SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____ to ____
Commission file number 1-35
GENERAL ELECTRIC COMPANY
(Exact name of registrant as specified in its charter)
New York 14-0689340
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3135 Easton Turnpike, Fairfield, CT 06431-0001
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (203) 373-2211
-------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
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
--- ---
There were 1,646,420,550 shares with a par value of $0.32 per share
outstanding at September 30, 1996.
Part I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Condensed Statement of Earnings
General Electric Company and consolidated affiliates
(Dollars, except per-share amounts, in millions)
Third quarter ended September 30 (Unaudited)
---------------------------------------------------------------------
Consolidated GE GECS
---------------------- ---------------------- ---------------------
1996 1995 1996 1995 1996 1995
---------- ---------- ---------- ---------- ---------- ----------
Sales of goods $8,507 $7,910 $8,509 $7,919 $ - $ -
Sales of services 2,939 2,166 2,969 2,187 - -
Earnings of GECS - - 816 711 - -
GECS revenues from operations 8,415 7,075 - - 8,449 7,099
Other income 160 190 160 189 - -
---------- ---------- ---------- ---------- ---------- ----------
Total revenues 20,021 17,341 12,454 11,006 8,449 7,099
---------- ---------- ---------- ---------- ---------- ----------
Cost of goods sold 6,188 5,787 6,190 5,796 - -
Cost of services sold 2,199 1,495 2,228 1,516 - -
Interest and other financial charges 1,925 1,911 175 190 1,756 1,726
Insurance losses and policyholder and annuity benefits 1,553 1,540 - - 1,553 1,540
Provision for losses on financing receivables 254 352 - - 254 352
Other costs and expenses 5,137 3,823 1,497 1,437 3,669 2,404
Minority interest in net earnings of
consolidated affiliates 67 40 29 11 38 29
---------- ---------- ---------- ---------- ---------- ----------
Total costs and expenses 17,323 14,948 10,119 8,950 7,270 6,051
---------- ---------- ---------- ---------- ---------- ----------
Earnings before income taxes 2,698 2,393 2,335 2,056 1,179 1,048
Provision for income taxes (910) (783) (547) (446) (363) (337)
---------- ---------- ---------- ---------- ---------- ----------
Net earnings $1,788 $1,610 $1,788 $1,610 $816 $711
========== ========== ========== ========== ========== ==========
Net earnings per share $1.08 $0.96
Dividends declared per share $0.46 $0.41
<FN>
See notes to Condensed Consolidated Financial Statements. Consolidating data are shown for "GE" and "GECS". Transactions
between GE and GECS have been eliminated from the "consolidated" columns.
Condensed Statement of Earnings
General Electric Company and consolidated affiliates
(Dollars, except per-share amounts, in millions) Nine months ended September 30 (Unaudited)
---------------------------------------------------------------------
Consolidated GE GECS
---------------------- ---------------------- ---------------------
1996 1995 1996 1995 1996 1995
---------- ---------- ---------- ---------- ---------- ----------
Sales of goods $24,299 $23,578 $24,310 $23,595 $ - $ -
Sales of services 8,341 6,958 8,430 7,026 - -
Earnings of GECS - - 2,149 1,842 - -
GECS revenues from operations 23,053 19,193 - - 23,151 19,268
Other income 492 547 490 548 - -
---------- ---------- ---------- ---------- ---------- ----------
Total revenues 56,185 50,276 35,379 33,011 23,151 19,268
---------- ---------- ---------- ---------- ---------- ----------
Cost of goods sold 17,432 17,136 17,443 17,153 - -
Cost of services sold 5,892 4,820 5,981 4,888 - -
Interest and other financial charges 5,720 5,403 455 474 5,280 4,946
Insurance losses and policyholder and annuity benefits 4,713 3,854 - - 4,713 3,854
Provision for losses on financing receivables 695 710 - - 695 710
Other costs and expenses 13,694 11,163 4,535 4,238 9,240 6,984
Minority interest in net earnings of consolidated
affiliates 188 125 68 43 120 82
---------- ---------- ---------- ---------- ---------- ----------
Total costs and expenses 48,334 43,211 28,482 26,796 20,048 16,576
---------- ---------- ---------- ---------- ---------- ----------
Earnings before income taxes 7,851 7,065 6,897 6,215 3,103 2,692
Provision for income taxes (2,638) (2,357) (1,684) (1,507) (954) (850)
---------- ---------- ---------- ---------- ---------- ----------
Net earnings $5,213 $4,708 $5,213 $4,708 $2,149 $1,842
========== ========== ========== ========== ========== ==========
Net earnings per share $3.15 $2.79
Dividends declared per share $1.38 $1.23
<FN>
See notes to Condensed Consolidated Financial Statements. Consolidating data are shown for "GE" and "GECS". Transactions
between GE and GECS have been eliminated from the "consolidated" columns.
