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 JUNE 30, 1999
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
incorporation or organization) (I.R.S. Employer 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 3,280,189,000 shares with a par value of $0.16 per share
outstanding at June 30, 1999.
2
GENERAL ELECTRIC COMPANY
PART I - FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Statements of Income:
Second Quarter Ended June 30, 1999 3
Six Months Ended June 30, 1999 4
Balance Sheet 5
Statement of Cash Flows 6
Summary of Operating Segments 7
Notes to Financial Statements 8
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition 10
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 6. Exhibits and Reports on Form 8-K 18
Signature 19
3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED STATEMENT OF EARNINGS
GENERAL ELECTRIC COMPANY AND CONSOLIDATED AFFILIATES
SECOND QUARTER ENDED JUNE 30 (UNAUDITED)
--------------------------------------------------------------------
(DOLLARS, EXCEPT PER-SHARE AMOUNTS, IN MILLIONS) CONSOLIDATED GE GECS
-------------------- -------------------- --------------------
1999 1998 1999 1998 1999 1998
-------- -------- -------- -------- -------- --------
Sales of goods $ 11,478 $ 11,022 $ 9,517 $ 9,129 $ 1,961 $ 1,893
Sales of services 4,379 4,043 4,449 4,088 -- --
Earnings of GECS -- -- 1,092 933 -- --
GECS revenues from services 11,348 9,863 -- -- 11,417 9,908
Other income 205 142 225 153 -- --
-------- -------- -------- -------- -------- --------
Total revenues 27,410 25,070 15,283 14,303 13,378 11,801
-------- -------- -------- -------- -------- --------
Cost of goods sold 8,143 7,919 6,337 6,191 1,806 1,728
Cost of services sold 3,014 2,765 3,084 2,810 -- --
Interest and other financial charges 2,404 2,366 220 204 2,237 2,187
Insurance losses and policyholder and annuity benefits 2,705 2,400 -- -- 2,705 2,400
Provision for losses on financing receivables 442 409 -- -- 442 409
Other costs and expenses 6,494 5,616 1,848 1,822 4,682 3,825
Minority interest in net earnings of
consolidated affiliates 108 61 63 28 45 33
-------- -------- -------- -------- -------- --------
Total costs and expenses 23,310 21,536 11,552 11,055 11,917 10,582
-------- -------- -------- -------- -------- --------
Earnings before income taxes 4,100 3,534 3,731 3,248 1,461 1,219
Provision for income taxes (1,280) (1,084) (911) (798) (369) (286)
-------- -------- -------- -------- -------- --------
Net earnings $ 2,820 $ 2,450 $ 2,820 $ 2,450 $ 1,092 $ 933
======== ======== ======== ======== ======== ========
Net earnings per share
Diluted $ 0.85 $ 0.74
Basic $ 0.86 $ 0.75
Dividends declared per share $ 0.35 $ 0.30
<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.
</FN>
4
CONDENSED STATEMENT OF EARNINGS
GENERAL ELECTRIC COMPANY AND CONSOLIDATED AFFILIATES
SIX MONTHS ENDED JUNE 30 (UNAUDITED)
--------------------------------------------------------------------
(DOLLARS, EXCEPT PER-SHARE AMOUNTS, IN MILLIONS) CONSOLIDATED GE GECS
-------------------- -------------------- --------------------
1999 1998 1999 1998 1999 1998
-------- -------- -------- -------- -------- --------
Sales of goods $ 21,489 $ 20,638 $ 17,887 $ 17,120 $ 3,601 $ 3,519
Sales of services 7,731 7,402 7,875 7,505 -- --
Earnings of GECS -- -- 2,124 1,814 -- --
GECS revenues from services 22,047 19,347 -- -- 22,160 19,433
Other income 308 309 343 328 -- --
-------- -------- -------- -------- -------- --------
Total revenues 51,575 47,696 28,229 26,767 25,761 22,952
-------- -------- -------- -------- -------- --------
Cost of goods sold 15,380 14,982 12,062 11,773 3,317 3,210
Cost of services sold 5,344 5,167 5,488 5,270 -- --
Interest and other financial charges 4,667 4,578 404 411 4,350 4,212
Insurance losses and policyholder and annuity benefits 5,324 4,613 -- -- 5,324 4,613
Provision for losses on financing receivables 821 741 -- -- 821 741
Other costs and expenses 12,533 11,049 3,589 3,470 9,005 7,639
Minority interest in net earnings of
consolidated affiliates 162 117 79 51 83 66
-------- -------- -------- -------- -------- --------
Total costs and expenses 44,231 41,247 21,622 20,975 22,900 20,481
-------- -------- -------- -------- -------- --------
Earnings before income taxes 7,344 6,449 6,607 5,792 2,861 2,471
Provision for income taxes (2,369) (2,108) (1,632) (1,451) (737) (657)
-------- -------- -------- -------- -------- --------
Net earnings $ 4,975 $ 4,341 $ 4,975 $ 4,341 $ 2,124 $ 1,814
======== ======== ======== ======== ======== ========
Net earnings per share
Diluted $ 1.50 $ 1.31
Basic $ 1.52 $ 1.33
Dividends declared per share $ 0.70 $ 0.60
<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.
