing Agent shall not be obligated to remarket such share if there shall be a material misstatement or omission in any disclosure docu- ment used in connection with the remarketing of such share or at any time the Remarketing Agent shall have determined that it is not advisable to remarket such share by reason of: (a) a pending or proposed change in applicable tax laws, (b) a material adverse change in the financial condition of the corporation, (c) a banking moratorium, (d) domestic or international hostilities, (e) an amendment of this Organization Certificate which materially and adversely changes the nature of the shares or the Remarketing Procedures or (f) a Payment Failure. Should the Remarketing Agent for any share of Remarketed Stock not succeed in so remarketing all such shares of Remarketed Stock tendered for remarketing on any date, the Remar- keting Agent shall select the shares of such Re- marketed Stock to be sold from those tendered pro rata. Payments for shares of Remarketed Stock remarketed shall be made by the Tender Agent (or such other agent as the corporation may appoint) on the date of remarketing by crediting such pay- ments to the accounts of the Holders thereof main- tained by the Tender Agent (or such other agent as the corporation may appoint) or, to the extent duly requested by Holders, by wire or other trans- fer in immediately available funds to their ac- counts with commercial banks in the United States, but, in either case, only upon surrender to the Tender Agent (or such other agent as the corpora- tion may appoint) of the certificates representing such shares of Remarketed Stock, properly endorsed for transfer. -32- 34 (2) Notice of Shares to be Retained. Each share of Remarketed Stock shall be deemed to have been tendered to the Tender Agent (or such other agent as the corporation may appoint) for sale by remarketing on the last day of each Dividend Peri- od, unless the Holder thereof shall have given irrevocable notice to the contrary to the Remar- keting Agent for such share of Remarketed Stock or, if so instructed by such Remarketing Agent, to the Tender Agent (or such other agent as the cor- poration may appoint). Such notice, which may be telephonic or written, must be delivered to such agent prior to 3:00 P.M., New York City time, on (i) the Business Day immediately preceding the last day of the Dividend Period or on such earlier day specified in a notice, if any, mailed by the Tender Agent at the direction of such Remarketing Agent to such Holder at its address as shown on the record of stockholders of the corporation, which day shall be a Business Day at least four (4) Business Days after the mailing of such notice. The notice from such Holder of an election to retain shares of Remarketed Stock shall state (i) the number of the certificate representing the shares of Remarketed Stock not to be deemed to have been so tendered, unless such certificate is held by the Remarketing Depository, (ii) the number of shares of Remarketed Stock represented by such certificate or, in the case of shares of Remarketed Stock held by the Remarketing Depository, the number of shares so held, and (iii) the number of such shares of Remarketed Stock which shall be deemed not to have been so tendered. (3) Shares Deemed to have been Tendered. The failure to give notice with respect to any share of Remarketed Stock as provided in Subsec- tion B(2) shall constitute the irrevocable tender for remarketing of such share. Certificates re- presenting shares so tendered and remarketed shall be issued to the purchasers thereof, irrespective of whether the certificates formerly representing such shares shall have been delivered to the Tend- er Agent (or such other agent as the corporation may appoint). Thereupon, such shares shall cease to accumulate dividends payable to the former Holders thereof, which shall have no further rights with respect to such shares, except the -33- 35 right to receive any previously declared but un- paid dividends thereon and the proceeds of the remarketing thereof upon surrender of the certifi- cates representing such shares to the Tender Agent (or such other agent as the corporation may ap- point) properly endorsed for transfer. (4) Funds for Purchase of Shares. Shares of Remarketed Stock tendered for remarketing as pro- vided in this Section Six shall be purchased sole- ly from the proceeds received from the purchasers of such shares in a remarketing. Neither the corporation, the Tender Agent nor any Remarketing Agent (nor any other agent which the corporation may appoint) shall be obligated to provide funds to make payment to the Holders of shares so ten- dered. SECTION SEVEN. Miscellaneous A. The Board of Directors or a duly authorized committee thereof may interpret the provisions hereof to resolve any inconsistency or ambiguity which may arise or be revealed in connection with the Auction Procedures or the Remarketing Procedures provided for herein. B. So long as the Dividend Rate is based on the results of an Auction, an Existing Holder (a) may sell, transfer or otherwise dispose of shares of Auction Stock only pursuant to a Bid or Sell Order in accordance with the Auction Procedures or to or through a Broker-Dealer or to a Person that shall have delivered a signed copy of a Master Purchaser's Letter to the Trust Company, provided that in the case of all transfers other than pursuant to Auctions, such Existing Holder, its Agent Member or its Broker-Dealer advises the Trust Company of such transfer, and (b) shall have the ownership of the shares of Variable Cumulative Preferred Stock of the series held by it maintained in book entry form by the Auction Stock Depository in the account of its Agent Member, which in turn will maintain records of such Existing Holder's beneficial ownership. C. Neither the corporation nor any Affiliate thereof may submit an Order in any Auction, except as set forth in the next sentence. Any Broker-Dealer that is an Affiliate of the corporation may submit Orders in Auctions but only if such Orders are not for its own account, except that if such affiliated Broker-Dealer holds shares of Vari- -34- 36 able Cumulative Preferred Stock for its own account, it must submit a Sell Order in the next Auction with respect to such shares. D. The Trust Company shall reject any Submitted Order of the corporation or an Affiliate, except for Orders of affiliated Broker-Dealers permitted under Subsection C of this Section Seven. E. Unless preferential dividends on the Variable Cumulative Preferred Stock or the Cumulative Preferred Stock are in arrears, the corporation shall have the right from time to time (if and to the extent at the time permitted under applicable law) to purchase on the open market or at private sale, or otherwise acquire, Outstanding shares of Variable Cumulative Preferred Stock of any series at a price not exceeding the price at which such stock might at the time be redeemed at the option of the corporation, plus an amount equal to accumulated and unpaid preferential divi- dends to the date of acquisition. F. Upon the selection of a Dividend Determination Method for a series of Variable Cumulative Preferred Stock other than the Dividend Determination Method then applicable to such series, the Holders of the shares of such series shall, upon request of the corporation, surrender the cer- tificates for such shares to the Auction Stock Depository, in the case of the selection of the Auction Method, or the Remarketing Depository, in the case of the selection of the Remarketing Method. In the event a Holder fails to so sur- render its certificates as aforesaid, such certificates shall be deemed cancelled and the corporation shall issue a new certificate to the Auction Stock Depository or the Remarketing Depository, as the case may be. G. The purchase price of each share of Variable Cumulative Preferred Stock which is sold either through the Auction Procedures or the Remarketing Procedures shall be One Hundred Thousand Dollars ($100,000). SECTION EIGHT. Redemption A. The shares of any Variable Cumulative Prefer- red Stock of each series shall be subject to redemption as a whole or in part only in whole shares at the option of the corporation on one of the following dates (each such date is hereinafter referred to herein as a "redemption date") (i) on the last day of any Dividend Period at a redemption price -35- 37 of One Hundred Thousand Dollars ($100,000) per share, plus accumulated and unpaid dividends to the date fixed for redemption and (ii) in the case of shares of Variable Cumu- lative Preferred Stock with a Dividend Period equal to or more than two (2) years, on any Dividend Payment Date for such shares at redemption prices determined by the corpora- tion prior to the commencement of such Dividend Period plus accumulated and unpaid dividends to the redemption date, on not less than thirty (30) nor more than sixty (60) days' notice by mail, first-class, postage prepaid, such notice to be addressed to the Holder at the address for such Holder as shown on the record of stockholders of the corporation, provided that such redemption prices in respect of all shares of all series of Variable Cumulative Preferred Stock authorized hereunder shall not exceed One Billion Two Hundred Million Dollars ($1,200,000,000) in the aggregate. B. Notwithstanding the foregoing, if any divi- dends on shares of Variable Cumulative Preferred Stock are in arrears, no shares of Variable Cumulative Preferred Stock shall be redeemed unless all Outstanding shares of Variable Cumulative Preferred Stock are simultaneously redeemed, and the corporation shall not purchase or otherwise acquire any shares of Variable Cumulative Preferred Stock, provided, that the foregoing shall not prevent the purchase or acqui- sition of shares of Variable Cumulative Preferred Stock pur- suant to a purchase or exchange offer made on the same terms to Holders of all outstanding shares of Variable Cumulative Preferred Stock. C. Each Holder of shares of Variable Cumulative Preferred Stock called for redemption shall surrender the certificate or certificates, if any, evidencing such shares to the corporation at the place designated in such notice and shall thereupon be entitled to receive payment of the redemption price plus an amount equal to accumulated and unpaid dividends to the redemption date therefor. D. If fewer than all of the Outstanding shares of Variable Cumulative Preferred Stock of any series are to be redeemed as set forth above, the number of shares to be redeemed shall be determined by the Board of Directors of the corporation (or any committee to which it may duly dele- gate the authority granted in this paragraph), and such shares shall be redeemed pro rata from the Holders of record of such shares in proportion to the number of such shares held by such Holders (with adjustments to avoid redemption of fractional shares). If fewer than all of the shares of Variable Cumulative Preferred Stock represented by any cer- -36- 38 tificate surrendered for redemption are redeemed (in the case where certificates are issued directly to the Holders), the corporation shall, without charge, issue a new certifi- cate representing the unredeemed shares. E. If notice of redemption shall have been given, and if on or before the redemption date specified in such notice all funds necessary for such redemption (including any dividend payable on such redemption date) shall have been (i) set aside by the corporation separate and apart from its other funds, in trust for the account of the Hold- ers of the shares to be so redeemed, so as to be and contin- ue to be available therefor, or (ii) deposited by the corpo- ration in trust, for the account of the Holders of the shares to be redeemed, with a bank or trust company in good standing, organized under the laws of the United States of America or the State of New York, doing business in the Borough of Manhattan, the City of New York; then, notwith- standing that any certificate, if any, for shares so called for redemption shall not have been surrendered for cancella- tion, from and after the date fixed for redemption, the shares represented thereby shall no longer be deemed Out- standing, the right to receive dividends thereon shall cease to accumulate and all rights with respect to the shares so called for redemption shall forthwith on such redemption date cease and terminate, except only the right of the Hold- ers thereof to receive out of funds so set aside or so deposited in trust, the amount payable upon redemption thereof, without interest. After the date designated for redemption such shares of Variable Cumulative Preferred Stock shall not be transferable on the books of the corpora- tion. Except as otherwise set forth in Section Seven, nothing herein contained shall limit any legal right of the corporation to purchase or otherwise acquire any share of said series. F. Whenever any shares of Variable Cumulative Preferred Stock are acquired by the corporation by purchase or are redeemed or otherwise retired, the same shall be can- celled and either such shares shall be eliminated from the authorized shares of Variable Cumulative Preferred Stock or, if at the time permitted under applicable law, such shares may be restored to the status of authorized but undesignated and unissued shares of Variable Cumulative Preferred Stock. G. Any notice which is mailed in the manner here- in provided shall be conclusively presumed to have been duly given whether or not the record holder receives the notice. In any case, failure duly to give such notice to the Holder -37- 39 of any shares of any series of Variable Cumulative Preferred Stock, designated for redemption, in whole or in part, or any defect in such notice shall not affect the validity of the proceedings for the redemption of any other shares of a series. SECTION NINE. Sinking Fund There shall not be any sinking fund for the re- demption of any shares of any series of Variable Cumulative Preferred Stock. SECTION TEN. Liquidation Preference A. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the corporation, the Holders of shares of Variable Cumulative Preferred Stock of each series shall be entitled to receive out of assets of the corporation available for distribution to stockholders, before any distribution of assets of the corporation is made to holders of Junior Stock, One Hundred Thousand Dollars ($100,000) per share plus an amount equal to accumulated and unpaid dividends to the date of distribution. B. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the corporation, and the amounts payable with respect to each series of the Variable Cumulative Preferred Stock, the Cumulative Pre- ferred Stock and any other shares of stock of the corpora- tion ranking as to any such distribution on a parity with the Variable Cumulative Preferred Stock are not paid in full, the holders of the Variable Cumulative Preferred Stock and of all such other shares shall share ratably in any such distribution of assets of the corporation in proportion to the full respective preferential amounts to which they are entitled assuming all amounts thereon were paid in full. C. After payment to the Holders of the Variable Cumulative Preferred Stock of the full preferential amounts to which they are entitled, the Holders of the shares of Variable Cumulative Preferred Stock will not be entitled to any further participation in any distribution of assets by the corporation. The merger or consolidation of the corpo- ration into or with any other corporation shall not be or be deemed to be a liquidation, dissolution or winding up for purposes of this Section Ten. -38- 40 SECTION ELEVEN. Voting Rights Holders of the Variable Cumulative Preferred Stock of any series are not entitled to any voting rights, except as may be required by law. SECTION TWELVE. Actions Requiring Shareholder Approval A. So long as any of the shares of a series of Variable Cumulative Preferred Stock shall remain Outstand- ing, the corporation shall not, without the consent of the Holders of at least two-thirds of the total number of shares of such series of Variable Cumulative Preferred Stock then Outstanding, given in person or by proxy either in writing or at a meeting of stockholders called for that purpose, amend or alter any of the preferences, privileges, and vot- ing powers or other restrictions or qualifications of the Variable Cumulative Preferred Stock of such series in any manner substantially prejudicial to the Holders thereof. B. Any consent of any stockholders required by the provisions of Subsection A. of this Section Twelve shall be in addition to any other consent or approval of stock- holders which may be required by any provisions of the laws of the State of New York, or by any provisions of the Organ- ization Certificate of the corporation, as to any action referred to in said Subsection A, and no such action shall be taken without compliance with any such provisions of said law or Organization Certificate. SECTION THIRTEEN. Variable Cumulative Preferred Stock, Series A, Variable Cumulative Pre- ferred Stock, Series B, Variable Cumulative Preferred Stock, Series C and Variable Cumulative Preferred Stock, Series D A. Designations. There are hereby created four series of the Variable Cumulative Preferred Stock, each series to consist of 725 shares, and such series to be designated respectively the "Variable Cumulative Preferred Stock, Series A" (the "Series A Shares") , the "Variable Cumulative Preferred Stock, Series B" (the "Series B Shares"), the "Variable Cumulative Preferred Stock, Series C" (the "Series C -39- 41 Shares") and the "Variable Cumulative Preferred Stock, Series D" (the "Series D Shares"). B. Dividends. The initial dividend rate for the Series A Shares shall be 5.70% per annum; for the Series B Shares shall be 5.70% per annum; for the Series C Shares shall be 5.75% per annum; and for the Series D Shares shall be 5.80% per annum. The initial Dividend Period shall end for the Series A Shares on August 29, 1988; for the Series B Shares on September 1, 1988; for the Series C Shares on September 8, 1988; and for the Series D Shares on September 15, 1988. SECTION FOURTEEN. Variable Cumulative Preferred Stock, Series E, Variable Cumulative Pre- ferred Stock, Series F and Variable Cumulative Preferred Stock, Series G A. Designations. There are hereby created three series of the Variable Cumulative Preferred Stock, each series to consist of 700 shares, and such series to be designated respectively the "Variable Cumulative Preferred Stock, Series E" (the "Series E Shares"), the "Variable Cumulative Preferred Stock, Series F" (the "Series F Shares") and the "Variable Cumulative Preferred Stock, Series G" (the "Series G Shares"). B. Dividends. The initial dividend rate for the Series E Shares shall be 5.95% per annum; for the Series F Shares shall be 6.00% per annum; and for the Series G Shares shall be 6.05% per annum. The initial Dividend Period shall end for the Series E Shares on September 21, 1988; for the Series F Shares on September 28, 1988; and for the Series G Shares on October 6, 1988. Fourth: The term of existence of the corporation is to be perpetual. Fifth: The number of its directors shall be not less than five nor more than twenty as shall from time to time be established by the by-laws of the corporation. -40- 42 4. The restatement of the Organization Certifi- cate of General Electric Capital Corporation was authorized by a resolution duly adopted by the Board of Directors at its regular meeting on the 16th day of November, 1988. -41- 43 IN WITNESS WHEREOF, this Restated Organization Certificate has been signed this 16th day of November, 1988. /s/ LEO A. HALLORAN ____________________ Leo A. Halloran Vice President /s/ BURTON J. KLOSTER, JR. __________________________ Burton J. Kloster, Jr. Secretary -42- 44 STATE OF CONNECTICUT ) : ss.: COUNTY OF FAIRFIELD ) Leo A. Halloran and Burton J. Kloster, Jr., each being duly sworn, respectively deposes and says: that the said Leo A. Halloran is a Vice President and that the said Burton J. Kloster, Jr. is the Secretary of General Electric Capital Corporation, the corporation executing the foregoing instru- ment; that each of them has read the same and that the statements contained therein are true and they have been authorized to execute and file the foregoing Restated Organization Certificate by resolution of the Board of Directors adopted at a Directors' meeting duly called and held on the 16th day of November, 1988. /s/ LEO A. HALLORAN ____________________ Leo A. Halloran /s/ BURTON J. KLOSTER, JR. __________________________ Burton J. Kloster, Jr. Subscribed and sworn to before me this 16th day of November, 1988. /s/ EVA-MARIA WILSON _____________________ Notary Public EVA-MARIA WILSON NOTARY PUBLIC My Commission Expires Mar. 31, 1991 45 State of New York Banking Department I, Roy A. Parchment, Deputy Superintendent of Banks of the State of New York, DO HEREBY APPROVE the annexed Certificate entitled, "Certificate of Amendment of the Organization Certificate of General Electric Capital Corporation under Section 8005 of the Banking Law" dated December 20, 1988, the purpose of which is to amend subparagraph (c) of ARTICLE THIRD of the Organization Certificate in certain respects. Witness, my hand and official seal of the Banking Department at the City of New York, this 21st day of December in the Year of our Lord one thousand nine hundred and eighty-eight /s/ ROY A. PARCHMENT ______________________________ Deputy Superintendent of Banks. 46 CERTIFICATE OF AMENDMENT OF THE ORGANIZATION CERTIFICATE OF GENERAL ELECTRIC CAPITAL CORPORATION UNDER SECTION 8005 OF THE BANKING LAW We, the undersigned, Leo A. Halloran and Burton J. Kloster, Jr., being respectively a Senior Vice President and the Secretary of General Electric Capital Corporation, do hereby certify and set forth: 1. The name of this corporation is General Electric Capital Corporation. The name under which the corporation was formed was General Electric Credit Corporation. 2. The Organization Certificate of General Electric Capital Corporation was filed by the Superintendent of Banks of the State of New York on the 6th day of October, 1943, and in the office of the Clerk of New York County on the 21st day of October, 1943. A Restated Organization Certificate was filed by the Superintendent of Banks of the State of New York on the 28th day of November, 1988 (hereinafter the "Organization Certificate"). 3. Paragraph Third of the Organization Certificate, which paragraph relates to the amount of capital stock of this corporation, is amended so as to add the following provisions authorizing two series and stating the numbers, designations and certain relative rights, preferences and limitations of such two series, as fixed by a resolution of a committee of the Board of Directors of the corporation to which the Board of Directors has duly delegated such authority, at the end of subparagraph (c) thereof, following Section Fourteen, as follows: SECTION FIFTEEN: Variable Cumulative Preferred Stock, Series H and Variable Cumulative Preferred Stock, Series I. A. Designations. There are hereby created two series of the Variable Cumulative Preferred Stock, each series to consist of 500 shares, and such series to be designated respectively the Variable 47 Cumulative Preferred Stock, Series H (the "Series H Shares") and the Variable Cumulative Preferred Stock, Series I (the "Series I Shares"). B. Dividends. The initial dividend rate for the Series H Shares shall be 7.30% per annum; and for the Series I Shares shall be 7.30% per annum. The initial Dividend Period shall end for the Series H Shares on February 13, 1989; and for the Series I Shares on February 16, 1989. C. Certain Redemption Prices. Notwithstanding the provisions of clause (ii) of paragraph A of SECTION EIGHT of subparagraph (c) of Paragraph Third, in the case of any Series H Shares or Series I Shares with a Dividend Period equal to or more than two (2) years, any redemption price determined by the corporation prior to the commencement of such Dividend Period shall not be less than One Hundred Thousand Dollars ($100,000) per share, plus accumulated and unpaid dividends to the date fixed for redemption. 4. The foregoing amendment of Paragraph Third of the Organization Certificate was authorized by a resolution of a duly authorized committee of the Board of Directors adopted at a meeting duly called and held on the 20th day of December, 1988, such resolution having been adopted pursuant to authority granted to the Board of Directors or a committee of the Board of Directors in the Organization Certificate referred to in paragraph 2 which was authorized by resolutions of the Board of Directors and by consent of the sole stockholder of the corporation. IN WITNESS WHEREOF, this Certificate has been signed this 20th day of December, 1988. /s/ LEO A. HALLORAN _______________________ Leo A. Halloran Senior Vice President /s/ BURTON J. KLOSTER, JR. _______________________ Burton J. Kloster, Jr. Secretary -2- 48 STATE OF CONNECTICUT ) : ss.: COUNTY OF FAIRFIELD ) Leo A. Halloran and Burton J. Kloster, Jr., each being duly sworn, respectively deposes and says: that the said Leo A. Halloran is a Senior Vice President and that the said Burton J. Kloster, Jr., is the Secretary of General Electric Capital Corporation, the corporation executing the foregoing instrument; that each of them has read the same and that the statements contained therein are true and they have been authorized to execute and file the foregoing Certificate of Amendment by resolution of a duly authorized committee of the Board of Directors adopted at a meeting duly called and held on the 20th day of December, 1988. /s/ LEO A. HALLORAN _____________________ Leo A. Halloran Senior Vice President /s/ BURTON J. KLOSTER, JR. _____________________ Burton J. Kloster, Jr. Secretary Subscribed and sworn to before me this 20th day of December, 1988 /s/ EVA-MARIA WILSON _____________________ Notary Public EVA-MARIA WILSON NOTARY PUBLIC My Commission Expires Mar. 31, 1991 -3- 49 State of New York, Banking Department I, Roy A. Parchment, Deputy Superintendent of Banks of the State of New York, DO HEREBY APPROVE the annexed certificate entitled, "Certificate of Amendment of the Organizational Certificate of General Electric Capital Corporation under Section 8005 of the Banking Law" dated December 19, 1989, the purpose of which is to amend ARTICLE THIRD of the Organization Certificate in certain respects. Witness, my hand and official seal of the Banking Department at the City of New York, this 22nd day of December in the Year of our Lord one thousand nine hundred and eighty-nine. /s/ ROY A. PARCHMENT _______________________________ Deputy Superintendent of Banks. 50 CERTIFICATE OF AMENDMENT OF THE ORGANIZATION CERTIFICATE OF GENERAL ELECTRIC CAPITAL CORPORATION UNDER SECTION 8005 OF THE BANKING LAW We, the undersigned, James A. Parke and Burton J. Kloster, Jr., being respectively a Senior Vice President and the Secretary of General Electric Capital Corporation, do hereby certify and set forth: 1. The name of this corporation is General Elec- tric Capital Corporation. The name under which the corpora- tion was formed was General Electric Credit Corporation. 2. The Organization Certificate of General Elec- tric Capital Corporation was filed by the Superintendent of Banks of the State of New York on the 6th day of October, 1943, and in the office of the Clerk of New York County on the 21st day of October, 1943. A Restated Organization Certificate was filed by the Superintendent of Banks of the State of New York on the 28th day of November, 1988 (herein- after the "Restated Organization Certificate") and a Certi- ficate of Amendment of the Organization Certificate was filed by the Superintendent of Banks of the State of New York on the 21st day of December, 1988 (hereinafter the "Certificate of Amendment"). The Restated Organization Certificate as amended by the Certificate of Amendment is hereinafter referred to as the "Organization Certificate". 3. The Organization Certificate of this corpora- tion shall be amended, in the manner set forth in paragraphs 4 and 5 hereof, to eliminate Five Hundred Thousand (500,000) authorized shares of Cumulative Preferred Stock of the par value of Two Hundred Dollars ($200) each. 4. The first paragraph of Paragraph Third of the Organization Certificate, which paragraph relates to the capital stock of this corporation, is amended in its entire- ty to read as follows: Third: The amount of the capital stock of the corporation is Seven Hundred Seventy-Three Million Nine Hundred Thousand Dollars ($773,900,000) and the number 51 of shares into which such capital stock shall be divi- ded is Three Million Eight Hundred Seventy-Three Thousand (3,873,000) shares, of which Seven Thousand (7,000) shares shall be Preferred Stock of the par value of One Hundred Dollars ($100) each, and Three Million Eight Hundred Sixty-Six Thousand (3,866,000) shares shall be Common Stock of the par value of Two Hundred Dollars ($200) each. 5. Subparagraph (b) of Paragraph Third of the Organization Certificate, which paragraph relates to Five Hundred Thousand (500,000) shares of the Cumulative Preferred Stock of the par value of Two Hundred Dollars ($200) each of this corporation, is amended in its entirety to read as follows: (b) [Deleted] 6. The foregoing amendments of Paragraph Third of the Organization Certificate were authorized by a resolution of the Board of Directors adopted at a meeting duly called and held on the 19th day of December, 1989 and by consent of the sole common stockholder of the corporation. IN WITNESS WHEREOF, this Certificate has been signed this 19th day of December, 1989. /s/ JAMES A. PARKE _____________________ James A. Parke Senior Vice President /s/ BURTON J. KLOSTER, JR. ___________________________ Burton J. Kloster, Jr. Secretary -2- 52 STATE OF CONNECTICUT ) : ss.: COUNTY OF FAIRFIELD ) James A. Parke and Burton J. Kloster, Jr., each being duly sworn, respectively deposes and says: that the said James A. Parke is a Senior Vice President and that the said Burton J. Kloster, Jr. is the Secretary of General Electric Capital Corporation, the corporation executing the foregoing instru- ment; that each of them has read the same and that the statements contained therein are true and they have been authorized to execute and file the foregoing Certificate of Amendment by resolution of the Board of Directors adopted at a meeting duly called and held on the 19th day of December, 1989. /s/ JAMES A. PARKE ______________________ James A. Parke Senior Vice President /s/ BURTON J. KLOSTER, JR. __________________________ Burton J. Kloster, Jr. Secretary Subscribed and sworn to before me this 19th day of December, 1989. /s/ MAGNOLIA D. LIVINGSTON ___________________________ Notary Public MAGNOLIA D. LIVINGSTON NOTARY PUBLIC My Commission Expires Mar. 31, 1993 53 State of New York Banking Department I, Carmine M. Tenga, Deputy Superintendent of Banks of the State of New York, DO HEREBY APPROVE the annexed certificate entitled, "Certificate of Amendment of the Organizational Certificate of General Electric Capital Corporation under Section 8005 of the Banking Law" dated September 27, 1990, the purpose of which is to amend ARTICLE THIRD of the Organization Certificate in certain respects. Witness, my hand and official seal of the Banking Department at the City of New York, this 28th day of September in the Year of our Lord one thousand nine hundred and ninety. /s/ CARMINE M. TENGA _______________________________ Deputy Superintendent of Banks. 54 CERTIFICATE OF AMENDMENT OF THE ORGANIZATION CERTIFICATE OF GENERAL ELECTRIC CAPITAL CORPORATION UNDER SECTION 8005 OF THE BANKING LAW We, the undersigned, James A. Parke and Burton J. Kloster, Jr., being respectively the Senior Vice President, Finance and the Secretary of General Electric Capital Corporation, do hereby certify and set forth: 1. The name of this corporation is General Electric Capital Corporation. The name under which the cor- poration was formed was General Electric Credit Corporation. 2. The Organization Certificate of General Electric Capital Corporation was filed by the Superintendent of Banks of the State of New York on the 6th day of October, 1943, and in the office of the Clerk of New York County on the 21st day of October, 1943. A Restated Organization Certificate was filed by the Superintendent of Banks of the State of New York on the 28th day of November, 1988 (herein- after the "Restated Organization Certificate"). Certificates of Amendment of the Organization Certificate were filed by the Superintendent of Banks of the State of New York on the 21st day of December, 1988 and the 22nd day of December, 1989 (hereinafter the "Certificates of Amendment") . The Restated Organization Certificate as amended by such Certificates of Amendment is hereinafter referred to as the "Organization Certificate". 3. Paragraph Third of the Organization Certifi- cate, which article relates to the capital stock of this corporation, is amended so as to (a) increase the number of authorized shares of Variable Cumulative Preferred Stock from 7,000 shares to 10,500 shares and (b) increase the maximum aggregate redemption price of all shares of all series of Variable Cumulative Preferred Stock from $1,200,000,000 to $1,550,000,000, by substituting in Paragraph Third in both places at which the words "Seven Thousand (7,000)" appear, the words "Ten Thousand Five Hundred (10,500)" and by substituting in part A of Section Eight of subparagraph (c) of Paragraph Third the words "One Billion Five Hundred Fifty Million Dollars ($1,550,000,000)" in place of the words "One Billion Two Hundred Million Dollars ($1,200,000,000)". 