Condensed Statement of Financial Position
General Electric Company and consolidated affiliates
(Dollars in millions) Consolidated GE GECS
---------------------- ---------------------- ---------------------
9/30/96 12/31/95 9/30/96 12/31/95 9/30/96 12/31/95
---------- ---------- ---------- ---------- ---------- ----------
Cash and equivalents $4,672 $2,823 $1,150 $874 $3,522 $1,949
Investment securities 48,278 41,067 5 4 48,273 41,063
Current receivables 8,597 8,735 8,677 8,891 - -
Inventories 5,061 4,395 5,061 4,395 - -
GECS financing receivables - net 94,615 93,272 - - 94,615 93,272
Other GECS receivables 12,548 12,417 - - 13,188 12,897
Property, plant and equipment (including equipment
leased to others) - net 28,212 25,679 10,396 10,234 17,816 15,445
Investment in GECS - - 13,588 12,774 - -
Intangible assets 13,914 11,654 7,073 6,643 6,841 5,011
Other assets 33,285 27,993 13,216 11,901 20,084 16,092
---------- ---------- ---------- ---------- ---------- ----------
Total assets $249,182 $228,035 $59,166 $55,716 $204,339 $185,729
========== ========== ========== ========== ========== ==========
Short-term borrowings $75,122 $64,463 $3,600 $1,666 $71,610 $62,808
Accounts payable 9,339 9,061 3,976 3,968 5,933 5,952
Other GE current liabilities 9,474 8,477 9,526 8,326 - -
Long-term borrowings 48,799 51,027 1,747 2,277 47,187 48,790
Insurance reserves and annuity benefits 48,901 39,699 - - 48,901 39,699
Other liabilities 16,715 15,363 9,319 8,928 7,286 6,312
Deferred income taxes 7,780 7,380 535 508 7,245 6,872
---------- ---------- ---------- ---------- ---------- ----------
Total liabilities 216,130 195,470 28,703 25,673 188,162 170,433
---------- ---------- ---------- ---------- ---------- ----------
Minority interest in equity of consolidated
affiliates 3,053 2,956 464 434 2,589 2,522
---------- ---------- ---------- ---------- ---------- ----------
Common stock (1,857,013,000 shares issued) 594 594 594 594 1 1
Unrealized gains on investment securities 437 1,000 437 1,000 431 989
Other capital 2,200 1,663 2,200 1,663 2,237 2,266
Retained earnings 37,459 34,528 37,459 34,528 10,919 9,518
Less common stock held in treasury (10,691) (8,176) (10,691) (8,176) - -
---------- ---------- ---------- ---------- ---------- ----------
Total share owners' equity 29,999 29,609 29,999 29,609 13,588 12,774
---------- ---------- ---------- ---------- ---------- ----------
Total liabilities and equity $249,182 $228,035 $59,166 $55,716 $204,339 $185,729
========== ========== ========== ========== ========== ==========
<FN>
See notes to Condensed Consolidated Financial Statements. Consolidating data are shown for "GE" and "GECS". September data
are unaudited. Transactions between GE and GECS have been eliminated from the "consolidated" columns.