</FN>
5
CONDENSED STATEMENT OF FINANCIAL POSITION
GENERAL ELECTRIC COMPANY AND CONSOLIDATED AFFILIATES
(DOLLARS IN MILLIONS) CONSOLIDATED GE GECS
---------------------- -------------------- ----------------------
6/30/99 12/31/98 6/30/99 12/31/98 6/30/99 12/31/98
--------- --------- -------- -------- --------- ---------
Cash and equivalents $ 5,099 $ 4,317 $ 1,332 $ 1,175 $ 4,142 $ 3,342
Investment securities 76,557 78,717 498 259 76,059 78,458
Current receivables 8,048 8,224 8,186 8,483 -- --
Inventories 6,576 6,049 5,894 5,305 682 744
Financing receivables - net 124,846 121,566 -- -- 124,846 121,566
Other GECS receivables 29,842 24,789 -- -- 30,976 25,973
Property, plant and equipment (including equipment
leased to others) - net 35,629 35,730 11,261 11,694 24,368 24,036
Investment in GECS -- -- 19,068 19,727 -- --
Intangible assets - net 24,727 23,635 11,035 9,996 13,692 13,639
All other assets 57,059 52,908 18,960 18,031 38,473 35,539
--------- --------- -------- -------- --------- ---------
Total assets $ 368,383 $ 355,935 $ 76,234 $ 74,670 $ 313,238 $ 303,297
========= ========= ======== ======== ========= =========
Short-term borrowings $ 120,391 $ 115,378 $ 2,206 $ 3,466 $ 119,246 $ 113,162
Accounts payable, principally trade accounts 11,557 12,502 4,730 4,845 8,696 8,815
Other GE current liabilities 16,159 13,699 15,328 13,619 -- --
Long-term borrowings 60,852 59,663 677 681 60,207 59,038
Insurance liabilities, reserves and annuity benefits 80,897 77,259 -- -- 80,897 77,259
All other liabilities 25,788 24,939 12,709 12,613 12,969 12,247
Deferred income taxes 8,016 9,340 148 (250) 7,868 9,590
--------- --------- -------- -------- --------- ---------
Total liabilities 323,660 312,780 35,798 34,974 289,883 280,111
--------- --------- -------- -------- --------- ---------
Minority interest in equity of consolidated
affiliates 5,112 4,275 825 816 4,287 3,459
--------- --------- -------- -------- --------- ---------
Accumulated unrealized gains on investment
securities - net <F1> 645 2,402 645 2,402 487 2,376
Accumulated currency translation adjustments <F1> (1,272) (738) (1,272) (738) (314) (215)
Common stock (3,280,189,000 and 3,271,296,000
shares outstanding at June 30, 1999 and
December 31, 1998, respectively) 594 594 594 594 1 1
Other capital 8,177 6,808 8,177 6,808 2,490 2,490
Retained earnings 51,235 48,553 51,235 48,553 16,404 15,075
Less common stock held in treasury (19,768) (18,739) (19,768) (18,739) -- --
--------- --------- -------- -------- --------- ---------
Total share owners' equity 39,611 38,880 39,611 38,880 19,068 19,727
--------- --------- -------- -------- --------- ---------
Total liabilities and equity $ 368,383 $ 355,935 $ 76,234 $ 74,670 $ 313,238 $ 303,297
========= ========= ======== ======== ========= =========
<FN>
See notes to condensed consolidated financial statements. Consolidating data are
shown for "GE" and"GECS." June data are unaudited. Transactions between GE and
GECS have been eliminated from the "consolidated" columns.
<F1> The sum of accumulated unrealized gains on investment securities and
accumulated currency translation adjustments constitutes "Accumulated
nonowner changes other than earnings," and was ($627) million and $1,664
million at June 30, 1999 and December 31, 1998, respectively.
