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, 1997
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 3,272,727,154 shares with a par value of $0.16 per share
outstanding at September 30, 1997.
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
------------------------- ------------------------ -------------------------
1997 1996 1997 1996 1997 1996
----------- ----------- ----------- ---------- ----------- -----------
Sales of goods $ 8,693 $ 8,507 $ 8,693 $ 8,509 $ - $ -
Sales of services 2,972 2,939 3,005 2,969 - -
Earnings of GECS - - 938 816 - -
GECS revenues from operations 10,141 8,415 - - 10,182 8,449
Other income 185 160 189 160 - -
----------- ----------- ----------- ---------- ----------- -----------
Total revenues 21,991 20,021 12,825 12,454 10,182 8,449
----------- ----------- ----------- ---------- ----------- -----------
Cost of goods sold 6,097 6,188 6,097 6,190 - -
Cost of services sold 2,200 2,199 2,233 2,228 - -
Interest and other financial charges 2,120 1,925 215 175 1,919 1,756
Insurance losses and policyholder and annuity benefits 1,980 1,553 - - 1,980 1,553
Provision for losses on financing receivables 371 254 - - 371 254
Other costs and expenses 6,292 5,137 1,673 1,497 4,650 3,669
Minority interest in net earnings of
consolidated affiliates 67 67 34 29 33 38
----------- ----------- ----------- ---------- ----------- -----------
Total costs and expenses 19,127 17,323 10,252 10,119 8,953 7,270
----------- ----------- ----------- ---------- ----------- -----------
Earnings before income taxes 2,864 2,698 2,573 2,335 1,229 1,179
Provision for income taxes (850) (910) (559) (547) (291) (363)
----------- ----------- ----------- ---------- ----------- -----------
Net earnings $ 2,014 $ 1,788 $ 2,014 $ 1,788 $ 938 $ 816
=========== =========== =========== ========== =========== ===========
Net earnings per share -a) $ 0.62 $ 0.54
Dividends declared per share -a) $ 0.26 $ 0.23
(a- 1996 data have been adjusted to reflect the two-for-one stock split
effective on April 28, 1997.
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
------------------------- ------------------------ -------------------------
1997 1996 1997 1996 1997 1996
----------- ----------- ----------- ---------- ----------- -----------
Sales of goods $ 25,654 $ 24,299 $ 25,656 $ 24,310 $ - $ -
Sales of services 9,080 8,341 9,184 8,430 - -
Earnings of GECS - - 2,490 2,149 - -
GECS revenues from operations 28,930 23,053 - - 29,043 23,151
Other income 481 492 483 490 - -
----------- ----------- ----------- ---------- ----------- -----------
Total revenues 64,145 56,185 37,813 35,379 29,043 23,151
----------- ----------- ----------- ---------- ----------- -----------
Cost of goods sold 18,189 17,432 18,191 17,443 - -
Cost of services sold 6,321 5,892 6,425 5,981 - -
Interest and other financial charges 6,072 5,720 538 455 5,564 5,280
Insurance losses and policyholder and annuity benefits 6,236 4,713 - - 6,236 4,713
Provision for losses on financing receivables 1,020 695 - - 1,020 695
Other costs and expenses 17,479 13,694 4,873 4,535 12,691 9,240
Minority interest in net earnings of consolidated
affiliates 174 188 90 68 84 120
----------- ----------- ----------- ---------- ----------- -----------
Total costs and expenses 55,491 48,334 30,117 28,482 25,595 20,048
----------- ----------- ----------- ---------- ----------- -----------
Earnings before income taxes 8,654 7,851 7,696 6,897 3,448 3,103
Provision for income taxes (2,801) (2,638) (1,843) (1,684) (958) (954)
----------- ----------- ----------- ---------- ----------- -----------
Net earnings $ 5,853 $ 5,213 $ 5,853 $ 5,213 $ 2,490 $ 2,149
=========== =========== =========== ========== =========== ===========
Net earnings per share -a) $ 1.79 $ 1.57
Dividends declared per share -a) $ 0.78 $ 0.69
(a- 1996 data have been adjusted to reflect the two-for-one stock split
effective on April 28, 1997.