Condensed Statement of Cash Flows
General Electric Company and consolidated affiliates
(Dollars in millions) Nine months ended September 30 (Unaudited)
---------------------------------------------------------------------
Consolidated GE GECS
---------------------- ---------------------- ---------------------
1996 1995 1996 1995 1996 1995
---------- ---------- ---------- ---------- ---------- ----------
Cash flows from operating activities
- ------------------------------------
Net earnings $5,213 $4,708 $5,213 $4,708 $2,149 $1,842
Adjustments to reconcile net earnings to cash
from operating activities
Depreciation and amortization 2,796 2,616 1,217 1,182 1,579 1,434
Earnings retained by GECS - - (1,401) (1,197) - -
Deferred income taxes 782 901 28 237 754 664
Decrease (increase) in GE current receivables 172 (151) 234 (205) - -
Increase in GE inventories (734) (779) (734) (779) - -
Increase (decrease) in accounts payable (369) 206 6 22 (755) 188
Increase in insurance reserves 1,109 679 - - 1,109 679
Provision for losses on financing
receivables 695 710 - - 695 710
All other operating activities 1,281 (1,035) 822 (1,553) 854 640
---------- ---------- ---------- ---------- ---------- ----------
Cash from operating activities 10,945 7,855 5,385 2,415 6,385 6,157
---------- ---------- ---------- ---------- ---------- ----------
Cash flows from investing activities
- ------------------------------------
Property, plant and equipment (including
equipment leased to others) - additions (5,597) (5,300) (1,522) (1,086) (4,075) (4,214)
Net increase in GECS financing receivables (1,036) (7,528) - - (1,036) (7,528)
Payments for principal businesses purchased (3,008) (3,463) (679) (238) (2,329) (3,236)
Proceeds from principal business dispositions - 660 - 96 - 575
All other investing activities (3,405) 140 17 309 (3,671) (273)
---------- ---------- ---------- ---------- ---------- ----------
Cash used for investing activities (13,046) (15,491) (2,184) (919) (11,111) (14,676)
---------- ---------- ---------- ---------- ---------- ----------
Cash flows from financing activities
- ------------------------------------
Net change in borrowings (maturities 90 days or less) 9,661 (3,402) 2,226 3,165 7,607 (6,535)
Newly issued debt (maturities more than 90 days) 17,942 29,391 191 468 17,751 28,923
Repayments and other reductions (maturities
more than 90 days) (19,789) (13,293) (1,100) (1,125) (18,689) (12,168)
Net purchase of GE shares for treasury (1,950) (2,220) (1,950) (2,220) - -
Dividends paid to share owners (2,292) (2,085) (2,292) (2,085) (748) (645)
All other financing activities 378 (187) - - 378 (187)
---------- ---------- ---------- ---------- ---------- ----------
Cash from (used for) financing activities 3,950 8,204 (2,925) (1,797) 6,299 9,388
---------- ---------- ---------- ---------- ---------- ----------
Increase (decrease) in cash and equivalents 1,849 568 276 (301) 1,573 869
Cash and equivalents at beginning of year 2,823 2,591 874 1,373 1,949 1,218
---------- ---------- ---------- ---------- ---------- ----------
Cash and equivalents at September 30 $4,672 $3,159 $1,150 $1,072 $3,522 $2,087
========== ========== ========== ========== ========== ==========
<FN>
See notes to Condensed Consolidated Financial Statements. Consolidating data are shown for "GE" and "GECS". Transactions
between GE and GECS have been eliminated from the "consolidated" columns.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. The accompanying condensed quarterly financial statements
represent the consolidation of General Electric Company and all companies which
it directly or indirectly controls, either through majority ownership or
otherwise. Reference is made to note 1 to the consolidated financial statements
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1995. That note discusses consolidation and financial statement
presentation. As used in this Report and in the Report on Form 10-K, "GE"
represents the adding together of all affiliated companies except General
Electric Capital Services, Inc. ("GECS"), which is presented on a one-line
basis; GECS consists of General Electric Capital Services, Inc. and all of its
affiliates; and "consolidated" represents the adding together of GE and GECS
with the effects of transactions between the two eliminated. Certain prior-year
amounts have been reclassified to conform to the current year presentation.
2. Two newly issued accounting standards were adopted in the first
quarter of 1996 and did not have a material effect on the financial position or
results of operations of the Company. Statement of Financial Accounting
Standards (SFAS) No. 121, Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of, requires that certain long-lived assets
be reviewed for impairment when events or circumstances indicate that the
carrying amounts of the assets may not be recoverable. If such review indicates
that the carrying amount of an asset exceeds the sum of its expected future cash
flows, the asset's carrying value is written down to fair value. Long-lived
assets to be disposed of are reported at the lower of carrying amount or fair
value less cost to sell. SFAS No. 122, Accounting for Mortgage Servicing Rights,
requires that capitalized rights to service mortgage loans be assessed for
impairment by individual risk stratum by comparing each stratum's carrying
amount with its fair value. Strata are based on the predominant risk
characteristics of the underlying loans, which include loan type and note rate.