</FN>
6
CONDENSED STATEMENT OF CASH FLOWS
GENERAL ELECTRIC COMPANY AND CONSOLIDATED AFFILIATES
SIX MONTHS ENDED JUNE 30 (UNAUDITED)
------------------------------------------------------------------
(DOLLARS IN MILLIONS) CONSOLIDATED GE GECS
-------------------- ------------------ --------------------
1999 1998 1999 1998 1999 1998
-------- -------- ------- ------- -------- --------
Cash flows from operating activities
Net earnings $ 4,975 $ 4,341 $ 4,975 $ 4,341 $ 2,124 $ 1,814
Adjustments to reconcile net earnings to cash
provided from (used for) operating activities
Depreciation and amortization of
property, plant and equipment 2,361 2,083 853 823 1,508 1,260
Amortization of goodwill and other intangibles 821 474 278 255 543 219
Earnings retained by GECS -- -- (1,329) (935) -- --
Deferred income taxes (179) 383 362 234 (541) 149
Decrease in GE current receivables 361 347 482 374 -- --
Decrease (increase) in inventories (451) 298 (513) 237 62 61
Decrease in accounts payable (1,060) (424) (171) (190) (178) (148)
Increase in insurance liabilities,
reserves and annuity benefits 1,034 1,594 -- -- 1,034 1,594
Provision for losses on financing receivables 821 741 -- -- 821 741
All other operating activities 1,637 (2,513) (200) (1,595) 1,480 (801)
-------- -------- ------- ------- -------- --------
Cash from operating activities 10,320 7,324 4,737 3,544 6,853 4,889
-------- -------- ------- ------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment
(including equipment leased to others) (4,839) (4,731) (674) (780) (4,165) (3,951)
Net increase in GECS financing receivables (5,555) (3,742) -- -- (5,555) (3,742)
Payments for principal businesses purchased (7,013) (1,982) (1,035) (989) (5,978) (993)
All other investing activities 1,397 (2,812) 671 150 639 (3,067)
-------- -------- ------- ------- -------- --------
Cash used for investing activities (16,010) (13,267) (1,038) (1,619) (15,059) (11,753)
-------- -------- ------- ------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in borrowings (maturities 90 days or less) 5,094 7,773 (1,307) 2,154 6,212 5,294
Newly issued debt (maturities longer than 90 days) 15,078 18,070 338 282 14,716 17,788
Repayments and other reductions (maturities
longer than 90 days) (11,986) (17,993) (379) (994) (11,607) (16,999)
Net (purchase) issuance of GE shares for treasury 98 (1,728) 98 (1,728) -- --
Dividends paid to share owners (2,292) (1,957) (2,292) (1,957) (795) (879)
All other financing activities 480 (221) -- -- 480 (221)
-------- -------- ------- ------- -------- --------
Cash from (used for) financing activities 6,472 3,944 (3,542) (2,243) 9,006 4,983
-------- -------- ------- ------- -------- --------
Increase (decrease) in cash and equivalents 782 (1,999) 157 (318) 800 (1,881)
Cash and equivalents at beginning of year 4,317 5,861 1,175 1,157 3,342 4,904
-------- -------- ------- ------- -------- --------
Cash and equivalents at June 30 $ 5,099 $ 3,862 $ 1,332 $ 839 $ 4,142 $ 3,023
======== ======== ======= ======= ======== ========
<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.
</FN>
7
SUMMARY OF OPERATING SEGMENTS
GENERAL ELECTRIC COMPANY AND CONSOLIDATED AFFILIATES
SECOND QUARTER ENDED SIX MONTHS ENDED
JUNE 30 (UNAUDITED) JUNE 30 (UNAUDITED)
------------------- -------------------
(DOLLARS IN MILLIONS) 1999 1998 1999 1998
-------- -------- -------- --------
REVENUES
GE
Aircraft Engines $ 2,605 $ 2,594 $ 4,995 $ 4,870
Appliances 1,476 1,442 2,677 2,664
Industrial Products and Systems 2,885 2,803 5,424 5,363
NBC 1,782 1,632 2,962 2,889
Plastics 1,741 1,684 3,356 3,286
Power Systems 2,322 2,168 4,017 3,764
Technical Products and Services 1,625 1,240 3,120 2,354
Eliminations (363) (347) (672) (577)
-------- -------- -------- --------
Total GE segment revenues 14,073 13,216 25,879 24,613
Corporate items 118 154 226 340
GECS net earnings 1,092 933 2,124 1,814
-------- -------- -------- --------
Total GE revenues 15,283 14,303 28,229 26,767
GECS segment revenues 13,378 11,801 25,761 22,952
Eliminations <F1> (1,251) (1,034) (2,415) (2,023)
-------- -------- -------- --------
CONSOLIDATED REVENUES $ 27,410 $ 25,070 $ 51,575 $ 47,696
======== ======== ======== ========
SEGMENT PROFIT
GE
Aircraft Engines $ 512 $ 427 $ 993 $ 846
Appliances 177 199 338 364
Industrial Products and Systems 540 475 933 868
NBC 544 475 878 774
Plastics 468 436 865 826
Power Systems 499 372 681 515
Technical Products and Services 328 262 596 496
-------- -------- -------- --------
Total GE operating profit 3,068 2,646 5,284 4,689
GECS net earnings 1,092 933 2,124 1,814
-------- -------- -------- --------
Total segment profit 4,160 3,579 7,408 6,503
GE interest and other financial charges (220) (204) (404) (411)
GE provision for income taxes (911) (798) (1,632) (1,451)
Corporate items and eliminations (209) (127) (397) (300)
-------- -------- -------- --------
CONSOLIDATED NET EARNINGS $ 2,820 $ 2,450 $ 4,975 $ 4,341
======== ======== ======== ========
<FN>
<F1> Principally the elimination of GECS net earnings.