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
------------------------- ------------------------ -------------------------
9/30/97 12/31/96 9/30/97 12/31/96 9/30/97 12/31/96
----------- ----------- ----------- ---------- ----------- -----------
Cash and equivalents $ 4,289 $ 4,191 $ 948 $ 957 $ 3,341 $ 3,234
Investment securities 66,705 59,889 11 17 66,694 59,872
Current receivables 8,315 8,704 8,397 8,826 - -
Inventories 5,412 4,473 5,412 4,473 - -
GECS financing receivables - net 97,087 99,714 - - 97,087 99,714
Other GECS receivables 16,314 15,418 - - 17,027 15,962
Property, plant and equipment (including equipment
leased to others) - net 31,069 28,795 10,679 10,832 20,390 17,963
Investment in GECS - - 16,836 14,276 - -
Intangible assets 16,180 16,007 7,403 7,367 8,777 8,640
Other assets 39,983 35,211 15,793 13,177 24,457 22,034
----------- ----------- ----------- ---------- ----------- -----------
Total assets $ 285,354 $ 272,402 $ 65,479 $ 59,925 $ 237,773 $ 227,419
=========== =========== =========== ========== =========== ===========
Short-term borrowings $ 86,577 $ 80,200 $ 4,047 $ 2,339 $ 82,864 $ 77,945
Accounts payable 9,662 10,205 4,307 4,195 6,633 6,787
Other GE current liabilities 11,247 10,102 10,688 9,886 - -
Long-term borrowings 47,501 49,246 1,745 1,710 45,872 47,676
Insurance liabilities and annuity benefits 64,702 61,327 - - 64,702 61,327
Other liabilities 19,665 18,917 9,732 9,660 9,826 9,138
Deferred income taxes 9,199 8,273 751 533 8,448 7,740
----------- ----------- ----------- ---------- ----------- -----------
Total liabilities 248,553 238,270 31,270 28,323 218,345 210,613
----------- ----------- ----------- ---------- ----------- -----------
Minority interest in equity of consolidated
affiliates 3,105 3,007 513 477 2,592 2,530
----------- ----------- ----------- ---------- ----------- -----------
Common stock (3,714,026,000 shares issued) -a) 594 594 594 594 1 1
Unrealized gains on investment securities 1,862 671 1,862 671 1,851 668
Other capital 3,457 2,498 3,457 2,498 2,134 2,253
Retained earnings 41,968 38,670 41,968 38,670 12,850 11,354
Less common stock held in treasury (14,185) (11,308) (14,185) (11,308) - -
----------- ----------- ----------- ---------- ----------- -----------
Total share owners' equity 33,696 31,125 33,696 31,125 16,836 14,276
----------- ----------- ----------- ---------- ----------- -----------
Total liabilities and equity $ 285,354 $ 272,402 $ 65,479 $ 59,925 $ 237,773 $ 227,419
=========== =========== =========== ========== =========== ===========
(a- Reflects the two-for-one stock split effective on April 28, 1997.