4. The foregoing amendments of Paragraph Third of the Organization Certificate were authorized by a 55 resolution of the Board of Directors adopted at a meeting duly called and held on the 27th day of September, 1990 and by consent of the sole common stockholder of the corporation. IN WITNESS WHEREOF, this Certificate has been signed this 27th day of September, 1990. /s/ JAMES A. PARKE ______________________________ James A. Parke Senior Vice President, Finance /s/ BURTON J. KLOSTER, JR. ______________________________ Burton J. Kloster, Jr. Secretary -2- 56 STATE OF CONNECTICUT ) : ss.: COUNTY OF FAIRFIELD ) James A. Parke and Burton J. Kloster, Jr., each being duly sworn, respectively deposes and says: that the said James A. Parke is the Senior Vice President, Finance and that the said Burton J. Kloster, Jr. is the Secretary of General Electric Capital Corporation, the corporation executing the foregoing instrument; that each of them has read the same and that the statements contained therein are true and they have been authorized to execute and file the foregoing Certificate of Amendment by resolution of the Board of Directors adopted at a meeting duly called and held on the 27th day of September, 1990. /s/ JAMES A PARKE ______________________________ James A. Parke Senior Vice President, Finance /s/ BURTON J. KLOSTER, JR. ______________________________ Burton J. Kloster, Jr. Secretary Subscribed and sworn to before me this 27th day of September, 1990 /s/ JOYCE M. WINDSOR _______________________ Notary Public JOYCE M. WINDSOR NOTARY PUBLIC MY COMMISSION EXPIRES MARCH 31, 1994 -3- 57 State of New York Banking Department I, Roy A. Parchment, Deputy Superintendent of Banks of the State of New York, DO HEREBY APPROVE the annexed certificate entitled, "Certificate of Amendment of the Organization Certificate of General Electric Capital Corporation under Section 8005 of the Banking Law" dated October 18, 1990, the purpose of which is to amend ARTICLE THIRD of the Organization Certificate in certain respects. Witness, my hand and official seal of the Banking Department at the City of New York, this 18th day of October in the Year of our Lord one thousand nine hundred and ninety. /s/ ROY A. PARCHMENT __________________________________ DEPUTY Superintendent of Banks. 58 CERTIFICATE OF AMENDMENT OF THE ORGANIZATION CERTIFICATE OF GENERAL ELECTRIC CAPITAL CORPORATION UNDER SECTION 8005 OF THE BANKING LAW We, the undersigned James A. Parke and Burton J. Kloster, Jr., being respectively the Senior Vice President, Finance and the Secretary of General Electric Capital Corporation, do hereby certify and set forth: 1. The name of this corporation is General Electric Capital Corporation. The name under which the corporation was formed was General Electric Credit Corporation. 2. The Organization Certificate of General Electric Capital Corporation was filed by the Superintendent of Banks of the State of New York on the 6th day of October, 1943, and in the office of the Clerk of New York County on the 21st day of October, 1943. A Restated Organization Certificate was filed by the Superintendent of Banks of the State of New York on the 28th day of November, 1988 (hereinafter the "Restated Organization Certificate"). Certificates of Amendment of the Organization Certificate were filed by the Superintendent of Banks of the State of New York on the 21st day of December, 1988, the 22nd day of December 1989 and the 28th day of September 1990 (hereinafter the "Certificates of Amendment"). The Restated Organization Certificate as amended by such Certificates of Amendment is hereinafter referred to as the "Organization Certificate". 3. Paragraph Third of the Organization Certificate, which Paragraph relates to the amount of capital stock of this corporation, is amended so as to add the following provisions authorizing two series and stating the numbers, designations and certain relative rights, preferences and limitations of such two series, as fixed by a resolution of the Board of Directors of the corporation, at the end of subparagraph (c) thereof, following Section Fifteen, as follows: SECTION SIXTEEN: Variable Cumulative Preferred Stock, Series J and Variable Cumulative Preferred Stock, Series K. 59 A. Designations. There are hereby created two series of the Variable Cumulative Preferred Stock, each series to consist of 500 shares, and such series to be designated respectively the Variable Cumulative Preferred Stock, Series J (the "Series J Shares") and the Variable Cumulative Preferred Stock, Series K (the "Series K Shares"). B. Dividends. The initial dividend rate for the Series J Shares shall be 6.125% per annum; and for the Series K Shares shall be 6.125% per annum. The initial Dividend Period shall end for the Series J Shares on December 10, 1990; and for the Series K Shares on December 11, 1990. C. Certain Redemption Prices. Notwithstanding the provisions of clause (ii) of paragraph A of SECTION EIGHT of subparagraph (c) of Paragraph Third, in the case of any Series J Shares or Series K Shares with a Dividend Period equal to or more than two (2) years, any redemption price determined by the corporation prior to the commencement of such Dividend Period shall not be less than One Hundred Thousand Dollars ($100,000) per share, plus accumulated and unpaid dividends to the date fixed for redemption. 4. The foregoing amendment of Paragraph Third of the Organization Certificate was authorized by a resolution of the Board of Directors adopted at a meeting duly called and held on the 18th day of October, 1990, such resolution having been adopted pursuant to authority granted to the Board of Directors or a committee of the Board of Directors in the Organization Certificate referred to in paragraph 2 which was authorized by resolutions of the Board of Directors and by consent of the sole common stockholder of the corporation. -2- 60 IN WITNESS WHEREOF, this Certificate has been signed this 18th day of October, 1990. /s/ JAMES A PARKE ______________________________ James A. Parke Senior Vice President, Finance /s/ BURTON J. KLOSTER, JR. ______________________________ Burton J. Kloster, Jr. Secretary -3- 61 STATE OF CONNECTICUT ) : ss.: COUNTY OF FAIRFIELD ) James A. Parke and Burton J. Kloster, Jr., each being duly sworn, respectively deposes and says: that the said James A. Parke is the Senior Vice President, Finance and that the said Burton J. Kloster, Jr., is the Secretary of General Electric Capital Corporation, the corporation executing the foregoing instrument; that each of them has read the same and that the statements contained therein are true and they have been authorized to execute and file the foregoing Certificate of Amendment by resolution of the Board of Directors adopted at a meeting duly called and held on the 18th day of October, 1990. /s/ JAMES A PARKE ______________________________ James A. Parke Senior Vice President, Finance /s/ BURTON J. KLOSTER, JR. _____________________________ Burton J. Kloster, Jr. Secretary Subscribed and sworn to before me this 18th day of October, 1990 /s/ JOYCE M. WINDSOR _______________________ Notary Public JOYCE M. WINDSOR NOTARY PUBLIC MY COMMISSION EXPIRES MARCH 31, 1994 -4- 62 State of New York, Banking Department I, Roy A. Parchment, Deputy Superintendent of Banks of the State of New York, DO HEREBY APPROVE the annexed certificate entitled, "Certificate of Amendment of the Organization Certificate of General Electric Capital Corporation under Section 8005 of the Banking Law" dated November 14, 1990, the purpose of which is to amend ARTICLE THIRD of the Organization Certificate in certain respects. Witness, my hand and official seal of the Banking Department at the City of New York, this 14th day of November in the Year of our Lord one thousand nine hundred and ninety. /s/ ROY A. PARCHMENT ______________________________________ DEPUTY Superintendent of Banks. 63 CERTIFICATE OF AMENDMENT OF THE ORGANIZATION CERTIFICATE OF GENERAL ELECTRIC CAPITAL CORPORATION UNDER SECTION 8005 OF THE BANKING LAW We, the undersigned James A. Parke and Burton J. Kloster, Jr., being respectively the Senior Vice President, Finance and the Secretary of General Electric Capital Corporation, do hereby certify and set forth: 1. The name of this corporation is General Electric Capital Corporation. The name under which the corporation was formed was General Electric Credit Corporation. 2. The Organization Certificate of General Electric Capital Corporation was filed by the Superintendent of Banks of the State of New York on the 6th day of October, 1943, and in the office of the Clerk of New York County on the 21st day of October, 1943. A Restated Organization Certificate was filed by the Superintendent of Banks of the State of New York on the 28th day of November, 1988 (hereinafter the "Restated Organization Certificate"). Certificates of Amendment of the Organization Certificate were filed by the Superintendent of Banks of the State of New York on the 21st day of December, 1988, the 22nd day of December, 1989, the 28th day of September, 1990 and the 18th day of October, 1990 (hereinafter the "Certificates of Amendment"). The Restated Organization Certificate as amended by such Certificates of Amendment is hereinafter referred to as the "Organization Certificate". 3. Paragraph Third of the Organization Certificate, which Paragraph relates to the amount of capital stock of this corporation, is amended so as to add the following provisions authorizing two series and stating the numbers, designations and certain relative rights, preferences and limitations of such two series, as fixed by a resolution of the Board of Directors of the corporation, at the end of subparagraph (c) thereof, following Section Sixteen, as follows: SECTION SEVENTEEN: Variable Cumulative Preferred Stock, Series L and Variable Cumulative Preferred Stock, Series M. 64 A. Designations. There are hereby created two series of the Variable Cumulative Preferred Stock, each series to consist of 500 shares, and such series to be designated respectively the Variable Cumulative Preferred Stock, Series L (the "Series L Shares") and the Variable Cumulative Preferred Stock, Series M (the "Series M Shares"). B. Dividends. The initial dividend rate for the Series L Shares shall be 6.25% per annum; and for the Series M Shares shall be 6.25% per annum. The initial Dividend Period shall end for the Series L Shares on January 16, 1991; and for the Series M Shares on January 22, 1991. C. Certain Redemption Prices. Notwithstanding the provisions of clause (ii) of paragraph A of SECTION EIGHT of subparagraph (c) of Paragraph Third, in the case of any Series L Shares or Series M Shares with a Dividend Period equal to or more than two (2) years, any redemption price determined by the corporation prior to the commencement of such Dividend Period shall not be less than One Hundred Thousand Dollars ($100,000) per share, plus accumulated and unpaid dividends to the date fixed for redemption. 4. The foregoing amendment of Paragraph Third of the Organization Certificate was authorized by a resolution of the Board of Directors adopted at a meeting duly called and held on the 14th day of November, 1990, such resolution having been adopted pursuant to authority granted to the Board of Directors or a committee of the Board of Directors in the Organization Certificate referred to in paragraph 2 which was authorized by resolutions of the Board of Directors and by consent of the sole common stockholder of the corporation. -2- 65 IN WITNESS WHEREOF, this Certificate has been signed this 14th day of November, 1990. /s/ JAMES A. PARKE ______________________________ James A. Parke Senior Vice President, Finance /s/ BURTON J. KLOSTER, JR. ______________________________ Burton J. Kloster, Jr. Secretary -3- 66 STATE OF CONNECTICUT ) : ss.: COUNTY OF FAIRFIELD ) James A. Parke and Burton J. Kloster, Jr., each being duly sworn, respectively deposes and says: that the said James A. Parke is the Senior Vice President, Finance and that the said Burton J. Kloster, Jr., is the Secretary of General Electric Capital Corporation, the corporation executing the foregoing instrument; that each of them has read the same and that the statements contained therein are true and they have been authorized to execute and file the foregoing Certificate of Amendment by resolution of the Board of Directors adopted at a meeting duly called and held on the 14th day of November, 1990. /s/ JAMES A PARKE ______________________________ James A. Parke Senior Vice President, Finance /s/ BURTON J. KLOSTER, JR. ______________________________ Burton J. Kloster, Jr. Secretary Subscribed and sworn to before me this 14th day of November, 1990 /s/ JOYCE M. WINDSOR _______________________ Notary Public JOYCE M. WINDSOR NOTARY PUBLIC MY COMMISSION EXPIRES MARCH 31, 1994 -4- 67 State of New York Banking Department I, Roy A. Parchment, Deputy Superintendent of Banks of the State of New York, DO HEREBY APPROVE the annexed certificate entitled, "Certificate of Amendment of the Organization Certificate of General Electric Capital Corporation under Section 8005 of the Banking Law" dated December 6, 1990, the purpose of which is to amend ARTICLE THIRD of the Organization Certificate in certain respects. Witness, my hand and official seal of the Banking Department at the City of New York, this 6th day of December in the Year of our Lord one thousand nine hundred and ninety. /s/ ROY A. PARCHMENT ___________________________________ DEPUTY Superintendent of Banks. 68 CERTIFICATE OF AMENDMENT OF THE ORGANIZATION CERTIFICATE OF GENERAL ELECTRIC CAPITAL CORPORATION UNDER SECTION 8005 OF THE BANKING LAW We, the undersigned James A. Parke and Burton J. Kloster, Jr., being respectively the Senior Vice President, Finance and the Secretary of General Electric Capital Corporation, do hereby certify and set forth: 1. The name of this corporation is General Electric Capital Corporation. The name under which the corporation was formed was General Electric Credit Corporation. 2. The Organization Certificate of General Electric Capital Corporation was filed by the Superintendent of Banks of the State of New York on the 6th day of October, 1943, and in the office of the Clerk of New York County on the 21st day of October, 1943. A Restated Organization Certificate was filed by the Superintendent of Banks of the State of New York on the 28th day of November, 1988 (hereinafter the "Restated Organization Certificate"). Certificates of Amendment of the Organization Certificate were filed by the Superintendent of Banks of the State of New York on the 21st day of December, 1988, the 22nd day of December, 1989, the 28th day of September, 1990, the 18th day of October, 1990 and the 14th day of November, 1990 (hereinafter the "Certificates of Amendment"). The Restated Organization Certificate as amended by such Certificates of Amendment is hereinafter referred to as the "Organization Certificate". 3. Paragraph Third of the Organization Certificate, which Paragraph relates to the amount of capital stock of this corporation, is amended so as to add the following provisions authorizing a series and stating the numbers, designations and certain relative rights, preferences and limitations of such series, as fixed by a resolution of a committee of the Board of Directors of the corporation to which the Board of Directors has duly delegated such authority, at the end of subparagraph (c) thereof, following Section Seventeen, as follows: SECTION EIGHTEEN: Variable Cumulative Preferred Stock, Series N 69 A. Designations. There is hereby created a series of the Variable Cumulative Preferred Stock, such series to consist of 750 shares, and such series to be designated the Variable Cumulative Preferred Stock, Series N (the "Series N Shares"). B. Dividends. The initial dividend rate for the Series N Shares shall be 6.50% per annum. The initial Dividend Period shall end for the Series N Shares on February 14, 1991. C. Certain Redemption Prices. Notwithstanding the provisions of clause (ii) of paragraph A of SECTION EIGHT of subparagraph (c) of Paragraph Third, in the case of any Series N Shares with a Dividend Period equal to or more than two (2) years, any redemption price determined by the corporation prior to the commencement of such Dividend Period shall not be less than One Hundred Thousand Dollars ($100,000) per share, plus accumulated and unpaid dividends to the date fixed for redemption. 4. The foregoing amendment of Paragraph Third of the Organization Certificate was authorized by a resolution of a duly authorized committee of the Board of Directors adopted at a meeting duly called and held on the 6th day of December, 1990, such resolution having been adopted pursuant to authority granted to the Board of Directors or a committee of the Board of Directors in the Organization Certificate referred to in paragraph 2 which was authorized by resolutions of the Board of Directors and by consent of the sole common stockholder of the corporation. IN WITNESS WHEREOF, this Certificate has been signed this 6th day of December, 1990. /s/ JAMES A. PARKE ______________________________ James A. Parke Senior Vice President, Finance /s/ BURTON J. KLOSTER, JR. ______________________________ Burton J. Kloster, Jr. Secretary -2- 70 STATE OF CONNECTICUT ) : ss.: COUNTY OF FAIRFIELD ) James A. Parke and Burton J. Kloster, Jr., each being duly sworn, respectively deposes and says: that the said James A. Parke is the Senior Vice President, Finance and that the said Burton J. Kloster, Jr., is the Secretary of General Electric Capital Corporation, the corporation executing the foregoing instrument; that each of them has read the same and that the statements contained therein are true and they have been authorized to execute and file the foregoing Certificate of Amendment by resolution of a duly authorized committee of the Board of Directors adopted at a meeting duly called and held on the 6th day of December, 1990. /s/ JAMES A. PARKE ______________________________ James A. Parke Senior Vice President, Finance /s/ BURTON J. KLOSTER, JR. ______________________________ Burton J. Kloster, Jr. Secretary Subscribed and sworn to before me this 6th day of December, 1990 /s/ JOYCE M. WINDSOR _______________________ Notary Public JOYCE M. WINDSOR NOTARY PUBLIC MY COMMISSION EXPIRES MARCH 31, 1994 -3- EX-3.II 3 BY-LAWS 1 GENERAL ELECTRIC CAPITAL CORPORATION BY-LAWS ARTICLE I. STOCKHOLDERS' MEETINGS SEC. 1. ANNUAL MEETING. The annual meeting of stockholders for the election of directors and the transaction of such other business as may properly come before it shall be held at such place, within or without the State of New York, as shall be stated in the notice of the meeting, such meeting to be held on the second Thursday in March of each and every year if not a legal holiday, and if a legal holiday, then on the next secular day following, or such other date as shall be designated from time to time by the board of directors and stated in the notice of the meeting, at such time as shall be stated in the notice of the meeting. The Secretary shall serve personally or by mail, not less than ten nor more than forty days before such meeting, a written notice thereof upon each person who appears upon the records of the corporation to be a stockholder. If mailed, it shall be addressed to a stockholder at his address as it appears on the stock records unless he shall have filed with the Secretary of the corporation a written request that notices intended for him be mailed to some other address, in which case it shall be mailed to the address designated in such request. The order of business shall be as follows: 1. Roll Call. 2. Proof of notice of meeting. 3. Reports of officers. 4. Election of Directors. 5. Miscellaneous. SEC. 2. SPECIAL MEETINGS. Special meetings of stockholders, other than those regulated by statute, may be called at any time by a majority of the Directors. Written notice of such meeting, stating the purpose for which it is called, shall be served personally or by mail, not less than five nor more than twenty days before the date set for such meeting. If mailed it shall be directed to a stockholder at his address as it appears on the stock records, unless he shall have filed with the Secretary of the corporation a written request that notices intended for him be mailed to some other address in which case it shall be mailed to the address designated in such request. No business other than that specified in the notice shall be transacted at any special meeting of stockholders. 2 SEC. 3. WAIVER. Notwithstanding any provision of the foregoing Sections 1 and 2, a meeting of the stockholders may be held at any time and at any place within or without the State of New York, and any action may be taken thereat, if notice and lapse of time be waived in writing by every stockholder having the right to vote at such meeting. SEC. 4. QUORUM. The presence, in person or by proxy, of the holders of a majority of the outstanding stock entitled to vote shall be necessary to constitute a quorum for the transaction of business, except at special meetings held for the election of directors, but a lesser number may adjourn to some future time not less than six nor more than twenty days later, and the Secretary shall thereupon mail notice of at least three days to each stockholder entitled to vote who was absent from such meeting. SEC. 5. CLOSING STOCK RECORDS. The Directors may prescribe a period not exceeding twenty days, prior to any meeting of stockholders, during which no transfer of a stock on the records of the corporation may be made. SEC. 6. VOTING. All voting at stockholders' meetings shall be by ballot, each of which shall state the name of the stockholder voting and the number of shares voted by him, and, if cast by proxy, the name of the proxy. ARTICLE II. DIRECTORS SEC. 1. NUMBER OF DIRECTORS. The board of directors shall consist of that number of members as shall be fixed, from time to time, by the stockholders or by a majority of the board of directors within the limits established by the applicable provisions of the New York Banking Law. SEC. 2. TERM OF OFFICE. Except as provided in Section 1 of this Article, the Directors shall be elected at the annual meeting of the stockholders for the term of one year by a plurality of the votes cast, but any Director so elected shall be subject to removal before the expiration of his term, by vote of the holders of a majority of the outstanding stock entitled to vote for the election of directors. Vacancies in the Board, occurring between annual meetings may be filled for the unexpired portion of the term by a majority of the remaining Directors. SEC. 3. DUTIES AND POWERS. The Board of Directors shall have the control and management of the affairs of the corporation, and may adopt such rules and regulations for the conduct of its meetings and the management of the corporation as it may deem proper, not inconsistent with law or these By-Laws. -2- 3 SEC. 4. MEETINGS. Regular meetings of the Board of Directors shall be held periodically on such dates as the Board may designate. Special meetings of the Board of Directors shall be called by the Secretary and held at the request of the President, the Chairman of the Board, or of any three of the Directors. The Secretary shall give notice of each meeting of the Board of Directors, whether regular or special, to each member of the Board by mail or telegraph at his last known post office address. Such notice shall be given by mailing the same at least two days before the meeting or by telegram sent at least one day before the meeting. One-third in number of the entire Board of Directors shall constitute a quorum at all meetings thereof, and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically provided by the statutes of the State of New York. The Board of Directors may hold its meetings, regular or special, and have an office or offices, and keep the records of the corporation, at such place or places within or without the State of New York as the Board may from time to time determine, unless otherwise expressly provided by the statutes of the State of New York. SEC. 5. EXECUTIVE COMMITTEE AND OTHER COMMITTEES. The Board of Directors may appoint from among its number an Executive Committee. The Executive Committee shall have and exercise all the powers of the Board of Directors in the management of the business and affairs of the corporation during intervals between meetings of the Board of Directors so far as may be permitted by law and as may not be inconsistent with the provisions of these By-Laws; but the Board of Directors may from time to time by resolution abolish such Executive Committee or so limit its powers as may be deemed expedient. The Board of Directors may appoint such other committees as the Board of Directors shall deem appropriate having such powers and functions as the Board of Directors shall, consistent with applicable law, confer upon such committees. Except as otherwise provided in a specific resolution of the Board of Directors, one-third in number of any committee (including the Executive Committee) appointed by the Board of Directors in accordance with this Sec. 5 shall constitute a quorum at all meetings of such committee, and the act of a majority of the directors present at any such committee meeting at which there is a quorum shall be the act of such committee, except as may be otherwise specifically provided by the statutes of the State of New York. -3- 4 SEC. 6. It shall not be necessary for any director of the corporation to be a stockholder of said corporation. SEC. 7. Any one or more members of the Board of Directors or any committee thereof may participate in a meeting of the Board of Directors or a committee thereof by means of a conference telephone or similar communications equipment allowing all persons participating in the meeting to hear each other at the same time. Participation by such means shall constitute presence in person at such meeting. ARTICLE III. OFFICERS SEC. 1. The officers of the corporation shall be a Chairman of the Board of Directors, a Vice Chairman of the Board of Directors, a President, a Vice President, a Comptroller, a Treasurer and a Secretary, who shall be elected by the Board of Directors at its first meeting following the annual meeting of the stockholders to serve for one year and until their respective successors are elected and qualified. Additional Vice Presidents may be elected from time to time for such terms as determined by the Board, which may also appoint one or more Assistant Secretaries and one or more Assistant Treasurers, and such subordinate officers and agents of the corporation as it may from time to time determine. Any vacancy in any office (including any office created between annual meetings of the Board following the annual meeting of the stockholders) may be filled for the unexpired term by the Board. The same person may occupy two or more offices except the offices of President and Secretary. SEC. 2. CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of the Board of Directors shall preside at the meetings of the stockholders and of the Board of Directors. He shall have supervision of such matters as may be designated to him by the Board of Directors. No non-U.S. citizen shall be qualified or authorized to be Chairman of the Board of Directors or to exercise any powers or duties of the Chairman of the Board of Directors in his absence or during his disability, for so long as the corporation is required by the United States maritime laws to be a U.S. citizen by reason of its ownership, direct or indirect, or other interest in any vessel documented under the laws of the United States. SEC. 3. VICE CHAIRMAN OF THE BOARD OF DIRECTORS. In the absence or disability of the Chairman of the Board, the Vice Chairman of the Board shall preside at meetings of the stockholders and of the Board of Directors. -4- 5 He shall have supervision of such matters as may be designated to him by the Board of Directors. SEC. 4. PRESIDENT. In the absence or disability of the Chairman of the Board and the Vice Chairman of the Board, the President shall preside at the meetings of the stockholders and of the Board of Directors. Subject to the Board of Directors, he shall have the general management of the affairs of the corporation and perform such other duties as by the vote of the Board of Directors he may be empowered or directed to perform and as may be incidental to his office. No non-U.S. citizen shall be qualified or authorized to be President or to exercise any powers or duties of the President in his absence or during his disability, for so long as the corporation is required by the United States maritime laws to be a U.S. citizen by reason of its ownership, direct or indirect, or other interest in any vessel documented under the laws of the United States. SEC. 5. VICE PRESIDENTS. Any Vice President may perform the duties of the President in his absence or during his inability to act, subject to the direction of the Chairman of the Board. The Vice Presidents shall have such other and further powers and shall perform such other and further duties as may be assigned to them by the Board. SEC. 6. TREASURER. The Treasurer shall have the care, safekeeping and custody of all funds and securities of the corporation, and he shall perform such other duties incident to his office as the Board of Directors may empower or direct him to perform, and in such manner as they may direct from time to time. SEC. 7. SECRETARY. The Secretary shall keep the minutes of the meetings of the Board of Directors and of the stockholders, and he shall be custodian of the seal of the corporation. He shall have charge of the stock records and such other corporate books and papers as the Board may entrust to his custody; he shall attend to the giving and serving of all notices of the corporation, and he shall keep or cause to be kept, a suitable record of the names and addresses of stockholders and the number of shares held by them respectively. He shall attend to such other duties as are incidental to his office and as may be assigned to him by the President or the Board of Directors. SEC. 8. ASSISTANT SECRETARY OR SECRETARIES AND ASSISTANT TREASURER OR TREASURERS. The Assistant Secretary or Secretaries and the Assistant Treasurer or Treasurers shall possess all the powers of the Secretary and of the Treasurer, respectively, in the absence or disability of those officers and shall have such other and further powers and perform such other and further duties as may be assigned to them respectively from time to time by the Board of Directors. -5- 6 SEC. 9. All other subordinate officers and agents of the company who may from time to time be appointed by the Board shall perform such duties and have such powers as may be assigned to them from time to time by the Board of Directors. An officer of the corporation may be appointed any such subordinate office or agent. SEC. 10. COMPTROLLER. The Comptroller shall keep or cause to be kept correct books of accounts of all of the corporation's business, and he shall perform such other duties incident to his office as the Board of Directors may empower or direct him to perform, and in such manner as they may direct from time to time. ARTICLE IV. FUNDS OF THE CORPORATION SEC. 1. The funds of the corporation shall be deposited in such banks and/or trust companies as the directors by resolution may designate. ARTICLE V. INSPECTORS SEC. 1. Two inspectors of election shall be elected at each annual meeting of stockholders to serve for one year and if any inspector shall refuse to serve and shall not be present, the meeting may appoint an inspector in his place. ARTICLE VI. SEAL SEC. 1. The seal of the corporation shall be in the form of a circle with the following words thereon, to wit: GENERAL ELECTRIC CAPITAL CORPORATION. It shall be affixed to all instruments requiring a seal. ARTICLE VII. WAIVER OF NOTICE SEC. 1. Whenever, under the provisions of any of these By-Laws, or of any of the corporate laws of the State of New York, the corporation, its directors or the stockholders are authorized to take any action or hold any meeting after notice to its members or after the lapse of a prescribed period of time, such action may be taken and such meeting may be held without notice and without the -6- 7 lapse of any period of time if such meeting or action be authorized or approved and such requirements be waived in writing by each person interested and entitled to notice or by his attorney thereunto authorized, either before or after such action or meeting. ARTICLE VIII. AMENDMENTS SEC. 1. These By-Laws may be altered, amended or repealed at any regular meeting of the Board of Directors (or any special meeting thereof duly called for that purpose) by a majority vote of the Directors attending and entitled to vote at such meeting, a quorum being present, provided that in the call for any special meeting notice of intention to amend the By-Laws must be given. ARTICLE IX. EMERGENCY BY-LAW SEC. 1. This Emergency By-Law shall become effective if the Defense Council of New York, as constituted under the New York State Defense Emergency Act now in effect or as it may hereafter be amended from time to time, shall order the effectiveness of emergency by-laws of New York corporations and shall cease to be effective when the Council shall so declare. This Emergency By-Law may also become effective in the manner outlined in Section 5 of this Article. SEC. 2. In the event this Emergency By-Law shall become effective the business of the Company shall continue to be managed by those members of the Board of Directors in office at the time the emergency arises who are available to act during the emergency. If less than three such Directors are available to act, additional Directors, in whatever number is necessary to constitute a Board of three Directors, shall be selected automatically from the first available officers or employees of General Electric Company and General Electric Capital Corporation in the order provided in the emergency succession list established by the Board of Directors and in effect at the time an emergency arises. SEC. 3. For the purposes of Sections 2 and 4(c) of