</FN>
8
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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, 1998.
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.
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. A summary of changes in share owners' equity that do not result
directly from transactions with share owners is provided below.
SECOND QUARTER ENDED
--------------------
(DOLLARS IN MILLIONS) 6/30/99 6/30/98
------- -------
Net earnings $ 2,820 $ 2,450
Unrealized gains (losses) on investment securities - net (1,373) 130
Foreign currency translation adjustments - net (146) (59)
------- -------
Total $ 1,301 $ 2,521
======= =======
SIX MONTHS ENDED
------------------
6/30/99 6/30/98
------- -------
Net earnings $ 4,975 $ 4,341
Unrealized gains (losses) on investment securities - net (1,757) 452
Foreign currency translation adjustments - net (534) (212)
------- -------
Total $ 2,684 $ 4,581
======= =======
4. In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 133, ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES (the "Statement"). The Statement requires
that, upon adoption, all derivative instruments (including certain derivative
9
instruments embedded in other contracts) be recognized in the balance sheet at
fair value, and that changes in such fair values be recognized in earnings
unless specific hedging criteria are met. Changes in the values of derivatives
that meet these hedging criteria will ultimately offset related earnings effects
of the hedged items; effects of certain changes in fair value are recorded in
equity pending recognition in earnings. In June 1999, the FASB delayed the
required effective date of the new standard to January 1, 2001. The impact of
adoption will be determined by several factors, including the specific hedging
instruments in place and their relationships to hedged items, as well as market
conditions. Management has not estimated the effect of adoption as it believes
that such determination will not be meaningful until closer to the adoption
date.
5. GE's inventories consisted of the following:
AT
------------------
(DOLLARS IN MILLIONS) 6/30/99 12/31/98
------- --------
GE
Raw materials and work in process $ 3,308 $ 3,154
Finished goods 3,310 2,967
Unbilled shipments 267 195
Revaluation to LIFO (991) (1,011)
------- -------
5,894 5,305
------- -------
GECS
Finished goods 682 744
------- -------
Total $ 6,576 $ 6,049
======= =======
6. Property, plant and equipment (including equipment leased to others)
consisted of the following:
AT
------------------
(DOLLARS IN MILLIONS) 6/30/99 12/31/98
------- --------
ORIGINAL COST
GE $28,407 $28,310
GECS 33,764 32,790
------- -------
Total 62,171 61,100
------- -------
ACCUMULATED DEPRECIATION AND AMORTIZATION
GE 17,146 16,616
GECS 9,396 8,754
------- -------
Total 26,542 25,370
------- -------
PROPERTY, PLANT AND EQUIPMENT -- NET
GE 11,261 11,694
GECS 24,368 24,036
------- -------
Total $35,629 $35,730
======= =======
10
7. GE's authorized common stock consisted of 4,400,000,000 shares
having a par value of $0.16 each. Information related to the calculation of
earnings per share follows.