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
------------------------- ------------------------ -------------------------
1997 1996 1997 1996 1997 1996
----------- ----------- ----------- ---------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 5,853 $ 5,213 $ 5,853 $ 5,213 $ 2,490 $ 2,149
Adjustments to reconcile net earnings to cash
provided from (used for) operating activities
Depreciation and amortization 2,980 2,796 1,215 1,217 1,765 1,579
Earnings retained by GECS - - (1,496) (1,401) - -
Deferred income taxes 714 782 229 28 485 754
Decrease in GE current receivables 465 172 500 234 - -
Increase in GE inventories (849) (734) (849) (734) - -
Increase (decrease) in accounts payable 150 (369) 74 6 439 (755)
Increase in insurance reserves 1,674 1,109 - - 1,674 1,109
Provision for losses on financing receivables 1,020 695 - - 1,020 695
All other operating activities (2,396) 1,281 (448) 822 (2,430) 854
----------- ----------- ----------- ---------- ----------- -----------
Cash from operating activities 9,611 10,945 5,078 5,385 5,443 6,385
----------- ----------- ----------- ---------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Property, plant and equipment (including
equipment leased to others) - additions (6,004) (5,597) (1,363) (1,522) (4,641) (4,075)
Net decrease (increase) in GECS financing receivables 1,893 (1,036) - - 1,893 (1,036)
Payments for principal businesses purchased (2,522) (3,008) (990) (679) (1,532) (2,329)
All other investing activities (3,032) (3,405) 190 17 (3,364) (3,671)
----------- ----------- ----------- ---------- ----------- -----------
Cash used for investing activities (9,665) (13,046) (2,163) (2,184) (7,644) (11,111)
----------- ----------- ----------- ---------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in borrowings (maturities 90 days or less) 9,137 9,661 2,206 2,226 7,157 7,607
Newly issued debt (maturities more than 90 days) 16,047 17,942 579 191 15,468 17,751
Repayments and other reductions (maturities
more than 90 days) (20,728) (19,789) (1,119) (1,100) (19,609) (18,689)
Net purchase of GE shares for treasury (2,031) (1,950) (2,031) (1,950) - -
Dividends paid to share owners (2,559) (2,292) (2,559) (2,292) (994) (748)
All other financing activities 286 378 - - 286 378
----------- ----------- ----------- ---------- ----------- -----------
Cash from (used for) financing activities 152 3,950 (2,924) (2,925) 2,308 6,299
----------- ----------- ----------- ---------- ----------- -----------
Increase (decrease) in cash and equivalents 98 1,849 (9) 276 107 1,573
Cash and equivalents at beginning of year 4,191 2,823 957 874 3,234 1,949
----------- ----------- ----------- ---------- ----------- -----------
Cash and equivalents at September 30 $ 4,289 $ 4,672 $ 948 $ 1,150 $ 3,341 $ 3,522
=========== =========== =========== ========== =========== ===========
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, 1996. 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 represents 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.
2. The condensed consolidated quarterly financial statements are
unaudited. These statements include all adjustments (consisting of normal
recurring accruals) considered necessary by management to present a fair
statement of the results of operations, financial position and cash flows. The
results reported in these condensed consolidated financial statements should not
be regarded as necessarily indicative of results that may be expected for the
entire year.
3. GE's inventories consisted of the following:
At
-----------------------
(Dollars in millions) 9/30/97 12/31/96
------- --------
Raw materials and work in process $ 3,441 $ 3,028
Finished goods 2,899 2,404
Unbilled shipments 270 258
Revaluation to LIFO (1,198) (1,217)
------- -------
Total inventories $ 5,412 $ 4,473
======= =======
4. Property, plant and equipment (including equipment leased to
others) consisted of the following:
At
---------------------
(Dollars in millions) 9/30/97 12/31/96
------- --------
ORIGINAL COST
- - GE $26,567 $25,950
- - GECS 27,540 24,834
------- -------
Total 54,107 50,784
------- -------
ACCUMULATED DEPRECIATION AND AMORTIZATION
- - GE 15,888 15,118
- - GECS 7,150 6,871
------- -------
Total 23,038 21,989
------- -------
PROPERTY, PLANT AND EQUIPMENT -- NET
- - GE 10,679 10,832
- - GECS 20,390 17,963
------- -------
Total $31,069 $28,795
======= =======
5. GE's authorized common stock consisted of 4,400,000,000 shares
having a par value of $0.16 each. Average shares outstanding for the third
quarter of 1997 and 1996 were 3,269,408,846 and 3,297,675,466, respectively.