this Article, a Director shall be deemed unavailable to act if he shall fail to attend a Directors' meeting called in the manner provided in Section 4(a) of this Article. This section, however, shall not affect in any way the right of a Director in office at the time an emergency arises to continue as a Director. -7- 8 SEC. 4. The Board of Directors shall be governed by the following basic procedures and shall have the following specific powers in addition to all other powers which it would otherwise have. (a) Meetings of the Board of Directors may be called by any Director, or by the first available officer or employee in the order provided in the emergency succession list referred to in Section 2 of this Article, by mailing to all Directors written notice thereof at their residence or place of business at least two days before the meeting and by using other reasonably available means of communication in an effort to contact each Director. (b) Three Directors shall constitute a quorum which may in all cases act by majority vote. (c) If the number of Directors who are available to act shall drop below three, additional Directors, in whatever number is necessary to constitute a Board of three Directors shall be selected automatically from the first available officers or employees in the order provided in the emergency succession list referred to in Section 2 of this Article. (d) Additional Directors, beyond the minimum number of three Directors, but not more than three additional Directors, may be elected from any officers or employees of General Electric Company and General Electric Capital Corporation on the emergency succession list referred to in Section 2 of this Article. (e) Any Director, other than a Director in office at the time an emergency arises, may be removed by a majority vote. (f) The Board of Directors may establish any additional procedures and may amend any of the provisions of this Article concerning the interim management of the affairs of the Company in an emergency if it considers it to be in the best interests of the Company to do so, except that it may not change Sections 3 or 4(e) of this Article in any manner which excludes from participation any person who was a Director in office at the time an emergency arises. (g) To the extent that it considers it practical to do so, the Board of Directors shall manage the business of the Company during an emergency in a manner which is consistent with the Charter and By-Laws. It is recognized, however, that in an emergency it may not always be practical to act in this manner and this Emergency -8- 9 By-Law is intended to and hereby empowers the Board of Directors with the maximum authority possible under New York State Defense Emergency Act, and all other applicable law, to conduct the interim management of the affairs of the Company in an emergency in what it considers to be the best interests of the Company. SEC. 5. If an obvious defense emergency exists because of an enemy attack and, if by reason of the emergency, the Defense Council of New York is itself unable to order the effectiveness of emergency by-laws as contemplated by Section 1 of this Article, then: (a) A quorum of the Board of Directors pursuant to Article II of these By-Laws may order the effectiveness of this Emergency By-Law, or (b) If a quorum of the Board of Directors pursuant to Article II of these By-Laws is not present at the first Board of Directors' meeting called, in the manner provided in Section 4(a) of this Article, after an emergency arises, then the provisions of this Emergency By-Law shall automatically become effective and shall remain in effect until it is practical for a normally constituted Board of Directors to resume management of the business of the Company. ARTICLE X. INDEMNIFICATION SEC. 1. The corporation shall, to the fullest extent permitted by the New York Banking Law, indemnify any person who (i) was or is or has agreed to become a director or officer of the corporation and (ii) is or was made, or threatened to be made, a party to an action or proceeding, whether civil or criminal, whether involving any actual or alleged breach of duty, neglect or error, any accountability, or any actual or alleged misstatement, misleading statement or other act or omission and whether brought or threatened in any court or administrative or legislative body or agency, including an action by or in the right of the corporation to procure a judgment in its favor and an action by or in the right of any other enterprise, which any director or officer of the corporation is serving, has served or has agreed to serve in any capacity at the request of the corporation, by reason of the fact that he, his testator or intestate, is or was a director or officer of the corporation, or is serving or served such other enterprise in any capacity against judgments, fines, amounts paid or to be paid in settlement, taxes or penalties, and costs, charges and expenses, including attorney's fees, incurred in connection with such action or proceeding or any -9- 10 appeal therein; provided, however, that no indemnification shall be provided to any such person if a judgment or other final adjudication adverse to the director or officer establishes that (x) his act were committed in bad faith or were the result of active and deliberate dishonesty and, in either case, were material to the cause of action so adjudicated, or (y) he personally gained in fact a financial profit or other advantage to which he was not legally entitled. The corporation shall advance to any person referred to in this Section 1 the expenses incurred in defending any action or proceeding upon the receipt of an undertaking by or on behalf of such person to repay such amount if such person is ultimately found not to be entitled to indemnification. The benefits of this Section 1 shall extend to the heirs and legal representatives of any person entitled to indemnification under this paragraph. The right to indemnification or advancement of expenses, under this Section I shall be retroactive to events occurring prior to the adoption of this Article X, to the extent not prohibited by law. No amendment of this by-law shall impair the rights of any such person arising at any time with respect to events occurring prior to such amendment. SEC. 2. The corporation may indemnify to the fullest extent permitted by law any person who is not a director or officer of the corporation to whom the corporation is permitted by applicable law to provide indemnification, whether pursuant to rights granted pursuant to, or provided by, the New York Banking Law or other rights created by (i) a resolution of shareholders, (ii) a resolution of directors, or (iii) a written agreement providing for such indemnification authorized by any officer designated by the Board of Directors of the corporation for such purpose, it being expressly intended that these by-laws authorize the creation of other rights in any such manner. The corporation may advance to any person referred to in this Section 2 the expenses incurred in defending any action or proceeding. The right of any such person to be indemnified and to receive advancement of expenses as authorized by this Section 2 shall not be exclusive of any other right which such person may have or hereafter acquire under any statute, provision of the Organization Certificate, by-law, agreement, vote of shareholders or disinterested directors or otherwise. Indemnification under this Section 2 may be made retroactive and may extend to events occurring prior to the adoption of this Article X, to the extent not prohibited by law, and the benefits permitted by this Section 2 shall extend to the heirs and legal representatives of any person indemnified pursuant to this Section 2. SEC. 3. For purposes of this Article X: the term"corporation" shall include any constituent corporation (including any constituent of a constituent) absorbed by the corporation in a consolidation or merger; the term "other enterprise" shall include any corporation of any type or kind, domestic or foreign, or any partnership, joint venture, trust or employee benefit plan; service "at the request of the corporation" shall include, but not be limited to, service by any such person as a director or officer of the corporation or in any capacity with or on behalf of any such other enterprise which imposes duties on, or involves -10- 11 services to the corporation or such other enterprise by, such person with respect to an employee benefit plan, its participants or beneficiaries; any excise taxes assessed on any such person with respect to an employee benefit plan shall be deemed to be indemnifiable expenses; and action by any such person in good faith with respect to any employee benefit plan which such person reasonably believes to be in the interest of the participants and beneficiaries of such plan shall be deemed to be action not opposed to the best interests of the corporation. SEC. 4. This Article X may be amended, modified or repealed either by action of the Board of Directors of the corporation or by the vote of the shareholders. -11- EX-4.III 4 AGREEMENT TO FURNISH INSTRUMENTS 1 EXHIBIT 4 (iii) March 22, 1994 Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 Subject: General Electric Capital Corporation Annual Report on Form 10-K for the fiscal year ended December 31, 1993 -- File No. 1-6461 Dear Sirs: Neither General Electric Capital Corporation (the "Corporation") nor any of its subsidiaries has outstanding any instrument with respect to its long-term debt under which the total amount of securities authorized exceeds 10% of the total assets of the registrant and its subsidiaries on a consolidated basis. In accordance with paragraph (b) (4) (iii) of Item 601 of Regulation S-K (17 CFR sec.229.601), the Corporation hereby agrees to furnish to the Securities and Exchange Commission, upon request, a copy of each instrument which defines the rights of holders of such long-term debt. Very truly yours, GENERAL ELECTRIC CAPITAL CORPORATION By: /s/ J. A. PARKE --------------------------------- J. A. Parke, Senior Vice President, Finance EX-12.A 5 COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES 1 EXHIBIT 12(a) GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
YEAR ENDED DECEMBER 31, ------------------------------------------ (Dollar amounts in millions) 1993 1992 1991 1990 1989 ------ ------ ------ ------ ------ Net earnings............................................. $1,478 $1,251 $1,125 $1,021 $ 859 Provision for income taxes............................... 664 415 362 350 303 Minority interest........................................ 114 14 (7) 4 9 ------ ------ ------ ------ ------ Earnings before income taxes and minority interest....... 2,256 1,680 1,480 1,375 1,171 ------ ------ ------ ------ ------ Fixed charges: Interest and discount............................... 3,503 3,713 4,280 4,334 3,816 One-third of rentals................................ 138 90 34 33 25 ------ ------ ------ ------ ------ Total fixed charges...................................... 3,641 3,803 4,314 4,367 3,841 ------ ------ ------ ------ ------ Less interest capitalized, net of amortization........... 4 6 7 19 11 ------ ------ ------ ------ ------ Earnings before income taxes and minority interest plus fixed charges.......................................... $5,893 $5,477 $5,787 $5,723 $5,001 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ Ratio of earnings to fixed charges....................... 1.62 1.44 1.34 1.31 1.30 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
EX-12.B 6 COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES 1 EXHIBIT 12(b) GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
YEAR ENDED DECEMBER 31, ------------------------------------------ (Dollar amounts in millions) 1993 1992 1991 1990 1989 ------ ------ ------ ------ ------ Net earnings............................................. $1,478 $1,251 $1,125 $1,021 $ 859 Provision for income taxes............................... 664 415 362 350 303 Minority interest........................................ 114 14 (7) 4 9 ------ ------ ------ ------ ------ Earnings before income taxes and minority interest....... 2,256 1,680 1,480 1,375 1,171 ------ ------ ------ ------ ------ Fixed charges: Interest and discount............................... 3,503 3,713 4,280 4,334 3,816 One-third of rentals................................ 138 90 34 33 25 ------ ------ ------ ------ ------ Total fixed charges...................................... 3,641 3,803 4,314 4,367 3,841 ------ ------ ------ ------ ------ Less interest capitalized, net of amortization........... 4 6 7 19 11 ------ ------ ------ ------ ------ Earnings before income taxes and minority interest plus fixed charges.......................................... $5,893 $5,477 $5,787 $5,723 $5,001 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ Preferred stock dividend requirements.................... $ 22 $ 26 $ 41 $ 42 $ 49 Ratio of earnings before provision for income taxes to net earnings........................................... 145% 134% 132% 135% 136% Preferred stock dividend factor on pre-tax basis......... 32 35 54 57 67 Fixed charges............................................ 3,641 3,803 4,314 4,367 3,841 ------ ------ ------ ------ ------ Total fixed charges and preferred stock dividend requirements........................................... $3,673 $3,838 $4,368 $4,424 $3,908 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ Ratio of earnings to combined fixed charges and preferred stock dividends........................................ 1.60 1.43 1.32 1.29 1.28 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
EX-23.II 7 CONSENT OF KPMG PEAT MARWICK 1 EXHIBIT 23(ii) To the Board of Directors General Electric Capital Corporation We consent to incorporation by reference in the Registration Statements on Form S-3 (Nos. 33-22974, 33-24667, 33-36601, 33-37156, 33-39376, 33-43081, 33-43420, 33-39596, 33-58506, 33-50909, 33-58508 and 33-50899) of General Electric Capital Corporation of our report dated February 11, 1994, relating to the statement of financial position of General Electric Capital Corporation and consolidated affiliates as of December 31, 1993 and 1992 and the related statements of current and retained earnings and cash flows and related schedules for each of the years in the three-year period ended December 31, 1993, which report appears in the December 31, 1993 annual report on Form 10-K of General Electric Capital Corporation. Our report refers to a change in 1993 in the method of accounting for certain investments in securities. /s/ KPMG PEAT MARWICK Stamford, Connecticut March 23, 1994 EX-24 8 POWER OF ATTORNEY 1 EXHIBIT 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned, being directors and/or officers of General Electric Capital Corporation, a New York corporation (the "Corporation"), hereby constitutes and appoints Gary C. Wendt, James A. Parke, John P. Malfettone and Burton J. Kloster, Jr., and each of them, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead in any and all capacities, to sign one or more Annual Reports for the Corporation's fiscal year ended December 31, 1993, on Form 10-K under the Securities Exchange Act of 1934, as amended, or such other form as such attorney-in-fact may deem necessary or desirable, any amendments thereto, and all additional amendments thereto in such form as they or any one of them may approve, and to file the same with all exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done to the end that such Annual Report or Annual Reports shall comply with the Securities Exchange Act of 1934, as amended, and the applicable Rules and Regulations of the Securities and Exchange Commission adopted or issued pursuant thereto, as fully and to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them or their or his substitute or resubstitute, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, each of the undersigned has hereunto set his hand this 23rd day of March, 1994. /s/ GARY C. WENDT /s/ JAMES A. PARKE - --------------------------------------------------- --------------------------------------------------- Gary C. Wendt, James A. Parke, Chairman of the Board, Director and Senior Vice President, Finance President and Chief Executive Officer (Principal Financial Officer) (Principal Executive Officer)
/s/ JOHN P. MALFETTONE --------------------------------------------- John P. Malfettone, Vice President and Comptroller (Principal Accounting Officer) /s/ NIGEL D. T. ANDREWS /s/ BURTON J. KLOSTER, JR. - --------------------------------------------------- --------------------------------------------------- Nigel D. T. Andrews, Director Burton J. Kloster, Jr., Director /s/ JAMES R. BUNT /s/ HUGH J. MURPHY - --------------------------------------------------- --------------------------------------------------- James R. Bunt, Director Hugh J. Murphy, Director /s/ DENIS J. NAYDEN - --------------------------------------------------- --------------------------------------------------- Michael A. Carpenter, Director Denis J. Nayden, Director /s/ DENNIS D. DAMMERMAN /s/ JOHN M. SAMUELS - --------------------------------------------------- --------------------------------------------------- Dennis D. Dammerman, Director John M. Samuels, Director /s/ PAOLO FRESCO /s/ EDWARD D. STEWART - --------------------------------------------------- --------------------------------------------------- Paolo Fresco, Director Edward D. Stewart, Director /s/ BENJAMIN W. HEINEMAN, JR. /s/ JOHN F. WELCH, JR. - --------------------------------------------------- --------------------------------------------------- Benjamin W. Heineman, Jr., Director John F. Welch, Jr., Director A MAJORITY OF THE BOARD OF DIRECTORS
EX-99.B 9 CONSOLIDATED FINANCIAL STATEMENTS 1 Annual Report Page 25 -------------------------------------------------------------------------- | | FINANCIAL SECTION -------------------------------------------------------------------------- | | CONTENTS Independent Auditors' Report 44 Audited Financial Statements Earnings 26 Financial Position 28 Cash Flows 30 Notes to Consolidated Financial Statements 45 Management's Discussion Operations Consolidated Operations 32 GE Operations 33 Industry Segments 33 GECS Operations 36 International Operations 38 Financial Resources and Liquidity 39 Selected Financial Data 42 Financial Responsibility 44 - ------------------------------------------------------------------------------------------------------------ CHART: REVENUES (In billions)
1989 1990 1991 1992 1993 $49.135 $52.619 $54.629 $57.073 $60.562 - ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------ CHART: EARNINGS PER SHARE BEFORE ACCOUNTING CHANGES (In dollars)
1989 1990 1991 1992 1993 $4.36 $4.85 $5.10 $5.51 $6.06 - ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------ CHART: DIVIDENDS PER SHARE (In dollars)
1989 1990 1991 1992 1993 $1.70 $1.92 $2.08 $2.32 $2.61 - ------------------------------------------------------------------------------------------------------------
F-1 2 Annual Report Page 26 -------------------------------------------------------------------------- | |STATEMENT OF EARNINGS
General Electric Company and consolidated affiliates ----------------------------------- For the years ended December 31 (In millions) 1993 1992 1991 - -------------------------------------------------------------- ----------------------------------- REVENUES Sales of goods $29,509 $29,575 $29,434 Sales of services 8,268 8,331 8,062 Other income (note 3) 735 799 792 Earnings of GECS before accounting change - - - GECS revenues from operations (note 4) 22,050 18,368 16,341 ------- ------- ------- Total revenues 60,562 57,073 54,629 ------- ------- ------- COSTS AND EXPENSES (note 5) Cost of goods sold 22,606 22,107 21,498 Cost of services sold 6,308 6,273 6,373 Interest and other financial charges (note 7) 6,989 6,860 7,401 Insurance losses and policyholder and annuity benefits 3,172 1,957 1,623 Provision for losses on financing receivables (note 8) 987 1,056 1,102 Other costs and expenses 13,774 12,494 10,834 Minority interest in net earnings of consolidated affiliates 151 53 72 ------- ------- ------- Total costs and expenses 53,987 50,800 48,903 ------- ------- ------- EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND ACCOUNTING CHANGES 6,575 6,273 5,726 Provision for income taxes (note 9) (2,151) (1,968) (1,742) ------- ------- ------- EARNINGS FROM CONTINUING OPERATIONS BEFORE ACCOUNTING CHANGES 4,424 4,305 3,984 ------- ------- ------- Earnings from discontinued operations, net of income taxes of $44, $248 and $259, respectively (note 2) 75 420 451 Gain on transfer of discontinued operations, net of income taxes of $752 678 - - ------- ------- ------- EARNINGS FROM DISCONTINUED OPERATIONS 753 420 451 ------- ------- ------- EARNINGS BEFORE ACCOUNTING CHANGES 5,177 4,725 4,435 Cumulative effects of accounting changes (notes 6 and 22) (862) - (1,799) ------- ------- ------- Net earnings $ 4,315 $ 4,725 $ 2,636 ======= ======= ======= - -------------------------------------------------------------- ----------------------------------- NET EARNINGS PER SHARE (in dollars) Continuing operations before accounting changes $ 5.18 $ 5.02 $ 4.58 Discontinued operations before accounting changes 0.88 0.49 0.52 ------- ------- ------- Earnings before accounting changes 6.06 5.51 5.10 Cumulative effects of accounting changes (1.01) - (2.07) ------- ------- ------- Net earnings per share $5.05 $5.51 $3.03 ======= ======= ======= - -------------------------------------------------------------- ------------------------------------ DIVIDENDS DECLARED PER SHARE (in dollars) $2.61 $2.32 $2.08 - -------------------------------------------------------------------------------------------------------- The notes to consolidated financial statements on pages 45-64 are an integral part of this statement.
F-2 3 Annual Report Page 27 - ---------------------------------------------------------------------------
GE GECS ------------------------------- ----------------------------- For the years ended December 31 (In millions) 1993 1992 1991 1993 1992 1991 - ---------------------------------------------------------- ------------------------------ ----------------------------- REVENUES Sales of goods $29,533 $29,595 $29,446 $ - $ - $ - Sales of services 8,289 8,348 8,075 - - - Other income (note 3) 730 812 798 - - - Earnings of GECS before accounting change 1,807 1,499 1,275 - - - GECS revenues from operations (note 4) - - - 22,137 18,440 16,399 ------- ------- ------- ------- ------- ------- Total revenues 40,359 40,254 39,594 22,137 18,440 16,399 ------- ------- ------- ------- ------- ------- COSTS AND EXPENSES (note 5) Cost of goods sold 22,630 22,127 21,510 - - - Cost of services sold 6,329 6,290 6,386 - - - Interest and other financial charges (note 7) 525 768 893 6,473 6,122 6,536 Insurance losses and policyholder and annuity benefits - - - 3,172 1,957 1,623 Provision for losses on financing receivables (note 8) - - - 987 1,056 1,102 Other costs and expenses 5,124 5,319 5,422 8,723 7,230 5,448 Minority interest in net earnings of consolidated affiliates 17 13 39 134 40 33 ------- ------- ------- ------- ------- ------- Total costs and expenses 34,625 34,517 34,250 19,489 16,405 14,742 ------- ------- ------- ------- ------- ------- EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND ACCOUNTING CHANGES 5,734 5,737 5,344 2,648 2,035 1,657 Provision for income taxes (note 9) (1,310) (1,432) (1,360) (841) (536) (382) ------- ------- ------- ------- ------- ------- EARNINGS FROM CONTINUING OPERATIONS BEFORE ACCOUNTING CHANGES 4,424 4,305 3,984 1,807 1,499 1,275 ------- ------- ------- ------- ------- ------- Earnings from discontinued operations, net of income taxes of $44, $248 and $259, respectively (note 2) 75 420 451 - - - Gain on transfer of discontinued operations, net of income taxes of $752 678 - - - - - ------- ------- ------- ------- ------- ------- EARNINGS FROM DISCONTINUED OPERATIONS 753 420 451 - - - ------- ------- ------- ------- ------- ------- EARNINGS BEFORE ACCOUNTING CHANGES 5,177 4,725 4,435 1,807 1,499 1,275 Cumulative effects of accounting changes (notes 6 and 22) (862) - (1,799) - - (19) ------- ------- ------- ------- ------- ------- NET EARNINGS $ 4,315 $ 4,725 $ 2,636 $ 1,807 $ 1,499 $ 1,256 ======= ======= ======= ======= ======= ======= - --------------------------------------------------------------------------------------------------------------------------------- In the supplemental consolidating data on this page, "GE" means the basis of consolidation as described in note 1 to the consolidated financial statements; "GECS" means General Electric Capital Services, Inc. and all of its affiliates and associated companies. Transactions between GE and GECS have been eliminated from the "General Electric Company and consolidated affiliates" columns on page 26.
F-3 4 Annual Report Page 28 -------------------------------------------------------------------------- | |STATEMENT OF FINANCIAL POSITION
General Electric Company and consolidated affiliates ------------------------------- At December 31 (In millions) 1993 1992 - --------------------------------------------------------------------- ------------------------------- ASSETS Cash and equivalents $ 3,218 $ 3,129 GECS trading securities (note 10) 30,165 24,154 Investment securities (note 11) 26,811 11,256 Securities purchased under agreements to resell 43,463 26,788 Current receivables (note 12) 8,195 7,150 Inventories (note 13) 3,824 4,574 GECS financing receivables (investment in time sales, loans and financing leases) - net (note 14) 63,948 59,388 Other GECS receivables 15,616 8,025 Property, plant and equipment (including equipment leased to others) - net (note 15) 21,228 20,387 Investment in GECS - - Intangible assets (note 16) 10,364 9,510 All other assets (note 17) 24,674 16,625 Net assets of discontinued operations - 1,890 -------- -------- TOTAL ASSETS $251,506 $192,876 ======== ======== - --------------------------------------------------------------------- ------------------------------- LIABILITIES AND EQUITY Short-term borrowings (note 18) $ 62,135 $ 56,389 Accounts payable, principally trade accounts 11,956 8,245 Securities sold under agreements to repurchase 56,669 36,014 Securities sold but not yet purchased, at market (note 19) 15,332 11,413 Progress collections and price adjustments accrued 2,608 2,150 Dividends payable 615 539 All other GE current costs and expenses accrued (note 20) 6,414 5,725 Long-term borrowings (note 18) 28,270 25,376 Insurance reserves and annuity benefits (note 21) 22,909 7,948 All other liabilities (note 22) 12,009 9,734 Deferred income taxes (note 23) 5,109 4,540 -------- -------- Total liabilities 224,026 168,073 -------- -------- Minority interest in equity of consolidated affiliates (note 24) 1,656 1,344 -------- -------- Common stock (926,564,000 shares issued) 584 584 Other capital 1,398 755 Retained earnings 28,613 26,527 Less common stock held in treasury (4,771) (4,407) -------- -------- Total share owners' equity (notes 25 and 26) 25,824 23,459 -------- -------- TOTAL LIABILITIES AND EQUITY $251,506 $192,876 ======== ======== - ----------------------------------------------------------------------------------------------------------- The notes to consolidated financial statements on pages 45-64 are an integral part of this statement.
F-4 5 Annual Report Page 29 - ---------------------------------------------------------------------------
GE GECS --------------------- ----------------------- At December 31 (In millions) 1993 1992 1993 1992 - ----------------------------------------------------------------------- --------------------- ----------------------- ASSETS Cash and equivalents $ 1,536 $ 1,189 $ 1,682 $ 1,940 GECS trading securities (note 10) - - 30,165 24,154 Investment securities (note 11) 19 32 26,792 11,224 Securities purchased under agreements to resell - - 43,463 26,788 Current receivables (note 12) 8,561 7,462 - - Inventories (note 13) 3,824 4,574 - - GECS financing receivables (investment in time sales, loans and financing leases) - net (note 14) - - 63,948 59,388 Other GECS receivables - - 15,799 8,476 Property, plant and equipment (including equipment leased to others) - net (note 15) 9,542 9,932 11,686 10,455 Investment in GECS 10,809 8,884 - - Intangible assets (note 16) 6,466 6,607 3,898 2,903 All other assets (note 17) 10,377 7,505 14,297 9,196 Net assets of discontinued operations - 1,890 - - ------- ------- -------- -------- TOTAL ASSETS $51,134 $48,075 $211,730 $154,524 ======= ======= ======== ======== - ----------------------------------------------------------------------- --------------------- ----------------------- LIABILITIES AND EQUITY Short-term borrowings (note 18) $ 2,391 $ 3,448 $ 60,003 $ 53,183 Accounts payable, principally trade accounts 2,331 2,217 9,885 6,624 Securities sold under agreements to repurchase - - 56,669 36,014 Securities sold but not yet purchased, at market (note 19) - - 15,332 11,413 Progress collections and price adjustments accrued 2,608 2,150 - - Dividends payable 615 539 - - All other GE current costs and expenses accrued (note 20) 6,414 5,725 - - Long-term borrowings (note 18) 2,413 3,420 25,885 21,957 Insurance reserves and annuity benefits (note 21) - - 22,909 7,948 All other liabilities (note 22) 8,482 7,096 3,529 2,638 Deferred income taxes (note 23) (299) (329) 5,408 4,869 ------- ------- -------- -------- Total liabilities 24,955 24,266 199,620 144,646 ------- ------- -------- -------- Minority interest in equity of consolidated affiliates (note 24) 355 350 1,301 994 ------- ------- -------- -------- Common stock (926,564,000 shares issued) 584 584 1 1 Other capital 1,398 755 2,596 1,868 Retained earnings 28,613 26,527 8,212 7,015 Less common stock held in treasury (4,771) (4,407) - - ------- ------- -------- -------- Total share owners' equity (notes 25 and 26) 25,824 23,459 10,809 8,884 ------- ------- -------- -------- TOTAL LIABILITIES AND EQUITY $51,134 $48,075 $211,730 $154,524 ======= ======= ======== ======== - -------------------------------------------------------------------------------------------------------------------------------- In the supplemental consolidating data on this page, "GE" means the basis of consolidation as described in note 1 to the consolidated financial statements; "GECS" means General Electric Capital Services, Inc. and all of its affiliates and associated companies. Transactions between GE and GECS have been eliminated from the "General Electric Company and consolidated affiliates" columns on page 28.
F-5 6 Annual Report Page 30 -------------------------------------------------------------------------- | | STATEMENT OF CASH FLOWS
General Electric Company and consolidated affiliates ------------------------------------ For the years ended December 31 (In millions) 1993 1992 1991 - --------------------------------------------------------------- ------------------------------------ CASH FLOWS FROM OPERATING ACTIVITIES Net earnings $ 4,315 $ 4,725 $ 2,636 Less earnings from discontinued operations (753) (420) (451) Adjustments to reconcile net earnings to cash provided from operating activities Cumulative effects of accounting changes 862 - 1,799 Depreciation, depletion and amortization 3,261 2,818 2,654 Earnings retained by GECS - - - Deferred income taxes 461 707 826 Decrease (increase) in GE current receivables (571) 135 (215) Decrease in GE inventories 750 820 378 Increase (decrease) in accounts payable 3,345 57 1,151 Increase in insurance reserves 1,479 703 725 Provision for losses on financing receivables 987 1,056 1,102 Net change in certain broker-dealer accounts 382 1,018 (1,548) All other operating activities (4,407) (2,111) (1,952) -------- -------- -------- Net cash from continuing operations 10,111 9,508 7,105 Net cash from discontinued operations 76 741 392 -------- -------- -------- CASH PROVIDED FROM OPERATING ACTIVITIES 10,187 10,249 7,497 -------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Additions to property, plant and equipment (4,739) (4,824) (4,870) Dispositions of property, plant and equipment 1,155 1,793 1,090 Net increase in GECS financing receivables (4,164) (4,683) (7,254) Payments for principal businesses purchased (2,090) (2,013) (3,769) Proceeds from principal business dispositions - 90 604 All other investing activities (6,639) (3,823) (2,045) -------- -------- -------- Cash for investing activities - continuing operations (16,477) (13,460) (16,244) Cash from (used for) investing activities - discontinued operations 886 (93) (117) -------- -------- -------- CASH USED FOR INVESTING ACTIVITIES (15,591) (13,553) (16,361) -------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Net change in borrowings (maturities 90 days or less) 4,464 3,092 6,126 Newly issued debt (maturities more than 90 days) 15,468 13,084 15,374 Repayments and other reductions (maturities more than 90 days) (11,853) (9,008) (10,158) Disposition of GE shares from treasury (mainly for employee plans) 406 425 410 Purchase of GE shares for treasury (770) (1,206) (1,112) Dividends paid to share owners (2,153) (1,925) (1,780) All other financing activities (69) - - -------- -------- -------- CASH PROVIDED FROM (USED FOR) FINANCING ACTIVITIES 5,493 4,462 8,860 -------- -------- -------- INCREASE (DECREASE) IN CASH AND EQUIVALENTS DURING YEAR 89 1,158 (4) Cash and equivalents at beginning of year 3,129 1,971 1,975 -------- -------- -------- Cash and equivalents at end of year $ 3,218 $ 3,129 $ 1,971 ======== ======== ======== - -------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION Cash paid during the year for interest $ (6,689) $ (6,477) $ (7,145) Cash paid during the year for income taxes (1,644) (1,033) (1,244) - -------------------------------------------------------------------------------------------------------- The notes to consolidated financial statements on pages 45-64 are an integral part of this statement.