SECOND QUARTER ENDED
---------------------------------
(DOLLAR AMOUNTS AND SHARES IN MILLIONS; 6/30/99 6/30/98
PER-SHARE AMOUNTS IN DOLLARS) --------------- ---------------
DILUTED BASIC DILUTED BASIC
------- ------ ------ ------
CONSOLIDATED OPERATIONS
Net earnings available to common share owners $2,820 $2,820 $2,450 $2,450
Dividend equivalents-- net of tax 2 -- 6 --
------ ------ ------ ------
Net earnings available for per-share calculation $2,822 $2,820 $2,456 $2,450
------ ------ ------ ------
AVERAGE EQUIVALENT SHARES
Shares of GE common stock 3,277 3,277 3,270 3,270
Employee compensation-related shares,
including stock options 54 -- 59 --
------ ------ ------ ------
Total average equivalent shares 3,331 3,277 3,329 3,270
------ ------ ------ ------
Net earnings per share $ 0.85 $ 0.86 $ 0.74 $ 0.75
====== ====== ====== ======
SIX MONTHS ENDED
---------------------------------
DILUTED BASIC DILUTED BASIC
------- ------ ------ ------
CONSOLIDATED OPERATIONS
Net earnings available to common share owners $4,975 $4,975 $4,341 $4,341
Dividend equivalents-- net of tax 4 -- 9 --
------ ------ ------ ------
Net earnings available for per-share calculation $4,979 $4,975 $4,350 $4,341
------ ------ ------ ------
AVERAGE EQUIVALENT SHARES
Shares of GE common stock 3,275 3,275 3,268 3,268
Employee compensation-related shares,
including stock options 55 -- 64 --
------ ------ ------ ------
Total average equivalent shares 3,330 3,275 3,332 3,268
------ ------ ------ ------
Net earnings per share $ 1.50 $ 1.52 $ 1.31 $ 1.33
====== ====== ====== ======
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
A. RESULTS OF OPERATIONS -- SECOND QUARTER OF 1999 COMPARED WITH SECOND
QUARTER OF 1998
General Electric Company's earnings for the second quarter of 1999 were
$2.820 billion, the highest for any quarter in the Company's history, an
increase of 15% over the same period in 1998. Earnings per share increased 15%
to $0.85, up from last year's $0.74.
Revenues rose to a record $27.4 billion, 9% more than last year's
quarter, reflecting continued growth from globalization and product services.
11
GE's second-quarter operating margin was 19.3% of sales, up from last
year's 18.1%, and was a record for any quarter in the Company's history. The
second-quarter margin growth reflects the increasing benefits from GE's Six
Sigma quality initiative.
GE Capital Services' second-quarter earnings rose to $1,092 million,
up 17% from last year's $933 million. These record results reflect the
globalization and diversity of GE Capital's 28 businesses. GECS' results were
driven by strong double-digit increases in Consumer Services, Mid-Market
Financing, Equipment Management and Specialized Financing segments.
Cash generated from GE's operating activities during the first half
was a record $4.7 billion, up 34% from last year's $3.5 billion. As part of the
six-year $17 billion share repurchase program, GE purchased $517 million of its
stock during the second quarter to reach $14.5 billion -- 296 million
shares -- purchased since December 1994.
SEGMENT ANALYSIS:
The comments that follow compare revenues and operating profit by
operating segment for the second quarters of 1999 and 1998.
o AIRCRAFT ENGINES reported a 20% increase in operating profit on
revenues that were about the same as a year ago. Revenues reflected the effects
of lower engine selling prices, which largely offset volume increases in product
services and commercial engines. The improvement in operating profit was
primarily attributable to growth in product services and productivity, which
more than offset cost increases.
o APPLIANCES revenues increased 2% over the second quarter of 1998, as
volume growth offset declines in selling prices. Operating profit decreased 11%
largely as a result of lower selling prices and increased spending on new
products, which more than offset productivity and the increase in volume.
o GE CAPITAL SERVICES second-quarter earnings rose to $1,092 million,
up 17% from last year's $933 million, reflecting strong double-digit increases
in Consumer Services, Mid-Market Financing, Equipment Management and Specialized
Financing activities. The overall improvement in earnings was largely
attributable to the effects of continued asset growth, principally from
acquisitions of businesses and portfolios, higher origination volume, and a
higher level of asset gains.
o INDUSTRIAL PRODUCTS AND SYSTEMS reported a 14% increase in operating
profit on revenues that were 3% higher than a year ago. The increase in segment
revenues reflected volume increases across all businesses in the segment,
particularly at Transportation Systems. The improvement in segment operating
profit was primarily attributable to productivity and higher volume which were
partially offset by the effects of lower selling prices and higher costs.
12
o NBC reported a 9% increase in revenues, reflecting improved revenues
at the network and continued growth in cable operations, particularly at CNBC.
Operating profit was 15% higher than a year ago as strong results in cable
operations and continuing benefits from cost reductions across the business more
than offset higher license fees for certain sports and prime-time programs that
were renewed.
o PLASTICS operating profit increased 7% on revenues that were 3%
higher than a year ago. The increase in revenues reflected improved volume,
which was partially offset by lower selling prices. The increase in operating
profit was primarily attributable to lower material costs, productivity and
higher volume, the combination of which more than offset selling price
decreases.
o POWER SYSTEMS revenues increased 7%, primarily as a result of
continued growth in product services, including acquisitions, and sharply higher
volume in gas turbines. Operating profit increased 34%, reflecting productivity
and volume growth.
o TECHNICAL PRODUCTS & SERVICES revenues increased 31% from the second
quarter of 1998, principally as a result of sharply higher volume at Medical
Systems, including the contribution of acquisitions. Operating profit grew 25%
in the second quarter, primarily as a result of the volume growth at Medical
Systems as well as improved results at Information Services.