Average shares outstanding for the first nine months of 1997 and 1996 were
3,277,216,644 and 3,311,971,304, respectively.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
A. RESULTS OF OPERATIONS -- THIRD QUARTER OF 1997 COMPARED WITH THIRD QUARTER OF
1996
General Electric Company achieved record third quarter earnings per
share and earnings in 1997. Earnings per share increased 15% to $0.62, up from
last year's $0.54, and earnings increased 13% to $2.014 billion. Earnings per
share grew faster than earnings, reflecting the impact of shares repurchased
under a four-year, $13 billion share repurchase program initiated in December
1994.
Revenues, including acquisitions, rose to a record $22.0 billion,
10% over last year's third quarter, principally because of increased global
activities and higher sales of spare parts and services by GE's equipment
businesses. Revenues increased at nine of GE's twelve businesses, led by GE
Capital Services, Aircraft Engines and Transportation Systems.
Ten of GE's twelve businesses reported higher operating profit for
the third quarter with seven, led by GE Capital Services, Medical Systems and
Plastics, achieving double-digit increases.
GE's third quarter operating margin was 14.5% of sales, up from last
year's 13.8%, and was a record for the quarter. The third quarter increase was
the seventeenth consecutive quarterly increase in GE's operating margin rate and
reflected the increasing benefits from GE's Six Sigma quality initiative.
GE Capital Services' third-quarter earnings were $938 million, a 15%
increase over last year's $816 million, reflecting the diversity of its 27
businesses.
Cash generated from GE's operating activities during the first nine
months of 1997 was $5.1 billion compared with $5.4 billion in the 1996 period.
As part of the $13 billion share repurchase program, GE purchased $935 million
of its stock during the third quarter to reach $9.1 billion -- 232 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 1997 and 1996.
o AIRCRAFT ENGINES revenues were sharply higher than last year
reflecting good volume growth and higher selling prices in the services
business, including the results of acquisitions. Volume and selling prices also
improved in the commercial engines business. Operating profit was somewhat
higher, reflecting the strong performance in services, higher selling prices and
improved volume, the combination of which more than offset higher costs.
o APPLIANCES third quarter revenues and operating profit increased
slightly. The revenue increase was principally attributable to higher volume,
including acquisitions, partially offset by selling price declines. The
improvement in operating profit was principally attributable to productivity
during the period partially offset by lower selling prices.
o BROADCASTING revenues were sharply lower than last year,
reflecting the impact of NBC's broadcast of the Summer Olympic Games on 1996's
third quarter revenues. Operating profit was somewhat lower, reflecting
primarily the absence of a current-year counterpart to Olympics coverage,
partially offset by improved pricing and growth in NBC's cable programming
services.
o GECS third-quarter earnings increased 15% to $938 million,
reflecting increases in net earnings in specialty insurance, mid-market
financing, equipment management, and specialized financing businesses. Earnings
were affected by higher losses associated with GECS' equity investment in
Montgomery Ward Holding Corp. (refer to Other Matters section), as well as
increased residual losses on automobiles, more than offset by asset gains, the
largest of which was $284 million (net of tax) associated with GECS' investment
in the common stock of Paine Webber Group Inc.
o INDUSTRIAL PRODUCTS AND SYSTEMS reported a strong increase in
operating profit on somewhat higher revenues. The increase in revenues reflected
volume increases across the segment and growth in services. The improvement in
operating profit was principally attributable to strong productivity
improvements, particularly at Lighting, Electrical Distribution and Control, and
Industrial Control Systems, and higher volume, particularly at Transportation
Systems, the combination of which more than offset the effects of lower selling
prices.
o MATERIALS operating profit was considerably higher on somewhat
higher revenues. The revenue performance reflected strong volume increases
largely offset by continued declines in selling prices. The improvement in
operating profit was principally attributable to productivity improvements and
the increase in volume, the combination of which more than offset the effects of
lower selling prices.
o POWER GENERATION revenues were somewhat lower compared with 1996's
third quarter, reflecting considerably lower volume at Nuovo Pignone, partially
offset by higher sales of gas turbines and increased volume in services.