Fair values are estimated based on discounted anticipated future net cash flows
considering market consensus for loan prepayment predictions and other economic
factors. To the extent that the carrying value of mortgage servicing rights
exceeds fair value by individual stratum, the resulting impairment is recognized
in earnings through a valuation allowance.
3. The condensed consolidated quarterly financial statements are
unaudited. These statements include all adjustments (consisting of normal
recurring accruals) considered necessary by management to present a fair
statement of the results of operations, financial position and cash flows. The
results reported in these condensed consolidated financial statements should not
be regarded as necessarily indicative of results that may be expected for the
entire year.
4. GE's inventories consisted of the following:
At
------------------------
(Dollars in millions) 9/30/96 12/31/95
------- --------
Raw materials and work in process $ 3,579 $ 3,205
Finished goods 2,533 2,277
Unbilled shipments 273 258
Revaluation to LIFO (1,324) (1,345)
------- -------
Total inventories $ 5,061 $ 4,395
======= =======
5. Property, plant and equipment (including equipment leased to
others) - net, consisted of the following:
At
------------------------
(Dollars in millions) 9/30/96 12/31/95
------- --------
Original cost
- - GE $25,741 $24,867
- - GECS 24,328 21,079
------- -------
Total 50,069 45,946
------- -------
Accumulated depreciation and amortization
- - GE 15,345 14,633
- - GECS 6,512 5,634
------- -------
Total 21,857 20,267
------- -------
Property, plant and equipment - net
- - GE 10,396 10,234
- - GECS 17,816 15,445
------- -------
Total $28,212 $25,679
======= =======
6. GE's authorized common stock consisted of 2,200,000,000 shares
having a par value of $0.32 each. Average shares outstanding for the third
quarter of 1996 and 1995 were 1,648,837,733 and 1,676,351,203, respectively.
Average shares outstanding for the first nine months of 1996 and 1995 were
1,655,985,652 and 1,688,136,763, respectively.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
A. RESULTS OF OPERATIONS--THIRD QUARTER OF 1996 COMPARED WITH THIRD QUARTER
OF 1995
General Electric Company achieved record third quarter earnings per
share and earnings in 1996. Earnings per share increased 13% to $1.08, up from
last year's $0.96, and earnings increased 11% to $1.788 billion. Earnings per
share grew faster than earnings, reflecting the impact of shares repurchased
under a three-year, $9 billion share repurchase program initiated in December
1994.
Revenues, including acquisitions, rose to a record $20.0 billion,
15% over last year's quarter. Increased global activities, revenues from the
Summer Olympic Games televised by NBC, and higher sales of spare parts and
services by GE's equipment businesses were the major contributors to the
increase. Revenues increased at nine of GE's twelve businesses, led by GE
Capital Services, NBC, and Power Systems.
GE's third quarter operating margin was 13.6% of sales, up from last
year's 13.4%, and was a record for the quarter. Excluding the results from NBC's
Olympics coverage, for which there was no 1995 counterpart, the margin rate was
13.8%.
Ten GE businesses reported improved operating profit with four - GE
Capital Services, Power Systems, NBC, and Motors - achieving double-digit
increases.
GE Capital Services' third-quarter earnings increased 15% to $816
million, benefiting from the globalization and diversity of its 26 businesses.
The record earnings were led by strong double-digit increases in its Consumer
Services, Specialty Insurance, and Equipment Management activities.
Cash generated from GE's operating activities through the first nine
months of 1996 was a record $5.4 billion, up from last year's $2.4 billion,
reflecting improvements in earnings, working capital (especially progress
collections) and, to a lesser extent, timing. As part of the $9 billion share
repurchase program, GE purchased $674 million of its stock during the third
quarter to reach $5.6 billion - 85 million shares purchased since December 1994.
