-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EMsLvbQgAO7V7T8fuJoEN6c1Fv5YqoXukQeVRn4/Pj2mIQlFbc8wlpryQ+PIZTvS BsytAzBEOPAfanV6tgAlxg== 0000040545-96-000007.txt : 19960321 0000040545-96-000007.hdr.sgml : 19960321 ACCESSION NUMBER: 0000040545-96-000007 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960320 SROS: BSE SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: GENERAL ELECTRIC CO CENTRAL INDEX KEY: 0000040545 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC & OTHER ELECTRICAL EQUIPMENT (NO COMPUTER EQUIP) [3600] IRS NUMBER: 140689340 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-00035 FILM NUMBER: 96536502 BUSINESS ADDRESS: STREET 1: 3135 EASTON TURNPIKE STREET 2: C/O BANK OF NEW YORK CITY: FAIRFIELD STATE: CT ZIP: 06431 BUSINESS PHONE: 2033732816 MAIL ADDRESS: STREET 1: 3135 EASTON TURNPIKE CITY: FAIRFIELD STATE: CT ZIP: 06431 10-K405 1 SECTIONS Business 2 Properties 18 Legal Proceedings 19 Submission of Matters to a Vote of Security Holders 23 Market for Stock 23 Selected Financial Data 24 Management's Discussion 24 Financial Statements 24 Disagreements 24 Directors and Executive Officers 25 Executive Compensation 26 Security Ownership 26 Certain Relationships 26 Exhibits, Financial Statement Schedules 27 Signatures 32 Differences Letter F-41 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) (x) Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 1995 Commission file number 1-35 or ( ) Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to --------- -------- GENERAL ELECTRIC COMPANY (Exact name of registrant as specified in charter) New York 14-0689340 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 3135 Easton Turnpike, Fairfield, CT 06431-0001 203/373-2211 (Address of principal executive offices) (Zip Code) (Telephone No.) SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: Title of each class Name of each exchange on which registered Common stock, par value $0.32 per share New York Stock Exchange Boston Stock Exchange There were 1,662,526,982 shares of common stock with a par value of $0.32 outstanding at March 3, 1996. These shares, which constitute all of the voting stock of the registrant, had an aggregate market value on March 3, 1996, of $127.8 billion. Affiliates of the Company beneficially own, in the aggregate, less than one-tenth of one percent of such shares. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x --- DOCUMENTS INCORPORATED BY REFERENCE The definitive proxy statement relating to the registrant's Annual Meeting of Share Owners, to be held April 24, 1996, is incorporated by reference in Part III to the extent described therein. 2 PART I ITEM 1. BUSINESS GENERAL Unless otherwise indicated by the context, the terms "GE," "GECS" and "GE Capital Services" are used on the basis of consolidation described in note 1 to the consolidated financial statements on page 45 of the 1995 Annual Report to Share Owners of General Electric Company. The financial section of such Annual Report to Share Owners (pages 25 through 64 of that document) is set forth in Part IV Item 14(a)(1) of this 10-K Report and is an integral part hereof. References in Parts I and II of this 10-K Report are to the page numbers of the 1995 Annual Report to Share Owners included in Part IV of this 10-K Report. Also, unless otherwise indicated by the context, "General Electric" means the parent company, General Electric Company. General Electric's address is 1 River Road, Schenectady, NY 12345- 6999; the Company also maintains executive offices at 3135 Easton Turnpike, Fairfield, CT 06431-0001. The "Company" (General Electric Company and consolidated affiliates) is one of the largest and most diversified industrial corporations in the world. From the time of General Electric's incorporation in 1892, the Company has engaged in developing, manufacturing and marketing a wide variety of products for the generation, transmission, distribution, control and utilization of electricity. Over the years, development and application of related and new technologies have broadened considerably the scope of activities of the Company and its affiliates. The Company's products include, but are not limited to, lamps and other lighting products; major appliances for the home; industrial automation products and components; motors; electrical distribution and control equipment; locomotives; power generation and delivery products; nuclear reactors, nuclear power support services and fuel assemblies; commercial and military aircraft jet engines; materials, including plastics, silicones and superabrasives; and a wide variety of high-technology products, including products used in medical diagnostic applications. The Company also offers a wide variety of services, including product support services; electrical product supply houses; electrical apparatus installation, engineering, repair and rebuilding services; and computer- related information services. The National Broadcasting Company, Inc. (NBC), a wholly-owned subsidiary, is engaged principally in furnishing network television services, in operating television stations, and in 3 providing cable programming and distribution services in the United States, Europe, Asia and Latin America. Through another wholly-owned subsidiary, General Electric Capital Services, Inc. (GECS), and its two principal subsidiaries, the Company offers a broad array of financial services including consumer financing, commercial and industrial financing, real estate financing, asset management and leasing, mortgage services, annuity and mutual fund sales, specialty insurance and reinsurance. Other services offered by GECS include satellite communications furnished by its subsidiary, GE Americom, Inc. The Company also licenses patents and provides technical services related to products it has developed, but such activities are not material to the Company. In November 1994, GE elected to terminate the operations of Kidder, Peabody Group Inc. (Kidder, Peabody), the GECS securities broker-dealer, by initiating an orderly liquidation of its assets and liabilities. As part of the liquidation plan, GE received securities of Paine Webber Group Inc. in exchange for certain broker-dealer assets and operations. Principal activities that were discontinued included securities underwriting; sales and trading of equity and fixed income securities; financial futures activities; advisory services for mergers, acquisitions and other corporate finance matters; merchant banking; research services; and asset management. This liquidation was substantially complete as of December 31, 1995. GE's Aerospace business segment, its subsidiary GE Government Services, Inc., and a component of GE that operated Knolls Atomic Power Laboratory under contract with the U.S. Department of Energy (together, GE Aerospace) were transferred on April 2, 1993, to a new company controlled by the shareholders of Martin Marietta Corporation (a predecessor company of Lockheed Martin Corporation). The businesses transferred provided high- technology products and services, such as automated test systems, electronics, avionic systems, computer software, armament systems, military vehicle equipment, missile system components, simulation systems, spacecraft, communication systems, radar, sonar, systems integration, and a variety of specialized services for government customers. Kidder, Peabody and GE Aerospace have been classified as discontinued operations in the 1995 Annual Report to Share Owners and throughout this report. Aggressive and able competition is encountered worldwide in virtually all of the Company's business activities. In many instances, the competitive climate is characterized by changing technology that requires continuing research and development commitments, and by capital-intensive needs to meet customer requirements. With respect to manufacturing operations, it is believed that, in general, GE has a leadership position (i.e., number one or number two) in most major markets served. The NBC Television Network is one of four major national commercial broadcast television networks. It also competes with two newly launched commercial broadcast networks, syndicated broadcast television programming and cable and satellite television programming activities. The businesses in which 4 GE Capital Services engages are subject to vigorous competition from various types of financial institutions, including commercial banks, thrifts, investment banks, credit unions, leasing companies, consumer loan companies, independent finance companies, finance companies associated with manufacturers, and insurance and reinsurance companies. GE has substantial export sales from the United States. In addition, the Company has majority, minority or other joint venture interests in a number of non-U.S. companies engaged primarily in manufacturing and distributing products and providing nonfinancial services similar to those sold within the United States. GECS' financial services operations outside the United States have expanded considerably over the past several years. INDUSTRY SEGMENTS The Company's operations are highly decentralized. The basic organization of the Company's continuing operations consists of 12 key businesses, which contain management units of differing sizes. For industry segment reporting purposes, the businesses are aggregated by the principal industries in which the Company participates. This aggregation is on a worldwide basis, which means that the operations of multi-industry non-U.S. affiliates' are classified by appropriate industry segment. Financial information on consolidated industry segments is presented on page 35 of the 1995 Annual Report to Share Owners in two parts: one for GE that includes GECS in the All Other segment on a one-line basis in accordance with the equity method of accounting, and one for GECS as a separate entity. For GE, five of the 12 key businesses (Aircraft Engines, Appliances, Power Systems, Plastics and NBC) represent individual segments (namely, Aircraft Engines, Appliances, Power Generation, Materials and Broadcasting, respectively). Except for "All Other," the remaining businesses are aggregated by the two industry segments in which they participate (Industrial Products and Systems, and Technical Products and Services). The All Other segment consists primarily of GECS' earnings, discussed above, and revenues derived from licensing use of GE technology to others. For GECS, revenues and operating profit are presented separately by the two industry segments in which it conducts its business (Financing and Specialty Insurance). There is appropriate elimination of the net earnings of GECS and the immaterial effect of transactions between GE and GECS segments to arrive at total consolidated data. Additional financial data and commentary on recent operating results for industry segments are reported on pages 34-37 of the 1995 Annual Report to Share Owners. Further details can be found in note 27 (pages 60 and 61 of that Report) to the consolidated financial statements. These data and 5 comments are for General Electric Company's continuing operations, except as otherwise indicated, and should be referred to in conjunction with the summary description of each of the industry segments which follows. AIRCRAFT ENGINES Aircraft Engines (8.7%, 9.5% and 11.8% of consolidated revenues in 1995, 1994 and 1993, respectively) produces, sells and services jet engines and related replacement parts for use in military and commercial aircraft. GE's military engines are used in a wide variety of aircraft that includes fighters, bombers, tankers, helicopters and surveillance aircraft. The CFM56, produced jointly by GE and Snecma of France, and GE's CF6 engines power aircraft in all categories of large commercial aircraft: short/medium, intermediate and long-range. Applications for the CFM56 engine include: Boeing's 737-300/-400/-500 series and the new 737-600X/- 700/-800 series; Airbus Industrie's A319, A320, A321 and A340 series; and military aircraft such as the KC-135R, E/KE-3 and E-6. The CF6 family of engines powers intermediate and long-range aircraft such as Boeing's 747 and 767 series, Airbus Industrie's A300, A310 and A330 series, and McDonnell Douglas' DC-10 and MD-11 series. The GE90 engine, which was certified by the Federal Aviation Administration in February 1995, is used to power Boeing's new 777 series twin-engine aircraft. The Company also produces jet engines for executive aircraft and regional commuter aircraft, and aircraft engine derivatives used for marine propulsion, mechanical drives and industrial power generation sources. The Company also provides maintenance and repair services for many models of engines, including engines manufactured by competitors. The worldwide competition in aircraft jet engines is intense. Both U.S. and export markets are important. Product development cycles are long and product quality and efficiency are critical to success. Research and development expenditures, both customer-financed and internally funded, are also important in this segment. Potential sales for any engine are limited by, among other things, its technological lifetime, which may vary considerably depending upon the rate of advance in the state of the art, by the small number of potential customers and by the limited number of airframes. Sales of replacement parts and services are an important part of the business. Aircraft engine orders tend to follow military and airline procurement cycles, although cycles for military and commercial engine procurements are different. U.S. procurements of military jet engines are affected by the government's response to changes in the global political and economic outlook. New aircraft and engines are also sold to commercial leasing enterprises, which invest in and provide such equipment to airlines. 6 In line with industry practice, sales of commercial jet aircraft engines often involve long-term financing commitments to customers. In making such commitments, it is GE's general practice to require that it have, or be able to establish, a secured position in the aircraft being financed. Under such airline financing programs, GE had issued loans and guaranties (principally guaranties) amounting to $1.4 billion at year-end 1995, and had entered into commitments totaling $1.5 billion to provide financial assistance on future aircraft engine sales. Estimated fair values of the aircraft securing these receivables and associated guaranties exceeded the related account balances or guarantied amounts at December 31, 1995. For current information about Aircraft Engines orders and backlog, see page 34 of the 1995 Annual Report to Share Owners. APPLIANCES Appliances (8.5%, 9.9% and 10.0% of consolidated revenues in 1995, 1994 and 1993, respectively) manufactures and/or markets a single class of product - major appliances - that includes refrigerators, electric and gas ranges, microwave ovens, freezers, dishwashers, clothes washers and dryers, and room air conditioning equipment. These are sold under GE, Hotpoint, RCA, Monogram and Profile brands as well as under private brands for retailers. GE microwave ovens and room air conditioners are mainly sourced from Asian suppliers while investment in Company-owned U.S. facilities is focused on refrigerators, dishwashers, ranges (primarily electric, but some gas) and home laundry equipment. A large portion of appliance sales is for the replacement market. Such sales are through a variety of retail outlets. The other principal market consists of residential building contractors who install appliances in new dwellings. GE has an extensive U.S. service network that supports its appliance business. Appliances continues to increase its operating presence in the global business arena and participates in numerous manufacturing and distribution joint ventures around the world. In 1995, an agreement was reached with Kojima, Japan's second largest electronics retailer, to sell GE appliances directly into the retail market in Japan at a lower ultimate cost to consumers. In 1993, a joint venture, Godrej-GE, was formed with India's largest appliance manufacturer, Godrej & Boyce Ltd. Also in 1993, Mabe, a joint venture in Mexico that produces high-quality gas ranges for the Mexican and U.S. markets, completed a new top-mount refrigerator facility and opened a new technology center. 7 Markets for appliances are influenced by economic trends such as increases or decreases in consumer disposable income, availability of credit and housing construction. Competition is very active in all products and comes from a number of principal manufacturers and suppliers. An important factor is cost; considerable competitive emphasis is placed on minimizing manufacturing and distribution costs and on reducing cycle time from order to product delivery. Other significant factors include brand recognition, quality, features offered, innovation, customer responsiveness and appliance service capability. A number of processes, such as Quick Response, New Product Introduction and Quick Market Intelligence, have been implemented to improve GE's competitiveness in these areas. An example of a significant initiative is "Save the Park," a joint initiative between management and unions, which was implemented during 1993 at Appliance Park in Louisville, Ky., to streamline processes, improve quality, realize significant savings and, ultimately, prevent relocation to alternative sites. In 1995, two major investment projects related to that initiative were completed: a $70 million upgrade of the large top-mount refrigeration plant and a $100 million redesign of the home laundry plant. BROADCASTING Broadcasting (5.6% of consolidated revenues in 1995, 1994 and 1993) consists primarily of the National Broadcasting Company (NBC). NBC's principal businesses are the furnishing within the United States of network television services to affiliated television stations, the production of live and recorded television programs, the operation, under licenses from the Federal Communications Commission (FCC), of television broadcasting stations, the operation of five cable/satellite networks around the world, and investment and programming activities in multimedia and cable television. The NBC Television Network is one of four major U.S. commercial broadcast television networks and serves more than 200 affiliated stations within the United States. At December 31, 1995, NBC owned and operated six television stations located in Chicago; Los Angeles; Miami; New York; Philadelphia; and Washington, D.C. In 1995, NBC announced the purchase of Outlet Communications, Inc. and its three television stations serving Columbus, Ohio; Providence, R.I.; and Raleigh, N.C. That acquisition was completed in February 1996. Broadcasting operations, including the NBC Television Network and owned stations, are subject to FCC regulation. NBC's operations include investment and programming activities in cable television, principally through its ownership of CNBC, America's Talking, NBC Super Channel, Canal de Noticias NBC and CNBC Asia, as well as equity investments in Arts and Entertainment, Court TV, American Movie Classics, Bravo, Prime Network and regional Sports Channels across the United States. In 1995, NBC launched NBC Digital Publishing, which publishes CD-ROMs, and NBC Online Ventures, which establishes news, sports 8 and entertainment sites on the World Wide Web and Microsoft Network. Internationally, NBC launched CNBC Asia, the first 24-hour business news channel to be broadcast live from three continents. Also in 1995, NBC secured United States television rights to the 2000, 2002, 2004, 2006 and 2008 Olympics. Further, NBC completed a transaction with CBS, Inc. (CBS) that involved an exchange of the assets of NBC's Denver station for the assets of the CBS station in Philadelphia, as well as an exchange of signals and transmitters in Miami. The transaction also involved the sale to CBS of NBC's station in Salt Lake City. In addition, NBC and Microsoft Corporation announced their intent to create two joint ventures, a 24-hour news and information cable channel and a comprehensive interactive on-line news and information service. NBC will contribute the assets of America's Talking and NBC Desktop, and Microsoft will contribute in excess of $200 million to the joint ventures. INDUSTRIAL PRODUCTS AND SYSTEMS Industrial Products and Systems (14.6%, 15.6% and 15.4% of consolidated revenues in 1995, 1994 and 1993, respectively) encompasses lighting products, electrical distribution and control equipment, transportation systems, motors, industrial automation products and GE Supply. No "similar" class of products or services within the segment approached 10% of any year's consolidated revenues during the three years ended December 31, 1995. Customers for many of these products and services include electrical distributors, original equipment manufacturers and industrial end users. Lighting includes a wide variety of lamps - incandescent, fluorescent, high intensity discharge, halogen and specialty - as well as outdoor lighting fixtures, wiring devices and quartz products. Markets and customers are global. In 1995, the Lighting business acquired the remaining interest in P.T. GE Angkasa Lighting in Indonesia, a joint venture that was formed the previous year. In 1994, Lighting purchased Focos S.A. in Mexico and Lindner Licht GmbH in Germany. The business also has strengthened its position in Asia with the formation of two joint ventures, GE Jiabao Lighting Company, Ltd. in China, completed in 1994, and Hitachi GE Lighting Ltd. in Japan, completed in 1993. Another Lighting venture, GE Apar Lighting Private Ltd., continued to expand with investments in new facilities and capacity in India. Markets for lighting products are extremely varied, ranging from household consumers to commercial and industrial end users and original equipment manufacturers. Electrical Distribution and Control includes power delivery and control products such as transformers, electricity meters, relays, capacitors and arresters sold for installation in commercial, industrial and residential facilities. In 1995, to bolster European market share and 9 global competitiveness, Electrical Distribution and Control (ED&C) acquired a majority interest in the low voltage business of AEG, a European manufacturer. Also in 1995, GE acquired the remaining interest in the GE Power Controls joint venture in Europe and Multilin, a leading manufacturer of electronics in Canada. Transportation Systems includes locomotives, transit propulsion equipment, motors for drilling devices and motorized wheels for off-highway vehicles such as those used in mining operations. Locomotives are sold worldwide, principally to railroads, while markets for other products include state and urban transit authorities and industrial users. In 1995, Transportation Systems formed a joint venture with Harris Corporation, GE- Harris Railway Electronics, that will expand its market focus to include communications and logistics systems for locomotive, train and fleet control. In 1994, the business began production of its alternating current (AC) locomotives. More than 600 of the 4,400 horsepower units are now in service on four railroads. A new 6,000 horsepower unit is under development and pre-production models are expected to be available to customers in 1996. For further information about Transportation Systems orders and backlog, see page 34 of the 1995 Annual Report to Share Owners. Motors and Industrial Systems includes electric motors and related products, installation, engineering and repair services for the appliance, commercial, industrial, heating, air conditioning, automotive and utility markets. Electrical and electronic industrial automation products, including drive systems, are customized controls and drives for metal and paper processing, mining, utilities and marine applications. Installation, engineering and repair services include management and technical expertise for power plants and other large projects; maintenance, inspection, repair and rebuilding of electrical apparatus produced by GE and others; and on- site engineering and upgrading of already installed products sold by GE and others. Motor products are used within GE and also are sold externally. In 1995, GE formed a joint venture with Fuji Electric of Japan to jointly pursue global sales of standard drives. Industrial automation products cover a broad range of electrical and electronic products with emphasis on manufacturing and advanced engineering automation applications. Through a 50-50 joint venture (GE Fanuc Automation Corporation) which has two operating subsidiaries (one in North America and the other in Europe), GE offers a wide range of high-technology industrial automation systems and equipment, including computer numerical controls and programmable logic controls. GE Supply operates a U.S. network of electrical supply houses and through its subsidiary, GE Supply Mexico, operates three supply houses in Mexico. GE Supply offers products of General Electric and other manufacturers to electrical contractors and to industrial, commercial and utility customers. 