B. RESULTS OF OPERATIONS -- FIRST HALF OF 1999 COMPARED WITH FIRST HALF OF 1998
Earnings for the six months ended June 30, 1999, were $4.975 billion,
up 15% from $4.341 billion in 1998's first half. Earnings per share increased
15% to $1.50 from $1.31.
Consolidated revenues for the first six months of 1999 aggregated $51.6
billion, up 8% from the comparable $47.7 billion in 1998's first half. GE's
sales of goods and services were 5% higher, with improvements led by Medical
Systems, Transportation Systems and Aircraft Engines.
Operating margin in the first half of 1999 was 17.9% of sales, compared
with last year's 16.7%. The improvement in operating margin reflects the
increasing benefits from GE's Six Sigma quality initiative.
As discussed in the 1998 GE Annual Report on Form 10-K, GE and GECS are
applying a Six Sigma quality approach to identify and mitigate Year 2000 issues
in their information systems, products, facilities and suppliers. Each business
has a Year 2000 leader who oversees a multi-functional project team responsible
for remediation and contingency planning, applying a Six Sigma quality approach
in four phases: (1) define/measure - identify and inventory possible sources of
Year 2000 issues; (2) analyze - determine the nature and extent of Year 2000
issues and develop project plans to address those issues; (3) improve - execute
project plans and perform a majority of the testing; and (4) control - complete
testing, continue monitoring readiness and complete necessary contingency plans.
As of the end of June 1999, virtually all significant information systems,
products, facilities, and suppliers were in the control phase. As a final step
in the control phase, GE and GECS are developing, testing and implementing
contingency plans to ameliorate any potential internal or external disruption of
13
critical business processes. The specific actions identified in such contingency
plans differ depending on circumstances, but most often include manual
work-arounds, deployment of backup or secondary technologies, rearranging work
schedules, and substitution of suppliers, as appropriate. While management does
not expect significant disruptions of critical business processes caused by
internal Year 2000 issues, the likelihood of externally-caused disruptions and
the ability of the contingency plans to ameliorate the effects of any such
externally-caused disruptions is not determinable. The total estimate of Year
2000 expenditures, adjusted for increases related to acquired companies, is in
line with previous projections. The activities related to Year 2000 efforts
necessarily involve estimates and projections of activities and resources that
will be required in the future. These estimates and projections could change as
work progresses.
SEGMENT ANALYSIS:
The following comments compare revenues and operating profit by
industry segment for the first half of 1999 with the same period of 1998.
AIRCRAFT ENGINES reported a 17% increase in operating profit on
revenues that were 3% higher than a year ago. The increase in revenues was
primarily attributable to higher volume, particularly in product services. The
improvement in operating profit reflected growth in product services and
productivity, which more than offset cost increases.
o APPLIANCES revenues were essentially flat compared with the first
half of 1998, as volume growth was largely offset by lower selling prices.
Operating profit decreased 7% principally as a result of lower selling prices
and increased spending on new products.
o GE CAPITAL SERVICES earnings for the first six months of 1999 rose to
$2,124 million, up 17% from last year's $1,814 million, reflecting strong
double-digit increases in Consumer Services, Mid-Market Financing, Equipment
Management and Specialized Financing activities. The overall improvement in
earnings was largely attributable to the effects of continued asset growth,
principally from acquisitions of businesses and portfolios, higher origination
volume, and a higher level of asset gains.
o INDUSTRIAL PRODUCTS AND SYSTEMS reported a 7% increase in operating
profit on revenues that were 1% higher than a year ago. The increase in segment
revenues reflected strong volume increases at Transportation Systems and
Industrial Systems, which were largely offset by lower selling prices across
most businesses in the segment. The improvement in segment operating profit was
primarily attributable to productivity which more than offset the effects of
lower selling prices and higher costs, including higher engineering costs
related to the introduction of Transportation Systems' new AC6000 locomotive.
14
o NBC reported a 13% increase in operating profit on revenues that were
3% higher than a year ago. The improvement in revenues was largely attributable
to growth in cable operations, particularly at CNBC. The operating profit
performance reflected a strong marketplace, growth in cable operations, and
continuing benefits from cost reductions across the business, the combination of
which more than offset higher license fees for certain sports and prime-time
programs that were renewed.
o PLASTICS operating profit increased 5% on revenues that were 2% ahead
of the first six months of 1998. The increase in revenues reflected improved
volume, which was partially offset by lower selling prices. The increase in
operating profit was primarily attributable to lower material costs,
productivity and higher volume, the combination of which more than offset
selling price decreases.
o POWER SYSTEMS revenues increased 7%, primarily as a result of
continued growth in product services, including acquisitions, and sharply higher
volume in gas turbines. Operating profit increased 32%, reflecting productivity
and volume growth.
o TECHNICAL PRODUCTS & SERVICES revenues increased 33% from the first
half of 1998, principally as a result of sharply higher volume at Medical
Systems, including the contribution of acquisitions. Operating profit grew 20%
in the second quarter, reflecting strong volume growth and productivity across
the segment, which more than offset the effects of lower selling prices.