F-6 7 Annual Report Page 31 - ---------------------------------------------------------------------------
GE GECS ------------------------------- ------------------------------ For the years ended December 31 (In millions) 1993 1992 1991 1993 1992 1991 - --------------------------------------------------------- ------------------------------- ------------------------------ CASH FLOWS FROM OPERATING ACTIVITIES Net earnings $ 4,315 $ 4,725 $ 2,636 $ 1,807 $ 1,499 $ 1,256 Less earnings from discontinued operations (753) (420) (451) - - - Adjustments to reconcile net earnings to cash provided from operating activities Cumulative effects of accounting changes 862 - 1,799 - - 19 Depreciation, depletion and amortization 1,631 1,483 1,429 1,630 1,335 1,225 Earnings retained by GECS (1,197) (999) (925) - - - Deferred income taxes 120 675 271 341 32 555 Decrease (increase) in GE current receivables (625) 68 (109) - - - Decrease in GE inventories 750 820 378 - - - Increase (decrease) in accounts payable 114 (43) (203) 3,246 139 1,391 Increase in insurance reserves - - - 1,479 703 725 Provision for losses on financing receivables - - - 987 1,056 1,102 Net change in certain broker-dealer accounts - - - 382 1,018 (1,548) All other operating activities (16) (1,736) (1,199) (4,419) (439) (754) ------- ------- ------- ------- ------- ------- Net cash from continuing operations 5,201 4,573 3,626 5,453 5,343 3,971 Net cash from discontinued operations 76 741 392 - - - ------- ------- ------- ------- ------- ------- CASH PROVIDED FROM OPERATING ACTIVITIES 5,277 5,314 4,018 5,453 5,343 3,971 ------- ------- ------- ------- ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES Additions to property, plant and equipment (1,588) (1,445) (2,126) (3,151) (3,379) (2,744) Dispositions of property, plant and equipment 55 46 61 1,100 1,747 1,029 Net increase in GECS financing receivables - - - (4,164) (4,683) (7,254) Payments for principal businesses purchased - - (933) (2,090) (2,013) (2,836) Proceeds from principal business dispositions - 90 327 - - 277 All other investing activities 298 (103) (60) (6,914) (3,668) (2,125) ------- ------- ------- ------- ------- ------- Cash for investing activities - continuing operations (1,235) (1,412) (2,731) (15,219) (11,996) (13,653) Cash from (used for) investing activities - discontinued operations 886 (93) (117) - - - ------- ------- ------- ------- ------- ------- CASH USED FOR INVESTING ACTIVITIES (349) (1,505) (2,848) (15,219) (11,996) (13,653) ------- ------- ------- ------- ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES Net change in borrowings (maturities 90 days or less) 46 (763) 483 4,462 3,895 5,641 Newly issued debt (maturities more than 90 days) 215 1,331 2,136 15,253 11,753 13,238 Repayments and other reductions (maturities more than 90 days) (2,325) (1,528) (1,573) (9,528) (7,480) (8,585) Disposition of GE shares from treasury (mainly for employee plans) 406 425 410 - - - Purchase of GE shares for treasury (770) (1,206) (1,112) - - - Dividends paid to share owners (2,153) (1,925) (1,780) (610) (500) (350) All other financing activities - - - (69) - - ------- ------- ------- ------- ------- ------- CASH PROVIDED FROM (USED FOR) FINANCING ACTIVITIES (4,581) (3,666) (1,436) 9,508 7,668 9,944 ------- ------- ------- ------- ------- ------- INCREASE (DECREASE) IN CASH AND EQUIVALENTS DURING YEAR 347 143 (266) (258) 1,015 262 Cash and equivalents at beginning of year 1,189 1,046 1,312 1,940 925 663 ------- ------- ------- ------- ------- ------- Cash and equivalents at end of year $ 1,536 $ 1,189 $ 1,046 $ 1,682 $ 1,940 $ 925 ======= ======= ======= ======= ======= ======= - ----------------------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION Cash paid during the year for interest $ (473) $ (570) $ (761) $(6,216) $(5,907) $(6,384) Cash paid during the year for income taxes (1,455) (936) (1,343) (189) (97) 99 - ----------------------------------------------------------------------------------------------------------------------------- In the supplemental consolidating data on this page, "GE" means the basis of consolidation as described in note 1 to the consolidated financial statements; "GECS" means General Electric Capital Services, Inc. and all of its affiliates and associated companies. Transactions between GE and GECS have been eliminated from the "General Electric Company and consolidated affiliates" columns on page 30.
F-7 8 Annual Report Page 32 -------------------------------------------------------------------------- | | MANAGEMENT'S DISCUSSION OF OPERATIONS OVERVIEW General Electric Company's consolidated financial statements represent the combination of the Company's manufacturing and nonfinancial services businesses ("GE") and the accounts of General Electric Capital Services, Inc. ("GECS"). See note 1 to the consolidated financial statements, which explains how the various financial data are presented. Management's Discussion of Operations is in four parts: Consolidated Operations, GE Operations, GECS Operations and, on page 38, International Operations. CONSOLIDATED OPERATIONS 1993 WAS ANOTHER SUCCESSFUL YEAR for the General Electric Company in a difficult global economy, reflecting solid operating performance in all of the businesses in its diversified portfolio except, as expected, Aircraft Engines. Consolidated revenues increased 6% to $60.6 billion, led by GE Capital Services, Power Systems, Transportation Systems, Appliances, and Electrical Distribution and Control. CONSOLIDATED EARNINGS were $4.315 billion compared with $4.725 billion in 1992 and $2.636 billion in 1991. Three important factors should be considered in evaluating the Company's 1993 operations - restructuring provisions, discontinued operations and the effect of an accounting change. Each of these factors is discussed separately below. Without these items, 1993 earnings would have been $5.102 billion, up 16% from the comparable 1992 level. Particularly good results were reported in GE Capital Services, NBC, Plastics and Power Systems. * Restructuring provisions in 1993 amounted to $678 million after taxes. These provisions cover costs of a plan that will enhance the Company's global competitiveness. The approved plan includes explicit programs that will result in the closing, downsizing and streamlining of certain production, service and administration facilities worldwide. Costs include, among other things, asset write-offs, lease terminations and severance benefits. See Industry Segments beginning on page 33 for further information on restructuring. * Discontinued operations reported earnings of $753 million ($.88 per share), up $333 million from 1992. The increase included a gain of $678 million ($.79 per share) resulting from transfer of the Aerospace businesses at the beginning of the second quarter, which was partially offset by the absence of nine months of 1992 earnings ($326 million) and lower first-quarter 1993 earnings ($19 million). * Accounting changes included the 1993 adoption of Statement of Financial Accounting Standards (SFAS) No. 112, Employers' Accounting for Postemployment Benefits. The transition effect of this accounting change decreased net earnings by $862 million ($1.01 per share), with a corresponding decrease in share owners' equity. See note 22 for a further discussion of SFAS No. 112. The 1991 accounting change, adoption of SFAS No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions, had the transition effect of reducing net earnings by $1,799 million ($2.07 per share), with a corresponding decrease in share owners' equity. As a result of these noncash charges, the return on average share owners' equity was reduced to 17.5% in 1993 and 12.2% in 1991, compared with 20.9% in 1992. NEW ACCOUNTING STANDARDS include SFAS No. 114, Accounting by Creditors for Impairment of a Loan, which modifies the accounting that applies when it is probable that all amounts due under contractual terms of a loan will not be collected. Management does not believe that this Statement, required to be adopted no later than the first quarter of 1995, will have a material effect on the Company's financial position or results of operations, although such effect will depend on the facts at the time of adoption. DIVIDENDS DECLARED totaled $2.229 billion in 1993. Per-share dividends of $2.61 were up 13% from the previous year's $2.32 per share, marking the 18th consecutive year of dividend growth. Dividends declared per share increased 12% in 1992 over 1991, following an 8% increase the year before. Even though substantial dividends were paid, the Company retained sufficient earnings to invest in new plant and equipment for a wide variety of capital expenditure projects, particularly those which increase productivity, and to provide adequate financial resources for internal and external growth opportunities. - ------------------------------------------------------------------------------------------------------ CHART: EARNINGS BEFORE ACCOUNTING CHANGES (In billions)
1989 1990 1991 1992 1993 Continuing operations $3.503 $3.889 $3.984 $4.305 $4.424 Discontinued operations 0.436 0.414 0.451 0.420 0.753 - ------------------------------------------------------------------------------------------------------
F-8 9 Annual Report Page 33 - --------------------------------------------------------------------------- GE OPERATIONS GE TOTAL REVENUES of $40.4 billion in 1993 were about the same as 1992's revenues, which were up about 2% from $39.6 billion in 1991. * GE's sales of goods and services were essentially unchanged during the three-year period, with the sales effects of changes in volume and prices differing markedly among its businesses. Overall, volume was about 2% higher in 1993 than in 1992, with good increases in Plastics, Transportation Systems, Appliances and Power Systems that were partially offset by reduced shipments in Aircraft Engines and lower advertising revenues in NBC, principally because there was no counterpart to the 1992 Summer Olympics. Lower 1993 selling prices in many businesses, particularly Plastics, Medical Systems and Lighting, offset the net volume increase. Sales in 1992 were up about 1% from 1991 because of the effect of about 2% higher shipment volume, approximately one-half of which was offset by lower selling prices. * GE's other income from a wide variety of sources was $730 million in 1993, $812 million in 1992 and $798 million in 1991. Details of GE's other income are in note 3. * Earnings of GECS were up 21% in 1993 following an 18% increase the year before. See page 36 for details of these earnings. TOTAL COSTS AND EXPENSES FOR GE were virtually flat for the three-year period, despite much higher restructuring provisions in 1993. Principal elements of these costs and expenses are costs of goods and services sold; selling, general and administrative expense; and interest expense. * Operating margin is sales of goods and services less the costs of goods and services sold and selling, general and administrative expenses. After restructuring provisions, operating margin was 9.9% of sales in 1993 compared with 11.1% in 1992 and 11.2% in 1991. Before such provisions, GE's operating margins were 12.5% in 1993 compared with 11.5% in 1992 and 1991. In 1993, all businesses other than Aircraft Engines increased their margin rates before restructuring by one to five full points. Strong 1992 operating margin improvements in Power Systems, NBC and Medical Systems were offset by the effects of reduced volume at Aircraft Engines and pricing pressures at both Plastics and Aircraft Engines. * Total cost productivity (sales in relation to costs on a constant dollar basis) was 3.8% in 1993 compared with 4.3% in 1992 and 3.9% in 1991, and it more than offset the impact of inflation on the Company in all three years. Lower volume at Aircraft Engines more than explained the 1993 decline. Excluding Aircraft Engines, productivity was 5.3% in 1993 compared with 4.8% in 1992. - ------------------------------------------------------------------------------------------------------ CHART: GE/S&P DIVIDENDS PER SHARE INCREASE COMPARED WITH 1988
1989 1990 1991 1992 1993 GE 16.4% 31.5% 42.5% 58.9% 78.8% S&P 500 13.6 24.4 25.4 27.2 30.6 - ------------------------------------------------------------------------------------------------------
* Interest expense in 1993 was $525 million, down 32% from $768 million in 1992. The lower interest expense was attributable to a decrease in the average level of borrowings and, to a lesser extent, lower interest rates. Interest expense decreased 14% in 1992 compared with 1991, primarily because of lower rates. GE enters 1994 on a strong note, with excellent cash flows and a strong balance sheet. The Company continues to be well positioned to capitalize on both global growth opportunities and gradual improvement in the U.S. economy in the coming year. GE INDUSTRY SEGMENT REVENUES AND OPERATING PROFIT for the last five years are shown in the table on page 35. Revenues include income from sales of goods and services to customers and other income. Sales from one Company component to another generally are priced at equivalent commercial selling prices. Intersegment revenues are shown in note 29. Operating profit includes provisions for restructuring actions. Corporate items not traceable to segments includes provision of $80 million to cover costs associated with rationalization of corporate facilities. * AIRCRAFT ENGINES revenues were down 11% from the 1992 level, which was 5% lower than in 1991. The decreases reflected the continuing weakness in shipments of engines and spare parts in both the military and commercial markets, which were only partially offset by higher sales of aeroderivative engines for marine and industrial applications and, in 1993, by consolidation of a recently acquired overhaul facility in the United Kingdom. Even with these market conditions, 1993 operating profit totaled $798 million, a 37% decline from 1992 following an 8% decrease the year before. The decreases were largely due to lower volume discussed above and, in 1993, provisions for restructuring of $267 million covering incremental costs associated with closing and relocating certain manufacturing F-9 10 Annual Report Page 34 - --------------------------------------------------------------------------- and warehousing facilities to reduce the cost structure of the business in line with lower volume. About $2.4 billion of 1993 revenues were from sales to the U.S. government, about the same as 1992 but down from $3.0 billion in 1991. Revenues associated with development of the F414 engine for the U.S. Navy's top-priority fighter offset declines in other diversified programs. Firm orders received during 1993 totaled $5.7 billion compared with $5.9 billion in 1992 and $6.3 billion in 1991. The firm order backlog declined to $7.7 billion at the end of 1993 from $9.5 billion at the end of 1992, reflecting a $0.9 billion excess of revenues over new orders and cancellations of $0.9 billion. Approximately 34% of the backlog was scheduled for delivery in 1994. The dual impact of declining military sales and weakness in commercial airline markets worldwide makes it unlikely that revenues and operating profit will rebound to levels of the early 1990s until, at the earliest, the 1996 to 1997 time frame. Management has taken aggressive actions over the past three years to respond to these market realities, reducing the work force by about 13,000 employees through layoffs and attrition, and it will continue to monitor the changing business conditions closely. * APPLIANCES revenues were up 4% from 1992, with volume improvement in all core appliance lines, mostly as a result of continued improvement in U.S. markets and slightly higher share. A 4% decrease in 1993 operating profit resulted principally from $136 million of restructuring provisions covering costs associated with closing, downsizing and consolidating consumer service and production facilities to enhance productivity. Benefits from 1993 productivity gains partially offset the effect of these provisions. Revenues were up 2% in 1992, reflecting increased demand in U.S. markets, particularly for refrigerators and ranges. A 4% decrease in 1992 operating profit resulted principally from lower selling prices, cost increases and significant investment in new products and services, the combination of which more than offset the higher volume and productivity gains. * BROADCASTING revenues were down 8% in 1993, primarily because there was no counterpart to the 1992 Summer Olympic Games. Operating profit, however, increased 29% despite $81 million of restructuring provisions to cover lease terminations, associated asset write-offs and other incremental costs to enhance productivity. The increase resulted mainly from absence of a counterpart to the programming costs associated with the Olympic Games and generally lower 1993 overhead costs. Cable operations posted significant gains in both revenues and operating profit. Operating profit declined 2% in 1992 from the prior year on an 8% increase in revenues. The decline was caused by the lack of a counterpart to the 1991 gain on the sale of NBC's interest in the RCA Columbia Home Video joint venture and the negative impact of the Summer Olympics, both of which were substantially offset by cost-control measures, double-digit profit increases at five of NBC's six owned-and- operated television stations and NBC Cable's first full year of operating profit. * INDUSTRIAL revenues in 1993 were 7% higher than in 1992, mainly because of significantly higher locomotive shipments. Operating profit declined 12%, however, largely because of restructuring provisions of $211 million to cover incremental costs of downsizing and consolidating production and logistical operations worldwide, and because of weak prices in most businesses. Both of these factors were only partially offset by very good productivity across the segment and substantially improved Lighting operations in Europe. In 1992, operating profit was about the same as in 1991 on slightly higher revenues, reflecting pricing pressures, cost increases and lower locomotive shipments, which were about offset by strong productivity throughout the segment and by higher revenues and operating profit in the Lighting business, including the effect of the 1992 consolidation of Thorn. * MATERIALS revenues increased 4% in 1993, primarily as a result of double-digit volume growth in U.S. and Asian markets, which was partially offset by worldwide price declines. Operating profit was 13% higher than in 1992 as substantial productivity improvements, material cost decreases and favorable exchange gains much more than offset the lower prices, the impact of inflation and $52 million of restructuring provisions for equipment write-offs and downsizing of European operations. Revenues increased 2% in 1992, principally because of a higher physical volume of shipments. Operating profit, however, decreased 8% because the combination of significant price erosion and cost inflation exceeded productivity gains. * POWER SYSTEMS revenues increased by 5% in 1993 as higher levels of gas turbine shipments, increased sales of nuclear fuel and volume increases in the Industrial Systems and Services business more than offset lower sales in Power Delivery. Operating profit increased 10% over 1992, principally on the strength of gas turbine revenues and productivity, the combination of which more than offset restructuring provisions of $124 million to cover, principally, incremental costs of facility demolitions, associated asset write- offs and downsizing of the apparatus service business. Operating profit was 18% higher in 1992 than in 1991 on 3% higher revenues, mainly reflecting Power Generation's volume growth in the gas turbine business and productivity gains. Power Systems orders totaled $7.0 billion for 1993 compared with the very strong $7.5 billion and $8.0 billion in 1992 and 1991, respectively. The Power Systems backlog was $9.9 billion at the end of 1993, down F-10 11 Annual Report Page 35 -------------------------------------------------------------------------- | |SUMMARY OF INDUSTRY SEGMENTS
General Electric Company and consolidated affiliates ------------------------------------------------------------------- For the years ended December 31 (In millions) 1993 1992 1991 1990 1989 - -------------------------------------------------------------------------------------------------------------------------------- REVENUES GE Aircraft Engines $ 6,580 $ 7,368 $ 7,777 $ 7,504 $ 6,862 Appliances 5,555 5,330 5,225 5,592 5,358 Broadcasting 3,102 3,363 3,121 3,236 3,392 Industrial 7,379 6,907 6,783 6,644 6,689 Materials 5,042 4,853 4,736 5,140 4,944 Power Systems 6,692 6,371 6,189 5,600 5,104 Technical Products and Services 4,174 4,674 4,686 4,259 4,049 All Other 2,043 1,749 1,545 1,369 1,246 Corporate items and eliminations (208) (361) (468) (285) (433) ------- ------- ------- ------- ------- Total GE 40,359 40,254 39,594 39,059 37,211 ------- ------- ------- ------- ------- GECS Financing 12,399 10,544 10,069 9,000 7,333 Specialty Insurance 4,862 3,863 2,989 2,853 2,710 Securities Broker-Dealer 4,861 4,022 3,346 2,923 2,897 All Other 15 11 (5) (2) 5 ------- ------- ------- ------- ------- Total GECS 22,137 18,440 16,399 14,774 12,945 ------- ------- ------- ------- ------- Eliminations (1,934) (1,621) (1,364) (1,214) (1,021) ------- ------- ------- ------- ------- CONSOLIDATED REVENUES $60,562 $57,073 $54,629 $52,619 $49,135 ======= ======= ======= ======= ======= - -------------------------------------------------------------------------------------------------------------------------------- OPERATING PROFIT GE Aircraft Engines $ 798 $ 1,274 $ 1,390 $ 1,253 $ 1,050 Appliances 372 386 400 435 386 Broadcasting 264 204 209 477 603 Industrial 782 888 885 910 847 Materials 834 740 800 1,010 1,055 Power Systems 1,143 1,037 882 666 471 Technical Products and Services 706 912 693 538 538 All Other 2,036 1,717 1,513 1,295 1,103 ------- ------- ------- ------- ------- Total GE 6,935 7,158 6,772 6,584 6,053 ------- ------- ------- ------- ------- GECS Financing 1,727 1,366 1,327 1,267 1,152 Specialty Insurance 770 641 501 457 361 Securities Broker-Dealer 439 300 119 (54) (53) All Other (288) (272) (290) (275) (322) ------- ------- ------- ------- ------- Total GECS 2,648 2,035 1,657 1,395 1,138 ------- ------- ------- ------- ------- Eliminations (1,794) (1,485) (1,259) (1,073) (903) ------- ------- ------- ------- ------- CONSOLIDATED OPERATING PROFIT 7,789 7,708 7,170 6,906 6,288 GE interest and financial charges, net of eliminations (529) (752) (881) (941) (715) GE items not traceable to segments (685) (683) (563) (480) (552) ------- ------- ------- ------- ------- EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND ACCOUNTING CHANGES $ 6,575 $ 6,273 $ 5,726 $ 5,485 $ 5,021 ======= ======= ======= ======= ======= - -------------------------------------------------------------------------------------------------------------------------------- The notes to consolidated financial statements on pages 45-64 are an integral part of this statement. "GE" means the basis of consolidation as described in note 1 to the consolidated financial statements; "GECS" means General Electric Capital Services, Inc. and all of its affiliates and associated companies. Operating profit of GE segments excludes interest and other financial charges; operating profit of GECS includes interest and discount expense, which is the largest element of GECS' operating costs.
F-11 12 Annual Report Page 36 - --------------------------------------------------------------------------- 4% from December 31, 1992, mainly because of the transfer of a component that procured materials for the U.S. Navy. Approximately 40% of the 1993 backlog was scheduled for shipment during 1994. * TECHNICAL PRODUCTS AND SERVICES revenues were down 11% in 1993, principally because of 1992 transfers, dispositions and realignment of the former Communications and Services businesses (other than GE Information Services). Increased physical volume of 1993 Medical Systems sales, up about 4% because of international sales, was largely offset by continuing pricing pressures worldwide. Segment operating profit in 1993 was down sharply, mainly because there was no counterpart to the 1992 gain on realignment of the equity position of GE and Ericsson in their mobile communications joint venture and because of restructuring provisions of $60 million to downsize manufacturing and services operations worldwide. Both of these factors were only partially offset by productivity gains and substantially improved Medical Systems operations in Europe. Operating profit was up 32% in 1992 over 1991 on flat revenues, primarily because of the aforementioned gain, strong productivity and much improved results in GE Information Services. Orders received by Medical Systems in 1993 were down slightly from 1992's strong performance. A decline in U.S. equipment markets more than offset growth in international orders. The backlog of unfilled orders at year-end 1993 was $1.7 billion ($1.8 billion at the end of 1992), about 80% of which was scheduled to be shipped in 1994. * ALL OTHER consists primarily of GECS' earnings, which are discussed below. Also included are revenues derived from licensing use of GE know-how to others. GECS OPERATIONS GECS conducts its business in three segments. Financing segment includes financing operations of GE Capital Corporation (GE Capital). Specialty Insurance segment includes operations of Employers Reinsurance Corporation (ERC) and the insurance businesses of GE Capital described on page 61. Securities Broker-Dealer segment includes operations of Kidder, Peabody Group Inc. (Kidder, Peabody). GECS' EARNINGS were $1.807 billion in 1993, 21% higher than 1992's earnings, which were 18% more than comparable 1991 earnings. The 1993 increase reflected strong performance in the Financing segment, mainly as a result of a favorable interest-rate environment, asset growth and improved asset quality. Earnings in GECS' Securities Broker-Dealer and Specialty Insurance segments also were substantially higher in 1993, following sharp improvements in 1992. GECS' PRINCIPAL COST IS FOR INTEREST on borrowings. Interest expense in 1993 was $6.5 billion, 6% higher than in 1992, which was 6% lower than in 1991. The 1993 increase was a result of funding increased security positions in the Securities Broker-Dealer segment, partially offset by substantially lower rates on higher average borrowings in the Financing segment. The 1992 decrease reflected substantially lower interest rates, which more than offset the effects of higher average borrowings. The composite interest rate on GECS' borrowings was 4.96% in 1993 compared with 5.78% in 1992 and 7.46% in 1991. GECS' OTHER COSTS AND EXPENSES increased to $8.7 billion in 1993 from $7.2 billion in 1992 and $5.4 billion in 1991, reflecting higher investment levels and acquisitions of businesses and portfolios. GECS' INDUSTRY SEGMENT REVENUES AND OPERATING PROFIT for the past five years are shown in the table on page 35. Revenues from operations (earned income) are detailed in note 4. * FINANCING segment operating profit of $1.727 billion in 1993 was up 26% from 1992, which was 3% higher than in 1991. Asset growth and increased financing spread, the excess of yield (rates earned) over interest rates on borrowings, were significant factors in both years. Assets grew 30% during 1993 and 10% in 1992 because of acquisitions of businesses and portfolios, including the 1993 annuity business acquisitions, and because of higher origination volume. During both years, the effects of declining interest rates on borrowings resulted in increased financing spreads. Yields on assets were essentially flat in 1993 compared with 1992, following a decline from 1991. Other costs and expenses increased in 1993 and 1992, mainly because of asset growth. The portfolio of financing receivables, $63.9 billion and $59.4 billion at the end of 1993 and 1992, respectively, is the Financing segment's largest asset and the primary source of its revenues. Related allowances for losses at the end of 1993 aggregated $1.7 billion (2.63% of receivables - the same level as 1992) and are, in management's judgment, appropriate given the risk profile of the portfolio. A discussion about the quality of certain elements of the Financing segment investment portfolio follows. Further details are included in note 14. Consumer loans receivable, primarily retailer and auto receivables, were $17.3 billion and $14.8 billion at the end of 1993 and 1992, respectively. GECS' investment in consumer auto finance lease receivables was $5.6 billion and $4.8 billion at the end of 1993 and 1992, respectively. Nonearning receivables, 1.7% of total loans and leases (2.1% at the end of 1992), amounted to $391 million at the end of 1993. The provision for losses on retailer and auto financing receivables was $469 million in 1993, a 19% F-12 13 Annual Report Page 37 - --------------------------------------------------------------------------- decrease from $578 million in 1992, reflecting reduced consumer delinquencies and intensified collection efforts, particularly in Europe. Most nonearning receivables were private-label credit card receivables, the majority of which were subject to various loss-sharing arrangements that provide full or partial recourse to the originating retailer. Commercial real estate loans classified as finance receivables by GE Capital's Commercial Real Estate business were $10.9 billion at December 31, 1993, up $0.4 billion from the end of 1992. In addition, the investment portfolio of GECS' annuity business, acquired during 1993, included $1.1 billion of commercial property loans. Commercial real estate loans are generally secured by first mortgages. In addition to loans, Commercial Real Estate's portfolio also included in other assets $2.2 billion of assets that were purchased for resale from Resolution Trust Corporation (RTC) and other institutions and $1.4 billion of investments in real estate joint ventures. In recent years, GECS has been one of the largest purchasers of assets from RTC and others, growing its portfolio of properties acquired for resale by $1.1 billion in 1993. To date, values realized on these assets have met or exceeded expectations at the time of purchase. Investments in real estate joint ventures have been made as part of original financings and in conjunction with loan restructurings where management believes that such investments will enhance economic returns. Commercial Real Estate's foreclosed properties at the end of 1993 declined to $110 million from $187 million at the end of 1992. At December 31, 1993, Commercial Real Estate's portfolio included loans secured by and investments in a variety of property types that were well dispersed geographically. Property types included apartments (36%), office buildings (32%), shopping centers (14%), mixed use (8%) and industrial and other (10%). These properties were located mainly across the United States as follows - Mid-Atlantic (21%), Northeast (20%), Southwest (19%), West (15%), Southeast (12%), Central (8%) - with the remainder (5%) across Canada and Europe. Nonearning and reduced earning receivables declined to $272 million in 1993 from $361 million in 1992, reflecting proactive management of delinquent receivables as well as write-offs. Loss provisions for Commercial Real Estate's investments were $387 million in 1993 ($248 million related to receivables and $139 million to other assets) compared with $299 million and $213 million in 1992 and 1991, respectively, as the portfolio continued to be adversely affected by the weakened commercial real estate market. Highly leveraged transaction (HLT) portfolio represents financing provided for highly leveraged management buyouts and corporate recapitalizations. The portion of those - --------------------------------------------------------------------------------- CHART: GECS' REVENUES (In billions)
1989 1990 1991 1992 1993 $12.945 $14.774 $16.399 $18.440 $22.137 - ---------------------------------------------------------------------------------
investments classified as financing receivables was $3.3 billion at the end of 1993 compared with $5.3 billion at the end of 1992, as substantial repayments reduced this liquidating portfolio. The year-end balance of amounts that had been written down to estimated fair value and carried in other assets as a result of restructuring or in-substance repossession aggregated $544 million at the end of 1993 and $513 million at the end of 1992 (net of allowances of $244 million and $224 million, respectively). Nonearning and reduced earning receivables declined to $139 million at the end of 1993 from $429 million the prior year. Loss provisions for HLT investments were $181 million in 1993 ($80 million related to receivables and $101 million to other assets) compared with $573 million in 1992 and $328 million in 1991. Nonearning and reduced earning receivables as well as loss provisions were favorably affected by the stronger economic climate during 1993 as well as by the successful restructurings implemented during the past few years. Other financing receivables, approximately $26 billion, consisted primarily of a diverse commercial, industrial and equipment loan and lease portfolio. This portfolio grew approximately $2 billion during 1993, while nonearning and reduced earning receivables decreased $46 million to $98 million at year end. GECS had loans and leases to commercial airlines, as discussed in note 17, that aggregated about $6.8 billion at the end of 1993, up from $6 billion at the end of 1992. At year-end 1993, GECS' commercial aircraft positions included conditional commitments to purchase aircraft at a cost of $865 million and financial guaranties and funding commitments amounting to $450 million. These purchase commitments are subject to the aircraft having been placed on lease under agreements, and with carriers, acceptable to GECS prior to delivery. Expenses associated with redeployment and refurbishment of owned aircraft F-13 14 Annual Report Page 38 - --------------------------------------------------------------------------- totaled $112 million in 1993 compared with nominal amounts in prior years. GECS' increasing investment demonstrates its continued long-term commitment to the airline industry. * SPECIALTY INSURANCE operating profit of $770 million in 1993 was 20% higher than in 1992, following an increase of 28% from 1991. The 1993 results reflected higher premium volume from bond refunding in the financial guaranty insurance business as well as reduced claims expense in the creditor insurance business. Higher volume and investment income at GECS' private mortgage and financial guaranty insurance businesses were the principal factors contributing to 1992's increase. * SECURITIES BROKER-DEALER (Kidder, Peabody) operating profit was $439 million in 1993, up 46% from 1992's record $300 million, which was $181 million higher than in 1991. Strong performances in both years reflected higher investment income from trading and investment banking activities. Favorable market conditions were an important factor in both years. Higher interest expense in both years reflected costs associated with funding increased security positions. Operating and administrative expenses increased in both years, primarily because of the revenue growth and, in 1992, because of costs associated with certain litigation settlements. ENTERING 1994, management believes that the diversity and strength of GECS' assets, along with vigilant attention to risk management, position it to deal effectively with a global and changing competitive and economic landscape. INTERNATIONAL OPERATIONS Estimated results of international operations include all exports from the United States plus the results of GE's and GECS' operations located outside the United States. International revenues were $18.5 billion (31% of consolidated revenues) compared with $18.0 billion in 1992 and $16.9 billion in 1991. In 1993, about 40% of GE's sales of goods and services were international, approximately the same as in the previous two years. The chart below left shows the growth in international revenues in relation to total revenues over the past five years. International operating profit was $2.4 billion (31% of consolidated operating profit) in 1993, $2.3 billion in 1992 and $2.4 billion in 1991. The accompanying financial results reported in U.S. dollars are unavoidably affected by currency exchange. A number of techniques are used to manage the effects of currency exchange, including selective borrowings in local currencies and selective hedging of significant cross-currency transactions. Also, international activity is diverse, as shown for revenues in the chart at the bottom of this column, and not concentrated in any single currency. GE's export sales by major world areas are as follows.