10 Markets for industrial products generally lag overall economic slowdowns as well as subsequent recoveries. U.S. industrial markets are undergoing significant structural changes reflecting, among other factors, international competition and pressures to modernize productive capacity. Additional information about certain of GE's industrial businesses follows. Competition for lighting products comes from a number of global firms as well as from smaller regional competitors and is based principally on brand awareness, price, distribution and product innovation. The nature of lighting products and market diversity make the lighting business somewhat less sensitive to economic cycles than other businesses in this segment. Electrical distribution and control equipment is sold to distributors, electrical contractors, large industrial users and original equipment manufacturers. Markets are affected principally by levels of (and cycles in) residential and non-residential construction as well as domestic industrial plant and equipment expenditures. Competitors include other large manufacturers, with international competition in U.S. markets increasing. In transportation systems, demand is historically cyclical. There is strong worldwide competition from major firms engaged in the sale of transportation equipment. External sales of motors and related products are principally to manufacturers of original equipment, distributors and industrial users. Competition includes other motor and component producers, integrated manufacturers and customers' own in-house capability. Markets for these products are price competitive, putting emphasis on economies of scale and manufacturing technology. Other market factors include energy-driven technological changes and the cyclical nature of the consumer end-user market. Competition in industrial automation is intense and comes from a number of U.S. and international sources. MATERIALS Materials (9.5%, 9.5% and 9.1% of consolidated revenues in 1995, 1994 and 1993, respectively) includes high-performance plastics used by compounders, molders and major original equipment manufacturers for use in a variety of applications, including fabrication of automotive parts, computer enclosures, major appliance parts and construction materials. Products also include ABS resins, silicones, superabrasives and laminates. Market opportunities for many of these products are created by substituting resins for other materials, which provides customers with productivity through improved material performance at lower cost. These materials are 11 sold to a diverse worldwide customer base, mainly manufacturers. The business has a significant operating presence around the world and participates in numerous manufacturing and distribution joint ventures. The business environment is characterized by technological innovation and heavy capital investment. Being competitive requires emphasis on efficient manufacturing process implementation and significant resources devoted to market and application development. Competitors include large, technology-driven suppliers of the same, as well as other functionally equivalent, materials. The business is cyclical and is subject to variations in price and in the availability of raw materials, such as cumene, benzene and methanol. Adequate capacity to satisfy growing demand and anticipation of new product or material performance requirements are key factors affecting competition. In 1995, the business continued development of a new polycarbonate manufacturing facility in Spain that will add capacity of 130,000 tons per year and will utilized a new manufacturing process co-developed with our manufacturing partner, Mitsui Petrochemicals of Japan. POWER GENERATION Power Generation (9.3%, 9.9% and 9.9% of consolidated revenues in 1995, 1994 and 1993, respectively) serves utility, industrial and governmental customers worldwide with products for the generation of electricity, with related installation, engineering and repair services and with environmental systems. Worldwide competition continues to be intense. For information about orders and backlog, see page 36 of the 1995 Annual Report to Share Owners. Gas turbines, which for the past several years have been the fastest growing part of this segment, are used principally as packaged power plants for electric utilities and for industrial cogeneration and mechanical drive applications. Through a licensing arrangement with GEC Alsthom of France, GE has access to the European gas turbine market. Centrifugal compressors are sold for application in gas reinjection, pipeline services and such process applications as refineries and ammonia plants. Steam turbine-generators are sold to the electric utility industry, to the U.S. Navy and, for cogeneration, to private industrial customers. Marine steam turbines also are sold to the U.S. Navy. In 1994, the business acquired an 81% interest in Nuovo Pignone, an Italian energy equipment manufacturer, further strengthening its position in Europe, North Africa, the Middle East and Asia. There have been no nuclear power plant orders in the United States since the mid-1970s. GE is currently participating in the construction of nuclear power plants in Japan. GE continues to invest in advanced technology development and to focus its resources on refueling and servicing its installed boiling-water reactors. 12 As discussed in the previous paragraph, there is intense worldwide competition for power generation products and services. The markets for most power generation products and services are worldwide and as a result are sensitive to the economic and political environment of each country in which the business participates. In the United States, many power generation markets are sensitive to the financial condition of the electric utility industry as well as the electric power conservation efforts by power users. Internationally, the influence of petroleum and related prices has a large impact on power generation markets. TECHNICAL PRODUCTS AND SERVICES Technical Products and Services (6.3%, 7.1% and 7.5% of consolidated revenues in 1995, 1994 and 1993, respectively) consists of technology operations providing products, systems and services to a variety of customers. Principal businesses included in this segment are Medical Systems and Information Services. Medical Systems include magnetic resonance (MR) scanners, computed tomography (CT) scanners, x-ray, nuclear imaging, ultrasound, and other diagnostic and therapy equipment and supporting services sold to hospitals and medical facilities worldwide. GE Medical Systems has a significant operating presence in Europe and Asia, including the operations of its affiliates, GE Medical Systems S.A. (France), GE Yokogawa Medical Systems (Japan) and WIPRO GE Medical Systems (India). Acquisitions and joint ventures continue to expand GE Medical Systems' global activities. In 1995, the business expanded its service offerings by entering into an agreement with Columbia/HCA, the largest multi-hospital system in the United States, to manage all of its diagnostic imaging equipment service. In 1993, GE Medical Systems' increased its presence in Asia through the purchase of an x-ray manufacturer in Japan, the addition of manufacturing capacity in China, and the formation of new sales and service joint ventures in Taiwan and Thailand. Also during 1993, the business opened new facilities in Argentina, Brazil and Mexico. Information services are provided to over 40,000 customers around the world and to internal customers by GE Information Services (GEIS). GEIS is a leading supplier of business productivity solutions, through the combination of electronic commerce services, inter-business process consulting and trading community management. Such solutions assist customers in lowering their costs, reducing cycle times, and improving quality in purchasing, logistics, and supplier and distribution channel management. In May 1994, Ameritech Corporation, a leading telecommunications company, invested $472 million in GEIS that is intended to convert to a 30% equity position in that business in the near future. 13 In 1993, GEIS exercised an option to purchase the remaining shares of International Network Services, Ltd., a leading European supplier of electronic data interchange services and software. Serving a diversity of customers with special needs (which are rapidly changing in areas such as medical and information systems), businesses in this segment compete against a variety of both U.S. and non- U.S. manufacturers or service operations including, in certain cases, customer in-house capabilities. Technological competence and innovation, excellence in design, high product performance, quality of service and competitive pricing are among the key factors affecting competition in the markets for these products and services. Throughout the world, demands on health care providers to control costs have become much more important. Medical Systems is responding with cost-effective technologies that improve operating efficiency and clinical productivity. See page 36 of the 1995 Annual Report to Share Owners for information about orders and backlog of GE Medical Systems' products. ALL OTHER GE All Other GE consists mostly of earnings of and investment in GECS, a wholly owned consolidated affiliate, which is accounted for on a one-line basis in accordance with the equity method of accounting. Other ongoing operations (0.4% of consolidated revenues in 1995, 1994 and 1993) mainly involve licensing the use of GE's know-how and patents to others. A separate discussion of segments within GECS appears below. GECS SEGMENTS GECS consists of the ownership of two principal affiliates that, together with their affiliates and other investments, constitute General Electric Company's principal financial services activities. GECS owns all of the common stock of General Electric Capital Corporation (GE Capital or GECC) and GE Global Insurance Holding Corporation (GE Global Insurance or GIH), the principal subsidiary of which is Employers Reinsurance Corporation (ERC). For industry segment purposes, Financing (27.2%, 24.8% and 22.3% of consolidated revenues in 1995, 1994 and 1993, respectively) consists solely of noninsurance activities of GE Capital; Specialty Insurance (10.6%, 8.2% and 8.7% of consolidated revenues in 1995, 1994 and 1993, respectively) consists of the activities of ERC as well as the activities of insurance entities discussed on page 15; and All Other is GECS corporate activities not identifiable with specific industry segments. 14 ADDITIONAL INFORMATION FOLLOWS. Financing activities of GE Capital, none of which individually constitutes as much as 10% of consolidated revenues, are summarized below. Very little of the financing provided by GE Capital involves products that are manufactured by GE. * Consumer services -- private-label and bank credit card loans, personal loans, time sales and revolving credit and inventory financing for retail merchants, auto leasing and inventory financing, mortgage servicing, and annuity and mutual fund sales. * Specialized financing -- loans and financing leases for major capital assets, including industrial facilities and equipment and energy-related facilities; commercial and residential real estate loans and investments; and loans to and investments in management buyouts, including those with high leverage, and corporate recapitalizations. * Equipment management -- leases, loans and asset management services for portfolios of commercial and transportation equipment, including aircraft, trailers, auto fleets, modular space units, railroad rolling stock, data processing equipment, oceangoing containers and satellites. * Mid-market financing -- loans and financing and operating leases for middle-market customers, including manufacturers, distributors and end users, of a variety of equipment, including data processing equipment, medical and diagnostic equipment, and equipment used in construction, manufacturing, office applications and telecommunications activities. GE Capital continues to experience broad growth from both internal sources and through acquisitions. In 1995, GE Capital's consumer services operations continued to expand its global presence through the acquisitions of SOVAC SA and Credit de l'Est (France), the Australian Retail Financial Network (Australia), the Pallas Group (United Kingdom), and the purchase of the remaining interest in United Merchants Finance Ltd. (Hong Kong). In 1994, it expanded into Japan with the acquisition of the consumer financing business of Minebea Co., Ltd., which provides a variety of consumer financial products and services, including consumer credit cards, home improvement loans, educational loans and collections. Consumer services operations also acquired Harcourt General's insurance businesses, which underwrite individual life, health, accident and credit insurance annuities. Mid-market financing acquired Northern Telecom Finance 15 Corporation, which provides financing to Northern Telecom's customers and dealers. In 1993, Consumer Services operations acquired GNA Corporation from Weyerhauser Company and Weyerhauser Financial Services, Inc. and United Pacific Life Insurance Company from Reliance Insurance Company and its parent, Reliance Group Holdings, Inc. Together, these two acquisitions constitute GECS' annuity business, a business that writes and markets tax- deferred annuities and sells proprietary and third-party mutual funds through independent agents and financial institutions. Other 1993 acquisitions expanded GECS' financial services activities in Europe, Scandinavia and Canada. GE Capital's activities are subject to a variety of federal and state regulations including, at the federal level, the Consumer Credit Protection Act, the Equal Credit Opportunity Act and certain regulations issued by the Federal Trade Commission. A majority of states have ceilings on rates chargeable to customers in retail time sales transactions, installment loans and revolving credit financing. Certain GECS consolidated affiliates are restricted from remitting funds to GECS in the form of dividends or loans by a variety of regulations, the purpose of which is to protect affected insurance policyholders, depositors or investors. GECS' international operations are also subject to regulation in their respective jurisdictions. To date, such regulations have not had a material adverse effect on GE Capital's volume of financing operations or profitability. Common carrier services of GE Americom are subject to regulation by the Federal Communications Commission. On March 28, 1991, GE entered into an agreement to make payments to GE Capital, constituting additions to pre-tax income, to the extent necessary to cause the ratio of earnings to fixed charges of GE Capital and consolidated affiliates (determined on a consolidated basis) to be not less than 1.10 for the period, as a single aggregation, of each GE Capital fiscal year commencing with fiscal year 1991. The agreement can only be terminated by written notice and termination is not effective until the third anniversary of the date of such notice. GE Capital's ratios of earnings to fixed charges for the years 1995, 1994 and 1993, respectively, were 1.51, 1.63 and 1.62, substantially above the level at which payments would be required. Under a separate agreement, GE has committed to make a capital contribution to GE Capital in the event certain GE Capital preferred stock is redeemed and such redemption were to cause the GE Capital debt-to-equity ratio, excluding from equity all net unrealized gains and losses on investment securities, to exceed 8 to 1. Specialty Insurance includes ERC, a multiple-line property and casualty reinsurer that writes all lines of reinsurance other than title and annuities, and other insurance activities of GE Capital. ERC reinsures property and casualty risks written by more than 1,000 U.S. and non-U.S. insurers, and has subsidiaries located in the United Kingdom, Denmark and, 16 beginning in 1995, Germany. By means of other subsidiaries, ERC writes property and casualty reinsurance through brokers and provides reinsurance brokerage services. ERC also writes certain specialty lines of insurance on a direct basis, principally excess workers' compensation for self- insurers, libel and allied torts, and errors and omissions coverage for insurance and real estate agents and brokers. In 1995, ERC expanded its European presence through the acquisitions of Frankona Reinsurance and Aachen Reinsurance in Germany. In December 1994, certain life and property and casualty affiliates of GE Capital were transferred to ERC. These affiliates had been managed by ERC since 1986. ERC is licensed in all states of the United States, the District of Columbia, certain provinces of Canada and in other jurisdictions. The other insurance activities of GECS consist of GE Capital affiliates that provide various forms of insurance. Financial Guaranty Insurance Company provides financial guaranty insurance, principally on municipal bonds and structured finance issues. GE Capital's mortgage insurance operations are engaged in providing primary and, on a limited basis, pooled private mortgage insurance. Other affiliates provide creditor insurance for international retail borrowers and, for GE Capital customers, credit life and certain types of property and casualty insurance. Businesses in the Specialty Insurance segment are generally subject to regulation by various insurance regulatory agencies. GEOGRAPHIC SEGMENTS, EXPORTS FROM THE U.S. AND TOTAL INTERNATIONAL OPERATIONS Financial data for geographic segments (based on the location of the Company operation supplying goods or services and including exports from the U.S. to unaffiliated customers) are reported in note 28 to consolidated financial statements on page 62 of the 1995 Annual Report to Share Owners. Additional financial data about GE's exports from the U.S. and total international operations are on page 38 of the 1995 Annual Report to Share Owners. ORDERS BACKLOG See pages 34, 36, 42 and 43 of the 1995 Annual Report to Share Owners for information about GE's backlog of unfilled orders. RESEARCH AND DEVELOPMENT Total expenditures for research and development were $1,892 million in 1995. Total expenditures had been $1,741 million in 1994 and $1,955 million in 1993. Of these amounts, $1,299 million in 1995 was GE-funded 17 ($1,176 million in 1994 and $1,297 million in 1993); and $593 million in 1995 was funded by customers ($565 million in 1994 and $658 million in 1993), principally the U.S. government. Aircraft Engines accounts for the largest share of GE's R&D expenditures from both Company and customer funds. Other significant expenditures of Company and customer research and development funds were for Power Systems, Medical Systems and Plastics. Approximately 7,900 person-years of scientist and engineering effort were devoted to research and development activities in 1995, with about 79% of the time involved primarily in GE-funded activities. ENVIRONMENTAL MATTERS See page 42 of GE's 1995 Annual Report to Share Owners for a discussion of environmental matters. EMPLOYEE RELATIONS At year-end 1995, General Electric Company and consolidated affiliates employed 222,000 persons, of whom approximately 150,000 were in the United States. For further information about employees, see page 43 of the 1995 Annual Report to Share Owners. Approximately 40,700 GE manufacturing, engineering and service employees in the United States are represented for collective bargaining purposes by a total of approximately 170 different local collective bargaining groups. A majority of such employees is represented by union locals that are affiliated with, and bargain in conjunction with, the International Union of Electronic, Electrical, Salaried, Machine and Furniture Workers (IUE-AFL-CIO). During 1994, General Electric Company negotiated three-year contracts with unions representing a substantial majority of those United States employees who are represented by unions. Most of these contracts will terminate in June 1997. NBC is party to approximately 100 labor agreements covering about 2,000 staff employees (and a large number of freelance employees) in the United States. These agreements are with various labor unions, expire at various dates and are generally for a term of three to four years. Contracts covering approximately one fourth of NBC's staff employees have expired and are currently under negotiation. 18 EXECUTIVE OFFICERS See Part III, Item 10 of this 10-K Report for information about Executive Officers of the Registrant. OTHER Because of the diversity of the Company's products and services, as well as the wide geographic dispersion of its production facilities, the Company uses numerous sources for the wide variety of raw materials needed for its operations. The Company has not been adversely affected by inability to obtain raw materials. The Company owns, or holds licenses to use, numerous patents. New patents are continuously being obtained through the Company's research and development activities as existing patents expire. Patented inventions are used both within the Company and licensed to others, but no industry segment is substantially dependent on any single patent or group of related patents. About 3% of consolidated revenues in 1995 (4% of GE revenues) were from sales of goods and services to agencies of the U.S. government, which is the Company's largest single customer. About 2% of consolidated revenues in 1995 (3% of GE revenues) were defense-related sales of aircraft engine goods and services. About 4% of consolidated revenues in 1994 (5% of GE revenues) were from sales of goods and services to agencies of the U.S. government. About 3% of consolidated revenues in 1994 (4% of GE revenues) were defense- related sales of aircraft engine goods and services. In 1993 about 5% of consolidated revenues (7% of GE revenues) were from sales of goods and services to agencies of the U.S. government. About 4% of consolidated revenues in 1993 (6% of GE revenues) were defense- related sales of aircraft engine goods and services. ITEM 2. PROPERTIES Manufacturing operations are carried on at approximately 136 manufacturing plants located in 30 states in the United States and Puerto Rico and at some 122 manufacturing plants located in 25 other countries. 19 ITEM 3. LEGAL PROCEEDINGS GENERAL As previously reported, the directors (other than Messrs. Calloway, Gonzalez, Opie, Penske and Warner) and certain officers are defendants in a civil suit purportedly brought on behalf of the Company as a shareholder derivative action by Leslie McNeil, Harold Sachs, Arun Shingala and Paul and Harriet Luts (the McNeil action) in New York State Supreme Court on November 19, 1991. The suit alleges the Company was negligent and engaged in fraud in connection with the design and construction of containment systems for nuclear power plants and contends that, as a result, GE has incurred significant financial liabilities and is potentially exposed to additional liabilities from claims brought by the Company's customers. The suit alleges breach of fiduciary duty by the defendants and seeks unspecified compensatory damages and other relief. On March 31, 1992, the defendants filed motions to dismiss the suit. On September 28, 1992, the court denied the motions as premature but ruled that they may be renewed after the completion of limited discovery. Defendants moved for reconsideration of that order, and on April 3, 1993, the court granted defendants' motion for reconsideration and directed that discovery be stayed pending the filing of an amended complaint. Plaintiffs filed an amended complaint on March 18, 1994, alleging breach of fiduciary duty, waste and indemnification claims. The defendants' time for responding to the amended complaint has been extended until 30 days following the completion of discovery. The defendants believe the plaintiffs' claims are without merit. As previously reported, on September 15, 1992, Evelyn Benfield filed a shareholder derivative action in United States District Court in Cincinnati, Ohio, purportedly on behalf of the Company, seeking compensatory damages and equitable relief arising out of the alleged failure to implement effective internal controls to prevent government contract fraud. The complaint names as defendants all of the current directors (except Messrs. Dammerman, Gonzalez, Opie, Penske and Warner), certain former directors, a former officer, and a former employee of the Company. Plaintiff claimed, in substance, that various defendants breached their fiduciary duties to the Company under state law by either participating in or failing to prevent government contract fraud. Plaintiff's claims were based primarily upon the fact that, in July 1992, the Company pled guilty to four federal felony counts and settled a related federal False Claims Act civil suit, all of which were related to diversions of funds in connection with the Company's sale of military aircraft engines to Israel. The Company paid a fine of $9.5 million and simultaneously agreed to pay $59.5 million to settle the False Claims Act 20 suit. On December 3, 1993, the court approved a settlement of the derivative action. Under the terms of the settlement, the Company received a payment of $19.5 million from an insurance policy that it maintains to cover officers' liability, less plaintiff's counsel fees and expenses awarded by the court. The defendants denied all allegations of wrongdoing, and all parties to the action agreed that the settlement was premised upon the litigation risks associated with the claims that a single former officer non-willfully failed to implement effectively the Company's compliance policies and procedures. In agreeing to resolve this matter, plaintiff did not contest the director-defendants' position that they had lawfully discharged their duties to GE and that the Company, at all relevant times, had in existence detailed plans and procedures designed to promote and enforce compliance with relevant laws. One share owner appealed the United States District Court's order approving the settlement. The United States Court of Appeals for the Sixth Circuit dismissed the appeal on November 10, 1994, and on January 12, 1995, denied the share owner's petition for rehearing. The case was concluded on June 25, 1995, when the United States Supreme Court denied the shareowner's petition for a writ of certiorari. As previously reported, the directors (except Messrs. Dammerman, Opie and Penske) and certain former directors were defendants in a civil suit purportedly brought on behalf of the Company as a share owner derivative action (the Bildstein action) which was commenced in New York State Supreme Court in January 1994. The suit sought compensatory damages arising out of the purported failure of the defendants to prevent alleged government contract fraud and alleged violations of the Foreign Corrupt Practices Act in connection with U.S. government-funded sales of military equipment to Egypt by a unit of the Company's former GE Aerospace component. The GE Aerospace businesses were transferred to a new company controlled by the shareholders of Martin Marietta Corporation (a predecessor company of Lockheed Martin Corporation) in 1993. The suit claimed that the risk of litigation arising from the alleged wrongdoing caused the Company to receive less than it would have otherwise received in connection with the transfer of GE Aerospace. On April 6, 1994, the Company and all other defendants moved to dismiss the complaint based on the plaintiff's failure to make a pre-litigation demand, among other reasons. On September 30, 1994, the court dismissed the complaint. On December 18, 1995, the Appellate Division of the Supreme Court of New York affirmed the dismissal. 