C. FINANCIAL CONDITION
With respect to the Condensed Statement of Financial Position,
consolidated assets of $368.4 billion at June 30, 1999, were $12.5 billion
higher than at December 31, 1998.
GE assets were $76.2 billion at June 30, 1999, an increase of $1.6
billion from December 31, 1998. The increase was primarily attributable to
additions to intangible assets ($1.0 billion), and increases in all other assets
($0.9 billion). The change in intangible assets was largely attributable to
acquisitions, the largest of which was Marquette Medical Systems which was
consolidated in the second quarter. The change in all other assets resulted
primarily from an increase in the prepaid pension asset. These increases were
partially offset by a decrease in the investment in GECS ($0.7 billion).
GECS assets increased by $9.9 billion from the end of 1998. Investment
securities decreased $2.4 billion largely as a result of decreases in fair
values of investment securities associated with higher interest rates during the
period. GE Capital's financing receivables, which, net of the allowance for
losses, aggregated $124.8 billion at the end of the second quarter, increased
$3.2 billion from the year-end 1998 level of $121.6 billion. The increase
resulted principally from new volume and acquisitions, the largest of which were
Pheonixcor and Long Term Credit Bank. Those increases were partially offset by
foreign currency translation effects related to European financing receivables.
Management believes that GE Capital's allowance for losses of $3.4 billion at
15
June 30, 1999 is appropriate given the strength and diversity of the portfolio
and current economic circumstances. Other receivables increased $5.0 billion,
principally related to acquisitions of Japan Leasing and Eagle Star. Other
assets increased $2.9 billion primarily reflecting higher investments in and
advances to non-consolidated affiliates and increases in "separate accounts,"
which are investments controlled by policyholders.
Consolidated liabilities of $323.7 billion at June 30, 1999, were $10.9
billion higher than the year-end 1998 balance of $312.8 billion. GE liabilities
increased $0.8 billion; GECS liabilities increased $9.8 billion.
GE total borrowings were $2.9 billion ($2.2 billion short-term and $0.7
billion long-term) at June 30, 1999, a decrease of $1.3 billion from December
31, 1998. GE's ratio of debt to total capital at the end of June 1999 was 6.7%
compared with 9.5% at the end of last year and 13.8% at June 30, 1998.
GECS liabilities increased to $289.9 billion compared with $280.1
billion at the end of 1998. The increase was principally attributable to higher
borrowings ($7.3 billion) and an increase of $3.6 billion in insurance
liabilities, reserves and annuity benefits, reflecting primarily the addition of
reserves of acquired companies, increases in separate accounts and additions to
reserves related to core growth. Short-term borrowings increased by $6.1 billion
to $119.2 billion and long-term borrowings increased by $1.2 billion to $60.2
billion.
With respect to cash flows, consolidated cash and equivalents were $5.1
billion at June 30, 1999, an increase of $0.8 billion during the first half.
Cash and equivalents were $3.9 billion at June 30, 1998, a decrease of $2.0
billion during last year's first half.
GE's cash and equivalents increased $0.2 billion during the first half
of 1999 to $1.3 billion at June 30, 1999. Cash provided from operating
activities was $4.7 billion during the first six months of 1999, compared with
$3.5 billion in the first half of 1998, reflecting continuing improvements in
earnings and higher progress collections during the period. Cash used for
investing activities ($1.0 billion) principally resulted from business
acquisitions and investments in new plant and equipment for a diverse number of
projects to lower costs and improve efficiencies. Cash used for financing
activities ($3.5 billion) included $1.3 billion for net reduction of debt, $0.9
billion for repurchases of the Company's common stock under the share repurchase
program and $2.3 billion for dividends paid to share owners, a 17% increase in
the per-share dividend rate compared with the first half of last year.
GE's cash and equivalents decreased $0.3 billion during the first half
of 1998 to $0.8 billion at June 30, 1998. Cash provided from operating
activities was $3.5 billion during the first six months of 1998, about the same
as in the first half of 1997. Cash used for investing activities ($1.6 billion)
principally represented acquisitions and investments in new plant and equipment
for a diverse number of projects to lower costs and improve efficiencies. Cash
used for financing activities ($2.2 billion) included $1.7 billion for
repurchases of the Company's common stock under the share repurchase program and
$2.0 billion for dividends paid to share owners, a 15% increase in the per-share
dividend rate compared with the first half of 1997. The effects of dividends and
16
share repurchases on cash used for financing activities were partially offset by
cash provided from higher net borrowings ($1.4 billion).