Operating profit was slightly lower, reflecting principally lower operating
profit at Nuovo Pignone.
o TECHNICAL PRODUCTS & SERVICES revenues were slightly higher than a
year ago as volume improvements at Medical Systems overcame price declines
across the segment. Segment operating profit increased sharply as productivity
improvements and higher volume more than offset effects of lower selling prices.
o ALL OTHER revenues and operating profit were sharply higher than
the prior year's third quarter, principally as a result of higher licensing
revenues.
B. RESULTS OF OPERATIONS -- FIRST NINE MONTHS OF 1997 COMPARED WITH FIRST NINE
MONTHS OF 1996
Net earnings were $5.853 billion in the first nine months of 1997,
up 12% from $5.213 billion in 1996's first nine months. Earnings per share
increased 14% to $1.79 from $1.57. Earnings per share grew faster than earnings,
reflecting the impact of shares repurchased under a four-year, $13 billion share
repurchase program initiated in December 1994.
Consolidated revenues for the first nine months of 1997 aggregated
$64.1 billion, up 14% from the comparable $56.2 billion in 1996's first nine
months. GE's sales of goods and services were 6% higher, led by Aircraft
Engines, Power Systems, Appliances and Transportation Systems. 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 1997 was 15.4% of
sales, an improvement over last year's 14.6%.
GE's operating profit increased 12% compared with the first nine
months of 1996. All twelve businesses reported higher operating profit, with
nine, led by GE Capital Services, Aircraft Engines, Broadcasting and Power
Generation, achieving double-digit increases.
SEGMENT ANALYSIS:
The following comments compare revenues and operating profit by
industry segment for the first nine months of 1997 with the same period of 1996.
o AIRCRAFT ENGINES had a considerable increase in operating profit
on sharply higher revenues compared with the first nine months of 1996. The
revenue and operating profit increases resulted from higher volume in commercial
engines and services, including results from an acquired services business, as
well as higher selling prices, the combination of which more than offset cost
increases.
o APPLIANCES reported revenues and operating profit that were
somewhat higher than a year ago. The increase in revenues reflected
acquisition-related volume as well as international sales growth. The operating
profit improvement was primarily attributable to productivity which more than
offset the effects of lower selling prices.
o BROADCASTING revenues were somewhat lower than last year,
reflecting the impact of NBC's broadcast of the Summer Olympic Games on 1996
revenues. Operating profit was considerably higher than a year ago, reflecting
improved prime-time pricing and growth in NBC's cable programming services, the
combination of which more than offset the absence of a current-year counterpart
to the Olympics coverage and higher license fees for certain prime-time programs
that were renewed.
o GE CAPITAL SERVICES net earnings increased by 16% to $2,490
million, reflecting increases in net earnings in specialty insurance, equipment
management, mid-market financing, and specialized financing businesses. Earnings
were affected by higher losses associated with GECS' equity investment in
Montgomery Ward Holding Corp. (refer to Other Matters section), as well as
increased residual losses on automobiles, more than offset by asset gains, the
largest of which was $284 million (net of tax) associated with GECS' investment
in the common stock of Paine Webber Group Inc.
o INDUSTRIAL PRODUCTS AND SYSTEMS reported much higher operating
profit on revenues that were somewhat higher than last year. The revenue
increase reflected good volume increases across all businesses in the segment.