- ---------------------------------------------------------------------------- GE'S EXPORTS FROM THE UNITED STATES TO EXTERNAL CUSTOMERS (In millions) 1993 1992 1991 - ---------------------------------------------------------------------------- Pacific Basin $2,645 $2,696 $2,408 Europe 2,320 2,018 2,342 Americas 981 1,126 1,008 Other 1,039 1,079 1,094 ------ ------ ------ $6,985 $6,919 $6,852 ====== ====== ====== - ----------------------------------------------------------------------------
Exports from GE operations in the United States to their affiliates totaled $1.513 billion in 1993, $1.281 billion in 1992 and $1.246 billion in 1991. GE made a positive 1993 contribution of more than $5.1 billion to the U.S. balance of trade. Total exports in 1993 were $8.5 billion, including exports from the United States to both external customers and affiliates. Imports from GE affiliates were $1.0 billion, and direct imports from external suppliers were $2.4 billion. - ------------------------------------------------------------------------------------------------------ CHART: CONSOLIDATED REVENUES (In billions)
1989 1990 1991 1992 1993 UNITED STATES $36.479 $37.736 $37.771 $39.056 $42.015 INTERNATIONAL 12.656 14.883 16.858 18.017 18.547 - ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------ CHART: CONSOLIDATED INTERNATIONAL REVENUES (In billions)
1989 1990 1991 1992 1993 EUROPE $5.815 $7.299 $8.124 $8.830 $9.268 PACIFIC BASIN 3.061 3.131 4.084 4.403 4.581 AMERICAS 2.784 3.268 3.194 3.346 3.256 OTHER 0.996 1.185 1.456 1.438 1.442 - ------------------------------------------------------------------------------------------------------
F-14 15 Annual Report Page 39 -------------------------------------------------------------------------- | | MANAGEMENT'S DISCUSSION OF FINANCIAL RESOURCES AND LIQUIDITY OVERVIEW THIS DISCUSSION OF FINANCIAL RESOURCES AND LIQUIDITY focuses on the Statement of Financial Position (page 28) and the Statement of Cash Flows (page 30). Throughout the discussion, it is important to differentiate between the businesses of GE and GECS. Although GE's manufacturing and nonfinancial services activities involve a variety of different businesses, their underlying characteristics are the development, the preparation for market and the sale of tangible goods and services. Risks and rewards are directly related to the ability to manage and finance those activities. GECS' principal businesses provide financing, insurance and broker- dealer services to third parties. The underlying characteristics of these businesses involve the management of financial risk. GECS' risks and rewards stem from the abilities of its businesses to continue on a selective basis to design and provide a wide range of financial services in a competitive marketplace and to receive adequate compensation for such services. GECS is not a "captive finance company" or a vehicle for "off-balance-sheet financing" for GE; very little of GECS' business is directly related to other GE operations. Despite the different business profiles of GE and GECS, the global commercial airline industry is one significant example of an important source of business for both. GE assumes financing positions primarily in support of engine sales whereas GECS is a significant source of lease and loan financing for the industry (see details in note 17). Even during the current difficult period in this historically cyclical industry, management believes that the financing positions are reasonably protected by collateral values and by its ability to control assets, either by ownership or by security interests. The fundamental differences between GE and GECS are reflected in the measurements commonly used by investors, rating agencies and financial analysts. These differences will become clearer in the discussion that follows with respect to the more significant items in the two financial statements. CASH FLOWS AND LIQUIDITY OF DISCONTINUED OPERATIONS are displayed in the accompanying financial statements separately from data on continuing operations. Discontinued operations generated $962 million, $648 million and $275 million of cash in 1993, 1992 and 1991, respectively. The 1993 cash flows were principally those associated with amounts received on transfer of the Aerospace businesses. STATEMENT OF FINANCIAL POSITION * GECS' TRADING SECURITIES comprise the market-making, investing and trading portfolio of Kidder, Peabody. The - ------------------------------------------------------------------------------- CHART: CONSOLIDATED TOTAL ASSETS (In billions)
1989 1990 1991 1992 1993 $126.121 $152.000 $166.508 $192.876 $251.506 - -------------------------------------------------------------------------------
increase to $30.2 billion at the end of 1993 from $24.2 billion at the end of 1992 principally reflected higher levels of government securities held in connection with Kidder, Peabody's trading and market-making activities. * INVESTMENT SECURITIES for each of the past two years were mainly investment-grade debt securities held by GECS' Specialty Insurance and annuity businesses in support of obligations to policyholders and annuitants. The increase of $15.6 billion during 1993 was principally related to annuity business acquisitions and adoption of SFAS No. 115 (see notes 1 and 11). * SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL (reverse repurchase agreements) are related to the liability account titled "Securities sold under agreements to repurchase" (repurchase agreements). The former typically represent highly liquid, short-term investments of excess funds; the latter, borrowing of such funds from others. The balances at the end of 1993 and 1992 (both assets and liabilities) were solely those of Kidder, Peabody in connection with its broker-dealer activities. The current-year increase of $16.7 billion primarily reflected the use of these agreements in increased "matched-book" transactions as well as to cover increased short inventory positions in similar securities. * GE'S CURRENT RECEIVABLES are mainly amounts due from customers ($5.7 billion at December 31, 1993, and $5.3 billion at December 31, 1992). As a measure of asset utilization, receivables turnover was 7.0 in 1993 compared with 6.9 in 1992. Management believes that the overall condition of customer receivables was satisfactory at the end of 1993. Current receivables other than amounts owed by customers are amounts that did not originate from sales of GE goods or services, such as advances to suppliers in connection with large contracts. F-15 16 Annual Report Page 40 - --------------------------------------------------------------------------- * INVENTORIES were $3.8 billion at December 31, 1993, down about $0.8 billion from the end of 1992. Inventory turnover was 6.0 in 1993 compared with 5.3 in 1992 and 4.7 in 1991. As with receivables turnover, inventory turnover is a measurement of efficient use of resources. About two-thirds of the inventory decrease in 1993 was achieved in Aircraft Engines as a result of reduced manufacturing cycle times and lower volume. Turnover improved more than one turn in Appliances, Motors and Transportation Systems. Last-in, first- out (LIFO) revaluations decreased $179 million in 1993 compared with decreases of $204 million in 1992 and $141 million in 1991. Included in these changes were decreases of $101 million, $183 million and $111 million (1993, 1992 and 1991, respectively) resulting from lower inventory levels. There were modest overall cost decreases in all three years. * GECS' FINANCING RECEIVABLES of $63.9 billion at year-end 1993 were $4.5 billion higher than at December 31, 1992. These receivables are discussed on page 36 and in note 14. * PROPERTY, PLANT AND EQUIPMENT (including equipment leased to others) was $21.2 billion at December 31, 1993, up $0.8 billion. GE's property, plant and equipment consists of investments for its own productive use, whereas the largest element of GECS' investment is in equipment that is provided to third parties on operating leases. Details by category of investment can be found in note 15. GE's total expenditures for new plant and equipment during 1993 were $1.6 billion, slightly higher than $1.4 billion in 1992. Total expenditures for the past five years were $9.4 billion, of which 25% was to increase capacity; 24% was to increase productivity; 12% was to replace and renew older equipment; 12% was to support new business start-ups; and 27% was for such other purposes as to improve research and development facilities and to provide for safety and environmental protection. GECS added $3.1 billion to its equipment leased to others during 1993. * INTANGIBLE ASSETS were $10.4 billion at year-end 1993. The majority of this consolidated total was GE's intangibles, which were $6.5 billion, about the same as the end of 1992. GECS' intangibles increased $1.0 billion, most of which was related to acquisitions in the annuity and mortgage- servicing businesses. * ALL OTHER ASSETS totaled $24.7 billion at year-end 1993, up $8.0 billion from the end of 1992. The principal reason for GE's increase of $2.9 billion was the investment in the convertible preferred stock of and receivables due from Martin Marietta Corporation in connection with transfer of the Aerospace businesses. GECS' increase of $5.1 billion related principally to assets acquired for resale, including mortgages held for resale associated with the mortgage-servicing businesses and purchases of real estate assets from Resolution Trust Corporation and other institutions. * TOTAL BORROWINGS on a consolidated basis aggregated $90.4 billion at December 31, 1993, compared with $81.8 billion at the end of 1992. The major debt-rating agencies evaluate the financial condition of GE and of GE Capital (GECS' major public borrowing entity) differently because of their distinct business characteristics. Using criteria appropriate to each and considering their combined strength, those major rating agencies continue to give the highest ratings to debt of both GE and GE Capital. GE has agreed to make payments to GE Capital to the extent necessary to cause GE Capital's consolidated ratio of earnings to fixed charges to be not less than 1.10. For the years 1993, 1992 and 1991, such ratios were 1.62, 1.44 and 1.34, respectively, substantially above the level at which payout would be required. Three years advance notice is required to terminate this agreement. GE's total borrowings were $4.8 billion at year-end 1993 ($2.4 billion short-term, $2.4 billion long-term), a decrease of about $2.1 billion from year-end 1992. The decrease was possible as a result of cash provided from continuing operating activities as well as from transfer of the Aerospace businesses. GE's total debt at the end of 1993 equaled 15.5% of total capital, down 6.9 points from the end of 1992. GECS' total borrowings were $85.9 billion at December 31, 1993, of which $60.0 billion was due in 1994 and $25.9 billion was due in subsequent years. Comparable amounts at the end of 1992 were: $75.1 billion total; $53.2 billion due within one year; and $21.9 billion due thereafter. GECS' composite interest rates are discussed on page 36. Individual GECS borrowings are structured within overall asset/liability interest rate and currency risk management strategies. Interest rate and currency swaps form an integral part of the Company's goal of achieving the lowest - ------------------------------------------------------------------------------ CHART: GE BORROWINGS AS A PERCENT OF TOTAL CAPITAL INVESTED
1989 1990 1991 1992 1993 21.04% 23.55% 26.18% 22.39% 15.50% - ------------------------------------------------------------------------------
F-16 17 Annual Report Page 41 - --------------------------------------------------------------------------- borrowing costs for particular funding strategies. Counterparty credit risk is closely monitored - approximately 90% of the notional amount of swaps outstanding at December 31, 1993, was with counterparties having credit ratings of Aa/AA or better. A large portion of GECS' borrowings was commercial paper ($46.3 billion and $42.2 billion at the end of 1993 and 1992, respectively). Most of this commercial paper is issued by GE Capital. The average remaining terms and interest rates of GE Capital's commercial paper were 35 days and 3.39% at the end of 1993 compared with 34 days and 3.57% at the end of 1992. GE Capital's ratio of debt to equity (leverage) was 7.59 to 1 at the end of 1993 compared with 7.91 to 1 at the end of 1992. Excluding net unrealized gains on investment securities included in equity, GE Capital's leverage was 7.96 to 1 at the end of 1993. STATEMENT OF CASH FLOWS Because cash management activities of GE and GECS are separate and distinct, it is more useful to review cash flows statements separately. GE GE's cash and equivalents aggregated $1.5 billion at the end of 1993, higher by $0.3 billion than at the end of 1992. During 1993, GE generated $5.2 billion in cash from its continuing operating activities and $1.0 billion from discontinued operations. This provided resources to pay $2.2 billion in dividends to share owners, to reduce total debt by $2.1 billion and to invest $1.6 billion in new plant and equipment. Management continually evaluates financing alternatives. Because of attractive short-term interest rates, it elected to maintain relatively high short-term debt levels, resulting, as in the previous two years, in an excess of current liabilities over current assets. Operating activities are the principal source of GE's cash flows from continuing operations. Over the past three years, operating activities have provided more than $13.4 billion of cash. Principal ongoing applications are payment of dividends to share owners ($5.9 billion total over the past three years) and investment in new plant and equipment ($5.2 billion total over the past three years). In addition, the Company repurchased and placed into treasury $3.1 billion of its common stock during the past three years. GE concluded its major share repurchase program at $5.0 billion, but it continues to acquire shares to meet benefit and compensation plan needs (about $0.4 billion annually). Expenditures for new plant and equipment are expected to total about $1.6 billion for 1994 as the need for additional manufacturing capacity is mitigated by continuing reductions in cycle times. Cash outlays associated - ------------------------------------------------------------------------------------ CHART: TOTAL ASSETS OF GECS (In billions)
1989 1990 1991 1992 1993 $90.928 $115.095 $127.814 $154.524 $211.730 - ------------------------------------------------------------------------------------
with 1993 restructuring programs are expected to be about $0.3 billion in 1994. Based on past performance and current expectations, in combination with the financial flexibility that comes with a strong balance sheet and the highest credit ratings, management believes that GE is in a sound position to continue making long-term investments for future growth, including selective acquisitions and investments in joint ventures, to reduce current debt levels and to grow dividends in line with earnings. GECS GECS' primary source of cash is financing activities involving the continued rollover of short-term borrowings and appropriate addition of borrowings with a reasonable balance of maturities. Over the past three years, GECS' borrowings with maturities of 90 days or less have increased by $14.0 billion. New borrowings of $40.2 billion having maturities longer than 90 days were added during those years, while $25.6 billion of such longer-term borrowings were retired. GECS also has generated significant cash from operating activities, a total of $14.8 billion during the past three years. GECS' principal use of cash has been investing in assets to grow its businesses. Of $40.9 billion that GECS invested over the past three years, $16.1 billion was used for additions to financing receivables, $9.3 billion was used to invest in new equipment, principally for lease to others, and $6.9 billion was for acquisitions of new businesses. With the financial flexibility that comes with excellent credit ratings, management believes GECS is well positioned to meet the global needs of its customers for capital and to continue providing GE share owners with good returns. F-17 18 Annual Report Page 42 -------------------------------------------------------------------------- | | MANAGEMENT'S DISCUSSION OF SELECTED FINANCIAL DATA SELECTED FINANCIAL DATA summarizes on the opposite page some data frequently requested about General Electric Company. The data are divided into three sections: upper portion - consolidated data; middle portion - GE data that reflect various conventional measurements for industrial enterprises; and lower portion - GECS data that reflect key information pertinent to capital services. GE'S TOTAL RESEARCH AND DEVELOPMENT expenditures were $1,955 million in 1993, up $59 million from 1992. Of the 1993 expenditures, $1,297 million was from GE's own funds, a slight decrease($56 million) from 1992, reflecting lower spending for two mature programs in Aircraft Engines. Expenditures from funds provided by customers (mainly the U.S. government) were $658 million in 1993, $115 million more than the year before. The Aircraft Engines, Medical Systems, Plastics and Power Systems businesses account for the largest share of GE's research and development expenditures from both Company and customer funds. GE'S TOTAL BACKLOG of firm unfilled orders at the end of 1993 was $22.9 billion, down $2.5 billion from year-end 1992. The decrease was more than explained by orders related to transferred businesses and, as discussed on page 34, Aircraft Engines. Orders constituting this backlog may be canceled or deferred by customers, subject in certain cases to cancellation penalties. See Industry Segments beginning on page 33 for further discussion on unfilled orders of relatively long-cycle manufacturing businesses. About 42% of the total unfilled orders at the end of 1993 was scheduled to be shipped in 1994, with most of the remainder to be shipped in the two years after that. For comparison, about 43% of the 1992 backlog was expected to be shipped in 1993. REGARDING ENVIRONMENTAL MATTERS, the operations of the Company, like those of other companies engaged in similar businesses, involve the use, disposal and cleanup of substances regulated under environmental protection laws. In 1993, GE had capital expenditures of about $140 million for projects related to the environment. The comparable amount in 1992 was about $110 million. These amounts exclude expenditures for remediation actions, which are principally expensed and discussed below. Capital expenditures for environmental purposes have included pollution control devices such as wastewater treatment plants, groundwater monitoring devices, air strippers or separators, and incinerators at new and existing facilities constructed or upgraded in the normal course of business. Consistent with policies stressing environmental responsibility, average annual capital expenditures other than for remediation projects are presently expected to range between $100 million and $150 million over the next two years. This level is in line with existing levels for new or expanded programs to build facilities or modify manufacturing processes to minimize waste and reduce emissions. The Company also is involved in a sizable number of remediation actions to clean up hazardous wastes as required by federal and state laws. Such statutes require that responsible parties fund remediation actions regardless of fault, legality of original disposal or ownership of a disposal site. Expenditures for site remediation actions amounted to approximately $80 million in 1993 compared with $85 million in 1992. It is presently expected that remediation actions will require average annual expenditures in the range of $80 million to $110 million over the next two years. Liabilities for remediation costs are based on management's best estimate of future costs; when there appears to be a range of possible costs with equal likelihood, liabilities are based on the lower end of such range. Possible insurance recoveries are not considered in estimating liabilities. It is difficult to estimate with any meaning the annual level of future remediation expenditures because of the many uncertainties, including uncertainties about the status of the law, regulation, technology and information related to individual sites. Subject to the foregoing, management believes that capital expenditures and remediation actions to comply with the present laws governing environmental protection will not have a material effect upon the Company's earnings, liquidity or competitive position. In making this determination, management considered the fact that, if remediation expenditures were to continue at the 1993 level, liabilities recorded at the end of 1993 would be sufficient to cover expenditures through the end of the century, and the probability of incurring more than nominal expenditures beyond 2015 is remote. Of course, lower annual expenditures could be incurred over a longer period without increasing the total expenditures. - ------------------------------------------------------------------------------------------------------ CHART: CONSOLIDATED EMPLOYMENT OF CONTINUING OPERATIONS AT YEAR END (In thousands)
1989 1990 1991 1992 1993 United States 192 188 178 173 163 Other countries 48 62 62 58 59 - ------------------------------------------------------------------------------------------------------
F-18 19 Annual Report Page 43 -------------------------------------------------------------------------- | |SELECTED FINANCIAL DATA
--------------------------------------------------------------- (Dollar amounts in millions; per-share amounts in dollars) 1993 1992 1991 1990 1989 - --------------------------------------------------------------------------------------------------------------------------------- GENERAL ELECTRIC COMPANY AND CONSOLIDATED AFFILIATES Revenues $ 60,562 $ 57,073 $ 54,629 $ 52,619 $ 49,135 Earnings from continuing operations 4,424 4,305 3,984 3,889 3,503 Earnings from discontinued operations 753 420 451 414 436 Earnings before accounting changes 5,177 4,725 4,435 4,303 3,939 Net earnings 4,315 4,725 2,636 4,303 3,939 Dividends declared 2,229 1,985 1,808 1,696 1,537 Earned on average share owners' equity 17.5% 20.9% 12.2% 20.2% 20.0% Per share Earnings from continuing operations $ 5.18 $ 5.02 $ 4.58 $ 4.38 $ 3.88 Earnings from discontinued operations 0.88 0.49 0.52 0.47 0.48 Earnings before accounting changes 6.06 5.51 5.10 4.85 4.36 Net earnings 5.05 5.51 3.03 4.85 4.36 Dividends declared 2.61 2.32 2.08 1.92 1.70 Stock price range 107-80 7/8 87 1/2-72 3/4 78 1/8-53 75 1/2-50 64 3/4-43 1/2 Total assets 251,506 192,876 166,508 152,000 126,121 Long-term borrowings 28,270 25,376 22,681 21,043 16,110 Shares outstanding - average (in thousands) 853,990 857,198 868,931 887,552 904,223 Share owner accounts - average 464,000 481,000 495,000 506,000 526,000 Employees at year end United States 163,000 173,000 178,000 188,000 192,000 Other countries 59,000 58,000 62,000 62,000 48,000 Discontinued operations (primarily U.S.) - 37,000 44,000 48,000 52,000 -------- -------- -------- -------- -------- Total employees 222,000 268,000 284,000 298,000 292,000 ======== ======== ======== ======== ======== - --------------------------------------------------------------------------------------------------------------------------------- GE DATA Short-term borrowings $ 2,391 $ 3,448 $ 3,482 $ 2,721 $ 1,696 Long-term borrowings 2,413 3,420 4,332 4,048 3,947 Minority interest 355 350 353 288 283 Share owners' equity 25,824 23,459 21,683 21,680 20,890 -------- -------- -------- -------- -------- Total capital invested $ 30,983 $ 30,677 $ 29,850 $ 28,737 $ 26,816 ======== ======== ======== ======== ======== Return on average total capital invested 15.2% 16.9% 11.1% 17.4% 17.0% Borrowings as a percentage of total capital invested 15.5% 22.4% 26.2% 23.6% 21.0% Working capital $ (419) $ (822) $ (231) $ 813 $ 2,125 Property, plant and equipment additions 1,588 1,445 2,164 2,102 2,073 Year-end orders backlog 22,861 25,434 26,049 25,195 22,473 - --------------------------------------------------------------------------------------------------------------------------------- GECS DATA Earnings before accounting change $ 1,807 $ 1,499 $ 1,275 $ 1,094 $ 927 Net earnings 1,807 1,499 1,256 1,094 927 Share owner's equity 10,809 8,884 7,758 6,833 6,069 Borrowings from others 85,888 75,140 66,420 57,400 47,905 Ratio of debt to equity (GE Capital) 7.59:1 7.91:1 7.80:1 7.77:1 7.80:1 Total assets of GE Capital $117,939 $ 92,632 $ 80,528 $ 70,385 $58,696 Reserve coverage on financing receivables 2.63% 2.63% 2.63% 2.63% 2.63% Insurance premiums written $ 3,956 $ 2,900 $ 2,155 $ 1,981 $ 1,819 Securities broker-dealer earned income 4,861 4,022 3,346 2,923 2,897 - --------------------------------------------------------------------------------------------------------------------------------- See notes 6 and 22 to the consolidated financial statements for information about the accounting changes in 1991 and 1993, respectively. "GE" means the basis of consolidation as described in note 1 to the consolidated financial statements; "GECS" means General Electric Capital Services, Inc. and all of its affiliates and associated companies. Transactions between GE and GECS have been eliminated from the "consolidated information."
F-19 20 Annual Report Page 44 -------------------------------------------------------------------------- | | MANAGEMENT'S DISCUSSION OF FINANCIAL RESPONSIBILITY The financial data in this report, including the audited financial statements, have been prepared by management using the best available information and applying judgment. Accounting principles used in preparing the financial statements are those that are generally accepted in the United States. Management believes that a sound, dynamic system of internal financial controls that balances benefits and costs provides the best safeguard for Company assets. Professional financial managers are responsible for implementing and overseeing the financial control system, reporting on management's stewardship of the assets entrusted to it by share owners and maintaining accurate records. GE is dedicated to the highest standards of integrity, ethics and social responsibility. This dedication is reflected in written policy statements covering, among other subjects, environmental protection, potentially conflicting outside interests of employees, compliance with antitrust laws, proper business practices, and adherence to the highest standards of conduct and practices in transactions with the U.S. government. Management continually emphasizes to all employees that even the appearance of impropriety can erode public confidence in the Company. Ongoing education and communication programs and review activities such as those conducted by the Company's Policy Compliance Review Board are designed to create a strong compliance culture - one that encourages employees to raise their policy questions and concerns and prohibits retribution for doing so. KPMG Peat Marwick provide an objective, independent review of management's discharge of its obligations relating to the fairness of reporting operating results and financial condition. Their report for 1993 appears below. The Audit Committee of the Board (consisting solely of Directors from outside GE) maintains an ongoing appraisal - on behalf of share owners - - of the activities and independence of the Company's independent auditors, the activities of its internal audit staff, financial reporting process, internal financial controls and compliance with key Company policies. John F. Welch, Jr. Dennis D. Dammerman Chairman of the Board and Senior Vice President Chief Executive Officer Finance February 11, 1994 -------------------------------------------------------------------------- | | INDEPENDENT AUDITORS' REPORT TO SHARE OWNERS AND BOARD OF DIRECTORS OF GENERAL ELECTRIC COMPANY We have audited the financial statements of General Electric Company and consolidated affiliates as listed in Item 14(a)(1) on page 23. In connection with our audits of the consolidated financial statements, we also have audited the financial statement schedules as listed in Item 14(a)(2) on page 23. These consolidated financial statements and financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedules based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the aforementioned financial statements present fairly, in all material respects, the financial position of General Electric Company and consolidated affiliates at December 31, 1993 and 1992, and the results of their operations and their cash flows for each of the years in the three- year period ended December 31, 1993, in conformity with generally accepted accounting principles. Also in our opinion, the related financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein. As discussed in notes 1 and 22 to the consolidated financial statements, the Company in 1993 adopted required changes in its methods of accounting for investments in certain securities and for postemployment benefits. As discussed in note 6, the Company in 1991 adopted a required change in its method of accounting for postretirement benefits other than pensions. KPMG Peat Marwick Stamford, Connecticut February 11, 1994 F-20 21 Annual Report Page 45 -------------------------------------------------------------------------- | | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONSOLIDATION. The consolidated financial statements represent the adding together of all affiliates - companies that General Electric directly or indirectly controls, either through majority ownership or otherwise. Results of associated companies - companies that are not controlled but are 20% to 50% owned - are included in the financial statements on a "one-line" basis. FINANCIAL STATEMENT PRESENTATION. Financial data and related measurements are presented in the following categories. * GE. This represents the adding together of all affiliates other than General Electric Capital Services, Inc. ("GECS"), which is presented on a one-line basis. * GECS. This affiliate owns all of the common stock of General Electric Capital Corporation (GE Capital), Employers Reinsurance Corporation (ERC) and Kidder, Peabody Group Inc. (Kidder, Peabody). These affiliates and their respective affiliates are consolidated in the GECS columns and constitute its business. * CONSOLIDATED. These data represent the adding together of GE and GECS. The effects of transactions among related companies within and between each of the above-mentioned groups are eliminated. Transactions between GE and GECS are not material. SALES OF GOODS AND SERVICES. A sale is recorded when title passes to the customer or when services are performed in accordance with contracts. GECS' REVENUES FROM OPERATIONS ("EARNED INCOME"). Income on all loans is recognized on the interest method. Accrual of interest income is suspended when collection of an account becomes doubtful, generally after the account becomes 90 days delinquent. Financing lease income, which includes residual values and investment tax credits, is recorded on the interest method so as to produce a level yield on funds not yet recovered. Unguaranteed residual values included in lease income are based primarily on periodic independent appraisals of the values of leased assets remaining at expiration of the lease terms. Operating lease income is recognized on a straight-line basis over the terms of underlying leases. Origination, commitment and other nonrefundable fees related to fundings are deferred and recorded in earned income on the interest method. Commitment fees related to loans not expected to be funded and line-of- credit fees are deferred and recorded in earned income on a straight-line basis over the period to which the fees relate. Syndication fees are recorded in earned income at the time related services are performed unless significant contingencies exist. Premiums on short-duration insurance contracts are reported as earned income over the terms of the related reinsurance treaties or insurance policies. In general, earned premiums are calculated on a pro rata basis or are determined based on reports received from reinsureds. Premium adjustments under retrospectively rated reinsurance contracts are recorded based on estimated losses and loss expenses, including both case and incurred-but-not-reported reserves. Revenues on long-duration insurance contracts are reported as earned when due. Premiums received under annuity contracts are not reported as revenues but as annuity benefits - a liability - and are adjusted according to terms of the respective policies. Kidder, Peabody's proprietary securities and commodities transactions, unrealized gains and losses on open contractual commitments (principally financial futures), forward contracts on U.S. government and federal agency securities and when-issued securities are recorded on a trade-date basis. Customer transactions and related revenues and expenses, investment banking revenues from management fees, sales concessions and underwriting fees are recorded on a settlement-date basis. Advisory fees are recorded as revenues when services are substantially completed and the revenue is reasonably determinable. DEPRECIATION AND AMORTIZATION. The cost of most of GE's manufacturing plant and equipment is depreciated using an accelerated method based primarily on a sum-of-the-years digits formula. If manufacturing plant and equipment is subject to abnormal economic conditions or obsolescence, additional depreciation is provided. The cost of GECS' equipment leased to others on operating leases is amortized, principally on a straight-line basis, to estimated net salvage value over the lease term or over the estimated economic life of the equipment. Depreciation of property and equipment for GECS' own use is recorded on either a sum-of-the-years digits formula or a straight-line basis over the lives of the assets. RECOGNITION OF LOSSES ON FINANCING RECEIVABLES AND INVESTMENTS. GE Capital maintains an allowance for losses on financing receivables at an amount that it believes is sufficient to provide adequate protection against future losses in the portfolio. When collateral is formally or substantively repossessed in satisfaction of a loan, the receivable is written down against the allowance for losses to estimated fair value and transferred to other assets. Subsequent to such transfer, these assets are carried at the lower of cost or estimated current fair value. This accounting has been employed principally for highly leveraged transactions (HLT) and real estate loans. F-21 22 Annual Report Page 46 - --------------------------------------------------------------------------- See note 8 for further information on GECS' allowance for losses on financing receivables. CASH EQUIVALENTS. Marketable securities with original maturities of three months or less are included in cash equivalents unless held for trading or investment. INVESTMENT AND TRADING SECURITIES. On December 31, 1993, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 115, Accounting for Certain Investments in Debt and Equity Securities, which requires that investments in debt securities and marketable equity securities be designated as trading, held-to-maturity or available-for- sale. Trading securities are reported at fair value, with changes in fair value included in earnings. Investment securities include both available- for-sale and held-to-maturity securities. Available-for-sale securities are reported at fair value, with net unrealized gains and losses that would be available to share owners included in equity. Held-to-maturity debt securities are reported at amortized cost. See notes 10 and 11 for a discussion of the classification and reporting of these securities at December 31, 1992. For all investment securities, unrealized losses that are other than temporary are recognized in earnings. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE (REPURCHASE AGREEMENTS) AND SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL (REVERSE REPURCHASE AGREEMENTS). Repurchase and reverse repurchase agreements are entered into by Kidder, Peabody and treated as financing transactions, carried at the contract amount at which the securities subsequently will be resold or reacquired. Repurchase agreements relate either to marketable securities, which are carried at market value, or to securities obtained pursuant to reverse repurchase agreements. It is Kidder, Peabody's policy to take possession of securities subject to reverse repurchase agreements, to monitor the market value of the underlying securities in relation to the related receivable, including accrued interest, and to obtain additional collateral when appropriate. INVENTORIES. Virtually all of GE's U.S. inventories are stated on a last- in, first-out (LIFO) basis; other inventories are primarily stated on a first-in, first-out (FIFO) basis. None of the inventories exceed realizable values. INTANGIBLE ASSETS. Goodwill is amortized over its estimated period of benefit and other intangible assets over their estimated lives. The amortization period does not exceed 40 years, and amortization is generally on a straight-line basis. Goodwill in excess of associated expected operating cash flows is considered to be impaired and is written down to fair value. DEFERRED INSURANCE ACQUISITION COSTS. For the property and casualty business, deferred insurance acquisition costs are amortized pro rata over the contract periods in which the related premiums are earned. For the life insurance business, these costs are amortized over the premium-paying periods of the contracts in proportion either to anticipated premium income or to gross profit, as appropriate. For certain annuity contracts, such costs are amortized on the basis of anticipated gross profits. For other lines of business, acquisition costs are amortized over the life of the related insurance contracts. Deferred insurance acquisition costs are reviewed for recoverability; for short-duration contracts, anticipated investment income is considered in making recoverability evaluations. NOTE 2 DISCONTINUED OPERATIONS On April 2, 1993, General Electric Company transferred GE's Aerospace business segment, GE Government Services, Inc., and an operating component of GE that operated Knolls Atomic Power Laboratory under a contract with the U.S. Department of Energy to a new company controlled by the shareholders of Martin Marietta Corporation in a transaction valued at $3.3 billion. The transfer resulted in a gain of $678 million after taxes of $752 million. Net assets of discontinued operations at December 31, 1992, have been segregated in the Statement of Financial Position. Summary operating results of discontinued operations, excluding the above gain, are as follows.