GECS cash and equivalents increased $0.8 billion during the first half
of 1999. Cash was used primarily to fund additions to property, plant and
equipment ($4.2 billion), principally equipment that is provided to third
parties on operating leases; to fund additions to financing receivables ($5.6
billion); and to fund acquisitions of businesses ($6.0 billion). Cash provided
from operating activities totaled $6.9 billion. Cash provided from financing
activities resulted primarily from increased net borrowings ($9.3 billion)
during the first six months of 1999.
GECS cash and equivalents decreased $1.9 billion during the first half
of 1998. Cash was used primarily to fund additions to property, plant and
equipment ($4.0 billion), principally equipment that is provided to third
parties on operating leases; to fund additions to financing receivables ($3.7
billion); to purchase investment securities ($2.7 billion); and to fund
acquisitions of businesses ($1.0 billion). Cash provided from operating
activities totaled $4.9 billion. Cash provided from financing activities
resulted primarily from increased net borrowings ($6.1 billion) during the first
six months of 1998.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
ENVIRONMENTAL
In May 1999, the New York State Department of Environmental
Conservation informed the company that it was seeking penalties of $325,000 for
violations of the state's Clean Water Act at its Waterford, NY facility. The
state alleges discharges in excess of permitted limits as well as reporting
violations. The matter is presently subject to negotiations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The annual meeting of Share Owners of General Electric Company was
held on April 21, 1999.
(b) All director nominees were elected.
(c) Certain matters voted upon at the meeting and the votes cast with
respect to such matters are as follows:
17
PROPOSALS AND VOTE TABULATIONS
VOTES CAST
------------------------------------------- BROKER
FOR AGAINST ABSTAIN NON-VOTES
------------- ------------- ----------- -----------
MANAGEMENT PROPOSALS
Approval of the appointment of
independent auditors for 1999 2,653,075,644 9,116,191 11,351,805 0
SHARE OWNER PROPOSALS
(1) Relating to cumulative voting 467,157,310 1,570,460,461 171,132,190 464,793,679
(2) Relating to workplace code of conduct 144,689,070 1,894,901,695 169,159,196 464,793,679
(3) Relating to sexual orientation policy 179,221,752 1,902,123,528 127,404,681 464,793,679
(4) Relating to CEO compensation 126,663,887 2,015,041,592 67,044,482 464,793,679
(5) Relating to executive compensation
criteria/environmental 118,715,343 1,954,631,600 135,403,018 464,793,679
(6) Relating to environmental education
report 136,850,253 1,912,814,571 159,085,037 464,793,679
(7) Relating to environmental report 173,097,955 1,889,266,338 146,385,668 464,793,679
(8) Relating to non-employee directors
retirement plan 623,856,037 1,541,158,288 43,735,636 464,793,679
(9) Relating to foreign military sales 140,132,304 1,914,044,108 154,573,549 464,793,679
ELECTION OF DIRECTORS
DIRECTOR VOTES RECEIVED VOTES WITHHELD
- -------- -------------- --------------
James I. Cash, Jr. 2,650,810,112 22,733,528
Silas S. Cathcart 2,646,622,703 26,920,937
Dennis D. Dammerman 2,646,040,839 27,502,801
Paolo Fresco 2,649,589,208 23,954,432
Claudio X. Gonzalez 2,651,825,831 21,717,809
Andrea Jung 2,651,058,061 22,485,579
Kenneth G. Langone 2,631,346,586 42,197,054
Gertrude G. Michelson 2,648,308,866 25,234,774
Eugene F. Murphy 2,645,956,126 27,587,514
Sam Nunn 2,629,333,905 44,209,735
John D. Opie 2,631,446,792 42,096,848
Roger S. Penske 2,633,228,846 40,314,794
Frank H. T. Rhodes 2,648,700,186 24,843,454
Andrew C. Sigler 2,650,207,886 23,335,754
Douglas A. Warner III 2,633,759,423 39,784,217
John F. Welch, Jr. 2,644,954,163 28,589,477
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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
* Data required by Statement of Financial Accounting Standards
No. 128, EARNINGS PER SHARE, is provided in note 7 to the
condensed consolidated financial statements in this report.
b. Reports on Form 8-K during the quarter ended June 30, 1999.
No reports on Form 8-K were filed during the quarter ended
June 30, 1999.
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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)
August 11, 1999 /s/ Philip D. Ameen
- --------------------- --------------------------------------------------------
Date Philip D. Ameen
Vice President and Comptroller
Duly Authorized Officer and Principal Accounting Officer