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 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 21 stockholders of Martin Marietta. 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 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. This motion remains pending. 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. As previously reported, following the Company's announcement on April 17, 1994, of a $210 million charge to net earnings based upon its discovery of false trading profits at its indirect subsidiary, Kidder, Peabody & Co., Incorporated ("Kidder"), the United States Securities and Exchange Commission ("SEC"), the United States Attorney for the Southern District of New York, and the New York Stock Exchange initiated investigations relating to the false trading profits. On January 9, 1996, the SEC initiated administrative enforcement proceedings against the former head of Kidder's government securities trading desk, Joseph Jett, alleging that he engaged in securities fraud and other violations and against two of his former supervisors for failure to supervise. Also, two civil suits purportedly brought on behalf of the Company as shareholder derivative actions were filed in New York State Supreme Court in New York County. Both suits claim that the Company's directors breached their fiduciary duties to the Company by failing to adequately supervise and control the Kidder employee responsible for the irregular trading. One suit, claiming damages of over 22 $350 million, was filed on May 10, 1994, by the Teachers' Retirement System of Louisiana against the Company, its directors (other than Messrs. Dammerman, Opie and Penske), Kidder, its parent, Kidder, Peabody Group Inc., and certain of Kidder's former officers and directors. The other suit was filed on June 3, 1994, by William Schrank and others against the Company's directors claiming unspecified damages and other relief. On May 19, 1995, the Company and the director defendants moved to dismiss the amended consolidated complaint for failure to make a pre-litigation demand, among other reasons. In addition, various shareholders of the Company have filed two purported class action suits claiming that the Company and Kidder, and certain of Kidder's former officers and employees, allegedly violated federal securities laws by issuing statements concerning the Company's financial condition that included the false trading profits at Kidder, and seeking compensatory damages for shareholders who purchased the Company's stock beginning as early as January 1993. The defendants filed motions to dismiss these purported class action suits. On October 4, 1995, the court dismissed the complaint against the Company, but denied the motion to dismiss the complaint against Kidder. On November 3, 1995, the plaintiffs in the case against the Company appealed the trial court's dismissal of their complaint to the Second Circuit Court of Appeals. ENVIRONMENTAL As previously reported, in September of 1993, the Environmental Protection Agency notified the Company that it was seeking at least $600,000 in penalties for alleged violations of the Clean Air Act at its Lynn, Massachusetts, Aircraft Engines facility. The allegations include the failure to undergo required permit reviews. The Company has tentatively agreed to settle the matter for $400,000. In January 1995, the Louisiana Department of Environmental Quality announced that it was seeking a penalty of $101,884 for alleged violations of its groundwater protection act. The Company has requested a hearing and settlement discussions are underway. 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. Settlement negotiations are underway. ___________________________________ 23 It is the view of management that none of the above described proceedings will have a material effect on the Company's consolidated earnings, liquidity or competitive position. For further information regarding environmental matters, see page 42 of GE's 1995 Annual Report to Share Owners. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS With respect to "Stock Exchange Information", in the United States, GE common stock is listed on the New York Stock Exchange (its principal market) and on the Boston Stock Exchange. GE common stock also is listed on certain foreign exchanges, including The Stock Exchange, London. Trading, as reported on the New York Stock Exchange, Inc., Composite Transactions Tape, and dividend information follows:
- ------------------------------------------------------------------------ Common stock market price ------------------------- Dividends (In dollars) High Low declared - ------------------------------------------------------------------------ 1995 Fourth quarter $ 73 1/8 $ 61 $ .46 Third quarter 64 5/8 56 3/8 .41 Second quarter 59 1/4 53 3/8 .41 First quarter 56 49 7/8 .41 1994 Fourth quarter 51 7/8 45 3/8 .41 Third quarter 51 3/8 46 1/4 .36 Second quarter 50 3/8 45 .36 First quarter 54 7/8 48 1/4 .36 - ------------------------------------------------------------------------
24 As of December 31, 1995, there were about 459,000 share owner accounts of record. ITEM 6. SELECTED FINANCIAL DATA Reported as data for revenues; earnings from continuing operations; earnings from continuing operations per share; earnings (loss) from discontinued operations; earnings before accounting changes; net earnings; net earnings per share; dividends declared; dividends declared per share; long-term borrowings; and total assets of continuing operations appearing on page 43 of the Annual Report to Share Owners for the fiscal year ended December 31, 1995. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Reported on pages 32-34 and 36-43 (and graphs on pages 32, 33, 37, 38, 39, 40, 41 and 42) of the Annual Report to Share Owners for the fiscal year ended December 31, 1995. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA See index under item 14. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. 25 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT Executive Officers of the Registrant (As of March 20, 1996)
Date assumed Executive Officer Name Position Age position - ---- -------- --- ---------------- John F. Welch, Jr. Chairman of the Board and Chief Executive Officer 60 April 1981 Philip D. Ameen Vice President and Comptroller 47 April 1994 James R. Bunt Vice President and Treasurer 54 January 1993 David L. Calhoun Vice President, GE Transportation Systems 38 June 1995 William J. Conaty Senior Vice President, Human Resources 50 October 1993 Dennis D. Dammerman Senior Vice President, Finance 50 March 1984 Lewis S. Edelheit Senior Vice President, Research and Development 53 November 1992 Paolo Fresco Vice Chairman and Executive Officer 62 October 1987 Dale F. Frey Vice President and President, GE Investment Corporation 63 March 1986 Benjamin W. Heineman, Jr. Senior Vice President, General Counsel and Secretary 52 September 1987 W. James McNerney, Jr. Senior Vice President, GE Lighting 46 January 1992 Eugene F. Murphy Senior Vice President, GE Aircraft Engines 60 October 1986 Robert L. Nardelli Senior Vice President, GE Power Systems 47 February 1992 Robert W. Nelson Vice President, Financial Planning and Analysis 55 September 1991 John D. Opie Vice Chairman of the Board and Executive Officer 58 August 1986 Gary M. Reiner Vice President, Business Development 41 January 1991 Gary L. Rogers Senior Vice President, GE Plastics 51 December 1989 James W. Rogers Vice President, GE Motors and Industrial Systems 45 May 1991 J. Richard Stonesifer Senior Vice President, GE Appliances 59 January 1992 John M. Trani Senior Vice President, GE Medical Systems 51 September 1986 Lloyd G. Trotter Vice President, GE Electrical Distribution and Control 50 November 1992
All Executive Officers are elected by the Board of Directors for an initial term which continues until the first Board meeting following the next annual statutory meeting of share owners and thereafter are elected for one-year terms or until their successors have been elected. 26 All Executive Officers have been executives of GE for the last five years except Robert L. Nardelli and Lewis S. Edelheit. Mr. Nardelli, who was an employee of GE from June 1971 through June 1988, was Executive Vice President and General Manager of J. I. Case, a manufacturer of construction equipment and farm machinery, from July 1988 to May 1991, and thereafter President of Camco, a Canadian subsidiary of GE that manufactures, distributes, sells and services appliances, until February 1992. Dr. Edelheit, who was an employee of GE from 1969 through 1985, was President and CEO of Quantum Medical Systems, Inc. (Quantum) from 1986 to August 1991, and thereafter Manager - Electronic Systems Research Center, GE Corporate Research and Development Laboratory, until November 1992. Quantum is a venture capital-backed medical ultrasound company that was acquired by Siemens A.G. in July 1990. The remaining information called for by this item is incorporated by reference to "Election of Directors" in the definitive proxy statement relating to the registrant's Annual Meeting of Share Owners to be held April 24, 1996. ITEM 11. EXECUTIVE COMPENSATION Incorporated by reference to "Board of Directors and Committees," "Summary Compensation Table," "Stock Appreciation Rights and Stock Options" and "Retirement Benefits" in the definitive proxy statement relating to the registrant's Annual Meeting of Share Owners to be held April 24, 1996. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Incorporated by reference to "Information relating to Directors, Nominees and Executive Officers" in the registrant's definitive proxy statement relating to its Annual Meeting of Share Owners to be held April 24, 1996. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Incorporated by reference to "Certain Transactions" in the registrant's definitive proxy statement relating to its Annual Meeting of Share Owners to be held April 24, 1996. 27 ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a)1. Financial statements applicable to General Electric Company and consolidated affiliates and contained on the page(s) indicated in the GE Annual Report to Share Owners for the fiscal year ended December 31, 1995.
Annual 10-K Report Report Page(s) Page(s) ------- ------- Statement of earnings for the years ended December 31, 1995, 1994 and 1993 26 F-2 Statement of financial position at December 31, 1995 and 1994 28 F-4 Statement of cash flows for the years ended December 31, 1995, 1994 and 1993 30 F-6 Independent Auditors' Report 44 F-20 Other financial information: Notes to consolidated financial statements 45-64 F-21 to F-40 Industry segment information 35 F-11 60-61 F-36 to F-37 Geographic segment information 62 F-38 Operations by quarter (unaudited) 64 F-40
(a)2. Financial Statement Schedule for General Electric Company and consolidated affiliates.
Schedule Page -------- ---- II Valuation and Qualifying Accounts F-41
The schedules listed in Reg. 210.5-04, except those listed above, have been omitted because they are not applicable or the required information is shown in the consolidated financial statements or notes thereto. 28 (a)3. Exhibit Index (3) Restated Certificate of Incorporation, as amended, and By-laws, as amended, of General Electric Company. (Incorporated by reference to Exhibit of the same number to General Electric Form 8-K (Commission file number 1-35) filed with the Commission April 28, 1994.) (4) Agreement to furnish to the Securities and Exchange Commission upon request a copy of instruments defining the rights of holders of certain long-term debt of the registrant and consolidated subsidiaries. (Incorporated by reference to Exhibit of the same number to General Electric Annual Report on Form 10-K (Commission file number 1-35) for the fiscal year ended December 31, 1994.) (10) All of the following exhibits consist of Executive Compensation Plans or Arrangements: (a) General Electric Incentive Compensation Plan, as amended effective July 1, 1991. (Incorporated by reference to Exhibit of the same number to General Electric Annual Report on Form 10-K (Commission file number 1-35) for the fiscal year ended December 31, 1991.) (b) General Electric 1983 Stock Option-Performance Unit Plan. (Incorporated by reference to Exhibit of the same number to General Electric Annual Report on Form 10-K (Commission file number 1-35) for the fiscal year ended December 31, 1988.) (c) General Electric Supplementary Pension Plan, as amended effective July 1, 1991.(Incorporated by reference to Exhibit 10(e) to General Electric Annual Report on Form 10-K (Commission file number 1-35) for the fiscal year ended December 31, 1991.) (d) Amendment to General Electric Supplementary Pension Plan dated May 22, 1992.(Incorporated by reference to Exhibit 10(d) to General Electric Annual Report on Form 10-K (Commission file number 1-35) for the fiscal year ended December 31, 1992.) (e) Amendment to General Electric Supplementary Pension Plan, dated September 10, 1993.(Incorporated by reference to Exhibit 10(e) to General Electric Annual Report on Form 10-K (Commission file number 1-35) for the fiscal year ended December 31, 1993.) 29 (f) Amendment to General Electric Supplementary Pension Plan, dated July 1, 1994. (Incorporate by reference to Exhibit of the same number to General Electric Annual Report on Form 10-K (Commission file number 1-35) for the fiscal year ended December 31, 1994.) (g) General Electric Deferred Compensation Plan for Directors, as amended May 25, 1990.(Incorporated by reference to Exhibit 10(f) to General Electric Annual Report on Form 10-K (Commission file number 1-35) for the fiscal year ended December 31, 1990.) (h) General Electric Insurance Plan for Directors. (Incorporated by reference to Exhibit 10(i) to General Electric Annual Report on Form 10-K (Commission file number 1-35) for the fiscal year ended December 31, 1980.) (i) General Electric Financial Planning Program, as amended through September 1993. (Incorporated by reference to Exhibit 10(h) to General Electric Annual Report on Form 10-K (Commission file number 1-35) for the fiscal year ended December 31, 1993.) (j) General Electric Supplemental Life Insurance Program, as amended February 8, 1991.(Incorporated by reference to Exhibit 10(i) to General Electric Annual Report on Form 10-K (Commission file number 1-35) for the fiscal year ended December 31, 1990.) (k) General Electric Directors' Retirement and Optional Life Insurance Plan.(Incorporated by reference to Exhibit 10(j) to General Electric Annual Report on Form 10-K (Commission file number 1-35) for the fiscal year ended December 31, 1986.) (l) General Electric 1987 Executive Deferred Salary Plan. (Incorporated by reference to Exhibit 10(k) to General Electric Annual Report on Form 10-K (Commission file number 1-35) for the fiscal year ended December 31, 1987.) (m) General Electric 1989 Stock Option Plan for Non-Employee Directors.(Incorporated by reference to Exhibit A to the General Electric Proxy Statement for its Annual Meeting of Share Owners held on April 26, 1989.) 30 (n) General Electric 1990 Long-Term Incentive Plan. (Incorporated by reference to Exhibit A to the General Electric Proxy Statement for its Annual Meeting of Share Owners held April 25, 1990.) (o) General Electric 1991 Executive Deferred Salary Plan. (Incorporated by reference to Exhibit 10(n) to General Electric Annual Report on Form 10-K (Commission file number 1-35) for the fiscal year ended December 31, 1990.) (p) General Electric 1994 Executive Deferred Salary Plan. (Incorporated by reference to Exhibit 10(o) to General Electric Annual Report on Form 10-K (Commission file number 1-35) for the fiscal year ended December 31, 1993.) (q) General Electric Directors' Charitable Gift Plan, as amended through May 1993. (Incorporated by reference to Exhibit 10(p) to General Electric Annual Report on Form 10-K (Commission file number 1-35) for the fiscal year ended December 31, 1993.) (r) Restated Employment Agreement, dated January 2, 1992, and Restated U.K. Employment Agreement, dated January 3, 1992, in each case between the registrant and P. Fresco, an Executive Officer and Director of the registrant. (Incorporated by reference to Exhibit 10(o) to General Electric Annual Report on Form 10-K (Commission file number 1-35) for the fiscal year ended December 31, 1992.) (s) General Electric Leadership Life Insurance Program, effective January 1, 1994. (Incorporated by reference to Exhibit 10(r) to General Electric Annual Report on Form 10-K (Commission file number 1-35) for the fiscal year ended December 31, 1993.) (t) General Electric 1995 Executive Deferred Salary Plan.* (11) Statement re Compilation of Per Share Earnings.* (12) Computation of Ratio of Earnings to Fixed Charges.* (21) Subsidiaries of Registrant.* 31 (23) Consent of independent auditors incorporated by reference in each Prospectus constituting part of the Registration Statements on Form S-3 (Registration Nos. 33-29024, 33-3908, 2-82072, 33-37106, 33-35922, 33-44593, 33-39596, 33-39596-01, 33-47181, 33-47085, 33-50639, 33-61029 and 33-61029-01) and on Form S-8 (Registration Nos. 33-4239, 33-23441, 33-24679, 2- 84145, 33-47500 and 33-49053).* (24) Power of Attorney.* (27) Financial Data Schedule.* (99)(a) Income Maintenance Agreement, dated March 28, 1991, between the registrant and General Electric Capital Corporation. (Incorporated by reference to Exhibit 28(a) to General Electric Annual Report on Form 10-K (Commission file number 1-35) for the fiscal year ended December 31, 1990.) (99)(b) Undertaking for Inclusion in Registration Statements on Form S-8 of General Electric Company. (Incorporated by reference to Exhibit 99(b) to General Electric Annual Report on Form 10-K (Commission file number 1-35) for the fiscal year ended December 31, 1992.) * Filed electronically herewith. (b) Reports on Form 8-K during the quarter ended December 31, 1995. There were no reports on Form 8-K filed by the registrant during the fourth quarter of 1995. 32 SIGNATURES Pursuant to the requirements of Section 13 of the Securities and Exchange Act of 1934, the registrant has duly caused this annual report on Form 10-K for the fiscal year ended December 31, 1995, to be signed on its behalf by the undersigned, and in the capacities indicated, thereunto duly authorized in the Town of Fairfield and State of Connecticut on the 20th day of March 1996. General Electric Company (Registrant) By Dennis D. Dammerman ----------------------------- Senior Vice President-Finance (Principal Financial Officer) 33 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signer Title Date ------ ----- ---- Dennis D. Dammerman - ------------------------------- Senior Vice President - Finance Principal Financial March 20, 1996 Officer Philip D. Ameen - ------------------------------ Vice President and Comptroller Principal Accounting March 20, 1996 Officer John F. Welch, Jr.* Chairman of the Board of Directors (Principal Executive Officer) D. Wayne Calloway* Director Silas S. Cathcart* Director Dennis D. Dammerman* Director Paolo Fresco* Director Claudio X. Gonzalez* Director Robert E. Mercer* Director Gertrude G. Michelson* Director John D. Opie* Director Barbara Scott Preiskel* Director Andrew C. Sigler* Director Douglas A. Warner III* Director A majority of the Board of Directors *By Benjamin W. Heineman, Jr. -------------------------------- Attorney-in-fact March 20, 1996 F-1 (Annual Report Pages) Annual Report Page No. 25 FINANCIAL SECTION CONTENTS 44 INDEPENDENT AUDITORS' REPORT AUDITED FINANCIAL STATEMENTS 26 Earnings 28 Financial Position 30 Cash Flows 45 Notes to Consolidated Financial Statements MANAGEMENT'S DISCUSSION 32 Operations 32 Consolidated Operations 33 GE Continuing Operations 34 Industry Segments 36 GECS Continuing Operations 38 International Operations 39 Financial Resources and Liquidity 42 Selected Financial Data 44 Financial Responsibility
- ----------------------------------------------------------------------------- REVENUES (In billions) 1991 1992 1993 1994 1995 - ----------------------------------------------------------------------------- $51.283 $53.051 $55.701 $60.109 $70.028 - -----------------------------------------------------------------------------
- ----------------------------------------------------------------------------- EARNINGS PER SHARE FROM CONTINUING OPERATIONS BEFORE ACCOUNTING CHANGES (In dollars) 1991 1992 1993 1994 1995 - ----------------------------------------------------------------------------- $2.27 $2.41 $2.45 $3.46 $3.90 - -----------------------------------------------------------------------------
- ----------------------------------------------------------------------------- DIVIDENDS PER SHARE (In dollars) 1991 1992 1993 1994 1995 - ----------------------------------------------------------------------------- $1.04 $1.16 $1.305 $1.49 $1.69 - -----------------------------------------------------------------------------
F-2 Annual Report Page No. 26 STATEMENT OF EARNINGS
General Electric Company and consolidated affiliates ----------------------------------- For the years ended December 31 (In millions) 1995 1994 1993 - -------------------------------------------------------------- ----------------------------------- REVENUES Sales of goods $33,157 $30,740 $29,509 Sales of services 9,733 8,803 8,268 Other income (note 3) 752 793 735 Earnings of GECS from continuing operations - - - GECS revenues from operations (note 4) 26,386 19,773 17,189 ------- ------- ------- Total revenues 70,028 60,109 55,701 ------- ------- ------- COSTS AND EXPENSES (note 5) Cost of goods sold 24,288 22,748 22,606 Cost of services sold 6,682 6,214 6,308 Interest and other financial charges 7,286 4,949 4,054 Insurance losses and policyholder and annuity benefits 5,285 3,507 3,172 Provision for losses on financing receivables (note 8) 1,117 873 987 Other costs and expenses 15,429 12,987 12,287 Minority interest in net earnings of consolidated affiliates 204 170 151 ------- ------- ------- Total costs and expenses 60,291 51,448 49,565 ------- ------- ------- EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND ACCOUNTING CHANGE 9,737 8,661 6,136 Provision for income taxes (note 9) (3,164) (2,746) (1,952) ------- ------- ------- EARNINGS FROM CONTINUING OPERATIONS BEFORE ACCOUNTING CHANGE 6,573 5,915 4,184 EARNINGS (LOSS) FROM DISCONTINUED OPERATIONS (note 2) - (1,189) 993 ------- ------- ------- EARNINGS BEFORE ACCOUNTING CHANGE 6,573 4,726 5,177 Cumulative effect of accounting change (note 20) - - (862) ------- ------- ------- NET EARNINGS $ 6,573 $ 4,726 $ 4,315 ======= ======= ======= - --------------------------------------------------------------------------------------------------------- NET EARNINGS PER SHARE (in dollars) Continuing operations before accounting change $ 3.90 $ 3.46 $ 2.45 Discontinued operations before accounting change - (0.69) 0.58 ------- ------- ------- Earnings before accounting change 3.90 2.77 3.03 Cumulative effect of accounting change - - (0.51) ------- ------- ------- Net earnings per share $ 3.90 $ 2.77 $ 2.52 ======= ======= ======= - --------------------------------------------------------------------------------------------------------- DIVIDENDS DECLARED PER SHARE (in dollars) $ 1.69 $ 1.49 $ 1.305 - --------------------------------------------------------------------------------------------------------- The notes to consolidated financial statements on pages 45-64 are an integral part of this statement.
F-3 Annual Report Page No. 27 STATEMENT OF EARNINGS
GE GECS -------------------------------- -------------------------------- For the years ended December 31 (In millions) 1995 1994 1993 1995 1994 1993 - ---------------------------------------------------------- -------------------------------- -------------------------------- REVENUES Sales of goods $33,177 $30,767 $29,533 $ - $ - $ - Sales of services 9,836 8,863 8,289 - - - Other income (note 3) 753 783 730 - - - Earnings of GECS from continuing operations 2,415 2,085 1,567 - - - GECS revenues from operations (note 4) - - - 26,492 19,875 17,276 ------- ------- ------- ------- ------- ------- Total revenues 46,181 42,498 40,119 26,492 19,875 17,276 ------- ------- ------- ------- ------- ------- COSTS AND EXPENSES (note 5) Cost of goods sold 24,308 22,775 22,630 - - - Cost of services sold 6,785 6,274 6,329 - - - Interest and other financial charges 649 410 525 6,661 4,545 3,538 Insurance losses and policyholder and annuity benefits - - - 5,285 3,507 3,172 Provision for losses on financing receivables (note 8) - - - 1,117 873 987 Other costs and expenses 5,743 5,211 5,124 9,769 7,862 7,236 Minority interest in net earnings of consolidated affiliates 64 31 17 140 139 134 ------- ------- ------- ------- ------- ------- Total costs and expenses 37,549 34,701 34,625 22,972 16,926 15,067 ------- ------- ------- ------- ------- ------- EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND ACCOUNTING CHANGE 8,632 7,797 5,494 3,520 2,949 2,209 Provision for income taxes (note 9) (2,059) (1,882) (1,310) (1,105) (864) (642) ------- ------- ------- ------- ------- ------- EARNINGS FROM CONTINUING OPERATIONS BEFORE ACCOUNTING CHANGE 6,573 5,915 4,184 2,415 2,085 1,567 EARNINGS (LOSS) FROM DISCONTINUED OPERATIONS (note 2) - (1,189) 993 - (1,189) 240 ------- ------- ------- ------- ------- ------- EARNINGS BEFORE ACCOUNTING CHANGE 6,573 4,726 5,177 2,415 896 1,807 Cumulative effect of accounting change (note 20) - - (862) - - - ------- ------- ------- ------- ------- ------- NET EARNINGS $ 6,573 $ 4,726 $ 4,315 $ 2,415 $ 896 $ 1,807 ======= ======= ======= ======= ======= ======= - ------------------------------------------------------------------------------------------------------------------------------------ In the consolidating data on this page, "GE" means the basis of consolidation as described in note 1 to the consolidated financial statements; "GECS" means General Electric Capital Services, Inc. and all of its affiliates and associated companies. Transactions between GE and GECS have been eliminated from the "General Electric Company and consolidated affiliates" columns on page 26.