The improvement in operating profit was attributable to productivity,
particularly at Lighting, Electrical Distribution and Control, and Industrial
Control Systems, as well as higher volume, particularly at Transportation
Systems and Lighting, the combination of which more than offset the effects of
lower selling prices.
o MATERIALS reported revenues and operating profit that were
slightly higher than a year ago. The revenue increase reflected volume increases
that were largely offset by lower selling prices. The improvement in operating
profit was attributable to the combination of productivity and higher volume,
which more than offset the effects of lower selling prices.
o POWER GENERATION revenues were considerably higher than last year,
reflecting volume growth in Nuovo Pignone and in gas turbines. Operating profit
also increased considerably, primarily as a result of strong productivity and
the higher volume which more than offset the effects of lower selling prices.
o TECHNICAL PRODUCTS & SERVICES revenues were slightly higher than
in 1996, reflecting volume growth at both Medical Systems and Information
Services, partially offset by the effects of lower selling prices. Operating
profit at Medical Systems was somewhat higher, as productivity and higher volume
more than offset a loss on patent litigation involving the Company's MRI product
line and lower selling prices. Operating profit at Information Services was
sharply higher, principally as a result of productivity which more than offset
the effects of lower selling prices.
o ALL OTHER operating profit, principally related to the licensing
of GE technology to others, was considerably higher on somewhat higher revenues.
C. FINANCIAL CONDITION
With respect to the Condensed Statement of Financial Position,
consolidated assets of $285.4 billion at September 30, 1997, were $13.0 billion
higher than the $272.4 billion at December 31, 1996.
GE assets were $65.5 billion at September 30, 1997, an increase of
$5.6 billion from December 31, 1996. The increase was principally attributable
to additions to other assets ($2.6 billion), an increase in the investment in
GECS ($2.6 billion), and higher inventory levels ($0.9 billion). The increase in
other assets was attributable to the acquisition of Greenwich/UNC 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 $1.2 billion after-tax increase in the market value of GECS investment
securities. The rise in inventories reflected seasonal increases in a number of
GE businesses.
GECS' assets increased by $10.4 billion from the end of 1996,
principally as a result of higher levels of investment in investment securities
as well as increases in other assets, both of which are described below. GECS
investment securities increased by $6.8 billion, reflecting the addition of
securities held by insurance companies acquired and new investments by various
GE Capital businesses, as well as increases in fair value of investment
securities during the period. Other assets increased $2.4 billion, principally
as a result of growth in investor-directed fund accounts, assets acquired for
resale and deferred insurance acquisition costs at GECS' insurance businesses.
GE Capital's financing receivables, which aggregated $97.1 billion, net of
reserves, at the end of the third quarter, were $2.6 billion lower than at
year-end 1996, primarily as a result of securitizations of consumer receivables.
Management believes that GE Capital's reserves of $2.6 billion (2.63% of the
receivables balance at September 30, 1997 -- the same as year-end 1996) are
appropriate given the strength and diversity of the portfolio and current
economic circumstances. Property, plant and equipment, principally equipment
leased to others, increased by $2.4 billion primarily as a result of higher auto
lease volume and, to lesser extent, new aircraft volume.
Consolidated liabilities of $248.6 billion at September 30, 1997,
were $10.3 billion higher than the year-end 1996 balance of $238.3 billion.
GE liabilities increased $2.9 billion to $31.3 billion. Total
borrowings were $5.8 billion ($4.1 billion short term and $1.7 billion long
term) at September 30, 1997, an increase of $1.7 billion from December 31, 1996.
The ratio of debt to total capital for GE at the end of the third quarter was
14.5% compared with 11.4% at the end of last year and 14.9% at September 30,
1996.
GECS' liabilities increased to $218.3 billion, compared with $210.6
billion at the end of 1996, principally because of higher insurance liabilities
and annuity benefits, which increased by $3.4 billion, primarily as a result of
the acquisition of Coregis Life Insurance Company and increases in reserves and
annuity benefits associated with new volume. Short-term borrowings increased by
$4.9 billion to $82.9 billion and long-term borrowings decreased by $1.8 billion
to $45.9 billion.