SEGMENT ANALYSIS:
The comments that follow compare revenues and operating profit by
industry segment for the third quarters of 1996 and 1995.
o AIRCRAFT ENGINES revenues were somewhat higher than last year
reflecting good performance in the commercial engines business, with volume
growth only partially offset by lower selling prices. Additionally, volume and
price both improved somewhat in the services business. Operating profit was
somewhat higher as productivity and increased volume more than offset higher
costs and lower selling prices.
o APPLIANCES quarterly revenues increased slightly on higher volume,
principally from U.S. market share gains across core product lines. Operating
profit increased somewhat, reflecting productivity during the period partially
offset by lower selling prices.
o BROADCASTING revenues were sharply higher than last year's third
quarter largely as a result of NBC's broadcast of the Summer Olympic Games.
Operating profit was also sharply higher, reflecting a strong advertising
market, continued excellent ratings in prime-time, and the profitable Olympics
coverage, the combination of which more than offset higher license fees for
certain prime-time programs that were renewed.
o GECS third-quarter earnings increased 15% to $816 million, led by
strong results in its Consumer Services, Specialty Insurance, and Equipment
Management activities. Overall, the increase in net earnings at GECS resulted
principally from a higher average level of invested assets, partially offset by
a decrease in financing spreads.
o INDUSTRIAL PRODUCTS AND SYSTEMS reported slightly higher operating
profit on flat revenues. The increase in operating profit was principally
attributable to productivity improvements at Electrical Distribution and
Control, Motors, and Lighting, which more than offset the effects of cost
increases.
o MATERIALS operating profit was somewhat higher on flat revenues.
While selling prices were lower, principally in petrochemicals and ABS resins,
operating profit benefited from productivity improvements, higher volume and
reductions in certain material costs.
o POWER GENERATION revenues were sharply higher compared with 1995's
third quarter, reflecting strong volume growth by Nuovo Pignone. Operating
profit also increased sharply, as productivity improvements and the higher
volume more than offset the effects of cost inflation and lower selling prices.
o TECHNICAL PRODUCTS & SERVICES revenues were somewhat higher than a
year ago as volume improvements at Medical Systems overcame price declines
across the segment. Segment operating profit was down slightly as a result of
lower pricing.
o ALL OTHER operating profit was somewhat higher on a modest
increase in revenues over the prior year's third quarter, principally as a
result of higher licensing revenues.
B. RESULTS OF OPERATIONS--FIRST NINE MONTHS OF 1996 COMPARED WITH FIRST NINE
MONTHS OF 1995
Net earnings were $5,213 million in the first nine months, up 11%
from $4,708 million in 1995's first nine months. Earnings per share increased
13% to $3.15 from $2.79. Earnings per share grew faster than earnings,
reflecting the impact of shares repurchased under a three-year, $9 billion share
repurchase program initiated in December 1994.
Consolidated revenues for the first nine months of 1996 aggregated
$56.2 billion, up 12% from the comparable $50.3 billion in 1995's first nine
months. GE's sales of goods and services were 7% higher, led by NBC, Power
Systems, Aircraft Engines and Appliances. The improvement in sales was largely
attributable to increases in the volume of goods and services sold which were
partially offset by the effects of lower selling prices.
Operating margin in the first nine months of 1996 was 14.6% of
sales, an improvement over last year's 14.2%. The improvement in operating
margin was led by NBC, Power Systems, Aircraft Engines, and Medical Systems.
SEGMENT ANALYSIS:
The following comments compare revenues and operating profit by
industry segment for the first nine months of 1996 with the same period of 1995.
o AIRCRAFT ENGINES revenues and operating profit were somewhat
higher than the first nine months of 1995. Higher services volume (including
spare parts) and higher volume in military engines more than accounted for the
increase in revenues. The most important factor in the operating profit
improvement was productivity, which more than offset higher costs and lower
selling prices.
o APPLIANCES revenues were somewhat higher than a year ago on higher
volume. Operating profit increased slightly as a result of productivity and the
higher volume which more than offset the effects of lower selling prices.
o BROADCASTING revenues were sharply higher than last year largely
as a result of NBC's broadcast of the Summer Olympic Games. Operating profit
also increased sharply, reflecting a strong advertising market and excellent
ratings in prime-time, strong results in its owned-and-operated stations, and
profitable Olympics coverage, the combination of which more than offset higher
license fees for certain prime-time programs that were renewed.
o GECS earnings were up 17% to $2,149 million. The earnings increase
was led by strong results in its Consumer Services, Specialty Insurance and
Equipment Management activities. Overall, the increase in net earnings at GECS
resulted principally from a higher average level of invested assets, partially
offset by a decrease in financing spreads.
o INDUSTRIAL PRODUCTS AND SYSTEMS revenues and operating profit
increased slightly over 1995. The revenue increase was principally attributable
to higher volume at Lighting, Electrical Distribution and Control and Motors.