F-4 Annual Report Page No. 28 STATEMENT OF FINANCIAL POSITION
General Electric Company and consolidated affiliates ------------------------------- At December 31 (In millions) 1995 1994 - -------------------------------------------------------------- ------------------------------- ASSETS Cash and equivalents $ 2,823 $ 2,591 Investment securities (note 10) 41,067 30,965 Current receivables (note 11) 8,735 7,527 Inventories (note 12) 4,395 3,880 GECS financing receivables (investment in time sales, loans and financing leases) - net (notes 8 and 13) 93,272 76,357 Other GECS receivables 12,417 5,763 Property, plant and equipment (including equipment leased to others) - net (note 14) 25,679 23,465 Investment in GECS - - Intangible assets (note 15) 13,342 11,373 All other assets (note 16) 26,305 23,950 -------- -------- TOTAL ASSETS $228,035 $185,871 ======== ======== - ------------------------------------------------------------------------------------------------------------ LIABILITIES AND EQUITY Short-term borrowings (note 18) $64,463 $57,781 Accounts payable, principally trade accounts 9,061 6,766 Progress collections and price adjustments accrued 1,812 2,065 Dividends payable 767 699 All other GE current costs and expenses accrued (note 17) 5,898 5,543 Long-term borrowings (note 18) 51,027 36,979 Insurance liabilities, reserves and annuity benefits (note 19) 39,699 29,438 All other liabilities (note 20) 15,363 13,161 Deferred income taxes (note 22) 7,380 5,205 -------- -------- Total liabilities 195,470 157,637 -------- -------- Minority interest in equity of consolidated affiliates (note 23) 2,956 1,847 -------- -------- Common stock (1,857,013,000 shares issued) 594 594 Unrealized gains (losses) on investment securities 1,000 (810) Other capital 1,663 1,122 Retained earnings 34,528 30,793 Less common stock held in treasury (8,176) (5,312) -------- -------- Total share owners' equity (notes 24 and 25) 29,609 26,387 -------- -------- TOTAL LIABILITIES AND EQUITY $228,035 $185,871 ======== ======== - ------------------------------------------------------------------------------------------------------------ The notes to consolidated financial statements on pages 45-64 are an integral part of this statement. Year- end 1994 assets and liabilities of Kidder, Peabody Group Inc., the discontinued securities broker-dealer of GECS, have been reclassified to "All other liabilities."
F-5 Annual Report Page No. 29 STATEMENT OF FINANCIAL POSITION
GE GECS ------------------- -------------------- At December 31 (In millions) 1995 1994 1995 1994 - -------------------------------------------------------------- ------------------- -------------------- ASSETS Cash and equivalents $ 874 $ 1,373 $ 1,949 $ 1,218 Investment securities (note 10) 4 93 41,063 30,872 Current receivables (note 11) 8,891 7,807 - - Inventories (note 12) 4,395 3,880 - - GECS financing receivables (investment in time sales, loans and financing leases) - net (notes 8 and 13) - - 93,272 76,357 Other GECS receivables - - 12,897 6,012 Property, plant and equipment (including equipment leased to others) - net (note 14) 10,234 9,525 15,445 13,940 Investment in GECS 12,774 9,380 - - Intangible assets (note 15) 6,643 6,336 6,699 5,037 All other assets (note 16) 11,901 12,419 14,404 11,531 ------- ------- -------- -------- TOTAL ASSETS $55,716 $50,813 $185,729 $144,967 ======= ======= ======== ======== - ------------------------------------------------------------------------------------------------------------------------ LIABILITIES AND EQUITY Short-term borrowings (note 18) $1,666 $906 $62,808 $57,087 Accounts payable, principally trade accounts 3,968 3,141 5,952 3,777 Progress collections and price adjustments accrued 1,812 2,065 - - Dividends payable 767 699 - - All other GE current costs and expenses accrued (note 17) 5,747 5,798 - - Long-term borrowings (note 18) 2,277 2,699 48,790 34,312 Insurance liabilities, reserves and annuity benefits (note 19) - - 39,699 29,438 All other liabilities (note 20) 8,928 8,468 6,312 4,571 Deferred income taxes (note 22) 508 268 6,872 4,937 ------- ------- -------- -------- Total liabilities 25,673 24,044 170,433 134,122 ------- ------- -------- -------- Minority interest in equity of consolidated affiliates (note 23) 434 382 2,522 1,465 ------- ------- -------- -------- Common stock (1,857,013,000 shares issued) 594 594 1 1 Unrealized gains (losses) on investment securities 1,000 (810) 989 (821) Other capital 1,663 1,122 2,266 2,006 Retained earnings 34,528 30,793 9,518 8,194 Less common stock held in treasury (8,176) (5,312) - - ------- ------- -------- -------- Total share owners' equity (notes 24 and 25) 29,609 26,387 12,774 9,380 ------- ------- -------- -------- TOTAL LIABILITIES AND EQUITY $55,716 $50,813 $185,729 $144,967 ======= ======= ======== ======== - ------------------------------------------------------------------------------------------------------------------------ In the consolidating data on this page, "GE" means the basis of consolidation as described in note 1 to the consolidated financial statements; "GECS" means General Electric Capital Services, Inc. and all of its affiliates and associated companies. Transactions between GE and GECS have been eliminated from the "General Electric Company and consolidated affiliates" columns on page 28.
F-6 Annual Report Page No. 30 STATEMENT OF CASH FLOWS
General Electric Company and consolidated affiliates ----------------------------------- For the years ended December 31 (In millions) 1995 1994 1993 - -------------------------------------------------------------- ----------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net earnings $ 6,573 $ 4,726 $ 4,315 Adjustments for discontinued operations - 1,189 (993) Adjustments to reconcile net earnings to cash provided from operating activities Cumulative effect of accounting change - - 862 Depreciation, depletion and amortization 3,594 3,207 3,223 Earnings retained by GECS - continuing operations - - - Deferred income taxes 1,047 1,228 548 Decrease (increase) in GE current receivables (632) 668 (571) Decrease (increase) in GE inventories 55 (56) 750 Increase (decrease) in accounts payable 244 697 639 Increase in insurance liabilities, reserves and annuity benefits 2,490 1,624 1,479 Provision for losses on financing receivables 1,117 873 987 All other operating activities 458 (2,399) 782 -------- -------- -------- CASH FROM OPERATING ACTIVITIES 14,946 11,757 12,021 -------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Additions to property, plant and equipment (6,447) (7,492) (4,727) Dispositions of property, plant and equipment 1,542 2,506 1,139 Net increase in GECS financing receivables (11,309) (9,525) (4,164) Payments for principal businesses purchased (5,641) (2,606) (2,090) All other investing activities (3,362) 372 (6,518) -------- -------- -------- CASH USED FOR INVESTING ACTIVITIES (25,217) (16,745) (16,360) -------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Net change in borrowings (maturities of 90 days or less) (3,487) (2,784) 2,406 Newly issued debt (maturities longer than 90 days) 37,604 23,239 15,468 Repayments and other reductions (maturities longer than 90 days) (18,580) (13,098) (11,851) Net purchase of GE shares for treasury (2,523) (353) (364) Dividends paid to share owners (2,770) (2,462) (2,153) All other financing activities 259 181 (69) -------- -------- -------- CASH FROM (USED FOR) FINANCING ACTIVITIES 10,503 4,723 3,437 -------- -------- -------- CASH FROM (USED FOR) DISCONTINUED OPERATIONS - (200) 962 -------- -------- -------- INCREASE (DECREASE) IN CASH AND EQUIVALENTS DURING YEAR 232 (465) 60 Cash and equivalents at beginning of year 2,591 3,056 2,996 -------- -------- -------- Cash and equivalents at end of year $ 2,823 $ 2,591 $ 3,056 ======== ======== ======== - --------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION Cash paid during the year for interest $ (6,645) $ (4,524) $ (3,754) Cash recovered (paid) during the year for income taxes (1,483) (1,777) (1,644) - --------------------------------------------------------------------------------------------------------- The notes to consolidated financial statements on pages 45-64 are an integral part of this statement. Data for 1994 and 1993 have been reclassified to combine cash flows of discontinued operations.
F-7 Annual Report Page No. 31 STATEMENT OF CASH FLOWS
For the years ended December 31 (in millions) GE GECS -------------------------------- -------------------------------- 1995 1994 1993 1995 1994 1993 - -------------------------------------------------------- -------------------------------- -------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net earnings $ 6,573 $ 4,726 $ 4,315 $ 2,415 $ 896 $ 1,807 Adjustments for discontinued operations - 1,189 (993) - 1,189 (240) Adjustments to reconcile net earnings to cash provided from operating activities Cumulative effect of accounting change - - 862 - - - Depreciation, depletion and amortization 1,581 1,545 1,631 2,013 1,662 1,592 Earnings retained by GECS - continuing operations (1,324) (1,181) (957) - - - Deferred income taxes 369 575 120 678 653 428 Decrease (increase) in GE current receivables (739) 754 (625) - - - Decrease (increase) in GE inventories 55 (56) 750 - - - Increase (decrease) in accounts payable 462 810 114 418 (222) 540 Increase in insurance liabilities, reserves and annuity benefits - - - 2,490 1,624 1,479 Provision for losses on financing receivables - - - 1,117 873 987 All other operating activities (912) (2,291) (16) 946 140 770 ------- ------- ------- -------- -------- -------- CASH FROM OPERATING ACTIVITIES 6,065 6,071 5,201 10,077 6,815 7,363 ------- ------- ------- -------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Additions to property, plant and equipment (1,831) (1,743) (1,588) (4,616) (5,749) (3,139) Dispositions of property, plant and equipment 38 86 55 1,504 2,420 1,084 Net increase in GECS financing receivables - - - (11,309) (9,525) (4,164) Payments for principal businesses purchased (238) (575) - (5,403) (2,031) (2,090) All other investing activities 408 14 298 (3,913) 176 (6,793) ------- ------- ------- -------- -------- -------- CASH USED FOR INVESTING ACTIVITIES (1,623) (2,218) (1,235) (23,737) (14,709) (15,102) ------- ------- ------- -------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Net change in borrowings (maturities of 90 days or less) 1,061 (566) 46 (4,510) (2,261) 2,404 Newly issued debt (maturities longer than 90 days) 826 766 215 36,778 22,473 15,253 Repayments and other reductions (maturities longer than 90 days) (1,535) (1,399) (2,325) (17,045) (11,699) (9,526) Net purchase of GE shares for treasury (2,523) (353) (364) - - - Dividends paid to share owners (2,770) (2,462) (2,153) (1,091) (904) (610) All other financing activities - (2) - 259 183 (69) ------- ------- ------- -------- -------- -------- CASH FROM (USED FOR) FINANCING ACTIVITIES (4,941) (4,016) (4,581) 14,391 7,792 7,452 ------- ------- ------- -------- -------- -------- CASH FROM (USED FOR) DISCONTINUED OPERATIONS - - 962 - (200) - ------- ------- ------- -------- -------- -------- INCREASE (DECREASE) IN CASH AND EQUIVALENTS DURING YEAR (499) (163) 347 731 (302) (287) Cash and equivalents at beginning of year 1,373 1,536 1,189 1,218 1,520 1,807 ------- ------- ------- -------- -------- -------- Cash and equivalents at end of year $ 874 $ 1,373 $ 1,536 $ 1,949 $ 1,218 $ 1,520 ======= ======= ======= ======== ======== ======== - ------------------------------------------------------------------------------------------------------------------------------------ SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION Cash paid during the year for interest $ (468) $ (374) $ (473) $ (6,177) $ (4,150) $ (3,281) Cash recovered (paid) during the year for income taxes (1,651) (1,456) (1,455) 168 (321) (189) - ------------------------------------------------------------------------------------------------------------------------------------ In the consolidating data on this page, "GE" means the basis of consolidation as described in note 1 to the consolidated financial statements; "GECS" means General Electric Capital Services, Inc. and all of its affiliates and associated companies. Transactions between GE and GECS have been eliminated from the "General Electric Company and consolidated affiliates" columns on page 30.
F-8 Annual Report Page No. 32 MANAGEMENT'S DISCUSSION OF OPERATIONS OVERVIEW General Electric Company's consolidated financial statements represent the combination of the Company's manufacturing and nonfinancial services businesses ("GE") and the accounts of General Electric Capital Services, Inc. ("GECS"). See note 1 to the consolidated financial statements, which explains how the various financial data are presented. Management's Discussion of Operations is presented in four parts: Consolidated Operations, GE Continuing Operations, GECS Continuing Operations and International Operations. CONSOLIDATED OPERATIONS GE achieved record revenues and earnings in 1995, as broad strength across its businesses, coupled with continued emphasis on globalization, productivity and effective asset management, produced top-line growth, higher margins and strong cash generation. Consolidated revenues, including acquisitions, rose to a record $70.0 billion, a 17% increase that was attributable primarily to the Company's increasing international activities. Eleven of twelve businesses increased revenues, with six businesses - led by GE Capital Services, Plastics and NBC - achieving double-digit increases. Consolidated earnings per share from continuing operations increased to $3.90, up 13% from last year's $3.46 from continuing operations, and earnings increased 11% to $6.573 billion. Earnings per share grew faster than earnings, reflecting the cumulative impact of $3.2 billion of shares purchased under a three-year, $9 billion share repurchase program initiated in December 1994. Net earnings in 1995 were 39% higher than 1994's $4.726 billion ($2.77 per share), which were 10% higher than 1993's $4.315 billion ($2.52 per share). Three factors affecting 1994 and 1993 are important to these comparisons: discontinued operations of the GECS securities broker-dealer and the GE Aerospace businesses; 1993 restructuring provisions; and the effect of an accounting change in 1993. Each is discussed separately below. Excluding the effects of these items, 1994 earnings would have been $5.915 billion, up 22% from $4.862 billion in 1993. * DISCONTINUED OPERATIONS reflected the results of the GECS securities broker-dealer, Kidder, Peabody Group Inc. (Kidder, Peabody) in 1994 and 1993, and the results of the discontinued GE Aerospace businesses in 1993. Note 2 provides additional information about these discontinued operations. The 1994 loss from discontinued operations included a provision of $868 million after taxes for exit costs related to the liquidation of Kidder, Peabody. This liquidation was substantially complete as of December 31, 1995. * RESTRUCTURING PROVISIONS in 1993, amounting to $678 million after taxes, covered costs of actions that have reduced GE's cost structure. Essentially all restructuring expenditures were completed by the end of 1994. Savings arising from these restructuring programs can best be observed in the growth in operating margin seen in the chart at the bottom of the page and in the productivity measurements discussed on page 33. * THE 1993 ACCOUNTING CHANGE represented effects of adopting Statement of Financial Accounting Standards (SFAS) No. 112, Employers' Accounting for Postemployment Benefits (see note 20). The transition effect of the accounting change decreased net earnings by $862 million ($0.51 per share), with a corresponding decrease in share owners' equity. TWO NEWLY ISSUED ACCOUNTING STANDARDS will be adopted in the first quarter of 1996 and are not expected to have a material effect on financial position or results of operations of GE or GECS. A summary of these standards follows. * 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 must be written down to fair value. * 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. Impairment, if any, would be recognized in earnings.