- ---------------------------------------------------------------------------- (In millions) 1993 1992 1991 - ---------------------------------------------------------------------------- Revenues $996 $5,231 $5,631 Earnings before income taxes 119 668 710 Provision for income taxes 44 248 259 Net earnings from discontinued operations 75 420 451 - ----------------------------------------------------------------------------
NOTE 3 GE OTHER INCOME
- ----------------------------------------------------------------------------- (In millions) 1993 1992 1991 - ----------------------------------------------------------------------------- Royalty and technical agreements $371 $384 $394 Marketable securities and bank deposits 75 73 78 Associated companies 65 195 156 Customer financing 29 40 71 Other investments Dividends 50 18 3 Interest 21 22 18 Other sundry items 119 80 78 ---- ---- ---- $730 $812 $798 ==== ==== ==== - -----------------------------------------------------------------------------
F-22 23 Annual Report Page 47 - --------------------------------------------------------------------------- NOTE 4 GECS REVENUES FROM OPERATIONS
- ---------------------------------------------------------------------------- (In millions) 1993 1992 1991 - ---------------------------------------------------------------------------- Time sales, loan, investment and other income $11,999 $10,464 $9,790 Financing leases 2,315 2,151 1,836 Operating lease rentals 3,267 2,444 2,205 Premium and commission income of insurance affiliates 3,697 2,687 2,008 Commissions and fees of securities broker-dealer 859 694 560 -------- -------- -------- $22,137 $18,440 $16,399 ======== ======== ======== - ----------------------------------------------------------------------------
Included in earned income from financing leases were gains on the sale of equipment at lease completion of $145 million in 1993, $126 million in 1992 and $147 million in 1991. Noncancelable future rentals due from customers for equipment on operating leases as of December 31, 1993, totaled $6,133 million and are due as follows: $2,036 million in 1994; $1,455 million in 1995; $879 million in 1996; $458 million in 1997; $316 million in 1998; and $989 million thereafter. NOTE 5 SUPPLEMENTAL COST DETAILS Total expenditures for research and development were $1,955 million, $1,896 million and $1,866 million in 1993, 1992 and 1991, respectively. The Company-funded portion aggregated $1,297 million in 1993, $1,353 million in 1992 and $1,196 million in 1991. Rental expense under operating leases was as follows.
- --------------------------------------------------------------------------- (In millions) 1993 1992 1991 - --------------------------------------------------------------------------- GE $635 $683 $675 GECS 498 331 169 - ---------------------------------------------------------------------------
At December 31, 1993, minimum rental commitments under noncancelable operating leases aggregated $2,380 million and $3,579 million for GE and GECS, respectively. Amounts payable over the next five years are as follows.
- --------------------------------------------------------------------------- (In millions) 1994 1995 1996 1997 1998 - --------------------------------------------------------------------------- GE $364 $274 $182 $144 $134 GECS 404 364 340 319 296 - ---------------------------------------------------------------------------
GE's selling, general and administrative expense totaled $5,124 million, $5,319 million and $5,422 million in 1993, 1992 and 1991, respectively. NOTE 6 PENSION AND OTHER RETIREE BENEFITS GE and its affiliates sponsor a number of pension, retiree health and life insurance and other retiree benefit plans. Principal plans are discussed below; other plans are not significant individually or in the aggregate. Effective January 1, 1991, the Company adopted SFAS No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions, using the immediate recognition transition option. The transition effect of this accounting change was a reduction in 1991 net earnings of $1,799 million ($2.07 per share). PRINCIPAL PENSION PLANS are the GE Pension Plan and the GE Supplementary Pension Plan. The GE Pension Plan covers substantially all GE employees in the United States and approximately 45% of GECS employees. Generally, benefits are based on the greater of a formula recognizing career earnings or a formula recognizing length of service and final average earnings. Benefit provisions are subject to collective bargaining. At the end of 1993, the GE Pension Plan covered approximately 457,000 participants, including 143,000 employees, 139,000 former employees with vested rights to future benefits and 175,000 retirees and beneficiaries receiving benefits. The GE Supplementary Pension Plan is an unfunded plan providing supplementary retirement benefits primarily to higher-level, longer-service U.S. employees. PRINCIPAL RETIREE BENEFIT PLANS generally provide health and life insurance benefits to employees who retire under the GE Pension Plan with 10 or more years of service. Benefit provisions are subject to collective bargaining. At the end of 1993, these plans covered approximately 246,000 retirees and dependents. TRANSFER OF AEROSPACE BUSINESSES in 1993 resulted in associated transfers of GE Pension Plan assets of $1,169 million and projected benefit obligations of $979 million to new pension plans. The 1993 gain on transfer of discontinued operations included pension plan curtailment/settlement losses of $125 million before income taxes and retiree health and life plan curtailment/settlement gains of $245 million before income taxes. F-23 24 Annual Report Page 48 - --------------------------------------------------------------------------- ACTUARIAL ASSUMPTIONS used during the past three years to determine costs and benefit obligations for principal plans are shown below.
- ------------------------------------------------------------------------- ACTUARIAL ASSUMPTIONS 1993 1992 1991 - ------------------------------------------------------------------------- Determination of cost/income for the year Discount rate 8.5% 9.0% 9.0% Compensation increases 5.5 6.0 6.0 Return on assets 9.5 9.5 9.5 Health care cost trend (a) 12.0 12.5 13.0 Determination of benefit obligation at year end Discount rate 7.25 9.0 9.0 Compensation increases 4.25 6.0 6.0 Health care cost trend 9.5 (b) 12.0 (a) 12.5 (a) - ------------------------------------------------------------------------- (a) Gradually declining to 6.6% after 2049. (b) Gradually declining to 5.0% after 2022. - -------------------------------------------------------------------------
Increasing the health care cost trend rates by one percentage point would increase the accumulated postretirement benefit obligation by $23 million and would increase annual aggregate service and interest costs by $3 million. Gains and losses that occur because actual experience differs from actuarial assumptions are amortized over the average future service period of employees. Amounts allocable to prior service for plan amendments are amortized in a similar manner. EMPLOYER COSTS for principal pension and retiree health and life insurance benefit plans follow.
- ------------------------------------------------------------------------- COST (INCOME) FOR PENSION PLANS (In millions) 1993 1992 1991 - ------------------------------------------------------------------------- Benefit cost for service during the year - net of employee contributions $ 452 $ 494 $ 446 Interest cost on benefit obligation 1,486 1,502 1,400 Actual return on plan assets (3,221) (1,562) (4,331) Unrecognized portion of return 1,066 (584) 2,272 Amortization (352) (436) (483) ------- ------- -------- Pension plan cost (income) (a) $ (569) $ (586) $ (696) ======= ======= ======== - ------------------------------------------------------------------------- (a) Pension plan cost (income) for continuing operations was $(555) million for 1993, $(494) million for 1992 and $(576) million for 1991. - -------------------------------------------------------------------------
- --------------------------------------------------------------------------------- COST (INCOME) FOR RETIREE HEALTH AND LIFE PLANS (In millions) 1993 1992 1991 - --------------------------------------------------------------------------------- Retiree health plans Benefit cost for service during the year $ 49 $ 62 $ 65 Interest cost on benefit obligation 192 203 214 Actual return on plan assets (3) (4) (9) Unrecognized portion of return 1 - 5 Amortization (26) (40) (33) ---- ---- ---- Retiree health plan cost 213 221 242 ---- ---- ---- Retiree life plans Benefit cost for service during the year 21 24 23 Interest cost on benefit obligation 111 110 104 Actual return on plan assets (152) (78) (129) Unrecognized portion of return 42 (20) 39 Amortization 7 2 - ---- ---- ---- Retiree life plan cost 29 38 37 ---- ---- ---- Total (a) $242 $259 $279 ==== ==== ==== - -------------------------------------------------------------------------------- (a) Retiree health and life plan cost for continuing operations was $224 million for 1993, $213 million for 1992 and $218 million for 1991. - --------------------------------------------------------------------------------
FUNDING POLICY for the GE Pension Plan is to contribute amounts sufficient to meet minimum funding requirements set forth in employee benefit and tax laws plus such additional amounts as GE may determine to be appropriate from time to time. GE has not made contributions since 1987 because the fully funded status of the GE Pension Plan precludes current tax deduction and because any Company contribution would require the Company to pay annual excise taxes. Subject to tax laws, the present value of future life insurance benefits for each eligible retiree is funded in the year of retirement. In general, retiree health benefits are paid as covered expenses are incurred. The following table compares the market-related value of assets with the present value of benefit obligations, recognizing the effects of future compensation and service. The market-related value of assets is based on cost plus recognition of market appreciation and depreciation in the portfolio over five years, a method that reduces the short-term impact of market fluctuations.
- --------------------------------------------------------------------------------- FUNDED STATUS OF PRINCIPAL PLANS (In millions) 1993 1992 1991 - --------------------------------------------------------------------------------- Pension plans Market-related value of assets $24,532 $24,204 $23,192 Projected benefit obligation 20,796 17,999 17,355 Retiree health and life plans Market-related value of assets 1,252 1,220 1,124 Accumulated postretirement benefit obligation 4,120 3,743 3,675 - ---------------------------------------------------------------------------------
Assets in trust consist mainly of common stock and fixed-income investments. GE common stock represents less than 2% of trust assets and is held in part in an indexed portfolio. Schedules reconciling the benefit obligations for principal plans with GE's recorded liabilities in the Statement of Financial Position are shown on the following page. F-24 25 Annual Report Page 49 - ---------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------ RECONCILIATION OF BENEFIT OBLIGATION WITH RECORDED LIABILITY Pension plans Retiree health plans Retiree life plans --------------------- ---------------------- ---------------------- December 31 (In millions) 1993 1992 1993 1992 1993 1992 - ------------------------------------------------------------------------------------------------------------------ Benefit obligation $20,796 $17,999 $2,586 $2,416 $1,534 $1,327 Fair value of trust assets (27,193) (26,466) (13) (32) (1,317) (1,221) Unamortized balances SFAS No. 87 transition gain 1,077 1,231 - - - - Experience gains (losses) 2,371 4,939 (654) (394) (206) (21) Plan amendments (395) (518) 580 764 - - Recorded prepaid asset 3,840 3,310 - - - - ------- ------- ------ ------- ------ ------ Recorded liability $ 496 $ 495 $2,499 $2,754 $ 11 $ 85 ======= ======= ====== ======= ====== ====== - ------------------------------------------------------------------------------------------------------------------
The portion of the projected benefit obligation representing the accumulated benefit obligation for pension plans was $19,890 million and $16,975 million at the end of 1993 and 1992, respectively. The vested benefit obligation for pension plans was $19,732 million and $16,799 million at the end of 1993 and 1992, respectively. Details of the accumulated postretirement benefit obligation are shown below.
- ------------------------------------------------------------------------ ACCUMULATED POSTRETIREMENT BENEFIT OBLIGATION December 31 (In millions) 1993 1992 - ------------------------------------------------------------------------ Retiree health plans Retirees and dependents $2,017 $1,789 Employees eligible to retire 119 137 Other employees 450 490 ------ ------ $2,586 $2,416 ====== ====== Retiree life plans Retirees and dependents $1,147 $907 Employees eligible to retire 79 83 Other employees 308 337 ------ ------ $1,534 $1,327 ====== ====== - ------------------------------------------------------------------------
NOTE 7 INTEREST AND OTHER FINANCIAL CHARGES GE. Interest capitalized, principally on major property, plant and equipment projects, was $21 million in 1993, $29 million in 1992 and $33 million in 1991. GECS. Interest and discount expense reported in the Statement of Earnings is net of interest income on temporary investments of excess funds ($42 million, $48 million and $54 million in 1993, 1992 and 1991, respectively) and capitalized interest ($5 million, $6 million and $8 million in 1993, 1992 and 1991, respectively). NOTE 8 GECS ALLOWANCE FOR LOSSES ON FINANCING RECEIVABLES GECS allowance for losses on financing receivables represented 2.63% of total financing receivables at year-end 1993 and 1992. The allowance for small-balance receivables is determined principally on the basis of actual experience during the preceding three years. Further allowances are provided to reflect management's judgment of additional loss potential. For other receivables, principally the larger loans and leases, the allowance for losses is determined primarily on the basis of management's judgment of net loss potential, including specific allowances for known troubled accounts. The table below shows the activity in the allowance for losses on financing receivables during each of the past three years.
- ------------------------------------------------------------------------- (In millions) 1993 1992 1991 - ------------------------------------------------------------------------- Balance at January 1 $1,607 $1,508 $1,360 Provisions charged to operations 987 1,056 1,102 Net transfers related to companies acquired or sold 126 52 135 Amounts written off - net (990) (1,009) (1,089) ------ ------ ------ Balance at December 31 $1,730 $1,607 $1,508 ====== ====== ====== - -------------------------------------------------------------------------
All accounts or portions thereof deemed to be uncollectible or to require an excessive collection cost are written off to the allowance for losses. Small-balance accounts are progressively written down (from 10% when more than three months delinquent to 100% when 9-12 months delinquent) to record the balances at estimated realizable value. If at any time during that period an account is judged to be uncollectible, such as in the case of a bankruptcy, the uncollectible balance is written off. Large-balance accounts are reviewed at least quarterly, and those accounts that are more than three months delinquent are written down, if necessary, to record the balances at estimated realizable value. Amounts written off in 1993 were approximately 1.46% of average financing receivables outstanding during the year, compared with 1.58% and 1.87% of average financing receivables outstanding during 1992 and 1991, respectively. F-25 26 Annual Report Page 50 - --------------------------------------------------------------------------- NOTE 9 PROVISION FOR INCOME TAXES
- -------------------------------------------------------------------------- (In millions) 1993 1992 1991 - -------------------------------------------------------------------------- GE Estimated amounts payable $1,207 $ 697 $1,088 Deferred tax expense from temporary differences 120 762 311 Investment credit deferred (amortized) - net (17) (27) (39) ------ ------ ------ 1,310 1,432 1,360 ------ ------ ------ GECS Estimated amounts payable (recoverable) 507 374 (192) Deferred tax expense from temporary differences 341 167 555 Investment credit deferred (amortized) - net (7) (5) 19 ------ ------ ------ 841 536 382 ------ ------ ------ CONSOLIDATED Estimated amounts payable 1,714 1,071 896 Deferred tax expense from temporary differences 461 929 866 Investment credit deferred (amortized) - net (24) (32) (20) ------ ------ ------ $2,151 $1,968 $1,742 ====== ====== ====== - --------------------------------------------------------------------------
GE includes GECS in filing a consolidated U.S. federal income tax return. GECS' provision for estimated taxes payable (recoverable) includes its effect on the consolidated return. Estimated consolidated amounts payable includes amounts applicable to non-U.S. jurisdictions of $328 million, $294 million and $254 million in 1993, 1992 and 1991, respectively. SFAS No. 109, Accounting for Income Taxes, was adopted effective January 1, 1992. The effect of adopting this new standard was not material. Deferred income tax balances reflect the impact of temporary differences between the carrying amount of assets and liabilities and their tax bases and are stated at enacted tax rates expected to be in effect when taxes are actually paid or recovered. See note 23 for details. Except for certain earnings that GE intends to reinvest indefinitely, provision has been made for the estimated U.S. federal income tax liabilities applicable to undistributed earnings of affiliates and associated companies. Based on location (not tax jurisdiction) of the business providing goods and services, consolidated U.S. income before taxes was $5,924 million in 1993, $5,639 million in 1992 and $5,034 million in 1991. The corresponding amounts for non-U.S. based operations were $651 million in 1993, $634 million in 1992 and $692 million in 1991.
- -------------------------------------------------------------------------------------------------------------------------------- RECONCILIATION OF U.S. FEDERAL Consolidated GE GECS STATUTORY RATE TO ACTUAL TAX RATE ------------------------- ----------------------- -------------------- 1993 1992 1991 1993 1992 1991 1993 1992 1991 - -------------------------------------------------------------------------------------------------------------------------------- Statutory U.S. federal income tax rate 35.0% 34.0% 34.0% 35.0% 34.0% 34.0% 35.0% 34.0% 34.0% ---- ---- ---- ---- ---- ---- ---- ---- ---- Increase (reduction) in rate resulting from: Inclusion of after-tax earnings of GECS in before-tax earnings of GE - - - (11.0) (8.9) (8.1) - - - Rate increase - deferred taxes 1.5 - - (0.2) - - 4.3 - - Amortization of goodwill 1.5 1.3 1.4 1.1 0.9 1.0 1.2 1.4 1.6 Tax-exempt income (2.8) (2.6) (2.9) - - - (6.8) (8.1) (10.1) Foreign Sales Corporation tax benefits (1.2) (1.1) (1.1) (1.4) (1.2) (1.2) - - - Dividends received not fully taxable (0.7) (0.3) (0.4) (0.3) - - (1.0) (1.0) (1.3) All other - net (0.6) 0.1 (0.6) (0.4) 0.2 (0.3) (0.9) - (1.1) ---- ---- ---- ---- ---- ---- ---- ---- ---- (2.3) (2.6) (3.6) (12.2) (9.0) (8.6) (3.2) (7.7) (10.9) ---- ---- ---- ---- ---- ---- ---- ---- ---- Actual income tax rate 32.7% 31.4% 30.4% 22.8% 25.0% 25.4% 31.8% 26.3% 23.1% ==== ==== ==== ==== ==== ==== ==== ==== ==== - --------------------------------------------------------------------------------------------------------------------------------
NOTE 10 GECS TRADING SECURITIES
- ------------------------------------------------------------------------ December 31 (In millions) 1993 1992 - ------------------------------------------------------------------------ U.S. government and federal agency securities $19,543 $16,172 Corporate stocks, bonds and non-U.S. securities 8,969 5,960 Mortgage loans 1,292 974 State and municipal securities 361 1,048 ------- ------- $30,165 $24,154 ======= ======= - ------------------------------------------------------------------------
The balance of GECS' trading securities at December 31, 1992, included investments in equity securities held by insurance affiliates at a fair value of $1,505 million, with unrealized pretax gains of $94 million (net of unrealized pretax losses of $37 million) included in equity. At December 31, 1993, equity securities held by insurance affiliates were classified as investment securities (see note 11). A significant portion of GECS' trading securities at December 31, 1993, was pledged as collateral for bank loans and repurchase agreements in connection with securities broker-dealer operations. F-26 27 Annual Report Page 51 - --------------------------------------------------------------------------- NOTE 11 INVESTMENT SECURITIES GE's investment securities were classified as available-for-sale at year- end 1993 and 1992. Carrying value was substantially the same as fair value at both year ends. At December 31, 1993, GECS' investment securities were classified as available-for-sale and reported at fair value, including net unrealized gains of $1,261 million before taxes. At December 31, 1992, investment securities of $9,033 million were classified as available-for-sale and were reported at the lower of aggregate amortized cost or fair value. The balance of the 1992 investment securities portfolio was carried at amortized cost. A summary of GECS' investment securities follows.
- ----------------------------------------------------------------------------------- GECS INVESTMENT SECURITIES Estimated Gross Gross Amortized fair unrealized unrealized (In millions) cost value gains (a) losses (a) - ----------------------------------------------------------------------------------- DECEMBER 31, 1993 Corporate, non-U.S. and other $11,448 $11,595 $ 206 $ (59) State and municipal 8,859 9,636 786 (9) Mortgage-backed 2,487 2,507 31 (11) Equity 1,517 1,826 393 (84) U.S. government and federal agency 1,220 1,228 15 (7) ------- ------- ------- ----- $25,531 $26,792 $ 1,431 $(170) ======= ======= ======= ===== DECEMBER 31, 1992 Corporate, non-U.S. and other $ 4,097 $ 4,167 $ 70 $ - State and municipal 6,626 6,951 339 (14) Mortgage-backed 246 252 7 (1) U.S. government and federal agency 255 264 10 (1) ------- ------- ------- ----- $11,224 $11,634 $ 426 $ (16) ======= ======= ======= ===== - ----------------------------------------------------------------------------------- (a) December 31, 1992, amounts include gross unrealized gains and losses of $32 million and $5 million, respectively, on investment securities carried at amortized cost. - -----------------------------------------------------------------------------------
Contractual maturities of debt securities, other than mortgage-backed securities, at December 31, 1993, are shown below.