The improvement in operating profit reflected productivity improvements across
the segment, which more than offset higher costs.
o MATERIALS operating profit was flat on slightly lower revenues,
reflecting the effects of lower selling prices, principally in petrochemicals
and ABS resins, and reductions in certain material costs.
o POWER GENERATION revenues were somewhat higher than a year ago as a
result of volume growth by Nuovo Pignone. Operating profit was much higher than
last year, reflecting productivity and the higher volume, as well as the absence
of modification costs related to the "F" turbine that adversely affected prior
year results, the combination of which were partially offset by lower selling
prices and cost inflation.
o TECHNICAL PRODUCTS AND SERVICES revenues were slightly higher than
the first nine months of 1995, a result of strong volume in Medical Systems,
largely offset by price declines across the segment. Operating profit showed a
slight increase as productivity and higher volume at Medical Systems,
particularly in services, more than offset continuing pricing pressures.
o ALL OTHER operating profit was somewhat higher on modest increase
in revenues over last year, principally as a result of higher licensing
revenues.
C. FINANCIAL CONDITION
With respect to the Condensed Statement of Financial Position,
consolidated assets of $249.2 billion at September 30, 1996, were $21.2 billion
higher than the $228.0 billion at December 31, 1995.
GE assets were $59.2 billion at September 30, 1996, an increase of
$3.5 billion from December 31, 1995. The increase was principally attributable
to additions to other assets ($1.3 billion), an increase in the investment in
GECS ($0.8 billion), and higher inventory levels ($0.7 billion). The increase in
other assets was attributable to an increase in the prepaid pension asset and
numerous other changes, none of which was individually significant. The increase
in the investment in GECS resulted from GECS earnings, net of dividends, and the
effect of a $0.6 billion after-tax decrease in the market value of GECS
investment securities. The rise in inventories reflected normal seasonal
increases in a number of GE businesses.
GECS' assets increased by $18.6 billion from the end of 1995,
principally as a result of higher levels of investment securities as well as
increases in all other assets, both of which are described below. GECS
investment securities increased by $7.2 billion, reflecting the addition of
securities held by insurance companies acquired and new investments by various
GE Capital businesses, partially offset by decreases in fair value largely
associated with an increase in interest rates at September 30, 1996. Other
assets increased $4.0 billion, principally as a result of two factors: the
addition of investor-directed fund accounts associated with the Life Insurance
Company of Virginia acquisition and increased investments in nonconsolidated
affiliates. GE Capital's financing receivables, which aggregated $94.6 billion,
net of reserves, at the end of the third quarter, were $1.3 billion higher
compared with year-end 1995, reflecting new volume in both loans and financing
leases partially offset by repayments and a shift in the nature of certain new
auto lease volume from financing leases in 1995 to operating leases in 1996.
Management believes that GE Capital's allowance for doubtful accounts of $2.6
billion (2.63% of the receivables balance at September 30, 1996 -- the same as
year-end 1995) is appropriate given the strength and diversity of the portfolio
and current economic circumstances. Property, plant and equipment, principally
equipment leased to others, was $2.4 billion higher than at the end of 1995,
principally as a result of the shift in auto lease volume previously discussed
and new lease volume in aircraft.
Consolidated liabilities of $216.1 billion at September 30, 1996,
were $20.6 billion higher than the year-end 1995 balance of $195.5 billion.
GE liabilities increased $3.0 billion to $28.7 billion. Total
borrowings were $5.3 billion ($3.6 billion short term and $1.7 billion long
term) at September 30, 1996, an increase of $1.4 billion from December 31, 1995.
The ratio of debt to total capital for GE at the end of September 1996 was 14.9%
compared with 11.6% at the end of last year and 17.5% at September 30, 1995.
Other current liabilities increased $1.2 billion, principally as a result of
higher federal taxes accrued and progress collections.