- ----------------------------------------------------------------------------- GE OPERATING MARGIN AS A PERCENTAGE OF SALES 1991 1992 1993 1994 1995 - ----------------------------------------------------------------------------- As reported 11.2% 11.1% 9.9% 13.6% 14.4% Restructuring charges 0.3 0.4 2.6 - - - -----------------------------------------------------------------------------
F-9 Annual Report Page No. 33 DIVIDENDS DECLARED totaled $2.838 billion in 1995. Per-share dividends of $1.69 were up 13% from the previous year, following a 14% increase from the year before. The 1995 increase marks the 20th consecutive year of dividend growth. The chart at right compares GE's dividend growth for the last five years with dividend growth of companies in the Standard and Poor's 500 stock index. GE CONTINUING OPERATIONS GE total revenues were $46.2 billion in 1995, compared with $42.5 billion in 1994 and $40.1 billion in 1993. * GE's sales of goods and services were $43.0 billion in 1995, an increase of 9% from 1994, which in turn was 5% higher than in 1993. The improvement was led by Plastics and NBC. Volume was about 8% higher in 1995, reflecting growth in most businesses and the effect of consolidating Nuovo Pignone, a European energy equipment manufacturer. The effects of selling prices on sales differed markedly among businesses during the year. Overall, selling prices were essentially flat in 1995, while the effect of currency exchange rates on the translation of sales denominated in other than U.S. dollars contributed modestly to the sales increase. Volume in 1994 was about 6% higher than in 1993, but was partially offset by the effects of lower selling prices. Currency exchange rates had a minor negative effect on 1994 sales. * GE's other income, earned from a wide variety of sources, was $753 million in 1995, $783 million in 1994 and $730 million in 1993. Details of GE's other income are provided in note 3. * Earnings of GECS from continuing operations were up 16% in 1995, following a 33% increase the year before. See page 36 for an analysis of these earnings. PRINCIPAL COSTS AND EXPENSES FOR GE are those classified as costs of goods and services sold, and selling, general and administrative expenses. OPERATING MARGIN is sales of goods and services less the costs of goods and services sold, and selling, general and administrative expenses. In 1995, GE's operating margin rose to a record 14.4% of sales, an improvement of 0.8 percentage points from 1994. The operating margin increase was led by strong improvements in Plastics, Aircraft Engines and NBC. Operating margin was 13.6% of sales in 1994, compared with 12.5% (before restructuring provisions) in 1993. Including restructuring provisions, 1993 operating margin was 9.9% of sales. The improved performance in 1994 was attributable
- ----------------------------------------------------------------------------- GE/S&P DIVIDEND GROWTH SINCE 1990 1991 1992 1993 1994 1995 - ----------------------------------------------------------------------------- GE 7.22% 18.39% 32.91% 51.63% 68.00% S&P 500 0.83 2.31 3.97 8.93 14.05 - -----------------------------------------------------------------------------
to Appliances, NBC, Power Systems and Transportation Systems, which increased their margin rates by one percentage point or more. TOTAL COST PRODUCTIVITY (sales in relation to costs, both on a constant dollar basis) has been a major source of improvements in operating margin, accounting for more than $1 billion of the increases in margin in each of the last three years. The productivity rate was 3.7% in 1995, reflecting the sharp improvement at Aircraft Engines and improvements at Plastics and Medical Systems, largely offset by adverse productivity performance by Power Systems, the result of its lower 1995 capacity utilization. While the productivity rate in 1994 was reasonably strong throughout most businesses, at 3.2% overall, it reflected adverse results of Aircraft Engines' lower volume. Cost savings provided by productivity improvements more than offset the impact of inflation in each of the last three years. GE INTEREST EXPENSE in 1995 was $649 million, up from $410 million in 1994, which was down from $525 million in 1993. The increase in interest expense was attributable to a number of factors, including higher interest rates and average borrowing levels. The decrease in interest expense in 1994 was primarily the result of lower borrowings partially offset by the effects of higher interest rates. ENTERING 1996 with excellent cash flows and a strong balance sheet, the Company continues to be well positioned to deliver strong performance in the current global economic environment. F-10 Annual Report Page No. 34 GE INDUSTRY SEGMENT REVENUES AND OPERATING PROFIT for the past five years are shown in the table on page 35. For additional information, including a description of the products and services included in each segment, see note 27. * AIRCRAFT ENGINES revenues increased 7% from 1994, which was down 13% from 1993. The revenue increase was primarily attributable to higher volume in commercial and military spares and related services, partially offset by effects of lower selling prices. Operating profit increased 26% from 1994, as significant productivity gains and, to a lesser degree, higher volume more than offset the effects of lower prices. Operating profit increased 17% during 1994, principally because there was no counterpart to 1993 restructuring provisions ($267 million). Excluding 1993 restructuring provisions, operating profit decreased 12% in 1994, largely as a result of lower volume. In 1995, $1.7 billion of revenues were from sales to the U.S. government, down $0.1 billion from 1994, which was $0.6 billion lower than in 1993. The lower 1994 revenues were primarily attributable to declines in sales for the F110 and T700 engine programs. Firm orders received during 1995 totaled $5.9 billion, up 7% from $5.5 billion in 1994. The firm orders backlog at year-end 1995 was $7.7 billion ($7.6 billion at the end of 1994), about 38% of which was scheduled for delivery in 1996. * APPLIANCES revenues were about the same as in 1994, as softening North American sales offset strong growth in Europe and Asia. Operating profit increased 2% despite higher material costs, primarily as a result of productivity. Operating profit rose 84% in 1994 on a 7% increase in revenues, in part because there was no counterpart to restructuring provisions of $136 million in 1993. Excluding 1993 restructuring provisions, operating profit increased 34% in 1994, primarily as a result of strong productivity and higher volume. * BROADCASTING revenues increased 17% in 1995, following an 8% increase in 1994. The revenue increase in both years was principally attributable to sharply stronger prime-time ratings and improved cable and owned-and-operated station performance, resulting in improved advertising prices throughout the period. Operating profit was up 48% in 1995, as a result of the stronger advertising revenues. Operating profit also increased sharply in 1994, in part because of restructuring provisions of $81 million in 1993. Excluding the effect of those provisions, operating profit improved 45% from 1993, reflecting the impact of stronger advertising, improved ratings performance and substantially improved cable operations. * INDUSTRIAL PRODUCTS AND SYSTEMS revenues rose 8% in 1995, following a 10% increase in 1994. The improvements in revenues in both years were largely attributable to increased volume in Transportation Systems, Lighting, and Motors and Industrial Systems (Motors). Operating profit increased 14% in 1995, after a 47% increase in 1994. The improvement in 1995 resulted from the combination of productivity across the segment and the volume increases, which more than offset higher material costs. The 1994 increase in operating profit reflected primarily the effect of $253 million of restructuring provisions in 1993. Absent restructuring provisions, operating profit increased 15% in 1994, principally because of improved European operations in Lighting and the combination of higher volume and productivity in Motors and Transportation Systems. Transportation Systems received orders of $1.6 billion in 1995, down $1.2 billion from 1994's record level. The backlog at year-end 1995 was $3.4 billion ($3.5 billion at the end of 1994), about 29% of which was scheduled for shipment in 1996. * MATERIALS revenues increased 17% in 1995, reflecting principally the effects of higher selling prices and the consolidation of Toshiba Silicones. Operating profit increased 51%, primarily because of higher prices, productivity and volume growth, the combination of which more than offset increases in material costs. Revenues were up 13% in 1994, primarily because of increased volume across all major product groups. Operating profit rose 16% in 1994, in part because there was no counterpart to $52 million of restructuring provisions in 1993. Excluding 1993 restructuring provisions, operating profit increased 9%, as ongoing productivity and improved volume more than offset the impact of lower selling prices and much higher material costs. * POWER GENERATION revenues were 10% higher in 1995, following a 7% increase in 1994. The current-year revenue increase was more than accounted for by the 1995 consolidation of Nuovo Pignone ($1.5 billion in revenues). Excluding Nuovo Pignone, the revenue decrease in 1995 resulted from lower volume in both gas and steam turbines. Operating profit decreased 38% in 1995, as the profit contribution of Nuovo Pignone was more than offset by the effects of difficult market conditions on volume and prices, cost inflation, and modification costs related to series "F" gas turbines. Operating profit in 1994 increased 21%, reflecting the effect of 1993 restructuring provisions of $82 million. Adjusting for 1993 restructuring provisions, operating profit increased 12%, primarily as a result of lower material costs and volume improvements that more than offset lower selling prices. F-11 Annual Report Page No. 35
SUMMARY OF INDUSTRY SEGMENTS General Electric Company and consolidated affiliates ------------------------------------------------------- For the years ended December 31 (In millions) 1995 1994 1993 1992 1991 - ------------------------------------------------------------------------------------------------------------------------ REVENUES GE Aircraft Engines $ 6,098 $ 5,714 $ 6,580 $ 7,368 $ 7,777 Appliances 5,933 5,965 5,555 5,330 5,225 Broadcasting 3,919 3,361 3,102 3,363 3,121 Industrial Products and Systems 10,194 9,406 8,575 8,210 8,248 Materials 6,647 5,681 5,042 4,853 4,736 Power Generation 6,545 5,933 5,530 5,106 4,813 Technical Products and Services 4,424 4,285 4,174 4,674 4,686 All Other 2,707 2,348 1,803 1,581 1,485 Corporate items and eliminations (286) (195) (242) (399) (538) ------- ------- ------- ------- ------- Total GE 46,181 42,498 40,119 40,086 39,553 ------- ------- ------- ------- ------- GECS Financing 19,042 14,932 12,399 10,544 10,069 Specialty Insurance 7,444 4,926 4,862 3,863 2,989 All Other 6 17 15 11 (5) ------- ------- ------- ------- ------- Total GECS 26,492 19,875 17,276 14,418 13,053 ------- ------- ------- ------- ------- Eliminations (2,645) (2,264) (1,694) (1,453) (1,323) ------- ------- ------- ------- ------- CONSOLIDATED REVENUES $70,028 $60,109 $55,701 $53,051 $51,283 ======= ======= ======= ======= ======= - ------------------------------------------------------------------------------------------------------------------------ OPERATING PROFIT GE Aircraft Engines $ 1,176 $ 935 $ 798 $ 1,274 $ 1,390 Appliances 697 683 372 386 400 Broadcasting 738 500 264 204 209 Industrial Products and Systems 1,519 1,328 901 1,071 1,088 Materials 1,465 967 834 740 800 Power Generation 769 1,238 1,024 854 679 Technical Products and Services 801 787 706 912 693 All Other 2,683 2,309 1,725 1,495 1,405 ------- ------- ------- ------- ------- Total GE 9,848 8,747 6,624 6,936 6,664 ------- ------- ------- ------- ------- GECS Financing 3,045 2,662 1,727 1,366 1,327 Specialty Insurance 1,020 589 770 641 501 All Other (545) (302) (288) (272) (290) ------- ------- ------- ------- ------- Total GECS 3,520 2,949 2,209 1,735 1,538 ------- ------- ------- ------- ------- Eliminations (2,396) (2,072) (1,554) (1,317) (1,199) ------- ------- ------- ------- ------- CONSOLIDATED OPERATING PROFIT 10,972 9,624 7,279 7,354 7,003 GE interest and financial charges, net of eliminations (644) (417) (529) (752) (881) GE items not traceable to segments (591) (546) (614) (629) (515) ------- ------- ------- ------- ------- EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND ACCOUNTING CHANGES $ 9,737 $ 8,661 $ 6,136 $ 5,973 $ 5,607 ======= ======= ======= ======= ======= - ------------------------------------------------------------------------------------------------------------------------ The notes to consolidated financial statements on pages 45-64 are an integral part of this statement. "GE" means the basis of consolidation as described in note 1 to the consolidated financial statements; "GECS" means General Electric Capital Services, Inc. and all of its affiliates and associated companies. Operating profit of GE segments excludes interest and other financial charges; operating profit of GECS includes interest and discount expense, which is the largest element of GECS' operating costs.
F-12 Annual Report Page No. 36 Power Generation orders were $6.7 billion for 1995, compared with $5.7 billion in 1994. The backlog of unfilled orders at year-end 1995 was $10.2 billion ($9.4 billion at the end of 1994), about 43% of which was scheduled to be shipped in 1996. The increases in orders and backlog were more than accounted for by the consolidation of Nuovo Pignone in 1995. * TECHNICAL PRODUCTS AND SERVICES revenues were up 3% in 1995, following a similar increase in 1994, as higher volume was partially offset by lower selling prices in both Medical Systems and Information Services. Medical Systems achieved strong volume growth in Asia and Europe, but the U.S. market was weak throughout both years. Information Services revenues increased in 1995 and 1994, reflecting continued worldwide growth in services associated with electronic commerce. Segment operating profit increased 2% in 1995, primarily a result of productivity gains. The 1994 increase in operating profit of 11% was partially attributable to 1993 restructuring provisions of $60 million. Excluding such provisions, 1994 operating profit was 3% ahead of 1993, reflecting productivity and volume improvements that were partially offset by weaker pricing at both Medical Systems and Information Services. Orders received by Medical Systems in 1995 were $3.7 billion, up 12% from 1994. The backlog of unfilled orders at year-end 1995 was $1.6 billion ($1.5 billion at the end of 1994), about 94% of which was scheduled to be shipped in 1996. * ALL OTHER consists primarily of GECS' earnings, which are discussed in the next section. Also included are revenues derived from licensing the use of GE technology to others. GECS CONTINUING OPERATIONS GECS conducts its operations in two segments: Financing and Specialty Insurance. The Financing segment includes financing operations of General Electric Capital Corporation (GE Capital). The Specialty Insurance segment includes operations of GE Global Insurance Holding Corporation (GE Global Insurance), the principal subsidiary of which is Employers Reinsurance Corporation (ERC), and the other insurance businesses described on page 61. IMPROVED OPERATING RESULTS for 1995 and 1994 reflect the effects of asset growth with approximately equal contributions from origination volume and from acquisitions of businesses and portfolios. * GECS revenues from operations were $26.5 billion in 1995, up 33% from 1994, which was up 15% from 1993. * GECS earnings from continuing operations were $2.4 billion in 1995, up 16% from 1994, which was up 33% from 1993. The 1995 increase reflected asset growth partially offset by a decrease in financing spreads (the excess of yields over interest rates on borrowings). The 1994 increase resulted primarily from asset growth, increased financing spreads and improved asset quality, which were partially offset by higher insurance losses. * GECS interest on borrowings in 1995 was $6.7 billion, 47% higher than in 1994, which was 28% higher than in 1993. Increases in 1995 and 1994 reflected the effects of higher average borrowings used to finance asset growth as well as the effects of higher interest rates. Part of the 1995 increase resulted from a shift during the year to longer-term funding. The composite interest rate on GECS' borrowings was 6.76% in 1995, compared with 5.47% in 1994 and 4.96% in 1993. * GECS insurance losses and policyholder and annuity benefits increased to $5.3 billion during 1995, compared with $3.5 billion in 1994 and $3.2 billion in 1993, primarily because of business acquisitions and growth in originations throughout the period. * GECS other costs and expenses increased to $9.8 billion in 1995 from $7.9 billion in 1994 and $7.2 billion in 1993, reflecting costs associated with acquired businesses and portfolios, and higher investment levels. GECS industry segment revenues and operating profit for the past five years are shown in the table on page 35. Revenues from operations (earned income) are detailed in note 4. * FINANCING SEGMENT revenues from operations were $19.0 billion in 1995, up 28% from 1994, which was up 20% from 1993. Asset growth and increased yields were significant factors in both years. Operating profit was $3.0 billion in 1995, up 14% from 1994, as the effects of the asset growth were partially offset by declining financing spreads and losses from adverse market conditions in the Mortgage Services business. Financing spreads declined during 1995, as the increase in borrowing rates outpaced the improvements in yields. Operating profit increased 54% in 1994 over 1993, the result of asset growth of 14%, increased financing spreads and improved asset quality. The provision for losses on financing receivables increased in 1995, principally reflecting portfolio growth, following a decline in 1994 that was attributable to improved quality of the portfolio. Other costs and expenses increased in both years, primarily as a result of asset growth. The portfolio of financing receivables, before allowance for losses, increased to $95.8 billion at the end of 1995 from $78.4 billion at the end of 1994. Financing receivables are the Financing segment's largest asset and its primary source of revenues. The related allowance for losses at the end of F-13 Annual Report Page No. 37 1995 amounted to $2.5 billion (2.63% of receivables - the same as for 1994 and 1993) and, in management's judgment, is appropriate given the risk profile of the portfolio. Amounts written off in 1995 were approximately 1.01% of the year's average financing receivables, compared with 1.04% and 1.59% during 1994 and 1993, respectively. A discussion of the quality of certain elements of the Financing segment portfolio follows. Nonearning receivables are those that are 90 days or more delinquent and reduced- earning receivables are receivables whose terms have been restructured to a below-market yield. Consumer receivables at year-end 1995 and 1994 are shown in the following table:
- ------------------------------------------------------------------------- (In millions) 1995 1994 - ------------------------------------------------------------------------- Credit card and personal loans $23,937 $19,124 Auto loans 5,555 3,991 Auto finance leases 12,461 7,473 ------- ------- Total consumer $41,953 $30,588 ======= ======= Nonearning and reduced-earning $671 $422 - As percentage of total 1.6% 1.4% Receivable write-offs for the year $644 $482 - -------------------------------------------------------------------------
Most of the nonearning consumer receivables were U.S. private-label credit card loans, the majority of which were subject to various loss-sharing agreements that provide full or partial recourse to the originating retailer. Delinquencies in the consumer portfolio were slightly higher at the end of 1995 than for 1994, consistent with overall industry experience. Commercial real estate portfolio at year-end 1995 and 1994 amounted to $17.4 billion and $16.9 billion, respectively, as shown in the following table:
- ------------------------------------------------------------------------- (In millions) 1995 1994 - ------------------------------------------------------------------------- Commercial real estate loans $13,405 $13,282 Nonearning and reduced-earning loans 179 179 Receivable write-offs for the year 147 209 Assets acquired for resale 2,335 2,103 Other (primarily ventures) 1,651 1,508 - -------------------------------------------------------------------------
Commercial real estate loans are generally secured by first mortgages. Assets are acquired for resale from various financial institutions. Values realized during 1995 and 1994 on disposition of assets acquired for resale have met or exceeded expectations at the time of purchase. The commercial real estate portfolio includes investments in a variety of property types and continues to be well dispersed geographically, principally in the continental United States. Write-offs in the commercial real estate portfolio declined during 1995, as markets continued to stabilize.
- ----------------------------------------------------------------------------- GECS EARNINGS FROM CONTINUING OPERATIONS (In billions) 1991 1992 1993 1994 1995 - ----------------------------------------------------------------------------- $1.221 $1.331 $1.567 $2.085 $2.415 - -----------------------------------------------------------------------------
Other financing receivables, totaling $40.4 billion at December 31, 1995, consisted of a diverse commercial, industrial and equipment loan and lease portfolio. This portfolio increased $5.9 billion during 1995, primarily because of acquisitions. The related nonearning and reduced-earning receivables increased to $285 million at year-end 1995 from $165 million at year-end 1994. GECS held loans and leases to commercial airlines, as discussed in note 16, amounting to $8.3 billion at the end of 1995, up from $7.6 billion at the end of 1994, reflecting purchases of aircraft. At year-end 1995, GECS' commercial aircraft positions included financial guaranties and funding commitments amounting to $409 million ($506 million at year-end 1994) and conditional commitments to purchase aircraft at a cost of $141 million ($81 million at year-end 1994). On January 22, 1996, GECS announced that it had placed a multi-year order for various Boeing aircraft with list prices approximating $4 billion. * SPECIALTY INSURANCE SEGMENT revenues from operations were $7.4 billion in 1995, an increase of 51% from 1994, which was essentially the same as 1993. The increase in 1995 reflected growth, primarily associated with business acquisitions, in the property and casualty reinsurance business. Operating profit increased to $1,020 million in 1995 from $589 million in 1994, principally because there was no current-year counterpart to the 1994 adverse loss development in the private mortgage pool insurance, the result of poor economic conditions and housing value declines in southern California. Operating profit in 1995 also was enhanced by improved returns on investment securities and effects of acquisitions. For 1994, private mortgage pool insurance losses more than offset operating profit increases in other parts of the segment, including primary mortgage insurance. F-14 Annual Report Page No. 38 INTERNATIONAL OPERATIONS Estimated results of international operations include all exports from the United States plus the results of GE's and GECS' operations located outside the United States. International revenues in 1995 were $26.9 billion (38% of consolidated revenues), compared with $20.0 billion in 1994 and $18.2 billion in 1993. In 1995, about 46% of GE's sales of goods and services were international, compared with about 40% in the previous two years. The chart below left depicts the growth in international revenues in relation to total revenues over the past five years. International operating profit was $3.0 billion (27% of consolidated operating profit) in 1995, compared with $2.6 billion in 1994 and $2.3 billion in 1993. GE's international revenues were $20.2 billion in 1995, an increase of 24% from 1994, reflecting strong growth in Europe and the Pacific Basin. European revenues increased by $2.5 billion, largely because of the 1995 consolidation of Nuovo Pignone's $1.5 billion of sales. Additionally, many GE businesses, especially Aircraft Engines and Plastics, achieved strong revenue performance in Europe during the year. GE's Pacific Basin revenues were up $0.9 billion in 1995, the result of consolidating Toshiba Silicones in the Plastics business, as well as growth across many other businesses, particularly Medical Systems and Lighting. GECS' international revenues were $6.7 billion in 1995 and year-end assets were about $43.3 billion. These revenues, which were derived primarily from operations in Europe, Canada and the Pacific Basin, were up sharply from $3.7 billion in 1994; year-end assets more than doubled during the year from approximately $21.5 billion at the end of 1994. The increase is attributable to expansion of GECS' operations into the international marketplace - expansion that management expects to continue. The accompanying financial results reported in U.S. dollars are unavoidably affected by currency exchange. A number of techniques are used to manage the effects of currency exchange, including selective borrowings in local currencies and selective hedging of significant cross-currency transactions. International activity is diverse, as shown for revenues in the chart at the bottom right of this page. Principal currencies include those of countries in the European Monetary Union, as well as the Japanese yen and the Canadian dollar. GE's export sales by major world areas follow.
- --------------------------------------------------------------------------- GE'S TOTAL EXPORTS FROM THE UNITED STATES (In millions) 1995 1994 1993 - --------------------------------------------------------------------------- Pacific Basin $3,397 $3,260 $2,645 Europe 1,701 1,319 2,320 Americas 1,023 1,027 981 Other 964 821 1,039 ------ ------ ------ Exports to external customers 7,085 6,427 6,985 Exports to affiliates 2,123 1,683 1,513 ------ ------ ------ Total exports $9,208 $8,110 $8,498 ====== ====== ====== - ---------------------------------------------------------------------------
< GE made a positive 1995 contribution of approximately $5.2 billion to the U.S. balance of trade. Total exports in 1995 were $9.2 billion; direct imports from external suppliers were $2.8 billion; and imports from GE affiliates were $1.2 billion.