- ------------------------------------------------------------------ GECS CONTRACTUAL MATURITIES (EXCLUDING MORTGAGE-BACKED SECURITIES) Estimated Amortized fair (In millions) cost value - ------------------------------------------------------------------ Due in 1994 $ 2,665 $ 2,696 1995-1998 4,326 4,476 1999-2003 4,316 4,429 2004 and later 10,220 10,858 - ------------------------------------------------------------------
It is expected that actual maturities will differ from contractual maturities because borrowers have the right to call or prepay certain obligations, sometimes without call or prepayment penalties. Proceeds from sales of investment securities in 1993 were $6,112 million ($3,514 million in 1992 and $2,814 million in 1991). Gross realized gains were $173 million in 1993 ($171 million in 1992 and $106 million in 1991). Gross realized losses were $34 million in 1993 ($4 million in 1992 and $9 million in 1991). NOTE 12 GE CURRENT RECEIVABLES
- ----------------------------------------------------------------- December 31 (In millions) 1993 1992 - ----------------------------------------------------------------- Aircraft Engines $1,860 $2,047 Appliances 456 446 Broadcasting 431 463 Industrial 1,161 1,150 Materials 1,060 719 Power Systems 2,083 1,389 Technical Products and Services 548 696 All Other 243 232 Corporate 889 498 ------ ------ 8,731 7,640 Less allowance for losses (170) (178) ------ ------ $8,561 $7,462 ====== ====== - -----------------------------------------------------------------
Of the total receivables balances at December 31, 1993 and 1992, $5,719 million and $5,284 million, respectively, were from sales of goods and services to customers, and $292 million and $170 million, respectively, were from transactions with associated companies. Current receivables of $402 million at year-end 1993 and $256 million at year-end 1992 arose from sales, principally of aircraft engine goods and services, on open account to various agencies of the U.S. government, which is GE's largest single customer (about 8%, 9% and 10% of GE's sales of goods and services were to the U.S. government in 1993, 1992 and 1991, respectively). Current receivables from sales on open account of aircraft engine goods and services to airline industry customers were $418 million and $651 million at December 31, 1993 and 1992, respectively. To reduce political and credit risks, certain long-term international medical equipment customer receivables are sold with partial credit recourse. Proceeds from such sales were $89 million, $71 million and $13 million in 1993, 1992 and 1991, respectively; balances outstanding were $146 million and $82 million at December 31, 1993 and 1992, respectively. F-27 28 Annual Report Page 52 - --------------------------------------------------------------------------- NOTE 13 GE INVENTORIES
- ----------------------------------------------------------------- December 31 (In millions) 1993 1992 - ----------------------------------------------------------------- Raw materials and work in process $2,983 $3,598 Finished goods 2,314 2,596 Unbilled shipments 156 188 ------ ------ 5,453 6,382 Less revaluation to LIFO (1,629) (1,808) ------ ------ $3,824 $4,574 ====== ====== - -----------------------------------------------------------------
LIFO revaluations decreased $179 million in 1993 compared with decreases of $204 million and $141 million in 1992 and 1991, respectively. Included in these changes were decreases of $101 million, $183 million and $111 million (1993, 1992 and 1991, respectively) resulting from lower inventory levels. There were modest cost decreases in 1993, 1992 and 1991. At December 31, 1993, GE is obligated to acquire, under take-or-pay or similar arrangements, about $250 million per year of raw materials at market prices through 1998. NOTE 14 GECS FINANCING RECEIVABLES (INVESTMENT IN TIME SALES, LOANS AND FINANCING LEASES)
- ----------------------------------------------------------------- December 31 (In millions) 1993 1992 - ----------------------------------------------------------------- TIME SALES AND LOANS Specialized financing $17,138 $18,725 Consumer services 18,732 15,267 Mid-market financing 5,514 3,952 Equipment management 438 71 ------- ------- 41,822 38,015 Deferred income (1,074) (945) ------- ------- Time sales and loans - net 40,748 37,070 ------- ------- INVESTMENT IN FINANCING LEASES Direct financing leases 22,063 20,890 Leveraged leases 2,867 3,035 ------- ------- Investment in financing leases 24,930 23,925 ------- ------- 65,678 60,995 ------- ------- Less allowance for losses (1,730) (1,607) ------- ------- $63,948 $59,388 ======= ======= - -----------------------------------------------------------------
Time sales and loans represents transactions in a variety of forms, including time sales, revolving charge and credit, mortgages, installment loans, intermediate-term loans and revolving loans secured by business assets. The portfolio includes time sales and loans carried at the principal amount on which finance charges are billed periodically, and time sales and loans acquired on a discount basis carried at gross book value, which includes finance charges. At year-end 1993 and 1992, specialized financing and consumer services loans included $11,887 million and $10,526 million, respectively, for commercial real estate loans and $3,293 million and $5,262 million, respectively, for highly leveraged transactions. Note 17 contains information on airline loans and leases. At December 31, 1993, contractual maturities for time sales and loans over the next five years and after were: $16,287 million in 1994; $6,286 million in 1995; $4,350 million in 1996; $4,104 million in 1997; $3,112 million in 1998; and $7,683 million in 1999 and later - aggregating $41,822 million. Experience has shown that a substantial portion of receivables will be paid prior to contractual maturity. Accordingly, the maturities of time sales and loans are not to be regarded as forecasts of future cash collections. Financing leases consists of direct financing and leveraged leases of aircraft, railroad rolling stock, autos, other transportation equipment, data processing equipment, medical equipment, and other manufacturing, power generation, mining and commercial equipment and facilities. As the sole owner of assets under direct financing leases and as the equity participant in leveraged leases, GECS is taxed on total lease payments received and is entitled to tax deductions based on the cost of leased assets and tax deductions for interest paid to third-party participants. GECS generally is entitled to any investment tax credit on leased equipment and to any residual value of leased assets. Investment in direct financing and leveraged leases represents unpaid rentals and estimated unguaranteed residual values of leased equipment, less related deferred income. Because GECS has no general obligation for principal and interest on notes and other instruments representing third- party participation related to leveraged leases, such notes and other instruments have not been included in liabilities but have been offset against the related rentals receivable. GECS' share of rentals receivable on leveraged leases is subordinate to the share of its other participants who also have a security interest in the leased equipment. GECS' investment in financing leases is shown on the following page. F-28 29 Annual Report Page 53
- ----------------------------------------------------------------------------------------------------------------------------- INVESTMENT IN FINANCING LEASES Total financing leases Direct financing leases Leveraged leases --------------------- ----------------------- ------------------- December 31 (In millions) 1993 1992 1993 1992 1993 1992 - ----------------------------------------------------------------------------------------------------------------------------- Total minimum lease payments receivable $38,080 $38,172 $26,584 $25,390 $11,496 $12,782 Less principal and interest on third-party nonrecourse debt (8,398) (9,446) - - (8,398) (9,446) ------- ------- ------- ------- ------- ------- Rentals receivable 29,682 28,726 26,584 25,390 3,098 3,336 Estimated unguaranteed residual value of leased assets 4,490 4,352 3,323 3,115 1,167 1,237 Less deferred income (a) (9,242) (9,153) (7,844) (7,615) (1,398) (1,538) ------- ------- ------- ------- ------- ------- INVESTMENT IN FINANCING LEASES (as shown on the previous page) 24,930 23,925 22,063 20,890 2,867 3,035 Less amounts to arrive at net investment Allowance for losses (538) (560) (464) (481) (74) (79) Deferred taxes arising from financing leases (4,917) (4,553) (2,157) (1,986) (2,760) (2,567) ------- ------- ------- ------- ------- ------- NET INVESTMENT IN FINANCING LEASES $19,475 $18,812 $19,442 $18,423 $ 33 $ 389 ======= ======= ======= ======= ======= ======= - ----------------------------------------------------------------------------------------------------------------------------- (a) Total financing lease deferred income is net of deferred initial direct costs of $83 million and $73 million for 1993 and 1992, respectively. - -----------------------------------------------------------------------------------------------------------------------------
At December 31, 1993, contractual maturities for rentals receivable over the next five years and after were: $6,417 million in 1994; $5,426 million in 1995; $3,919 million in 1996; $2,570 million in 1997; $1,720 million in 1998 and $9,630 million in 1999 and later - aggregating $29,682 million. As with time sales and loans, experience has shown that a portion of receivables will be paid prior to contractual maturity and these amounts should not be regarded as forecasts of future cash flows. Under arrangements with customers, GE Capital has committed to lend funds ($2,131 million and $1,794 million at December 31, 1993 and 1992, respectively) and has issued sundry financial guarantees and letters of credit ($1,863 million and $1,693 million at December 31, 1993 and 1992, respectively). The above commitments and guarantees exclude those related to commercial aircraft (see note 17). Note 21 discusses financial guaranties of insurance affiliates. At December 31, 1993 and 1992, GE Capital was conditionally obligated to advance $2,244 million and $2,236 million, respectively, principally under performance-based standby lending commitments. GE Capital also was obligated for $2,946 million and $2,147 million at year-end 1993 and 1992, respectively, under standby liquidity facilities related to third-party commercial paper programs, although management believes that the prospects of being required to fund under such standby facilities are remote. Nonearning consumer time sales and loans, primarily private-label credit card receivables, amounted to $391 million and $444 million at December 31, 1993 and 1992, respectively. A majority of these receivables were subject to various loss-sharing arrangements that provide full or partial recourse to the originating private-label entity. Nonearning and reduced earning receivables other than consumer time sales and loans were $509 million and $934 million at year-end 1993 and 1992, respectively. Earnings of $11 million and $30 million realized in 1993 and 1992, respectively, were $41 million and $75 million lower than would have been reported had these receivables earned income in accordance with their original terms. NOTE 15 PROPERTY, PLANT AND EQUIPMENT (INCLUDING EQUIPMENT LEASED TO OTHERS)
- --------------------------------------------------------------------------- December 31 (In millions) 1993 1992 - --------------------------------------------------------------------------- ORIGINAL COST GE Land and improvements $ 395 $ 375 Buildings, structures and related equipment 5,370 5,398 Machinery and equipment 15,420 14,936 Leasehold costs and manufacturing plant under construction 1,170 1,183 Other 86 86 ------- ------- 22,441 21,978 ------- ------- GECS Buildings and equipment 1,850 1,733 Equipment leased to others Aircraft 3,677 2,850 Marine shipping containers 2,985 2,584 Vehicles 3,568 2,274 Railroad rolling stock 1,498 1,478 Other 2,160 2,758 ------- ------- 15,738 13,677 ------- ------- $38,179 $35,655 ======= ======= ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION GE $12,899 $12,046 GECS Buildings and equipment 814 673 Equipment leased to others 3,238 2,549 ------- ------- $16,951 $15,268 ======= ======= - ---------------------------------------------------------------------------
Included in GECS' equipment leased to others at year-end 1993 was $244 million of commercial aircraft off-lease ($94 million in 1992). Current-year amortization of GECS' equipment leased to others was $1,395 million, $1,133 million and $1,055 million in 1993, 1992 and 1991, respectively. F-29 30 Annual Report Page 54 - --------------------------------------------------------------------------- Note 16 Intangible Assets
- ----------------------------------------------------------------- December 31 (In millions) 1993 1992 - ----------------------------------------------------------------- GE Goodwill $ 5,713 $ 5,873 Other intangibles 753 734 ------- ------- 6,466 6,607 ------- ------- GECS Goodwill 2,133 1,841 Other intangibles 1,765 1,062 ------- ------- 3,898 2,903 ------- ------- $10,364 $ 9,510 ======= ======= - -----------------------------------------------------------------
GE's intangible assets are shown net of accumulated amortization of $1,760 million in 1993 and $1,476 million in 1992. GECS' intangible assets are net of accumulated amortization of $878 million in 1993 and $646 million in 1992. NOTE 17 ALL OTHER ASSETS
- ----------------------------------------------------------------------- December 31 (In millions) 1993 1992 - ----------------------------------------------------------------------- GE Investments Associated companies (a) $ 1,336 $ 1,301 Government and government- guaranteed securities 293 274 Other 1,639 390 ------- ------- 3,268 1,965 Prepaid pension asset 3,840 3,310 Other 3,269 2,230 ------- ------- 10,377 7,505 ------- ------- GECS Investments Assets acquired for resale 8,141 3,388 Associated companies (b) 2,079 1,720 Other 1,756 2,216 ------- ------- 11,976 7,324 Deferred insurance acquisition costs 987 720 Foreclosed real estate properties 213 304 Other 1,121 848 ------- ------- 14,297 9,196 ------- ------- ELIMINATIONS - (76) ------- ------- $24,674 $16,625 ======= ======= - ----------------------------------------------------------------------- (a) Includes advances of $131 million and $196 million at December 31, 1993 and 1992, respectively. (b) Includes advances of $1,159 million and $687 million at December 31, 1993 and 1992, respectively. - -----------------------------------------------------------------------
In line with industry practice, sales of commercial jet aircraft engines often involve long-term customer financing commitments. In making such commitments, it is GE's general practice to require that it have, or be able to establish, a secured position in the aircraft being financed. Under such airline financing programs, GE had issued loans and guarantees (principally guarantees) amounting to $1,201 million at year-end 1993 and $974 million at year-end 1992; and it had entered into commitments totaling $1.4 billion and $2.3 billion at year-end 1993 and 1992, respectively, to provide financial assistance on future aircraft engine sales. Estimated fair values of the aircraft securing these receivables and guarantees exceeded the related account balances or guaranteed amounts at December 31, 1993. GECS acts as a lender and lessor to the commercial airline industry. At December 31, 1993 and 1992, the aggregate amount of such GECS loans, leases and equipment leased to others was $6,776 million and $5,978 million, respectively. In addition, GECS had issued financial guarantees and funding commitments of $450 million at December 31, 1993 ($645 million at year-end 1992) and had conditional commitments to purchase aircraft at a cost of $865 million. These purchase commitments are subject to the aircraft having been placed on lease under agreements, and with carriers, acceptable to GECS prior to delivery. At year-end 1993, the National Broadcasting Company had $3,011 million of commitments to acquire broadcast material or the rights to broadcast television programs that require payments through the year 2000. GECS' other investments included $75 million and $275 million at December 31, 1993 and 1992, respectively, of in-substance repossessions at the lower of cost or estimated fair value previously included in financing receivables. GECS' mortgage-servicing activities include the purchase and resale of mortgages. GECS had open commitments to purchase mortgages totaling $5,935 million and $2,963 million at December 31, 1993 and 1992, respectively, as well as open commitments to sell mortgages totaling $6,426 million and $1,777 million, respectively, at year-end 1993 and 1992. At December 31, 1993 and 1992, mortgages sold with full or partial recourse to GECS aggregated $2,526 million and $3,876 million, respectively. F-30 31 Annual Report Page 55 - --------------------------------------------------------------------------- NOTE 18 BORROWINGS
- ------------------------------------------------------------------------------------------------ SHORT-TERM BORROWINGS 1993 1992 -------------------------- ---------------------- December 31 Average Average (In millions) Amount rate Amount rate - ------------------------------------------------------------------------------------------------ GE Commercial paper $ 708 3.36% $ 1,175 3.53% Payable to banks (principally non-U.S.) 588 6.41 456 8.73 Notes to trust departments 102 3.03 269 3.14 Other (a) 993 1,548 ------- ------- 2,391 3,448 ------- ------- GECS Commercial paper 46,298 3.39 42,168 3.57 Payable to banks 4,957 3.59 4,516 4.20 Notes to trust departments 1,882 3.10 1,659 3.54 Other (a) 6,866 4,840 ------- ------- 60,003 53,183 ------- ------- ELIMINATIONS (259) (242) ------- ------- $62,135 $56,389 ======= ======= - ------------------------------------------------------------------------------------------------ (a) Includes the current portion of long-term debt. - ------------------------------------------------------------------------------------------------
Confirmed credit lines of approximately $3.1 billion had been extended to GE by 40 banks at year-end 1993. Substantially all of GE's credit lines are available to GE Capital and GECS in addition to their own credit lines. At year-end 1993, GE Capital had committed lines of credit aggregating $19.0 billion with 134 banks, including $6.0 billion of revolving credit agreements pursuant to which GE Capital has the right to borrow funds for periods exceeding one year. A total of $4.6 billion of GE Capital's credit lines is available for use by GECS; $1.8 billion is available for use by GE. During 1993, neither GE nor GECS borrowed under any of these credit lines. Both compensate banks for credit facilities either in the form of fees or a combination of balances and fees as agreed to with each bank. Compensating balances and commitment fees were immaterial in each of the past three years. Kidder, Peabody had established credit lines of $6.1 billion at December 31, 1993, including $3.1 billion available on an unsecured basis. Borrowings from banks were primarily unsecured demand obligations, at interest rates approximating broker call loan rates, to finance inventories of securities and to facilitate the securities settlement process. Aggregate amounts of long-term borrowings that mature during the next five years, after deducting debt reacquired for sinking-fund needs, are as follows.
- ----------------------------------------------------------------------- (In millions) 1994 1995 1996 1997 1998 - ----------------------------------------------------------------------- GE $ 819 $ 258 $ 627 $ 511 $ 584 GECS 6,421 6,204 4,868 2,971 3,566 - -----------------------------------------------------------------------
Outstanding balances in long-term borrowings at December 31, 1993 and 1992, were as follows.
- ----------------------------------------------------------------------------------------------------- LONG-TERM BORROWINGS Weighted December 31 average (In millions) interest rate Maturities 1993 1992 - ----------------------------------------------------------------------------------------------------- GE Notes (a) 7.13% 1995-1998 $ 1,694 $ 2,298 Debentures/sinking- fund debentures - - - 300 Deep discount notes - - - 150 Industrial development/ pollution control bonds (a) 3.09 1995-2019 272 272 Other (a) (b) 447 400 ------- ------- 2,413 3,420 ------- ------- GECS Senior notes Notes (a) (c) 6.03 1995-2012 22,042 18,087 Zero coupon/deep discount notes 13.72 1995-2001 1,407 1,578 Reset or remarketed notes (d) 8.39 2007-2018 1,500 1,500 Floating rate notes (e) 1995-2053 521 496 Less unamortized discount/premium (344) (464) ------- ------- 25,126 21,197 Subordinated notes (f) 8.12 2006-2012 759 760 ------- ------- 25,885 21,957 ------- ------- ELIMINATIONS (28) (1) ------- ------- $28,270 $25,376 ======= ======= - ----------------------------------------------------------------------------------------------------- (a) At December 31, 1993, GE and GECS had agreed with others to exchange currencies on principal amounts equivalent to U.S. $498 million and $8,101 million, respectively, and related interest payments. GE and GECS also had entered into interest rate swaps with others related to interest on $610 million and $13,224 million, respectively. At December 31, 1992, GE and GECS had agreed with others to exchange currencies on principal amounts equivalent to U.S. $1,224 million and $6,499 million, respectively, and related interest payments. GE and GECS also had entered into interest rate swaps with others relating to interest on $2,352 million and $8,549 million, respectively. (b) Includes original issue premium and discount and a variety of obligations having various interest rates and maturities, including borrowings by parent operating components and all affiliate borrowings. (c) At December 31, 1993 and 1992, counterparties held options under which GECS can be caused to execute interest rate swaps associated with interest payments through 1999 on $500 million and $625 million, respectively. (d) Interest rates are reset at the end of the initial and each subsequent interest period. At each rate-reset date, GECS may redeem notes in whole or in part at its option. Current interest periods range from March 1994 to May 1996. (e) The rate of interest payable on each note is a variable rate based on the commercial paper rate each month. Interest is payable either monthly or semiannually at the option of GECS. (f) Includes $700 million at December 31, 1993 and 1992, guaranteed by GE. - -----------------------------------------------------------------------------------------------------
F-31 32 Annual Report Page 56 - --------------------------------------------------------------------------- NOTE 19 GECS SECURITIES SOLD BUT NOT YET PURCHASED, AT MARKET
- -------------------------------------------------------------------------- December 31 (In millions) 1993 1992 - -------------------------------------------------------------------------- U.S. government $12,789 $ 9,570 Corporate stocks, bonds and non-U.S. securities 2,528 1,802 State and municipal securities 15 41 ------- ------- $15,332 $11,413 ======= ======= - --------------------------------------------------------------------------
NOTE 20 GE ALL OTHER CURRENT COSTS AND EXPENSES ACCRUED At year-end 1993 and 1992, this account included taxes accrued of $1,664 million and $1,460 million, respectively, and compensation and benefit accruals (including the current portion of postretirement and postemployment benefit accruals) of $1,311 million and $1,000 million, respectively. Also included are amounts for product warranties, estimated costs on shipments billed to customers and a wide variety of sundry items. NOTE 21 INSURANCE RESERVES AND ANNUITY BENEFITS Insurance reserves and annuity benefits represents policyholders' benefits, unearned premiums and provisions for policy losses in GECS' insurance and annuity businesses. The estimated liability for insurance losses and loss expenses consists of both case and incurred-but-not-reported reserves. Where experience is not sufficient, industry averages are used. Estimated amounts of salvage and subrogation recoverable on paid and unpaid losses are deducted from outstanding losses. The liability for future policy benefits of the life insurance affiliates has been computed mainly by a net-level-premium method based on assumptions for investment yields, mortality and terminations that were appropriate at date of purchase or at the time the policies were developed, including provisions for adverse deviations. Interest rates credited to annuity contracts in 1993 ranged from 3.7% to 9.7%. For most annuities, interest rates to be credited are redetermined by management on an annual basis. SFAS No. 113, Accounting and Reporting for Reinsurance of Short- Duration and Long-Duration Contracts, was adopted during 1993. The principal effect of this Statement was to report reinsurance receivables and prepaid reinsurance premiums, a total of $1,818 million at December 31, 1993, as assets. Such amounts were reported as reductions of insurance reserves at the end of 1992. Financial guaranties, principally by GE Capital's Financial Guaranty Insurance Company, were $101.4 billion and $81.3 billion at year-end 1993 and 1992, respectively, before reinsurance of $17.3 billion and $13.7 billion, respectively. Mortgage insurance risk in force of GE Capital's mortgage insurance operations aggregated $27.0 billion and $21.3 billion at December 31, 1993 and 1992, respectively. NOTE 22 GE ALL OTHER LIABILITIES (INCLUDING POSTEMPLOYMENT BENEFITS) This account includes noncurrent compensation and benefit accruals at year- end 1993 and 1992 of $4,507 million and $3,743 million, respectively. Other noncurrent liabilities include amounts for product warranties, deferred incentive compensation, deferred income and a wide variety of sundry items. The Company adopted SFAS No. 112, Employers' Accounting for Postemployment Benefits, effective as of January 1, 1993. This Statement requires that employers recognize over the service lives of employees the costs of postemployment benefits if certain conditions are met. The principal effect for GE was to change the method of accounting for severance benefits. Under the previous accounting policy, the total cost of severance benefits was expensed when the severance event occurred. The cumulative effect of the accounting change as of January 1, 1993, amounted to $1,306 million before taxes ($862 million, or $1.01 per share, after taxes). Aside from the one-time effect of the adjustment, adoption of SFAS No. 112 was not material to 1993 earnings, and there was no 1993 cash flow impact. F-32 33 Annual Report Page 57 - --------------------------------------------------------------------------- NOTE 23 DEFERRED INCOME TAXES Aggregate deferred tax amounts are summarized below.
- -------------------------------------------------------------------------- December 31 (In millions) 1993 1992 - -------------------------------------------------------------------------- Assets GE $ 3,547 $ 2,864 GECS 2,204 1,810 ------- ------- 5,751 4,674 ------- ------- Liabilities GE 3,248 2,535 GECS 7,612 6,679 ------- ------- 10,860 9,214 ------- ------- Net deferred tax liability $ 5,109 $ 4,540 ======= ======= - --------------------------------------------------------------------------
Principal components of the net deferred tax liability balances are shown below for GE and GECS.
- -------------------------------------------------------------------------- December 31 (In millions) 1993 1992 - -------------------------------------------------------------------------- GE Provisions for expenses $(2,219) $(1,491) Retiree insurance plans (879) (965) GE pension 1,170 957 Depreciation 890 829 Other - net 739 341 ------ ------ (299) (329) ------ ------ GECS Financing leases 4,917 4,553 Operating leases 966 811 Net unrealized gains on securities 437 19 Tax transfer leases 340 329 Provision for losses (831) (715) Insurance reserves (370) (344) AMT credit carryforwards - (200) Other - net (51) 416 ------ ------ 5,408 4,869 ------ ------ Net deferred tax liability $5,109 $4,540 ====== ====== - --------------------------------------------------------------------------
Deferred taxes were determined under SFAS No. 109, Accounting for Income Taxes, which was adopted effective January 1, 1992. NOTE 24 MINORITY INTEREST IN EQUITY OF CONSOLIDATED AFFILIATES Minority interest in equity of consolidated GECS affiliates includes 8,750 shares of $100 par value variable cumulative preferred stock issued by GE Capital with a liquidation preference value of $875 million. Dividend rates on this preferred stock ranged from 2.33% to 2.79% during 1993 and from 2.44% to 3.49% during 1992. NOTE 25 SHARE OWNERS' EQUITY
- ------------------------------------------------------------------------- (In millions) 1993 1992 1991 - ------------------------------------------------------------------------- COMMON STOCK ISSUED Balance at January 1 and December 31 $ 584 $ 584 $ 584 ======= ======= ======= OTHER CAPITAL Balance at January 1 $755 $938 $1,061 Currency translation adjustments (279) (209) (175) Unrealized gains on securities 812 30 45 Gains (losses) on treasury stock dispositions 110 (4) 7 ------- ------- ------- Balance at December 31 $ 1,398 $ 755 $ 938 ======= ======= ======= RETAINED EARNINGS Balance at January 1 $26,527 $23,787 $22,959 Net earnings 4,315 4,725 2,636 Dividends declared (2,229) (1,985) (1,808) ------- ------- ------- Balance at December 31 $28,613 $26,527 $23,787 ======= ======= ======= COMMON STOCK HELD IN TREASURY Balance at January 1 $ 4,407 $ 3,626 $ 2,924 Purchases 770 1,206 1,112 Dispositions (406) (425) (410) ------- ------- ------- Balance at December 31 $ 4,771 $ 4,407 $ 3,626 ======= ======= ======= - -------------------------------------------------------------------------
Authorized shares of common stock (par value $0.63) total 1,100,000,000 shares. Common shares issued and outstanding are summarized in the table below.
- ------------------------------------------------------------------------ SHARES OF GE COMMON STOCK December 31 (In thousands) 1993 1992 1991 - ------------------------------------------------------------------------ Issued 926,564 926,564 926,564 In treasury (72,913) (71,135) (62,442) ------- ------- ------- Outstanding 853,651 855,429 864,122 ======= ======= ======= - ------------------------------------------------------------------------
The current Proxy Statement includes a proposal recommended by the Board of Directors on December 17, 1993, which, if approved by share owners, would (a) increase the number of authorized shares of common stock from 1,100,000,000 shares each with a par value of $0.63 to 2,200,000,000 shares each with a par value of $0.32 and F-33 34 Annual Report Page 58 - --------------------------------------------------------------------------- (b) split each unissued and issued common share, including shares held in treasury, into two shares of common stock each with a par value of $0.32. GE has 50,000,000 authorized shares of preferred stock ($1.00 par value), but no such shares have been issued. The effects of translating to U.S. dollars the financial statements of non-U.S. affiliates whose functional currency is the local currency are included in other capital. Asset and liability accounts are translated at year-end exchange rates, while revenues and expenses are translated at average rates for the period. The cumulative currency translation adjustment was a $246 million reduction of other capital at December 31, 1993, compared with cumulative additions to other capital of $33 million and $242 million at December 31, 1992 and 1991, respectively. NOTE 26 OTHER STOCK-RELATED INFORMATION Stock option plans, stock appreciation rights (SARs), restricted stock and restricted stock units are described in the Company's current Proxy Statement. With certain restrictions, the Company can meet requirements for stock option shares from either unissued or treasury shares.
- ----------------------------------------------------------------------- STOCK OPTION INFORMATION Average per share --------------------- Shares subject Option Market (Shares in thousands) to option price price - ------------------------------------------------------------------------ Balance at January 1, 1993 24,082 $64.37 $85.50 Options granted 8,790 91.80 91.80 Replacement options 441 57.19 57.19 Options exercised (3,036) 56.65 95.14 Options terminated (600) 73.67 - ------ Balance at December 31, 1993 29,677 72.99 104.88 ====== - ------------------------------------------------------------------------
The replacement options replaced canceled SARs and have identical terms thereto. At December 31, 1993, there were 3,529,125 SARs exercisable at an average price of $75.32. There were 1,836,050 restricted stock shares and restricted stock units outstanding at December 31, 1993. At December 31, 1993 and 1992, respectively, there were 8,069,046 and 8,755,078 shares available for grants of options, SARs, restricted stock and restricted stock units. Under the 1990 Long-Term Incentive Plan, 0.95% of the Company's issued common stock (including treasury shares) as of the first day of each calendar year during which the Plan is in effect become available for granting awards in such year. Any unused portion, in addition to shares allocated to awards that are canceled or forfeited, is available for later years. Outstanding options and rights expire on various dates through December 17, 2003. Restricted stock grants vest on various dates up to normal retirement of grantees. NOTE 27 GECS' BROKER-DEALER POSITIONS
- -------------------------------------------------------------------------- December 31 (In millions) 1993 1992 - -------------------------------------------------------------------------- INCLUDED IN GECS' OTHER RECEIVABLES Securities failed to deliver $2,315 $218 Deposits paid for securities borrowed 1,944 1,976 Clearing organizations and other 3,207 930 ------ ------ $7,466 $3,124 ====== ====== INCLUDED IN GECS' ACCOUNTS PAYABLE Securities failed to receive $1,701 $193 Deposits received for securities loaned 1,390 1,051 Clearing organizations and other 275 100 ------ ------ $3,366 $1,344 ====== ====== - --------------------------------------------------------------------------
Kidder, Peabody, in conducting its normal operations, employs a wide variety of financial instruments in order to balance its investment positions. Management believes that the most meaningful measures of these positions for a broker-dealer are the values at which the positions are presented in the Statement of Financial Position in accordance with securities industry practices. The following required supplemental disclosures of gross contract terms are indicators of the nature and extent of such broker-dealer positions and are not intended to portray the much smaller credit or economic risk. At December 31, 1993, open commitments to sell mortgage-backed securities amounted to $18,539 million ($17,191 million in 1992); open commitments to purchase mortgage-backed securities amounted to $14,637 million ($13,131 million in 1992); interest rate swap agreements were open for interest on $4,084 million ($6,038 million in 1992); commitments amounting to $10,837 million ($6,711 million in 1992) were open under options written to cover price changes in securities; the face amount of open interest rate futures and forward contracts for currencies as well as money market and other instruments amounted to $30,506 million ($10,936 million in 1992); contracts establishing limits on counterparty exposure to interest rates were outstanding for interest on $1,610 million ($2,722 million in 1992); and firm underwriting commitments for the purchase of stock or debt amounted to $3,311 million ($4,094 million in 1992). F-34 35 Annual Report Page 59 - --------------------------------------------------------------------------- Note 28 Supplemental Cash Flows Information Changes in operating assets and liabilities are net of acquisitions and dispositions of businesses. "Payments for principal businesses purchased" in the Statement of Cash Flows is net of cash acquired and includes debt assumed and immediately repaid in acquisitions. "All other operating activities" in the Statement of Cash Flows consists principally of adjustments to current and noncurrent accruals of costs and expenses, amortization of premium and discount on debt, and adjustments to assets such as amortization of goodwill and intangibles. The Statement of Cash Flows excludes certain noncash transactions that had no significant effects on the investing or financing activities of GE or GECS. Certain supplemental information for GECS' cash flows is shown below.