GECS' liabilities increased to $188.2 billion, compared with $170.4
billion at the end of 1995, principally as a result of higher insurance reserves
and annuity benefits and increases in short-term borrowings. Insurance reserves
and annuity benefits increased by $9.2 billion, primarily due to the
acquisitions of Life Insurance Company of Virginia and Union Fidelity Life
Insurance Company. Short-term borrowings increased by $8.8 billion to $71.6
billion and long-term borrowings decreased by $1.6 billion to $47.2 billion
reflecting, in part, a shift from long-term to short-term financing.
With respect to cash flows, consolidated cash and equivalents were
$4.7 billion at September 30, 1996, an increase of $1.9 billion during the first
nine months of 1996. Cash and equivalents were $3.2 billion at September 30,
1995, an increase of $0.6 billion since the beginning of the year.
GE's cash and equivalents were $1.2 billion at September 30, 1996,
an increase of $0.3 billion from December 31, 1995. During the first nine months
of 1996, cash provided from operating activities increased to $5.4 billion, up
from $2.4 billion during the first nine months of last year, reflecting
improvements in earnings and working capital, principally in trade receivables
and progress collections related to large power generation orders, as well as
collections of sundry receivables. Cash used for investing activities ($2.2
billion) represented principally investments in new plant and equipment for a
wide variety of projects to reduce costs and improve efficiency. Cash used for
financing activities ($2.9 billion) included $2.4 billion for repurchases of the
Company's common stock under the share repurchase program and $2.3 billion for
dividends paid to share owners, reflecting a 12% increase in the per-share
dividend rate compared with the first nine months of last year. The dividends
and share repurchases were partially offset by funds provided from a combination
of higher borrowings ($1.3 billion) and net dispositions of GE shares from
treasury ($0.4 billion).
GE's cash and equivalents were $1.1 billion at September 30, 1995, a
decrease of $0.3 billion from $1.4 billion at December 31, 1994. During the
first nine months of 1995, cash from operating activities totaled $2.4 billion,
despite the use of (a) $1.5 billion for "all other operating activities," more
than half of which was attributable to a reduction in progress collections and
(b) $0.8 billion for normal seasonal increases in inventories. Cash used for
investing activities ($0.9 billion) represented principally investments in new
plant and equipment for a wide variety of projects to reduce costs and improve
efficiencies. Cash used for financing activities ($1.8 billion) included $2.5
billion for repurchases of the Company's common stock under the share repurchase
program and $2.1 billion for dividends paid to share owners, representing a 14%
increase in the per-share dividend rate compared with the first nine months of
1994. Cash used for dividends and share repurchases was, in part, provided from
a combination of proceeds from both higher borrowings ($2.5 billion) and net
dispositions of GE shares from treasury ($0.3 billion).
GECS' cash and equivalents increased $1.6 billion during the first
nine months of 1996. Cash provided from operating activities totaled $6.4
billion, compared with $6.2 billion for the first nine months of 1995. Cash was
used primarily to fund additions to property, plant and equipment, principally
equipment that is provided to third parties on operating leases ($4.1 billion);
to fund acquisitions of businesses ($2.3 billion), the largest of which were
Life Insurance Company of Virginia and Union Fidelity Life Insurance Company; to
fund increased investments in nonconsolidated affiliates ($1.4 billion); and to
fund additions to financing receivables ($1.0 billion). Cash provided from
financing activities resulted primarily from increased borrowings ($6.7 billion)
during the first nine months of 1996.