- ----------------------------------------------------------------------------- CONSOLIDATED REVENUES (In billions) 1991 1992 1993 1994 1995 - ----------------------------------------------------------------------------- United States $34.631 $35.228 $37.471 $40.064 $43.164 International 16.652 17.823 18.230 20.045 26.864 - -----------------------------------------------------------------------------
- ----------------------------------------------------------------------------- CONSOLIDATED INTERNATIONAL REVENUES (In billions) 1991 1992 1993 1994 1995 - ----------------------------------------------------------------------------- Europe $7.972 $8.721 $9.042 $9.116 $14.117 Pacific Basin 4.030 4.349 4.531 5.997 7.136 Americas 3.194 3.315 3.215 3.763 4.105 Other 1.456 1.438 1.442 1.169 1.506 - -----------------------------------------------------------------------------
F-15 Annual Report Page No. 39 MANAGEMENT'S DISCUSSION OF FINANCIAL RESOURCES AND LIQUIDITY OVERVIEW This discussion of financial resources and liquidity focuses on the Statement of Financial Position (page 28) and the Statement of Cash Flows (page 30). Throughout the discussion, it is important to understand the differences between the businesses of GE and GECS. Although GE's manufacturing and nonfinancial services activities involve a variety of different businesses, their underlying characteristics are development, preparation for market and delivery of tangible goods and services. Risks and rewards are directly related to the ability to manage and finance those activities. GECS' principal businesses provide financing, asset management, insurance and other financial services to third parties. The underlying characteristics of these businesses involve the management of financial risk. GECS' risks and rewards stem from the abilities of its businesses to continue to design and provide a wide range of financial services in a competitive marketplace and to receive adequate compensation for such services. GECS is not a "captive finance company" nor a vehicle for "off-balance-sheet financing" for GE; very little of GECS' business is directly related to other GE operations. Despite the different business profiles of GE and GECS, the global commercial airline industry is one significant example of an important source of business for both. GE assumes financing positions primarily in support of engine sales, whereas GECS is a significant source of lease and loan financing for the industry (see details in note 16). Management believes that, particularly as the industry regains financial strength, these financing positions are reasonably protected by collateral values and by its ability to control assets, either by ownership or security interests. The fundamental differences between GE and GECS are reflected in the measurements commonly used by investors, rating agencies and financial analysts. These differences will become clearer in the discussion that follows with respect to the more significant items in the financial statements. STATEMENT OF FINANCIAL POSITION * INVESTMENT SECURITIES for each of the past two years comprised mainly investment-grade debt securities held by GECS' specialty insurance and annuity businesses in support of obligations to policyholders and annuitants. The increase of $10.2 billion at GECS during 1995 was principally related to acquisitions, increases in fair value resulting from lower year-end interest rates and investment of premiums. * GE'S CURRENT RECEIVABLES were $8.9 billion and $7.8 billion at the end of 1995 and 1994, respectively, and included $6.6 billion and $5.7 billion due from customers at the end of 1995 and 1994, respectively. As a measure of
- ----------------------------------------------------------------------------- GE ANNUAL INVENTORY TURNOVER 1991 1992 1993 1994 1995 - ----------------------------------------------------------------------------- 4.71 5.26 5.97 6.86 6.90 - -----------------------------------------------------------------------------
asset utilization, customer receivables turnover was 6.7 in 1995, compared with 6.9 in 1994, a decline solely attributable to consolidation of Nuovo Pignone. Current receivables other than amounts owed by customers are primarily amounts that did not originate from sales of GE goods or services, such as advances to suppliers in connection with large contracts. * INVENTORIES were $4.4 billion at December 31, 1995, up $0.5 billion from the end of 1994. As a measure of inventory utilization, turnover was 6.9 in 1995, about the same as in 1994. Absent the consolidation of Nuovo Pignone, inventory turnover would have been 7.2 in 1995, continuing the improvements achieved over the past five years. Last-in, first-out (LIFO) revaluations decreased $87 million in 1995, compared with decreases of $197 million in 1994 and $179 million in 1993. Included in these changes were decreases of $88 million, $72 million and $101 million (1995, 1994 and 1993, respectively) that resulted from lower LIFO inventory levels. There was no cost change in 1995 and net cost decreases in 1994 and 1993. * GECS FINANCING RECEIVABLES were $93.3 billion at year-end 1995, net of allowance for doubtful accounts, up $16.9 billion over 1994. These receivables are discussed on page 36 and in notes 8 and 13. * GECS OTHER RECEIVABLES were $12.9 billion and $6.0 billion at December 31, 1995 and 1994, respectively. The 1995 increase was almost entirely attributable to premiums receivable and reinsurance recoverables, reflecting acquired businesses and a general increase in underwriting activity. * PROPERTY, PLANT AND EQUIPMENT (including equipment leased to others) was $25.7 billion at December 31, 1995, up $2.2 billion from 1994. GE's property, plant and equipment consists of investments for its own productive use, whereas the largest element of GECS' investment is in equipment provided to third parties on operating leases. Details by category of investment can be found in note 14. F-16 Annual Report Page No. 40 GE's total expenditures for new plant and equipment during 1995 totaled $1.8 billion, up slightly from $1.7 billion in 1994. Total expenditures for the past five years were $8.8 billion, of which 36% was investment in productivity, through new equipment and process improvements; 35% was investment for growth, through new capacity and product development; and 29% was investment for such other purposes as improvement of research and development facilities and safety and environmental protection. GECS' additions to its equipment leased to others were $4.5 billion during 1995 ($5.6 billion during 1994). * INTANGIBLE ASSETS were $13.3 billion at year-end 1995, up from $11.4 billion at year-end 1994. GE's intangibles increased to $6.6 billion from $6.3 billion at the end of 1994. The $1.7 billion increase in GECS' intangibles was primarily goodwill attributable to various acquisitions, none of which was individually material. * ALL OTHER ASSETS totaled $26.3 billion at year-end 1995, an increase of $2.4 billion from the end of 1994. GE's other assets decreased $0.5 billion, reflecting the 1995 consolidation of Nuovo Pignone, which was classified in other assets in 1994, and an increase in the prepaid pension asset. GECS' increase of $2.9 billion related principally to acquisitions. * INSURANCE LIABILITIES, RESERVES AND ANNUITY BENEFITS were $39.7 billion, $10.3 billion higher than in 1994. The increase was primarily attributable to acquisitions. * CONSOLIDATED BORROWINGS aggregated $115.5 billion at December 31, 1995, compared with $94.8 billion at the end of 1994. The major debt-rating agencies evaluate the financial condition of GE and of GE Capital (GECS' major public borrowing entity) differently because of their distinct business characteristics. Using criteria appropriate to each and considering their combined strength, those major rating agencies continue to give the highest ratings to debt of both GE and GE Capital. GE has committed to contribute capital to GE Capital in the event of either a significant, specified decrease in the ratio of GE Capital's earnings to fixed charges or a failure to maintain a specified debt-to-equity ratio in the event certain GE Capital preferred stock is redeemed. GE also has guarantied subordinated debt of GECS with a face amount of $1,000 million and $700 million at December 31, 1995 and 1994, respectively. Management believes the likelihood that GE will be required to contribute capital under either the commitments or the guaranties is remote. GE's total borrowings were $3.9 billion at year-end 1995 ($1.6 billion short-term, $2.3 billion long-term), an increase of about $0.3 billion from year-end 1994. GE's total debt at the end of 1995 equaled 11.6% of total capital, down from 11.9% at the end of 1994. GECS' total borrowings were $111.6 billion at December 31, 1995, of which $62.8 billion is due in 1996 and $48.8 billion is due in subsequent years. Comparable amounts at the end of 1994 were $91.4 billion total, $57.1 billion due within one year and $34.3 billion due thereafter. GECS' composite interest rates are discussed on page 36. A large portion of GECS' borrowings ($41.2 billion and $43.7 billion at the end of 1995 and 1994, respectively) was issued in active commercial paper markets that management believes will continue to be a reliable source of short-term financing. Most of this commercial paper is issued by GE Capital. The average remaining terms and interest rates of GE Capital's commercial paper were 41 days and 5.88%, respectively, at the end of 1995, compared with 45 days and 5.90% at the end of 1994. GE Capital's leverage (ratio of debt to equity, excluding from equity all net unrealized gains and losses on investment securities) was 7.89 to 1 at the end of 1995, compared with 7.94 to 1 at the end of 1994. By comparison, including in equity all net unrealized gains and losses on investment securities, GE Capital's ratio of debt to equity was 7.59 to 1 at the end of 1995, compared with 8.43 to 1 at the end of 1994. INTEREST RATE AND CURRENCY RISK MANAGEMENT Both GE and GECS are exposed to various types of risk, although the nature of their activities means that the respective risks are different. The multinational nature of GE's operations and the relatively low level of GE's borrowings means that currency management is more important than managing exposure to changes in interest rates. On the other hand, changes in interest rates are the more significant exposure for GECS because of the potential effects of such changes on financing spreads. The correlation between interest rate changes and financing spreads is subject to many factors and cannot be forecast with reliability. Although not necessarily relevant to future effects, management estimates that, all
- ----------------------------------------------------------------------------- GE BORROWINGS AS A PERCENTAGE OF TOTAL CAPITAL INVESTED 1991 1992 1993 1994 1995 - ----------------------------------------------------------------------------- 26.18% 22.39% 15.51% 11.87% 11.60% - -----------------------------------------------------------------------------
F-17 Annual Report Page No. 41 else constant, an increase of 100 basis points in interest rates for all of 1995 would have reduced GECS net earnings by approximately $65 million. GE and GECS use various financial instruments, particularly interest rate, currency and basis swaps, but also options and currency forwards, to manage their respective risks. GE and GECS are exclusively end users of these instruments, which are commonly referred to as derivatives; neither GE nor GECS engages in trading, market-making or other speculative activities in the derivatives markets. Established practices require that derivative financial instruments relate to specific asset, liability or equity transactions or to currency exposures. The total exposure of GE and GECS to credit risk associated with in-the-money derivatives at December 31, 1995, was $50 million and $680 million, respectively. Management does not anticipate any loss from this exposure. More detailed information regarding these financial instruments, as well as the strategies and policies for their use, is contained in notes 1, 18 and 29. STATEMENT OF CASH FLOWS Because cash management activities of GE and GECS are separate and distinct, it is more useful to review their cash flows statements separately. GE GE's cash and equivalents aggregated $0.9 billion at the end of 1995, about $0.5 billion lower than at the end of 1994. During 1995, GE generated $6.1 billion in cash from operating activities, about the same as in 1994. The 1995 cash generation provided most of the resources to repurchase $3.1 billion of GE common stock under share repurchase programs, to pay $2.8 billion in dividends to share owners, and to invest $1.8 billion in new plant and equipment. Operating activities are the principal source of GE's cash flows from continuing operations. Over the past three years, operating activities have provided more than $17.3 billion of cash. Principal applications were payment of dividends to share owners ($7.4 billion), investment in new plant and equipment ($5.2 billion) and reduction of debt ($2.9 billion). In addition, the Company repurchased and placed into treasury $3.4 billion of its common stock during the past three years under share repurchase programs. In December 1994, GE's Board of Directors authorized the repurchase of up to $5 billion of the Company's common stock over the following two years. In December 1995, the Board increased the authorized amount of the repurchase to $9 billion and extended the program through 1997. This program is a direct result of GE's solid financial condition and cash-generating capability, and it was authorized after evaluating various alternatives to enhance long-term share owner value.
- ----------------------------------------------------------------------------- GE CUMULATIVE CASH FLOWS (In billions) 1991 1992 1993 1994 1995 - ----------------------------------------------------------------------------- Cash flows from operating activities $3.626 $8.199 $13.400 $19.471 $25.536 Dividends paid 1.780 3.705 5.858 8.320 11.090 Shares repurchased 1.043 2.175 2.882 3.955 7.057 - -----------------------------------------------------------------------------
Based on past performance and current expectations, in combination with the financial flexibility that comes with a strong balance sheet and the highest credit ratings, management believes that GE is in a sound position to complete the share repurchase program, to grow dividends in line with earnings, and to continue making long-term investments for future growth, including selective acquisitions and investments in joint ventures. Expenditures for new plant and equipment in 1996 are expected to be about 20% higher than in 1995, principally for productivity and growth. GECS GECS' primary source of cash is financing activities involving the continued rollover of short-term borrowings and appropriate addition of borrowings with a reasonable balance of maturities. Over the past three years, GECS' borrowings with maturities of 90 days or less have decreased by $4.4 billion. New borrowings of $74.5 billion having maturities longer than 90 days were added during those years, while $38.3 billion of such longer-term borrowings were retired. GECS also generated $24.3 billion from continuing operating activities. GECS' principal use of cash has been investing in assets to grow its businesses. Of the $53.5 billion that GECS invested over the past three years, $25.0 billion was used for additions to financing receivables, $13.5 billion was used to invest in new equipment, principally for lease to others, and $9.5 billion was used for acquisitions of new businesses. With the financial flexibility that comes with excellent credit ratings, management believes that GECS should be well positioned to meet the global needs of its customers for capital and to continue providing GE share owners with good returns. F-18 Annual Report Page No. 42 MANAGEMENT'S DISCUSSION OF SELECTED FINANCIAL DATA SELECTED FINANCIAL DATA summarizes on the opposite page some data frequently requested about General Electric Company. The data are divided into three sections: upper portion - consolidated data; middle portion - GE data that reflect various conventional measurements for industrial enterprises; and lower portion - GECS data that reflect key information pertinent to financial services. GE'S TOTAL RESEARCH AND DEVELOPMENT expenditures were $1,892 million in 1995, up $151 million (or 9%) from 1994. In 1995, expenditures of $1,299 million were from GE's own funds, up 10% from 1994. Expenditures reflected continuing research and development work related to new product programs, including the next generation of gas turbines, a more powerful version of the recently introduced AC locomotive and, in Aircraft Engines, introduction of the new GE90 and development of more fuel-efficient versions of the best- selling CFM56. Expenditures from funds provided by customers (mainly the U.S. government) were $593 million in 1995, up $28 million from 1994, primarily reflecting additional research efforts in advanced propulsion technologies at Aircraft Engines. GE'S TOTAL BACKLOG of firm unfilled orders at the end of 1995 was $25.5 billion, up $1.2 billion from the 1994 level. The increase was more than accounted for by the 1995 consolidation of Nuovo Pignone. Orders constituting this backlog may be canceled or deferred by customers, subject in certain cases to cancellation penalties. See Industry Segments beginning on page 34 for further discussion on unfilled orders of relatively long- cycle manufacturing businesses. About 46% of total unfilled orders at the end of 1995 was scheduled to be shipped in 1996, with most of the remainder to be shipped in the two years after that. For comparison, about 50% of the 1994 backlog was expected to be shipped in 1995. REGARDING ENVIRONMENTAL MATTERS, the Company's operations, like operations of other companies engaged in similar businesses, involve the use, disposal and cleanup of substances regulated under environmental protection laws. In 1995, GE had capital expenditures of about $75 million for projects related to the environment. The comparable amount in 1994 was $63 million. These amounts exclude expenditures for remediation actions, which are principally expensed and are discussed below. Capital expenditures for environmental purposes have included pollution control devices - such as wastewater treatment plants, groundwater monitoring devices, air strippers or separators, and incinerators - at new and existing facilities constructed or upgraded in the normal course of business. Consistent with policies stressing environmental responsibility, average annual capital expenditures other than for remediation projects are presently expected to be about $85 million over the next two years. This level is in line with existing levels for new or expanded programs to build facilities or modify manufacturing processes to minimize waste and reduce emissions. GE also is involved in a sizable number of remediation actions to clean up hazardous wastes as required by federal and state laws. Such statutes require that responsible parties fund remediation actions regardless of fault, legality of original disposal or ownership of a disposal site. Expenditures for site remediation actions amounted to approximately $76 million in 1995, compared with $98 million in 1994. It is presently expected that remediation actions will require average annual expenditures in the range of $80 million to $110 million over the next two years. Liabilities for remediation costs are based on management's best estimate of future costs; when there appears to be a range of possible costs with equal likelihood, liabilities are based on the lower end of such range. Possible insurance recoveries are not considered in estimating liabilities. It is difficult to estimate with any meaning the annual level of future remediation expenditures because of the many uncertainties, including uncertainties about the status of laws, regulations, technology and information related to individual sites. Subject to the foregoing, management believes that capital expenditures and remediation actions to comply with the present laws governing environmental protection will not have a material effect on consolidated earnings, liquidity or competitive position. In making this determination, management considered the fact that, if remediation expenditures were to continue at the 1995 level, liabilities recorded at the end of 1995 would be sufficient to cover expenditures through the end of 2001, and that the probability of incurring more than nominal expenditures beyond 2015 is remote. Of course, lower annual expenditures could be incurred over a longer period without increasing the total expenditures.
- ----------------------------------------------------------------------------- GE SHARE PRICE ACTIVITY 1991 1992 1993 1994 1995 - ----------------------------------------------------------------------------- High $39.00 $43.75 $53.50 $54.875 $73.125 Low 26.50 36.375 40.375 45.00 49.875 Close 38.25 42.75 52.44 51.00 72.00 - -----------------------------------------------------------------------------
F-19 Annual Report Page No. 43 SELECTED FINANCIAL DATA
----------------------------------------------------------------- (Dollar amounts in millions; per-share amounts in dollars) 1995 1994 1993 1992 1991 - ----------------------------------------------------------------------------------------------------------------------- GENERAL ELECTRIC COMPANY AND CONSOLIDATED AFFILIATES Revenues $ 70,028 $60,109 $55,701 $53,051 $51,283 Earnings from continuing operations 6,573 5,915 4,184 4,137 3,943 Earnings (loss) from discontinued operations - (1,189) 993 588 492 Earnings before accounting changes 6,573 4,726 5,177 4,725 4,435 Net earnings 6,573 4,726 4,315 4,725 2,636 Dividends declared 2,838 2,546 2,229 1,985 1,808 Earned on average share owners' equity 23.5% 18.1% 17.5% 20.9% 12.2% Per share Earnings from continuing operations $ 3.90 $ 3.46 $ 2.45 $ 2.41 $ 2.27 Earnings (loss) from discontinued operations - (0.69) 0.58 0.34 0.28 Earnings before accounting changes 3.90 2.77 3.03 2.75 2.55 Net earnings 3.90 2.77 2.52 2.75 1.51 Dividends declared 1.69 1.49 1.305 1.16 1.04 Stock price range 73 1/8-49 7/8 54 7/8-45 53 1/2-40 3/8 43 3/4-36 3/8 39-26 1/2 Total assets of continuing operations 228,035 185,871 166,413 135,472 123,115 Long-term borrowings 51,027 36,979 28,194 25,298 22,602 Shares outstanding - average (in thousands) 1,683,812 1,708,738 1,707,979 1,714,396 1,737,863 Share owner accounts - average 460,000 458,000 464,000 481,000 495,000 Employees at year end United States 150,000 156,000 157,000 168,000 173,000 Other countries 72,000 60,000 59,000 58,000 62,000 Discontinued operations (primarily U.S.) - 5,000 6,000 42,000 49,000 -------- ------- ------- ------- ------- Total employees 222,000 221,000 222,000 268,000 284,000 ======== ======= ======= ======= ======= - ----------------------------------------------------------------------------------------------------------------------- GE DATA Short-term borrowings $ 1,666 $ 906 $ 2,391 $ 3,448 $ 3,482 Long-term borrowings 2,277 2,699 2,413 3,420 4,332 Minority interest 434 382 355 350 353 Share owners' equity 29,609 26,387 25,824 23,459 21,683 -------- ------- ------- ------- ------- Total capital invested $ 33,986 $30,374 $30,983 $30,677 $29,850 ======== ======= ======= ======= ======= Return on average total capital invested 21.3% 15.9% 15.2% 16.9% 11.1% Borrowings as a percentage of total capital invested 11.6% 11.9% 15.5% 22.4% 26.2% Working capital $ 204 $ 544 $ (419) $ (822) $ (231) Property, plant and equipment additions 1,831 1,743 1,588 1,445 2,164 Year-end orders backlog 25,507 24,324 22,861 25,434 26,049 - ----------------------------------------------------------------------------------------------------------------------- GECS DATA Revenues $ 26,492 $19,875 $17,276 $14,418 $13,053 Earnings from continuing operations 2,415 2,085 1,567 1,331 1,221 Earnings (losses) from discontinued operations - (1,189) 240 168 54 Net earnings 2,415 896 1,807 1,499 1,256 Share owner's equity 12,774 9,380 10,809 8,884 7,758 Minority interest 2,522 1,465 1,301 994 865 Borrowings from others 111,598 91,399 81,052 72,360 63,313 Ratio of debt to equity at GE Capital 7.89:1 7.94:1 7.96:1 7.91:1 7.80:1 Total assets of GE Capital $160,825 $130,904 $117,939 $92,632 $80,528 Reserve coverage on financing receivables 2.63% 2.63% 2.63% 2.63% 2.63% Insurance premiums written $ 6,158 $ 3,962 $ 3,956 $ 2,900 $ 2,155 - ------------------------------------------------------------------------------------------------------------------------ Equity excludes unrealized gains and losses on investment securities. See note 20 to the consolidated financial statements for information about the 1993 accounting change. The 1991 accounting change represented the adoption of SFAS No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions. "GE" means the basis of consolidation as described in note 1 to the consolidated financial statements; "GECS" means General Electric Capital Services, Inc. and all of its affiliates and associated companies. Transactions between GE and GECS have been eliminated from the "consolidated information."