With respect to cash flows, consolidated cash and equivalents were
$4.3 billion at September 30, 1997, an increase of $0.1 billion during the first
nine months of 1997. Cash and equivalents were $4.7 billion at September 30,
1996, an increase of $1.9 billion since the beginning of the year.
GE's cash and equivalents were $0.9 billion at September 30, 1997,
approximately the same as at the end of 1996. During the first nine months of
1997, cash provided from operating activities was $5.1 billion, compared with
$5.4 billion in cash flows during the comparable period in 1996. Strong 1997
cash generation from, among other things, continued improvements in earnings was
more than offset by absence of counterparts to two 1996 matters -- progress
collections related to large power generation orders and timing of collections
of sundry receivables. Cash used for investing activities ($2.2 billion)
represented principally the acquisition of Greenwich Air Services and
investments in new plant and equipment for a wide variety of projects to reduce
costs and improve efficiencies. Cash used for financing activities ($2.9
billion) included $2.7 billion for repurchases of the Company's common stock
under the share repurchase program and $2.6 billion for dividends paid to share
owners, a 13% 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 higher borrowings ($1.7 billion).
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 the preceding year, reflecting
improvements in earnings and working capital, principally in trade receivables
and progress collections as well as timing of 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 1995. 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).
GECS' cash and equivalents increased $0.1 billion during the first
nine months of 1997. Cash provided from operating activities totaled $5.4
billion, compared with $6.4 billion for the first nine months of 1996. Cash was
used primarily to fund additions to property, plant and equipment ($4.6
billion), principally equipment that is provided to third parties on operating
leases, and for acquisitions of businesses ($1.5 billion), the largest of which
were Coregis and Bank Aufina. Cash provided from financing activities resulted
primarily from increased borrowings ($3.0 billion) during the first nine months
of 1997.
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.
D. OTHER MATTERS
GECS has a noncontrolling investment in the common stock of
Montgomery Ward Holding Corp. ("MWHC"), which, together with its wholly-owned
subsidiary, Montgomery Ward & Co., Incorporated ("MWC"), are engaged in retail
merchandising and direct response marketing (the latter conducted primarily
through Signature Financial/Marketing, Inc. ("Signature"), which markets
consumer club and insurance products). MWHC and MWC filed for reorganization
under Chapter 11 of the U.S. Bankruptcy Code on July 7, 1997.
MWHC reported losses from operations during the first nine months of
1997, and GECS' investment was reduced for its share of such losses, resulting
in the writing-off of its investments in MWHC common and preferred stock. GECS
also has other investments, primarily inventory financing that resulted from
ordinary course of business transactions with MWHC and its affiliates, amounting
to approximately $833 million at September 30, 1997. Subsequent to the MWHC
bankruptcy filing, GECS announced a $1.0 billion Debtor-In-Possession financing
commitment, subject to certain conditions, to MWHC for the purchase of inventory
and to cover other costs, a majority of which has been syndicated.
MWHC and its affiliates, under new management in 1997, are
continuing their restructuring efforts as well as developing a plan of
reorganization. Restructuring plans are likely to include the implementation of
a revised merchandising strategy, the closing and/or upgrading of selected
retail stores, and the sale of Signature (which is not included in the Chapter
11 bankruptcy filing).
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
ENVIRONMENTAL
In August of 1996 the Florida Department of Environmental Protection
informed Greenwich Air Services that it was seeking penalties of $278,555 for
violations of the state's hazardous waste law at its Miami facility (the
facility was subsequently acquired as a portion of GE's purchase of Greenwich
which was consummated in September of 1997). The matter has been tentatively
settled for $36,270 plus a supplemental wastewater treatment project.
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, 1997.
No reports on Form 8-K were filed during the quarter ended
September 30, 1997.
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)
October 24, 1997 Philip D. Ameen
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Date Vice President and Comptroller
Duly Authorized Officer and Principal Accounting Officer