GECS' cash and equivalents increased $0.9 billion during the first
nine months of 1995. Cash was used primarily to fund GE Capital's growth in
financing receivables ($7.5 billion); for additions to equipment that is
provided to third parties on operating leases ($4.2 billion); and for
acquisitions of businesses ($3.2 billion), the largest of which were certain
businesses of ITT Financial Corporation, Credit de l'Est (France), Frankona
Reinsurance (Germany), Australian Retail Financial Network (Australia), Pallas
Group (United Kingdom) and the remaining 50% interest in United Merchants
Finance Limited (Hong Kong). Cash provided from operating activities totaled
$6.2 billion. Cash provided from financing activities was $9.4 billion,
principally the result of increased borrowings during the first nine months of
1995.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
GENERAL
As previously reported, on March 12, 1993, a complaint was filed in
United States District Court for the District of Connecticut by ten employees of
the Company's former Aerospace business, purportedly on behalf of all GE
Aerospace employees whose GE employment status is or was affected by the then
planned transfer of GE Aerospace to a new company controlled by the stockholders
of Martin Marietta Corporation. The complaint sought to clarify and enforce the
plaintiffs' claimed rights to pension benefits in accordance with, and rights to
assets then held in, the GE Pension Plan (the "Plan"). The complaint names the
Company, the trustees of the GE Pension Trust ("Trust"), and Martin Marietta
Corporation and one of its former plan administrators as defendants. The
complaint alleged primarily that the Company's planned transfer of certain
assets of the Trust to a Martin Marietta pension trust, in connection with the
transfer of the Aerospace business, violated the rights of the plaintiffs under
the Plan and applicable provisions of the Employee Retirement Income Security
Act of 1974 and the Internal Revenue Code. The complaint sought equitable and
declaratory relief, including an injunction against transfer of the Plan assets
except under circumstances and protections, if any, approved by the court, an
order that the Company disgorge all profits allegedly received by it as a result
of any such transfer and the making of restitution to the Trust for alleged
investment losses resulting from the Company's treatment of Plan assets in
connection with the transaction or alternatively the transfer of additional
assets from the Trust to a new Martin Marietta pension trust, and an order
requiring Martin Marietta to continue to offer transferred employees all accrued
pension-related benefits for which they were eligible under the Plan as of the
closing date of the transfer of the GE Aerospace business to Martin Marietta. On
March 23, 1993, the Company and Martin Marietta Corporation filed motions to
dismiss the complaint on the basis that the complaint does not state any claim
upon which relief can be granted as a matter of law. On April 2, 1993, the
transfer of the Aerospace business occurred, and on June 7, 1993, the court
issued an order denying plaintiffs' request for injunctive relief. On September
26, 1996, the District Court granted defendants' motion to dismiss those claims
which were based on allegations that the transfer of plan assets was unlawful,
and ordered discovery on the remaining claims.
The directors are defendants in a civil suit purportedly brought on
behalf of the Company as a share owner derivative and class action (the Cohen
action) in New York State Supreme Court, New York County, on September 18, 1996.
The suit is based upon the Company's solicitation, in the 1996 proxy statement,
of share owner approval of the 1996 Non-Employee Director Stock Option Plan.
Under the Plan, which the share owners approved, 3,000 stock options will be
granted annually to each of the Company's non-employee directors through 2003.
Each annual grant entitles the director, for a period of 10 years from the date
of the grant, to purchase 3,000 shares of GE stock from the Company at the
market price of GE stock on the date of grant. The suit claims that the options
would have an estimated value to the directors on the annual date of grant which
should have been disclosed. The suit also claims that the directors breached
their fiduciary duties because the 1996 proxy statement did not state that the
options would have such an alleged, estimated value to the directors when
granted. The suit seeks compensatory damages and invalidation of the Plan and
all options granted under the Plan. The Company believes that the options have
no value to the directors on the date of grant, that the options will have no
value to the directors unless the GE stock price increases above the grant
price, and that the 1996 proxy statement contained full and adequate disclosure
because, among other things, any reasonable share owner would understand that
the value of the options to the non-employee directors would only occur when and
if the stock price rises above the grant price. The Company thus believes the
claims are without merit and is defending the suit.
ENVIRONMENTAL
As previously reported, in March 1995, the Environmental Protection
Agency stated that it was seeking $300,000 in penalties for alleged violations
of the Clean Air Act at the Company's Waterford, New York facility.
In July 1996, the company settled the matter for $60,684.
As previously reported, in August of 1995 the Georgia Department of
Natural Resources issued a draft Corrective Action Consent Order seeking
$100,000 in penalties for violations of the Georgia Hazardous Waste Rules at the
Company's Rome, Georgia facility. In August, 1996, the company agreed to settle
the matter for $100,000 and a plan to address remediation.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
Exhibit 11. Computation of Per Share Earnings.
Exhibit 12. Computation of Ratio of Earnings to Fixed Charges.
Exhibit 27. Financial Data Schedule
b. Reports on Form 8-K during the quarter ended September 30, 1996.
No reports on Form 8-K were filed during the quarter ended
September 30, 1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
General Electric Company
(Registrant)
November 14, 1996 Philip D. Ameen
- ----------------- -------------------------------------
Date Vice President and Comptroller
Duly Authorized Officer and Principal
Accounting Officer