F-20 Annual Report Page No. 44 MANAGEMENT'S DISCUSSION OF FINANCIAL RESPONSIBILITY The financial data in this report, including the audited financial statements, have been prepared by management using the best available information and applying judgment. Accounting principles used in preparing the financial statements are those that are generally accepted in the United States. Management believes that a sound, dynamic system of internal financial controls that balances benefits and costs provides the best safeguard for Company assets. Professional financial managers are responsible for implementing and overseeing the financial control system, reporting on management's stewardship of the assets entrusted to it by share owners and maintaining accurate records. GE is dedicated to the highest standards of integrity, ethics and social responsibility. This dedication is reflected in written policy statements covering, among other subjects, environmental protection, potentially conflicting outside interests of employees, compliance with antitrust laws, proper business practices and adherence to the highest standards of conduct and practices in transactions with the U.S. government. Management continually emphasizes to all employees that even the appearance of impropriety can erode public confidence in the Company. Ongoing education and communication programs and review activities, such as those conducted by the Company's Policy Compliance Review Board, are designed to create a strong compliance culture - one that encourages employees to raise their policy questions and concerns and that prohibits retribution for doing so. KPMG Peat Marwick LLP provides an objective, independent review of management's discharge of its obligations relating to the fairness of reporting operating results and financial condition. Their report for 1995 appears below. The Audit Committee of the Board (consisting solely of Directors from outside GE) maintains an ongoing appraisal - on behalf of share owners - of the activities and independence of the Company's independent auditors, the activities of its internal audit staff, financial reporting process, internal financial controls and compliance with key Company policies. /s/ John F. Welch, Jr. /s/ Dennis D. Dammerman - ---------------------------- --------------------------- John F. Welch, Jr. Dennis D. Dammerman Chairman of the Board and Senior Vice President Chief Executive Officer Finance February 9, 1996 Independent Auditors' Report To Share Owners and Board of Directors of General Electric Company We have audited the financial statements of General Electric Company and consolidated affiliates as listed in Item 14 (a)(1) on page 27. In connection with our audits of the consolidated financial statements, we also have audited the financial statement schedule as listed in Item 14 (a)(2) on page 27. These consolidated financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the aforementioned financial statements present fairly, in all material respects, the financial position of General Electric Company and consolidated affiliates at December 31, 1995 and 1994, and the results of their operations and their cash flows for each of the years in the three- year period ended December 31, 1995, in conformity with generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. As discussed in note 20 to the consolidated financial statements, the Company in 1993 adopted a required change in its method of accounting for postemployment benefits. /s/ KPMG Peat Marwick LLP - ---------------------------------------- KPMG Peat Marwick LLP Stamford, Connecticut February 9, 1996 F-21 Annual Report Page No. 45 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONSOLIDATION. The consolidated financial statements represent the adding together of all affiliates - companies that General Electric directly or indirectly controls, either through majority ownership or otherwise. Results of associated companies - generally companies that are 20% to 50% owned and over which GE, directly or indirectly, has significant influence - are included in the financial statements on a "one-line" basis. FINANCIAL STATEMENT PRESENTATION. Financial data and related measurements are presented in the following categories. * GE. This represents the adding together of all affiliates other than General Electric Capital Services, Inc. ("GECS"), whose continuing operations are presented on a one-line basis. * GECS. This affiliate owns all of the common stock of General Electric Capital Corporation (GE Capital) and GE Global Insurance Holding Corporation (GE Global Insurance). GE Capital, GE Global Insurance and their respective affiliates are consolidated in the GECS columns and constitute its business. * CONSOLIDATED. These data represent the adding together of GE and GECS. The effects of transactions among related companies within and between each of the above-mentioned groups are eliminated. Transactions between GE and GECS are not material. Certain prior-year amounts have been reclassified to conform to the 1995 presentation. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect reported amounts and related disclosures. Actual results could differ from those estimates. SALES OF GOODS AND SERVICES. A sale is recorded when title passes to the customer or when services are performed in accordance with contracts. GECS REVENUES FROM OPERATIONS ("EARNED INCOME"). Income on all loans is recognized on the interest method. Accrual of interest income is suspended at the earlier of the time at which collection of an account becomes doubtful or the account becomes 90 days delinquent. Interest income on impaired loans is recognized either as cash is collected or on a cost- recovery basis as conditions warrant. Financing lease income is recorded on the interest method so as to produce a level yield on funds not yet recovered. Estimated unguarantied residual values of leased assets are based primarily on periodic independent appraisals of the values of leased assets remaining at expiration of the lease terms. Operating lease income is recognized on a straight-line basis over the terms of underlying leases. Origination, commitment and other nonrefundable fees related to fundings are deferred and recorded in earned income on the interest method. Commitment fees related to loans not expected to be funded and line-of-credit fees are deferred and recorded in earned income on a straight-line basis over the period to which the fees relate. Syndication fees are recorded in earned income at the time related services are performed unless significant contingencies exist. Premiums on insurance contracts are reported as earned income over the terms of the related reinsurance treaties or insurance policies. In general, earned premiums are calculated on a pro rata basis or are determined based on reports received from reinsureds. Premium adjustments under retrospectively rated reinsurance contracts are recorded based on estimated losses and loss expenses, including both case and incurred-but-not-reported reserves. Premiums received under annuity contracts that do not have significant mortality or morbidity risk are not reported as revenues but as annuity benefits - a liability - and are adjusted according to terms of the respective policies. DEPRECIATION AND AMORTIZATION. The cost of most of GE's manufacturing plant and equipment is depreciated using an accelerated method based primarily on a sum-of-the-years digits formula. If manufacturing plant and equipment is subject to abnormal economic conditions or obsolescence, additional depreciation is provided. The cost of GECS' equipment leased to others on operating leases is amortized, principally on a straight-line basis, to estimated net salvage value over the lease term or over the estimated economic life of the equipment. Depreciation of property and equipment for GECS' own use is recorded on either a sum-of-the-years digits formula or a straight-line basis over the lives of the assets. RECOGNITION OF LOSSES ON FINANCING RECEIVABLES AND INVESTMENTS. GECS maintains an allowance for losses on financing receivables at an amount that it believes is sufficient to provide adequate protection against future losses in the portfolio. When collateral is repossessed in satisfaction of a loan, the receivable is written down against the allowance for losses to estimated fair value less costs to sell, transferred to other assets and subsequently carried at the lower of cost or estimated fair value less costs to sell. This accounting method has been employed principally for specialized financing transactions. See note 8 for further information on GECS' allowance for losses on financing receivables. F-22 Annual Report Page No. 46 CASH EQUIVALENTS. Marketable securities with original maturities of three months or less are included in cash equivalents. INVESTMENT SECURITIES. The Company has designated its investments in debt securities and marketable equity securities as available-for-sale. Those securities are reported at fair value, with net unrealized gains and losses included in equity, net of applicable taxes. Unrealized losses that are other than temporary are recognized in earnings. INVENTORIES. All inventories are stated at the lower of cost or realizable values. Cost for virtually all of GE's U.S. inventories is stated on a last- in, first-out (LIFO) basis; cost of other inventories is primarily determined on a first-in, first-out (FIFO) basis. INTANGIBLE ASSETS. Goodwill is amortized over its estimated period of benefit on a straight-line basis; other intangible assets are amortized on appropriate bases over their estimated lives. No amortization period exceeds 40 years. Goodwill in excess of associated expected operating cash flows is considered to be impaired and is written down to fair value. DEFERRED INSURANCE ACQUISITION COSTS. For the property and casualty business, deferred insurance acquisition costs are amortized pro rata over the contract periods in which the related premiums are earned. For the life insurance business, these costs are amortized over the premium-paying periods of the contracts in proportion either to anticipated premium income or to gross profit, as appropriate. For certain annuity contracts, such costs are amortized on the basis of anticipated gross profits. For other lines of business, acquisition costs are amortized over the life of the related insurance contracts. Deferred insurance acquisition costs are reviewed for recoverability; anticipated investment income is considered in making recoverability evaluations. INTEREST RATE AND CURRENCY RISK MANAGEMENT. As a matter of policy, neither GE nor GECS engages in derivatives trading, market-making or other speculative activities. Any instrument designated but ineffective as a hedge is marked to market and recognized in operations immediately. GE and GECS use swaps primarily to optimize funding costs. To a lesser degree, and in combination with options and limit contracts, GECS uses swaps to stabilize cash flows from mortgage-related assets. Interest rate and currency swaps that modify borrowings or designated assets, including swaps associated with forecasted commercial paper renewals, are accounted for on an accrual basis. Both GE and GECS require all other swaps, as well as options and forwards, to be designated and accounted for as hedges of specific assets, liabilities or committed transactions; resulting payments and receipts are recognized contemporaneously with effects of hedged transactions. A payment or receipt arising from early termination of an effective hedge is accounted for as an adjustment to the basis of the hedged transaction. 2. DISCONTINUED OPERATIONS A summary of discontinued operations follows.
- ------------------------------------------------------------------------- (In millions) 1994 1993 - ------------------------------------------------------------------------- Earnings (loss) from GECS securities broker-dealer $(1,189) $240 Earnings from GE Aerospace - 753 ------- ---- Earnings (loss) from discontinued operations $(1,189) $993 ======= ==== - -------------------------------------------------------------------------
GECS SECURITIES BROKER-DEALER. In November 1994, GE elected to terminate the operations of Kidder, Peabody Group Inc. (Kidder, Peabody), the GECS securities broker-dealer, by initiating an orderly liquidation of its assets and liabilities. As part of the liquidation plan, GE received securities of Paine Webber Group Inc. valued at $657 million in exchange for certain broker-dealer assets and operations. Summary operating results of the discontinued broker-dealer operations follow.
- ------------------------------------------------------------------------- (In millions) 1994 1993 - ------------------------------------------------------------------------- Revenues $ 4,578 $4,861 ======= ====== Earnings (loss) before income taxes $(551) $ 439 Income tax benefit (provision) 230 (199) ------- ------ Earnings (loss) from discontinued operations (321) 240 Provision for loss, net of income tax benefit of $266 (868) - ------- ----- Earnings (loss) from GECS securities broker-dealer $(1,189) $ 240 ======= ====== - -------------------------------------------------------------------------
The 1994 provision of $868 million after taxes, shown in the summary above, related to exit costs associated with liquidation of Kidder, Peabody. This liquidation was substantially complete as of December 31, 1995. GE AEROSPACE. In April 1993, General Electric Company transferred GE's Aerospace business segment, GE Government Services, Inc., and a component of GE that operated Knolls Atomic Power Laboratory under a contract with the U.S. Department of Energy to a new company controlled by the shareholders of Martin Marietta Corporation in a transaction valued at $3.3 billion. Summary operating results of discontinued aerospace operations follow.
- ------------------------------------------------------------------------- (In millions) 1993 - ------------------------------------------------------------------------- Revenues $996 ==== Earnings before income taxes $119 Provision for income taxes (44) ---- Earnings from discontinued operations 75 Gain on transfer, net of income taxes of $752 678 ---- Earnings from GE Aerospace $753 ==== - -------------------------------------------------------------------------
F-23 Annual Report Page No. 47 3. GE OTHER INCOME
- ------------------------------------------------------------------------- (In millions) 1995 1994 1993 - ------------------------------------------------------------------------- Royalty and technical agreements $453 $395 $371 Associated companies 111 115 65 Marketable securities and bank deposits 70 77 75 Customer financing 26 28 29 Other investments Dividends 62 62 50 Interest 18 21 21 Other items 13 85 119 ---- ---- ---- $753 $783 $730 ==== ==== ==== - -------------------------------------------------------------------------
4. GECS REVENUES FROM OPERATIONS
- ------------------------------------------------------------------------- (In millions) 1995 1994 1993 - ------------------------------------------------------------------------- Time sales, loan, investment and other income $13,004 $9,709 $7,997 Financing leases 3,176 2,539 2,315 Operating lease rentals 4,080 3,802 3,267 Premium and commission income of insurance affiliates 6,232 3,825 3,697 ------- ------- ------- $26,492 $19,875 $17,276 ======= ======= ======= - -------------------------------------------------------------------------
Included in earned income from financing leases were pretax gains on the sale of equipment at lease completion of $191 million in 1995, $180 million in 1994 and $145 million in 1993. 5. SUPPLEMENTAL COST DETAILS Total expenditures for research and development were $1,892 million, $1,741 million and $1,955 million in 1995, 1994 and 1993, respectively. The Company- funded portion aggregated $1,299 million in 1995, $1,176 million in 1994 and $1,297 million in 1993. Rental expense under operating leases is shown below.
- ------------------------------------------------------------------------- (In millions) 1995 1994 1993 - ------------------------------------------------------------------------- GE $523 $514 $635 GECS 524 468 413 - -------------------------------------------------------------------------
At December 31, 1995, minimum rental commitments under noncancelable operating leases aggregated $2,705 million and $3,119 million for GE and GECS, respectively. Amounts payable over the next five years are shown below.
- ------------------------------------------------------------------------- (In millions) 1996 1997 1998 1999 2000 - ------------------------------------------------------------------------- GE $358 $324 $275 $216 $164 GECS 434 384 345 320 288 - -------------------------------------------------------------------------
GE's selling, general and administrative expense totaled $5,743 million in 1995, $5,211 million in 1994 and $5,124 million in 1993. Insignificant amounts of interest were capitalized by GE and GECS in 1995, 1994 and 1993. 6. PENSION BENEFITS GE and its affiliates sponsor a number of pension plans. Principal pension plans are discussed below; other pension plans are not significant individually or in the aggregate. PRINCIPAL PENSION PLANS are the GE Pension Plan and the GE Supplementary Pension Plan. The GE Pension Plan covers substantially all GE employees and 65% of GECS employees in the United States. Generally, benefits are based on the greater of a formula recognizing career earnings or a formula recognizing length of service and final average earnings. Benefit provisions are subject to collective bargaining. At the end of 1995, the GE Pension Plan covered approximately 462,000 participants, including 134,000 employees, 147,000 former employees with vested rights to future benefits, and 181,000 retirees and beneficiaries receiving benefits. The GE Supplementary Pension Plan is an unfunded plan providing supplementary retirement benefits primarily to higher-level, longer-service U.S. employees. Details of income for principal pension plans follow.
- ------------------------------------------------------------------------- PENSION PLAN INCOME (In millions) 1995 1994 1993 - ------------------------------------------------------------------------- Actual return on plan assets $ 5,439 $ 316 $ 3,221 Unrecognized portion of return (3,087) 1,951 (1,066) Service cost for benefits earned (469) (496) (452) Interest cost on benefit obligation (1,580) (1,491) (1,486) Amortization 394 294 352 ------- ------- ------- Total pension plan income $ 697 $ 574 $ 569 ======= ======= ======= - ------------------------------------------------------------------------- Net of employee contributions. - -------------------------------------------------------------------------
Actual return on trust assets in 1995 was 21.2%, compared with the 9.5% assumed return on such assets. The effect of this higher return will be recognized in future years. The 1993 gain on transfer of discontinued Aerospace operations included a pretax pension plan curtailment/settlement loss of $125 million. F-24 Annual Report Page No. 48 FUNDING POLICY for the GE Pension Plan is to contribute amounts sufficient to meet minimum funding requirements as set forth in employee benefit and tax laws plus such additional amounts as GE may determine to be appropriate. GE has not made contributions since 1987 because the fully funded status of the GE Pension Plan precludes current tax deduction and because any Company contribution would require payment of annual excise taxes.
- ------------------------------------------------------------------------- FUNDED STATUS OF PENSION PLANS December 31 (In millions) 1995 1994 - ------------------------------------------------------------------------- Market-related value of assets $27,795 $25,441 Projected benefit obligation 23,119 19,334 - -------------------------------------------------------------------------
The market-related value of pension assets recognizes market appreciation or depreciation in the portfolio over five years, a method that reduces the short-term impact of market fluctuations. Plan assets are held in trust and consist mainly of common stock and fixed-income investments. GE common stock represents about 3% of trust assets. An analysis of amounts shown in the Statement of Financial Position is shown below.
- ------------------------------------------------------------------------- PREPAID PENSION ASSET December 31 (In millions) 1995 1994 - ------------------------------------------------------------------------- Fair value of trust assets $30,200 $26,166 Projected benefit obligation (23,119) (19,334) ------- ------- Assets in excess of obligation 7,081 6,832 Add (deduct) unamortized balances SFAS No. 87 transition gain (769) (923) Experience gains (2,127) (2,548) Plan amendments 523 602 Pension liability 564 526 ------- ------- PREPAID PENSION ASSET $5,272 $4,489 ======= ======= - -------------------------------------------------------------------------
The accumulated benefit obligation was $22,052 million and $18,430 million at year-end 1995 and 1994, respectively; the vested benefit obligation was approximately equal to the accumulated benefit obligation at the end of both years. ACTUARIAL ASSUMPTIONS AND TECHNIQUES used to determine costs and benefit obligations for principal pension plans follow.
- ------------------------------------------------------------------------- ACTUARIAL ASSUMPTIONS December 31 1995 1994 - ------------------------------------------------------------------------- Discount rate 7.0% 8.5% Compensation increases 4.0 5.5 Return on assets for the year 9.5 9.5 - -------------------------------------------------------------------------
Experience gains and losses, as well as the effects of changes in actuarial assumptions and plan provisions, are amortized over employees' average future service period. 7. RETIREE HEALTH AND LIFE BENEFITS GE and its affiliates sponsor a number of retiree health and life insurance benefit plans. Principal retiree benefit plans are discussed below; other such plans are not significant individually or in the aggregate. PRINCIPAL RETIREE BENEFIT PLANS generally provide health and life insurance benefits to employees who retire under the GE Pension Plan with 10 or more years of service. Retirees share in the cost of their health care benefits. Benefit provisions are subject to collective bargaining. At the end of 1995, these plans covered approximately 252,000 retirees and dependents. Details of cost for principal retiree benefit plans follow.
- ------------------------------------------------------------------------- COST OF RETIREE BENEFIT PLANS (In millions) 1995 1994 1993 - ------------------------------------------------------------------------- RETIREE HEALTH PLANS Service cost for benefits earned $73 $78 $49 Interest cost on benefit obligation 189 191 192 Actual return on plan assets - - (3) Unrecognized portion of return - (1) 1 Amortization (12) (3) (26) ------- ------- ------- Retiree health plan cost 250 265 213 ------- ------- ------- RETIREE LIFE PLANS Service cost for benefits earned 13 24 21 Interest cost on benefit obligation 108 105 111 Actual return on plan assets (329) (2) (152) Unrecognized portion of return 206 (120) 42 Amortization 1 8 7 ------- ------- ------- Retiree life plan cost (income) (1) 15 29 ------- ------- ------- TOTAL COST $249 $280 $242 ======= ======= ======= - -------------------------------------------------------------------------
The 1993 gain on transfer of discontinued Aerospace operations included a pretax retiree health and life plan curtailment/settlement gain of $245 million. FUNDING POLICY for retiree health benefits is generally to pay covered expenses as they are incurred. GE funds retiree life insurance benefits at its discretion and within limits imposed by tax laws.
- ------------------------------------------------------------------------- FUNDED STATUS OF RETIREE BENEFIT PLANS December 31 (In millions) 1995 1994 - ------------------------------------------------------------------------- c> Market-related value of assets $1,430 $1,346 Accumulated postretirement benefit obligation 4,089 3,701 - -------------------------------------------------------------------------
The market-related value of assets of retiree life plans recognizes market appreciation or depreciation in the portfolio over five years, a method that reduces the short-term impact of market fluctuations. Plan assets are held in trust and consist mainly of common stock and fixed-income investments. GE common stock represents about 2% of trust assets. F-25 Annual Report Page No. 49 An analysis of amounts shown in the Statement of Financial Position is shown below.
- ----------------------------------------------------------------------------------------------- RETIREE BENEFIT LIABILITY/ASSET Retiree health plans Retiree life plans -------------------- ------------------- December 31 (In millions) 1995 1994 1995 1994 - ----------------------------------------------------------------------------------------------- Accumulated postretirement benefit obligation Retirees and dependents $1,984 $1,858 $1,314 $1,099 Employees eligible to retire 95 101 53 55 Other employees 451 427 192 161 ------ ------ ------ ------ 2,530 2,386 1,559 1,315 Less fair value of trust assets - - (1,556) (1,323) ------ ------ ------ ------ Obligation over (under) assets 2,530 2,386 3 (8) Add (deduct) unamortized balances Experience losses (292) (112) (199) (198) Plan amendments 177 188 119 130 ------ ------ ------ ------ RETIREE BENEFIT LIABILITY (PREPAID ASSET) $2,415 $2,462 $(77) $(76) ====== ====== ====== ====== - -----------------------------------------------------------------------------------------------
ACTUARIAL ASSUMPTIONS AND TECHNIQUES used to determine costs and benefit obligations for principal retiree benefit plans are shown below.
- ------------------------------------------------------------------------- ACTUARIAL ASSUMPTIONS December 31 1995 1994 - ------------------------------------------------------------------------- Discount rate 7.0% 8.5% Compensation increases 4.0 5.5 Health care cost trend 8.5 9.0 Return on assets for the year 9.5 9.5 - ------------------------------------------------------------------------- Gradually declining to 5.0% after 2002. Gradually declining to 5.0% after 2022. - -------------------------------------------------------------------------
Increasing the health care cost trend rates by one percentage point would not have had a material effect on the December 31, 1995, accumulated postretirement benefit obligation or the annual cost of retiree health plans. Experience gains and losses, as well as the effects of changes in actuarial assumptions and plan provisions, are amortized over employees' average future service period. 8. GECS ALLOWANCE FOR LOSSES ON FINANCING RECEIVABLES GECS allowance for losses on financing receivables represented 2.63% of total financing receivables at year-end 1995 and 1994. The allowance for small-balance receivables is determined principally on the basis of actual experience during the preceding three years. Further allowances are provided to reflect management's judgment of additional loss potential. For other receivables, principally the larger loans and leases, the allowance for losses is determined primarily on the basis of management's judgment of net loss potential, including specific allowances for known troubled accounts. The table below shows the activity in the allowance for losses on financing receivables during each of the past three years.
- ------------------------------------------------------------------------- (In millions) 1995 1994 1993 - ------------------------------------------------------------------------- Balance at January 1 $2,062 $1,730 $1,607 Provisions charged to operations 1,117 873 987 Net transfers related to companies acquired or sold 217 199 126 Amounts written off - net (877) (740) (990) ------ ------ ------ Balance at December 31 $2,519 $2,062 $1,730 ====== ====== ====== - -------------------------------------------------------------------------
All accounts or portions thereof deemed to be uncollectible or to require an excessive collection cost are written off to the allowance for losses. Generally, small-balance accounts are progressively written down (from 10% when more than three months delinquent to 100% when 9 to 12 months delinquent) to record the balances at estimated realizable value. If at any time during that period an account is judged to be uncollectible, such as in the case of a bankruptcy, the uncollectible balance is written off. Large- balance accounts are reviewed at least quarterly, and those accounts with amounts that are judged to be uncollectible are written down to estimated realizable value. F-26 Annual Report Page No. 50 9. PROVISION FOR INCOME TAXES
- ------------------------------------------------------------------------------------------ (In millions) 1995 1994 1993 - ------------------------------------------------------------------------------------------ GE Estimated amounts payable $1,696 $1,305 $1,207 Deferred tax expense from temporary differences 373 592 120 Investment credit amortized - net (10) (15) (17) ------ ------ ------ 2,059 1,882 1,310 ------ ------ ------ GECS Estimated amounts payable 434 447 221 Deferred tax expense from temporary differences 678 431 428 Investment credit amortized - net (7) (14) (7) ------ ------ ------ 1,105 864 642 ------ ------ ------ CONSOLIDATED Estimated amounts payable 2,130 1,752 1,428 Deferred tax expense from temporary differences 1,051 1,023 548 Investment credit amortized - net (17) (29) (24) ------ ------ ------ $3,164 $2,746 $1,952 ====== ====== ====== - ------------------------------------------------------------------------------------------
GE includes GECS in filing a consolidated U.S. federal income tax return. GECS' provision for estimated taxes payable includes its effect on the consolidated return. Estimated consolidated amounts payable includes amounts applicable to non-U.S. jurisdictions of $721 million, $453 million and $302 million in 1995, 1994 and 1993, respectively. Deferred income tax balances reflect the impact of temporary differences between the carrying amounts of assets and liabilities and their tax bases and are stated at enacted tax rates expected to be in effect when taxes are actually paid or recovered. See note 22 for details. Except for certain earnings that GE intends to reinvest indefinitely, provision has been made for the estimated U.S. federal income tax liabilities applicable to undistributed earnings of affiliates and associated companies. Based on location (not tax jurisdiction) of the business providing goods and services, consolidated U.S. income before taxes was $8.1 billion in 1995, $7.5 billion in 1994 and $5.6 billion in 1993. The corresponding amounts for non-U.S. based operations were $1.6 billion in 1995, $1.2 billion in 1994 and $0.5 billion in 1993.