- ----------------------------------------------------------------------------------------------------------------------------- For the years ended December 31 (In millions) 1993 1992 1991 - ----------------------------------------------------------------------------------------------------------------------------- CERTAIN BROKER-DEALER ACCOUNTS Trading securities $ (7,517) $ (5,966) $ (5,463) Securities purchased under agreements to resell (16,675) (7,386) 4,006 Securities sold under agreements to repurchase 20,655 7,841 349 Securities sold but not yet purchased 3,919 6,529 (440) -------- -------- -------- $ 382 $ 1,018 $ (1,548) ======== ======== ======== FINANCING RECEIVABLES Increase in loans to customers $(30,002) $(27,069) $(25,030) Principal collections from customers 27,571 25,136 25,289 Investment in equipment for financing leases (7,204) (7,758) (8,829) Principal collections on financing leases 6,812 5,338 3,726 Net change in credit card receivables (1,341) (330) (2,410) -------- -------- -------- $ (4,164) $ (4,683) $ (7,254) ======== ======== ======== ALL OTHER INVESTING ACTIVITIES Purchases of securities by insurance and annuity businesses $(10,488) $ (6,865) $ (6,002) Dispositions and maturities of securities by insurance and annuity businesses 7,698 6,200 5,415 Other (4,124) (3,003) (1,538) -------- -------- -------- $ (6,914) $ (3,668) $ (2,125) ======== ======== ======== NEWLY ISSUED DEBT HAVING MATURITIES MORE THAN 90 DAYS Short-term (91-365 days) $ 4,315 $4,456 $ 4,863 Long-term (over one year) 10,885 6,699 6,317 Long-term subordinated - 450 250 Proceeds - nonrecourse, leveraged lease debt 53 148 1,808 -------- -------- -------- $ 15,253 $ 11,753 $ 13,238 ======== ======== ======== REPAYMENTS AND OTHER REDUCTIONS OF DEBT HAVING MATURITIES MORE THAN 90 DAYS Short-term (91-365 days) $ (9,008) $ (6,474) $ (6,504) Long-term (over one year) (208) (658) (1,769) Long-term subordinated - (76) (32) Principal payments - nonrecourse, leveraged lease debt (312) (272) (280) -------- -------- -------- $ (9,528) $ (7,480) $ (8,585) ======== ======== ======== ALL OTHER FINANCING ACTIVITIES Proceeds from sales of investment and annuity contracts $ 509 $ - $ - Redemption of investment and annuity contracts (578) - - -------- -------- -------- $ (69) $ - $ - ======== ======== ======== - -----------------------------------------------------------------------------------------------------------------------------
F-35 36 Annual Report Page 60 - --------------------------------------------------------------------------- NOTE 29 INDUSTRY SEGMENTS
- ---------------------------------------------------------------------------------------------------------------------------- REVENUES (In millions) For the years ended December 31 - ---------------------------------------------------------------------------------------------------------------------------- Total revenues Intersegment revenues External revenues ---------------------------- ---------------------------- ------------------------ 1993 1992 1991 1993 1992 1991 1993 1992 1991 - ---------------------------------------------------------------------------------------------------------------------------- GE Aircraft Engines $ 6,580 $ 7,368 $ 7,777 $ 59 $ 57 $ 29 $ 6,521 $ 7,311 $ 7,748 Appliances 5,555 5,330 5,225 3 3 4 5,552 5,327 5,221 Broadcasting 3,102 3,363 3,121 - - 1 3,102 3,363 3,120 Industrial 7,379 6,907 6,783 264 267 327 7,115 6,640 6,456 Materials 5,042 4,853 4,736 50 51 51 4,992 4,802 4,685 Power Systems 6,692 6,371 6,189 246 272 265 6,446 6,099 5,924 Technical Products and Services 4,174 4,674 4,686 18 68 99 4,156 4,606 4,587 All Other 2,043 1,749 1,545 - - - 2,043 1,749 1,545 Corporate items and eliminations (208) (361) (468) (640) (718) (776) 432 357 308 ------- ------- ------- ------- ------- ------- ------- ------- ------- Total GE 40,359 40,254 39,594 - - - 40,359 40,254 39,594 ------- ------- ------- ------- ------- ------- ------- ------- ------- GECS Financing 12,399 10,544 10,069 - - - 12,399 10,544 10,069 Specialty Insurance 4,862 3,863 2,989 - - - 4,862 3,863 2,989 Securities Broker-Dealer 4,861 4,022 3,346 - - - 4,861 4,022 3,346 All Other 15 11 (5) - - - 15 11 (5) ------- ------- ------- ------- ------- ------- ------- ------- ------- Total GECS 22,137 18,440 16,399 - - - 22,137 18,440 16,399 ------- ------- ------- ------- ------- ------- ------- ------- ------- Eliminations (1,934) (1,621) (1,364) - - - (1,934) (1,621) (1,364) ------- ------- ------- ------- ------- ------- ------- ------- ------- Consolidated revenues $60,562 $57,073 $54,629 $ - $ - $ - $60,562 $57,073 $54,629 ======= ======= ======= ======= ======= ======= ======= ======= ======= - ---------------------------------------------------------------------------------------------------------------------------- "All Other" GE revenues consists primarily of GECS' earnings. - ----------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------- ASSETS PROPERTY, PLANT AND EQUIPMENT (INCLUDING EQUIPMENT LEASED TO OTHERS) (In millions) At December 31 For the years ended December 31 - ---------------------------------------------------------------------------------------------------------------------------- Depreciation, depletion and Additions amortization ----------------------------- ----------------------------- ---------------------------- 1993 1992 1991 1993 1992 1991 1993 1992 1991 - ---------------------------------------------------------------------------------------------------------------------------- GE Aircraft Engines $ 5,329 $ 6,153 $ 6,649 $ 208 $ 276 $ 371 $ 339 $ 294 $ 295 Appliances 2,193 2,248 2,503 132 126 118 131 105 106 Broadcasting 3,742 3,736 3,886 56 52 70 98 82 84 Industrial 4,909 4,983 4,824 379 299 320 310 282 262 Materials 8,181 8,081 8,340 376 255 784 417 393 369 Power Systems 4,408 3,614 3,450 251 245 267 185 159 144 Technical Products and Services 2,179 2,393 2,629 126 118 148 89 74 98 All Other 11,604 9,719 8,750 1 1 6 3 5 5 Corporate items and eliminations 8,589 7,148 6,119 59 73 80 59 89 66 -------- -------- -------- ------- ------- ------- ------- ------- ------- Total GE 51,134 48,075 47,150 1,588 1,445 2,164 1,631 1,483 1,429 -------- -------- -------- ------- ------- ------- ------- ------- ------- GECS Financing 106,854 82,207 74,554 3,352 4,761 3,688 1,545 1,259 1,161 Specialty Insurance 18,915 14,624 11,812 15 17 11 9 13 8 Securities Broker-Dealer 85,009 55,455 41,218 15 32 31 38 34 38 All Other 952 2,238 230 59 118 41 38 29 18 -------- -------- -------- ------- ------- ------- ------- ------- ------- Total GECS 211,730 154,524 127,814 3,441 4,928 3,771 1,630 1,335 1,225 -------- -------- -------- ------- ------- ------- ------- ------- ------- Eliminations (11,358) (9,723) (8,456) - - - - - - -------- -------- -------- ------- ------- ------- ------- ------- ------- Consolidated totals $251,506 $192,876 $166,508 $5,029 $6,373 $5,935 $3,261 $2,818 $2,654 ======== ======== ======== ======= ======= ======= ======= ======= ======= - ---------------------------------------------------------------------------------------------------------------------------- "All Other" GE assets consists primarily of investment in GECS. - ----------------------------------------------------------------------------------------------------------------------------
F-36 37 Annual Report Page 61 - --------------------------------------------------------------------------- A description of industry segments for General Electric Company and consolidated affiliates follows. * AIRCRAFT ENGINES. Jet engines and replacement parts and repair services for all categories of commercial aircraft (short/medium, intermediate and long-range); a wide variety of military planes, including fighters, bombers, tankers and helicopters; and executive and commuter aircraft. Sold worldwide to airframe manufacturers, airlines and government agencies. Also, aircraft engine derivatives used as marine propulsion and industrial power sources. * APPLIANCES. Major appliances such as refrigerators, freezers, electric and gas ranges, dishwashers, clothes washers and dryers, microwave ovens and room air conditioning equipment. Sold primarily in North America, but also in global markets, under various GE and private-label brands. Distributed to retail outlets, mainly for the replacement market, and to building contractors and distributors for new installations. * BROADCASTING. Primarily the National Broadcasting Company (NBC). Principal businesses are furnishing of U.S. network television services to more than 200 affiliated stations, production of television programs, operation of six VHF television broadcasting stations, and investment and programming activities in cable television. * INDUSTRIAL. Lighting products (including a wide variety of lamps, wiring devices and quartz products); electrical distribution and control equipment; transportation systems products (including diesel-electric locomotives, transit propulsion equipment and motorized wheels for off- highway vehicles); electric motors and related products; a broad range of electrical and electronic industrial automation products; and GE Supply, a network of electrical supply houses. Markets are extremely varied. Products are sold to commercial and industrial end users, original equipment manufacturers, electrical distributors, retail outlets, railways and transit authorities. Increasingly, products are developed for and sold in global markets. * MATERIALS. High-performance engineered plastics used in applications such as automobiles and housings for computers and other business equipment; ABS resins; silicones; superabrasives such as man-made diamonds; and laminates. Sold worldwide to a diverse customer base consisting mainly of manufacturers. * POWER SYSTEMS. Products mainly for the generation, transmission and distribution of electricity, including related installation, engineering and repair services. Markets and competition are global. Steam turbine-generators are sold to electric utilities, to the U.S. Navy, and, for cogeneration, to industrial and other power customers. Marine steam turbines and propulsion gears are sold to the U.S. Navy. Gas turbines are sold principally as packaged power plants for electric utilities and for industrial cogeneration and mechanical drive applications. Power Systems also includes power delivery and control products, such as transformers, meters, relays, capacitors and arresters for the utility industry; nuclear reactors; and fuel and support services for GE's installed boiling water reactors. * TECHNICAL PRODUCTS AND SERVICES. Medical systems such as magnetic resonance (MR) and computed tomography (CT) scanners, x-ray, nuclear imaging, ultrasound and other diagnostic equipment sold worldwide to hospitals and medical facilities. This segment also includes a full range of computer-based information and data interchange services for internal use and external commercial and industrial customers. * GECS FINANCING. Operations of GE Capital as follows: Consumer services - private-label and bank credit card loans, time sales and revolving credit and inventory financing for retail merchants, auto leasing and inventory financing, mortgage servicing, and annuity and mutual fund sales. Specialized financing - loans and financing leases for major capital assets, including aircraft, industrial facilities and equipment, and energy- related facilities; commercial and residential real estate loans and investments; and loans to and investments in highly leveraged management buyouts and corporate recapitalizations. Equipment management - leases, loans and asset management services for portfolios of commercial and transportation equipment, including aircraft, trailers, auto fleets, modular space units, railroad rolling stock, data processing equipment, ocean-going containers and satellites. Mid-market financing - loans and financing and operating leases for middle-market customers, including manufacturers, distributors and end users, for a variety of equipment, including data processing equipment, medical and diagnostic equipment, and equipment used in construction, manufacturing, office applications and telecommunications activities. Very few of the products financed by GE Capital are manufactured by other GE segments. * GECS SPECIALTY INSURANCE. U.S. and international multiple-line property and casualty reinsurance and certain directly written specialty insurance; financial guaranty insurance, principally on municipal bonds and structured finance issues; private mortgage insurance; creditor insurance covering international customer loan repayments; and life reinsurance. * GECS SECURITIES BROKER-DEALER. Kidder, Peabody, a full-service international investment bank and securities broker, member of the principal stock and commodities exchanges and a primary dealer in U.S. government securities. Offers services such as underwriting, sales and trading, advisory services on acquisitions and financings, research and asset management. F-37 38 Annual Report Page 62 - --------------------------------------------------------------------------- NOTE 30 GEOGRAPHIC SEGMENT INFORMATION (CONSOLIDATED) U.S. revenues include GE exports to external customers, as shown by major areas of the world on page 38, and royalty and licensing income from non- U.S. sources. The Company manages its exposure to currency movements by committing to future exchanges of currencies at specified prices and dates. Commitments outstanding at December 31, 1993 and 1992, were $1,386 million and $1,533 million, respectively, for GE and $1,833 million and $2,084 million, respectively, for GECS, excluding Kidder, Peabody.
- --------------------------------------------------------------------------------------------------------------------------------- REVENUES (In millions) For the years ended December 31 - --------------------------------------------------------------------------------------------------------------------------------- Total revenues Intersegment revenues External revenues ------------------------------- ------------------------------ -------------------------------- 1993 1992 1991 1993 1992 1991 1993 1992 1991 - ---------------------------------------------------------------------------------------------------------------------------------- United States $52,039 $48,710 $47,277 $1,513 $1,281 $1,246 $50,526 $47,429 $46,031 Other areas of the world 11,210 10,776 9,662 1,174 1,132 1,064 10,036 9,644 8,598 Intercompany eliminations (2,687) (2,413) (2,310) (2,687) (2,413) (2,310) - - - ------- ------- ------- ------ ------ ------ ------- ------- ------- Total $60,562 $57,073 $54,629 $ - $ - $ - $60,562 $57,073 $54,629 ======= ======= ======= ====== ====== ====== ======= ======= ======= - --------------------------------------------------------------------------------------------------------------------------------- OPERATING PROFIT ASSETS (In millions) For the years ended December 31 At December 31 - --------------------------------------------------------------------------------------------- 1993 1992 1991 1993 1992 1991 - --------------------------------------------------------------------------------------------- United States $7,019 $6,883 $6,294 $219,903 $168,797 $147,648 Other areas of the world 793 819 898 31,791 24,244 19,031 Intercompany eliminations (23) 6 (22) (188) (165) (171) ------ ------ ------ -------- -------- -------- Total $7,789 $7,708 $7,170 $251,506 $192,876 $166,508 ====== ====== ====== ======== ======== ======== - ---------------------------------------------------------------------------------------------
NOTE 31 FAIR VALUES OF FINANCIAL INSTRUMENTS As required under generally accepted accounting principles, financial instruments are presented in the accompanying financial statements - generally at either cost or fair value - based on both the characteristics of and management intentions regarding the instruments. Management believes that the financial statement presentation is the most useful for displaying the Company's results. However, SFAS No. 107, Disclosure About Fair Value of Financial Instruments, requires disclosure of an estimate of the fair value of certain financial instruments. These disclosures disregard management intentions regarding the instruments, and, therefore, management believes that this information may be of limited usefulness. Apart from the Company's own borrowings, certain marketable securities and the financial instruments of Kidder, Peabody, relatively few of the Company's financial instruments are actively traded. Thus, fair values must often be determined by using one or more models that indicate value based on estimates of quantifiable characteristics as of a particular date. Because this undertaking is, by nature, difficult and highly judgmental, for a limited number of instruments, alternative valuation techniques indicate values sufficiently diverse that the only practicable disclosure is a range of values. Users of the following data are cautioned that limitations in the estimation techniques may have produced disclosed values different from those that could have been realized at December 31, 1993 or 1992. Moreover, the disclosed values are representative of fair values only as of the dates indicated inasmuch as interest rates, performance of the economy, tax policies and other variables significantly impact fair valuations. Cash and equivalents, trading securities, reverse repurchase agreements, repurchase agreements and other receivables have been excluded as their carrying amounts and fair values are the same, or approximately the same. Values were estimated as follows. INVESTMENT SECURITIES. Based on quoted market prices or dealer quotes for actively traded securities. Value of other such securities was estimated using quoted market prices for similar securities. F-38 39 Annual Report Page 63 - --------------------------------------------------------------------------- TIME SALES, LOANS AND RELATED PARTICIPATIONS. Based on quoted market prices, recent transactions, market comparables and/or discounted future cash flows, using rates at which similar loans would have been made to similar borrowers. INVESTMENTS IN ASSOCIATED COMPANIES. Based on market comparables, recent transactions and/or discounted future cash flows for GECS investments. These equity interests were generally acquired in connection with financing transactions and, for purposes of this disclosure, fair values were estimated. GE's investments (aggregating $1,336 million and $1,301 million at December 31, 1993 and 1992, respectively) comprise many small investments, many of which are located outside the United States, and generally involve joint ventures for specific, limited objectives; determination of fair values is impracticable. OTHER FINANCIAL INSTRUMENTS. Based on recent comparable transactions, market comparables, discounted future cash flows, quoted market prices, and/or estimates of the cost to terminate or otherwise settle obligations to counterparties. BORROWINGS. Based on quoted market prices or market comparables. Fair values of interest rate and currency swaps on borrowings are based on quoted market prices and include the effects of counterparty creditworthiness. ANNUITY BENEFITS. Based on expected future cash flows, discounted at currently offered discount rates for immediate annuity contracts or cash surrender value for single premium deferred annuities. FINANCIAL GUARANTIES OF INSURANCE AFFILIATES. Based on future cash flows, considering expected renewal premiums, claims, refunds and servicing costs, discounted at a market rate. The carrying amounts and estimated fair values of the Company's financial instruments were as follows.
- ----------------------------------------------------------------------------------------------------------------------- ASSETS (LIABILITIES) 1993 1992 ------------------------------ -------------------------------- Carrying Estimated Carrying Estimated At December 31 (In millions) amount fair value amount fair value - ----------------------------------------------------------------------------------------------------------------------- GE Investment securities $ 19 $ 19 $ 32 $ 32 Other financial instruments 2,105 2,261 832 869 Borrowings (a) (4,804) (4,933) (6,868) (6,991) GECS Investment securities 26,792 26,792 11,224 11,634 Time sales, loans and related participations 39,678 41,410-40,685 36,131 37,420-36,240 Investments in associated companies 2,079 2,830-2,635 1,720 2,295-2,180 Other financial instruments 6,045 6,085-5,960 2,430 2,545-2,405 Annuity benefits (8,894) (8,660) - - Borrowings (a) (b) (85,888) (87,020) (75,140) (76,400) Financial guaranties of insurance affiliates (1,312) (135)-(220) (1,036) 200-55 - ----------------------------------------------------------------------------------------------------------------------- (a) Swap contracts are integral to the Company's goal of achieving the lowest borrowing costs for particular funding strategies. The above fair values of borrowings include fair values of associated interest rate and currency swaps. At December 31, 1993, the approximate settlement values of GE's and GECS' swaps were $21 million and $340 million, respectively. Without such swaps, estimated fair values of GE's and GECS' borrowings would have been $4,912 million and $86,680 million, respectively. Approximately 90% of the notional amount of swaps outstanding at December 31, 1993, was with counterparties having credit ratings of Aa/AA or better. (b) Proceeds from borrowings are invested in a variety of GECS activities, including both financial instruments, shown in the preceding table, as well as leases, for which fair value disclosures are neither required nor reasonably estimable. When evaluating the extent to which estimated fair value of borrowings exceeds the related carrying amount, users should consider that the fair value of the fixed payment stream for long-term leases would increase as well. - -----------------------------------------------------------------------------------------------------------------------
F-39 40 Annual Report Page 64 - --------------------------------------------------------------------------- NOTE 32 QUARTERLY INFORMATION (UNAUDITED)
- --------------------------------------------------------------------------------------------------------------------------- First quarter Second quarter Third quarter Fourth quarter (Dollar amounts in millions; ----------------- ----------------- ----------------- ----------------- per-share amounts in dollars) 1993 1992 1993 1992 1993 1992 1993 1992 - --------------------------------------------------------------------------------------------------------------------------- CONSOLIDATED OPERATIONS Earnings from continuing operations $1,085 $ 964 $ 656 $1,130 $1,206 $ 996 $ 1,477 $ 1,215 Earnings from discontinued operations 75 94 - 86 - 114 - 126 Gain on transfer of discontinued operations - - 678 - - - - - Accounting change (862) (a) - - - - - - - ------ ------ ------ ------ ------ ------ ------ ------ Net earnings $ 298 $1,058 $1,334 $1,216 $1,206 $1,110 $ 1,477 $1,341 ====== ====== ====== ====== ====== ====== ====== ====== Per share Earnings from continuing operations $ 1.27 $ 1.12 $ 0.77 $ 1.32 $ 1.41 $ 1.17 $ 1.73 $ 1.42 Earnings from discontinued operations 0.09 0.11 0.79 0.10 - 0.13 - 0.15 Accounting change (1.01) (a) - - - - - - - ------ ------ ------ ------ ------ ------ ------ ------ Net earnings $ 0.35 $ 1.23 $ 1.56 $ 1.42 $ 1.41 $ 1.30 $ 1.73 $ 1.57 ====== ====== ====== ====== ====== ====== ====== ====== SELECTED DATA - CONTINUING OPERATIONS GE Sales of goods and services $7,968 $7,996 $9,468 $9,513 $8,779 $9,242 $11,607 $11,192 Gross profit from sales 2,074 2,083 1,662 2,496 2,198 2,123 2,929 2,824 GECS Revenues from operations 4,763 4,301 5,129 4,493 5,919 4,761 6,326 4,885 Operating profit 644 517 583 484 833 542 588 492 - --------------------------------------------------------------------------------------------------------------------------- (a) Reflects the cumulative effect to January 1, 1993, of the change in accounting for postemployment benefits (SFAS No. 112). As originally reported, net earnings for the first quarter were $1,160 million, or $1.36 per share. - ---------------------------------------------------------------------------------------------------------------------------
For GE, gross profit from sales is sales of goods and services less cost of goods and services sold. For GECS, operating profit is income before taxes. Second-quarter 1993 earnings from continuing operations were reduced by restructuring provisions of $678 million ($0.79 per share) after tax. Second-quarter gross profit from sales was reduced by restructuring provisions of $875 million before tax. Earnings-per-share amounts for each quarter are required to be computed independently and, in 1992, did not equal the total year earnings- per-share amounts. F-40 41 GENERAL ELECTRIC COMPANY AND CONSOLIDATED AFFILIATES SCHEDULE II AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS, PROMOTERS AND EMPLOYEES OTHER THAN RELATED PARTIES
(In millions) Deductions Balance at ---------- beginning of Amounts Balance at Name of Debtor period Additions Collected end of period - -------------- ------------ --------- ---------- ------------- 1993: Employees: William J. Conaty $ - $ 0.5(a) $ - $ 0.5 ====== ====== ====== ====== 1992: Employees: Names $ - $ - $ - $ - ====== ====== ====== ====== 1991: Employees: Names $ - $ - $ - $ - ====== ====== ====== ====== (a)In connection with the relocation of William J. Conaty, who was promoted to the position of Senior Vice President - Human Resources in 1993, the Company provided a $0.5 million loan to assist him in purchasing a home. The loan is secured by a second mortgage on the home and is repayable, with interest at the Company's commercial paper borrowing rate, in five years.
F-41 42 GENERAL ELECTRIC COMPANY AND CONSOLIDATED AFFILIATES SCHEDULE VIII VALUATION AND QUALIFYING ACCOUNTS
GE allowance for losses deducted from assets ----------------------- Accounts and notes receivable Investments ---------- ---------- (Amounts in millions) Balance, January 1, 1991 $191 $106 Provisions charged (credited) to operations 58 10 (Deductions) additions (58) (50) ---- ---- Balance, December 31, 1991 191 (1) 66 Provisions charged (credited) to operations 78 10 (Deductions) additions (73) (19) ---- ---- Balance, December 31, 1992 196 (1) 57 Provisions charged (credited) to operations 51 57 (Deductions) additions (49) (5) ---- ---- Balance, December 31, 1993 $198 (1) $109 ==== ==== - -------------------------- (1) The year-end balance is segregated on the Statement of Financial Position as follows:
1993 1992 1991 ---- ---- ---- Current receivables $170 $178 $181 Other assets (long-term receivables, customer financing, etc.) 28 18 10 ---- ---- ---- $198 $196 $191 ==== ==== ==== Reference is made to note 8 in Notes to Consolidated Financial Statements appearing in the 1993 Annual Report to Share Owners which contains information with respect to GECS allowance for losses on financing receivables for 1993, 1992 and 1991.
F-42 43 GENERAL ELECTRIC COMPANY AND CONSOLIDATED AFFILIATES SCHEDULE IX SHORT-TERM BORROWINGS
At December 31 ------- ---------- Maximum Average for year Weighted amount --------------------- Average outstanding Weighted Interest at any Amount Interest Category Balance Rate month-end Outstanding Rate (e) - -------- ------- -------- --------- ----------- -------- 1993 (Dollar amounts in millions) - ---- GE -- Commercial paper $ 708 3.36% $ 2,943 $ 2,591 (a) 3.11% Bank borrowings - affiliates (principally non U.S.) 588 6.41% 588 451 (b) 10.46% Notes with trust departments 102 3.03% 348 280 (b) 3.23% Current portion of long-term borrowings 819 Other 174 ------- Total GE 2,391 3,322 (c) 4.12% ------- GECS ---- Commercial paper 46,298 3.39% 46,298 41,689 (a) 3.28% Banks 4,957 3.59% 4,957 3,773 (a) 3.59% Current portion of long-term borrowings 6,421 Notes with trust departments 1,882 3.10% 2,317 1,895 (a) 2.97% Passbooks and investment certificates 445 ------- Total GECS 60,003 47,357 (d) 3.29% ------- Eliminations (259) ------- Consolidated $62,135 ------------ ======= (a) Average daily balance. (b) Average balance is calculated by averaging month-end balances for the year. (c) Excludes current portion of long-term debt and other. (d) Excludes current portion of long-term debt and passbooks and investment certificates. (e) Short-term interest expense incurred divided by the average balance outstanding.
F-43 44 GENERAL ELECTRIC COMPANY AND CONSOLIDATED AFFILIATES SCHEDULE IX SHORT-TERM BORROWINGS
At December 31 ------- ---------- Maximum Average for year Weighted amount --------------------- Average outstanding Weighted Interest at any Amount Interest Category Balance Rate month-end Outstanding Rate (e) - -------- ------- -------- --------- ----------- -------- 1992 (Dollar amounts in millions) - ---- GE -- Commercial paper $ 1,175 3.53% $ 4,596 $ 3,921 (a) 3.77% Bank borrowings - affiliates (principally non U.S. 456 8.73% 777 680 (b) 12.55% Notes with trust departments 269 3.14% 376 331 (b) 3.74% Current portion of long-term borrowings 1,359 Other 189 ------- Total GE 3,448 4,932 (c) 4.98% ------- GECS ---- Commercial paper 42,168 3.57% 42,168 38,816 (a) 3.94% Banks 4,516 4.20% 5,907 3,560 (a) 4.35% Current portion of long-term borrowings 4,300 Notes with trust departments 1,659 3.54% 1,841 1,441 (a) 3.54% Passbooks and investment certificates 540 ------- Total GECS 53,183 43,817 (d) 3.96% ------- Eliminations (242) ------- Consolidated $56,389 ------------ ======= (a) Average daily balance. (b) Average balance is calculated by averaging month-end balances for the year. (c) Excludes current portion of long-term debt and other. (d) Excludes current portion of long-term debt and passbooks and investment certificates. (e) Short-term interest expense incurred divided by the average balance outstanding.
F-44 45 GENERAL ELECTRIC COMPANY AND CONSOLIDATED AFFILIATES SCHEDULE IX SHORT-TERM BORROWINGS
At December 31 ------- ---------- Maximum Average for year Weighted amount --------------------- Average outstanding Weighted Interest at any Amount Interest Category Balance Rate month-end Outstanding Rate (e) - -------- ------- -------- --------- ----------- -------- 1991 (Dollar amounts in millions) - ---- GE -- Commercial paper $ 1,369 5.43% $5,095 $4,047 (a) 6.02% Bank borrowings - affiliates (principally non U.S.) 1,464 11.93% 1,464 1,015 (b) 12.69% Notes with trust departments 297 4.77% 396 348 (b) 5.96% Current portion of long-term borrowings 259 Other 93 ------ Total GE 3,482 5,410 (c) 7.27% ------ GECS ---- Commercial paper 38,822 5.12% 38,822 35,768 (a) 6.15% Banks 3,003 5.20% 4,264 3,655 (a) 6.20% Current portion of long-term borrowings 4,370 Notes with trust departments 897 4.90% 897 1,090 (a) 5.83% Passbooks and investment certificates 978 ------- Total GECS 48,070 40,513 (d) 6.36% ------- Eliminations (202) ------- Consolidated $51,350 ------------ ======= (a) Average daily balance. (b) Average balance is calculated by averaging month-end balances for the year. (c) Excludes current portion of long-term debt and other. (d) Excludes current portion of long-term debt and passbooks and investment certificates. (e) Short-term interest expense incurred divided by the average balance outstanding.
F-45 46 GENERAL ELECTRIC COMPANY AND CONSOLIDATED AFFILIATES SCHEDULE X SUPPLEMENTARY INCOME STATEMENT INFORMATION
For the year ended December 31 ------------------------------ (In millions) 1993 1992 1991 ---- ---- ---- GE Employee compensation, including Social Security taxes and other benefits $8,981 $9,258 $9,201 Maintenance and repairs 705 768 738 Advertising 332 347 344 Taxes, except payroll and income taxes 286 249 286 GECS Employee compensation, including Social Security taxes and other benefits 2,067 1,631 1,333 Advertising 111 101 97 Taxes, except payroll and income taxes 151 97 118 Consolidated Employee compensation, including Social Security taxes and other benefits 11,048 10,889 10,534 Maintenance and repairs 705 768 738 Advertising 443 448 441 Taxes, except payroll and income taxes 437 346 404 Total employee compensation data include Social Security taxes of $645 million in 1993, $649 million in 1992 and $651 million in 1991. Amounts for depreciation and amortization of intangible assets, which were less than 1% of total sales and revenues in each of the three years shown, are included in "all other operating activities" in the Statements of Cash Flows.
F-46 47 Exhibit 12 GENERAL ELECTRIC COMPANY RATIO OF EARNINGS TO FIXED CHARGES
Year ended December 31 (Dollars in millions) ----------------------------------------------- 1989 1990 1991 1992 1993 ---- ---- ---- ---- ---- GE except GECS - -------------- "Earnings" /1/ $ 4,848 $ 5,225 $ 5,383 $ 5,750 $ 5,751 Less: Equity in undistributed earnings of General Electric Capital Services, Inc. /2/ (927) (744) (925) (999) (1,197) Plus: Interest and other financial charges included in expense 738 962 893 768 525 One-third of rental expense /3/ 201 207 225 228 212 ------- ------- ------- ------- -------- Adjusted "earnings" $ 4,860 $ 5,650 $ 5,576 $ 5,747 $ 5,291 ======= ======= ======= ======= ======== Fixed Charges: Interest and other financial charges $ 738 $ 962 $ 893 $ 768 $ 525 Interest capitalized 34 26 33 29 21 One-third of rental expense /3/ 201 207 225 228 212 ------- ------- ------- ------- -------- Total fixed charges $ 973 $ 1,195 $ 1,151 $ 1,025 $ 758 ======= ======= ======= ======= ======== Ratio of earnings to fixed charges 4.99 4.73 4.84 5.61 6.98 ======= ======= ======= ======= ======== General Electric Company and consolidated affiliates - ----------------------------------------- "Earnings" /1/ $ 5,105 $ 5,567 $ 5,798 $ 6,326 $ 6,726 Plus: Interest and other financial charges included in expense 6,763 7,498 7,455 6,908 7,031 One-third of rental expense /3/ 246 260 281 338 378 ------- ------- ------- ------- -------- Adjusted "earnings" $12,114 $13,325 $13,534 $13,572 $14,135 ======= ======= ======= ======= ======== Fixed Charges: Interest and other financial charges $ 6,763 $ 7,498 $ 7,455 $ 6,908 $ 7,031 Interest capitalized 47 46 41 35 26 One-third of rental expense /3/ 246 260 281 338 378 ------- ------- ------- ------- -------- Total fixed charges $ 7,056 $ 7,804 $ 7,777 $ 7,281 $ 7,435 ======= ======= ======= ======= ======== Ratio of earnings to fixed charges 1.72 1.71 1.74 1.86 1.90 ======= ======= ======= ======= ======== /1/ Earnings for all years consist of earnings from continuing operations before income taxes and minority interest. For 1991 and 1993, earnings are before cumulative effects of changes in accounting principle. /2/ Earnings for all years consist of earnings after income taxes. For 1991, earnings are before cumulative effect of change in accounting principle. /3/ Considered to be representative of interest factor in rental expense.
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