- -------------------------------------------------------------------------------------------------------------------------------- RECONCILIATION OF U.S. FEDERAL Consolidated GE GECS STATUTORY TAX RATE TO ACTUAL RATE ------------------------- ------------------------- -------------------------- 1995 1994 1993 1995 1994 1993 1995 1994 1993 - -------------------------------------------------------------------------------------------------------------------------------- Statutory U.S. federal income tax rate 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% ---- ---- ---- ---- ---- ---- ---- ---- ---- Increase (reduction) in rate resulting from: Inclusion of after-tax earnings of GECS in before-tax earnings of GE - - - (9.8) (9.4) (10.0) - - - Rate increase - deferred taxes - - 1.6 - - (0.2) - - 5.2 Amortization of goodwill 1.1 1.1 1.5 0.8 0.8 1.2 1.1 1.0 1.2 Tax-exempt income (2.1) (2.4) (2.9) - - - (5.8) (6.9) (8.3) Foreign Sales Corporation tax benefits (0.9) (1.1) (1.3) (1.1) (1.2) (1.5) - - - Dividends received, not fully taxable (0.5) (0.5) (0.7) (0.2) (0.3) (0.3) (0.8) (0.8) (1.2) All other - net (0.1) (0.4) (1.4) (0.8) (0.8) (0.4) 1.9 1.0 (2.8) ---- ---- ---- ---- ---- ---- ---- ---- ---- (2.5) (3.3) (3.2) (11.1) (10.9) (11.2) (3.6) (5.7) (5.9) ---- ---- ---- ---- ---- ---- ---- ---- ---- Actual income tax rate 32.5% 31.7% 31.8% 23.9% 24.1% 23.8% 31.4% 29.3% 29.1% ==== ==== ==== ==== ==== ==== ==== ==== ==== - --------------------------------------------------------------------------------------------------------------------------------
F-27 Annual Report Page No. 51 10. GECS INVESTMENT SECURITIES
- ----------------------------------------------------------------------------------------------- Gross Gross Amortized unrealized unrealized Estimated (In millions) cost gains losses fair value - ----------------------------------------------------------------------------------------------- DECEMBER 31, 1995 Corporate and other $12,313 $ 463 $ (63) $12,713 State and municipal 9,460 570 (11) 10,019 Mortgage-backed 5,991 255 (65) 6,181 Non-U.S. 6,887 213 (37) 7,063 Equity 2,843 412 (59) 3,196 U.S. government and federal agency 1,817 77 (3) 1,891 ------- ------- ------- ------- $39,311 $ 1,990 $ (238) $41,063 ======= ======= ======= ======= DECEMBER 31, 1994 Corporate and other $10,883 $4 $(763) $10,124 State and municipal 9,193 146 (392) 8,947 Mortgage-backed 4,927 82 (220) 4,789 Non-U.S. 3,892 20 (76) 3,836 Equity 2,147 201 (180) 2,168 U.S. government and federal agency 1,185 - (177) 1,008 ------- ------- ------- ------- $32,227 $453 $(1,808) $30,872 ======= ======= ======= ======= - -----------------------------------------------------------------------------------------------
At December 31, 1995, contractual maturities of debt securities, other than mortgage-backed securities, were as follows:
- ------------------------------------------------------------------------- GECS CONTRACTUAL MATURITIES (EXCLUDING MORTGAGE-BACKED SECURITIES) Amortized Estimated (In millions) cost fair value - ------------------------------------------------------------------------- Due in 1996 $2,359 $2,386 1997-2000 9,753 9,982 2001-2005 6,821 7,129 2006 and later 11,544 12,189 - -------------------------------------------------------------------------
It is expected that actual maturities will differ from contractual maturities because borrowers have the right to call or prepay certain obligations, sometimes without call or prepayment penalties. Proceeds from sales of investment securities in 1995 were $11,017 million ($5,821 million in 1994 and $6,112 million in 1993). Gross realized gains were $503 million in 1995 ($281 million in 1994 and $173 million in 1993). Gross realized losses were $157 million in 1995 ($112 million in 1994 and $34 million in 1993). 11. GE CURRENT RECEIVABLES
- ------------------------------------------------------------------------- December 31 (In millions) 1995 1994 - ------------------------------------------------------------------------- Aircraft Engines $1,373 $1,183 Appliances 595 499 Broadcasting 556 493 Industrial Products and Systems 1,525 1,503 Materials 1,322 1,256 Power Generation 2,334 1,925 Technical Products and Services 692 603 All Other 94 282 Corporate 631 268 ------ ------ 9,122 8,012 Less allowance for losses (231) (205) ------ ------ $8,891 $7,807 ====== ====== - -------------------------------------------------------------------------
Of receivables balances at December 31, 1995 and 1994 before allowance for losses, $6,582 million and $5,668 million, respectively, were from sales of goods and services to customers, and $293 million and $196 million, respectively, were from transactions with associated companies. Current receivables of $322 million at year-end 1995 and $387 million at year-end 1994 arose from sales, principally of aircraft engine goods and services, on open account to various agencies of the U.S. government, which is GE's largest single customer. About 5%, 6% and 8% of GE's sales of goods and services were to the U.S. government in 1995, 1994 and 1993, respectively. 12. GE INVENTORIES
- ------------------------------------------------------------------------- December 31 (In millions) 1995 1994 - ------------------------------------------------------------------------- Raw materials and work in process $ 3,205 $ 2,933 Finished goods 2,277 2,165 Unbilled shipments 258 214 ------- ------- 5,740 5,312 Less revaluation to LIFO (1,345) (1,432) ------- ------- $ 4,395 $ 3,880 ======= ======= - -------------------------------------------------------------------------
LIFO revaluations decreased $87 million in 1995, compared with decreases of $197 million in 1994 and $179 million in 1993. Included in these changes were decreases of $88 million, $72 million and $101 million in 1995, 1994 and 1993, respectively, that resulted from lower LIFO inventory levels. There was no cost change in 1995 and net cost decreases in 1994 and 1993. As of December 31, 1995, GE is obligated to acquire raw materials at market prices through the year 2000 under various take-or-pay or similar arrangements. Annual minimum commitments under these arrangements are insignificant. F-28 Annual Report Page No. 52 13. GECS FINANCING RECEIVABLES (INVESTMENT IN TIME SALES, LOANS AND FINANCING LEASES)
- ------------------------------------------------------------------------- December 31 (In millions) 1995 1994 - ------------------------------------------------------------------------- TIME SALES AND LOANS Consumer services $33,430 $25,906 Specialized financing 18,230 17,988 Mid-market financing 8,795 5,916 Equipment management 1,371 1,516 Specialty insurance 189 - ------- ------- 62,015 51,326 Deferred income (2,424) (1,305) ------- ------- Time sales and loans - net 59,591 50,021 ------- ------- INVESTMENT IN FINANCING LEASES Direct financing leases 33,291 25,916 Leveraged leases 2,909 2,482 ------- ------- Investment in financing leases 36,200 28,398 ------- ------- 95,791 78,419 Less allowance for losses (2,519) (2,062) ------- ------- $93,272 $76,357 ======= ======= - -------------------------------------------------------------------------
Time sales and loans represents transactions in a variety of forms, including time sales, revolving charge and credit, mortgages, installment loans, intermediate-term loans and revolving loans secured by business assets. The portfolio includes time sales and loans carried at the principal amount on which finance charges are billed periodically, and time sales and loans carried at gross book value, which includes finance charges. At year-end 1995 and 1994, specialized financing and consumer services loans included $13,405 million and $13,282 million, respectively, for commercial real estate loans. Note 16 contains information on airline loans and leases. At December 31, 1995, contractual maturities for time sales and loans were $24,543 million in 1996; $11,933 million in 1997; $6,635 million in 1998; $5,052 million in 1999; $4,424 million in 2000; and $9,428 million thereafter - - aggregating $62,015 million. Experience has shown that a substantial portion of receivables will be paid prior to contractual maturity. Accordingly, the maturities of time sales and loans are not to be regarded as forecasts of future cash collections. Investment in financing leases consists of direct financing and leveraged leases of aircraft, railroad rolling stock, autos, other transportation equipment, data processing equipment and medical equipment, as well as other manufacturing, power generation, mining and commercial equipment and facilities. As the sole owner of assets under direct financing leases and as the equity participant in leveraged leases, GECS is taxed on total lease payments received and is entitled to tax deductions based on the cost of leased assets and tax deductions for interest paid to third-party participants. GECS generally is entitled to any residual value of leased assets. Investment in direct financing and leveraged leases represents unpaid rentals and estimated unguarantied residual values of leased equipment, less related deferred income. GECS has no general obligation for principal and interest on notes and other instruments representing third-party participation related to leveraged leases; such notes and other instruments have not been included in liabilities but have been offset against the related rentals receivable. GECS' share of rentals receivable on leveraged leases is subordinate to the share of other participants who also have security interests in the leased equipment.
- --------------------------------------------------------------------------------------------------------------------- Total Direct NET INVESTMENT IN FINANCING LEASES financing leases financing leases Leveraged leases ---------------- ---------------- ---------------- December 31 (In millions) 1995 1994 1995 1994 1995 1994 - --------------------------------------------------------------------------------------------------------------------- Total minimum lease payments receivable $50,059 $39,968 $37,434 $30,338 $12,625 $ 9,630 Less principal and interest on third-party nonrecourse debt (9,329) (7,103) - - (9,329) (7,103) ------- ------- ------- ------- ------- ------- Net rentals receivable 40,730 32,865 37,434 30,338 3,296 2,527 Estimated unguarantied residual value of leased assets 5,768 4,889 4,630 3,767 1,138 1,122 Less deferred income (10,298) (9,356) (8,773) (8,189) (1,525) (1,167) ------- ------- ------- ------- ------- ------- INVESTMENT IN FINANCING LEASES (as shown above) 36,200 28,398 33,291 25,916 2,909 2,482 Less amounts to arrive at net investment Allowance for losses (745) (570) (669) (471) (76) (99) Deferred taxes arising from financing leases (5,746) (5,075) (2,959) (2,470) (2,787) (2,605) ------- ------- ------- ------- ------- ------- NET INVESTMENT IN FINANCING LEASES $29,709 $22,753 $29,663 $22,975 $ 46 $ (222) ======= ======= ======= ======= ======= ======= - ---------------------------------------------------------------------------------------------------------------------
F-29 Annual Report Page No. 53 At December 31, 1995, contractual maturities for rentals receivable under financing leases were $8,780 million in 1996; $10,418 million in 1997; $6,837 million in 1998; $3,631 million in 1999; $2,126 million in 2000; and $8,938 million thereafter - aggregating $40,730 million. As with time sales and loans, experience has shown that a portion of receivables will be paid prior to contractual maturity, and these amounts should not be regarded as forecasts of future cash flows. Nonearning consumer receivables, primarily private-label credit card receivables, amounted to $671 million and $422 million at December 31, 1995 and 1994, respectively. A majority of these receivables were subject to various loss-sharing arrangements that provide full or partial recourse to the originating private-label entity. Nonearning and reduced-earning receivables other than consumer receivables were $464 million and $346 million at year-end 1995 and 1994, respectively. On January 1, 1995, GE adopted Statement of Financial Accounting Standards (SFAS) No. 114, Accounting by Creditors for Impairment of a Loan, and the related SFAS No. 118, Accounting by Creditors for Impairment of a Loan - - Income Recognition and Disclosures. These Statements do not apply to, among other things, leases or large groups of smaller-balance, homogeneous loans, and therefore are principally relevant to GECS' commercial loans. There was no effect of adopting the Statements on 1995 results of operations or financial position because the allowance for losses established under the previous accounting policy continued to be appropriate following the accounting change. The Statements require disclosures of impaired loans - loans for which it is probable that the lender will be unable to collect all amounts due according to original contractual terms of the loan agreement, based on current information and events. At December 31, 1995, loans that required disclosure as impaired amounted to $867 million, principally commercial real estate loans. For $647 million of such loans, the required allowance for losses was $285 million. The remaining $220 million of loans represents the recorded investment in loans that are fully recoverable, but only because the recorded investment had been reduced through charge-offs or deferral of income recognition. These loans must be disclosed under the Statements' technical definition of "impaired" because GECS will be unable to collect all amounts due according to original contractual terms of the loan agreement. Under the Statements, such loans do not require an allowance for losses. GECS' average investment in impaired loans requiring disclosure under the Statements was $1,037 million during 1995, with revenue of $49 million recognized, principally on the cash basis. 14. PROPERTY, PLANT AND EQUIPMENT (INCLUDING EQUIPMENT LEASED TO OTHERS)
- ------------------------------------------------------------------------- December 31 (In millions) 1995 1994 - ------------------------------------------------------------------------- ORIGINAL COST GE Land and improvements $ 496 $ 416 Buildings, structures and related equipment 6,063 5,547 Machinery and equipment 17,184 15,847 Leasehold costs and manufacturing plant under construction 1,100 1,073 Other 24 24 ------- ------- 24,867 22,907 ------- ------- GECS Buildings and equipment 2,616 1,875 Equipment leased to others Aircraft 5,682 4,601 Vehicles 4,948 4,542 Marine shipping containers 3,253 3,333 Railroad rolling stock 1,811 1,605 Other 2,769 2,807 ------- ------- 21,079 18,763 ------- ------- $45,946 $41,670 ======= ======= ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION GE $14,633 $13,382 GECS Buildings and equipment 964 794 Equipment leased to others 4,670 4,029 ------- ------- $20,267 $18,205 ======= ======= - ------------------------------------------------------------------------- Includes $101 million and $226 million of commercial aircraft off- lease in 1995 and 1994, respectively. - -------------------------------------------------------------------------
Amortization of GECS' equipment leased to others was $1,702 million, $1,435 million and $1,395 million in 1995, 1994 and 1993, respectively. Noncancelable future rentals due from customers for equipment on operating leases at year-end 1995 totaled $8,412 million and are due as follows: $2,501 million in 1996; $1,657 million in 1997; $1,119 million in 1998; $732 million in 1999; $450 million in 2000; and $1,953 million thereafter. F-30 Annual Report Page No. 54 15. INTANGIBLE ASSETS
- ------------------------------------------------------------------------- December 31 (In millions) 1995 1994 - ------------------------------------------------------------------------- GE Goodwill $ 5,901 $ 5,605 Other intangibles 742 731 ------- ------- 6,643 6,336 ------- ------- GECS Goodwill 3,984 2,513 Mortgage servicing rights 1,688 1,351 Other intangibles 1,027 1,173 ------- ------- 6,699 5,037 ------- ------- $13,342 $11,373 ======= ======= - -------------------------------------------------------------------------
GE's intangible assets are shown net of accumulated amortization of $2,347 million in 1995 and $2,049 million in 1994. GECS' intangible assets are net of accumulated amortization of $1,494 million in 1995 and $988 million in 1994. 16. ALL OTHER ASSETS
- ------------------------------------------------------------------------- December 31 (In millions) 1995 1994 - ------------------------------------------------------------------------- GE Investments Associated companies $ 1,201 $ 1,945 Government and government-guarantied securities 100 273 Other 1,572 1,713 ------- ------- 2,873 3,931 Prepaid pension asset 5,272 4,489 Other 3,756 3,999 ------- ------- 11,901 12,419 ------- ------- GECS Investments Assets acquired for resale 3,998 3,867 Associated companies 3,566 2,098 Real estate ventures 1,564 1,400 Other 2,072 1,652 ------- ------- 11,200 9,017 Deferred insurance acquisition costs 1,336 1,290 Other 1,868 1,224 ------- ------- 14,404 11,531 ------- ------- $26,305 $23,950 ======= ======= - ------------------------------------------------------------------------- Includes advances. - -------------------------------------------------------------------------
In line with industry practice, sales of commercial jet aircraft engines often involve long-term customer financing commitments. In making such commitments, it is GE's general practice to require that it have or be able to establish a secured position in the aircraft being financed. Under such airline financing programs, GE had issued loans and guaranties (principally guaranties) amounting to $1,433 million at year-end 1995 and $1,260 million at year-end 1994; and it had entered into commitments totaling $1,505 million and $1,136 million at year-end 1995 and 1994, respectively, to provide financial assistance on future aircraft engine sales. Estimated fair values of the aircraft securing these receivables and associated guaranties exceeded the related account balances and guarantied amounts at December 31, 1995. GE sells certain long-term receivables from the airline industry with recourse. Proceeds from such sales amounted to $297 million in 1995 and $137 million in 1993. No receivables were sold in 1994. Balances outstanding were $487 million and $269 million at December 31, 1995 and 1994, respectively. GECS acts as a lender and lessor to the commercial airline industry. At December 31, 1995 and 1994, the balance of such GECS loans, leases and equipment leased to others was $8,337 million and $7,571 million, respectively. In addition, GECS had issued financial guaranties and funding commitments of $409 million at December 31, 1995 ($506 million at year-end 1994) and had conditional commitments to purchase aircraft at a cost of $141 million ($81 million at year-end 1994). At year-end 1995, the National Broadcasting Company had $7,953 million of commitments to acquire broadcast material or the rights to broadcast television programs, including U.S. television rights to future Olympic games, and commitments under long-term television station affiliation agreements that require payments through the year 2008. In connection with numerous projects, primarily power generation bids and contracts, GE had issued various bid and performance bonds and guaranties totaling $2,462 million at year-end 1995 and $2,229 million at year-end 1994. 17. GE ALL OTHER CURRENT COSTS AND EXPENSES ACCRUED At year-end 1995 and 1994, this account included taxes accrued of $1,598 million and $1,238 million, respectively, and compensation and benefit accruals of $1,233 million and $1,191 million, respectively. Also included are amounts for product warranties, estimated costs on shipments billed to customers and a variety of sundry items. F-31 Annual Report Page No. 55 18. BORROWINGS
- ----------------------------------------------------------------------------------------------- SHORT-TERM BORROWINGS 1995 1994 ---------------------- -------------------- December 31 Average Average (In millions) Amount rate Amount rate - ----------------------------------------------------------------------------------------------- GE Payable to banks $ 266 8.18% $ 353 8.21% Commercial paper (U.S.) 403 5.72 - Current portion of long-term debt 697 243 Other 300 310 ------- ------- 1,666 906 ------- ------- GECS Commercial paper U.S. 37,432 5.82 41,759 5.88 Non-U.S. 3,796 6.33 1,938 6.27 Current portion of long-term debt 15,719 9,695 Other 5,861 3,695 ------- ------- 62,808 57,087 ------- ------- ELIMINATIONS (11) (212) ------- ------- $64,463 $57,781 ======= ======= - ----------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------- LONG-TERM BORROWINGS Weighted December 31 average interest (In millions) rate Maturities 1995 1994 - ----------------------------------------------------------------------------------------------- GE Senior notes 7.16% 1997-2000 $ 988 $ 1,480 Payable to banks 6.11 1997-2003 482 283 Industrial development/pollution control bonds 3.90 1997-2019 260 261 Other 547 675 ------- ------- 2,277 2,699 ------- ------- GECS Senior notes 6.56 1997-2055 47,794 33,615 Subordinated notes 7.88 2006-2035 996 697 ------- ------- 48,790 34,312 ------- ------- ELIMINATIONS (40) (32) ------- ------- $51,027 $36,979 ======= ======= - ----------------------------------------------------------------------------------------------- Includes the effects of associated interest rate and currency swaps. Includes a variety of obligations having various interest rates and maturities, including certain borrowings by parent operating components and affiliates. Guarantied by GE. - -----------------------------------------------------------------------------------------------
INTEREST RATE AND CURRENCY SWAPS are employed by GE and GECS to achieve the lowest cost of funds for a particular funding strategy. GECS enters into interest rate swaps and currency swaps (including non-U.S. currency and cross-currency interest rate swaps) to modify interest rates and/ or currencies of specific debt instruments. For example, to fund U.S. operations, GE Capital may issue fixed-rate debt denominated in a currency other than the U.S. dollar and simultaneously enter into a currency swap to create synthetic fixed-rate U.S. dollar debt with a lower yield than could be achieved directly. Such interest rate and currency swaps have been designated as modifying interest rates, currencies, or both. Neither GE nor GECS engages in derivatives trading, market-making or other speculative activities. GECS used a portion of this interest rate swap portfolio to convert interest rate exposure on short-term and floating rate long-term borrowings to interest rates that are fixed over the terms of the related swaps; interest rate basis swaps also are employed to manage short-term financing factors - for example, to convert commercial paper-based interest costs to prime rate- based costs. At December 31, 1995 and 1994, such swaps were outstanding for principal amounts equivalent to $11,451 million and $9,301 million with maturities from 1996 to 2029 and weighted average interest rates of 6.86% and 6.80%, respectively. Aggregate amounts of long-term borrowings that mature during the next five years are as follows.
- ------------------------------------------------------------------------- (In millions) 1996 1997 1998 1999 2000 - ------------------------------------------------------------------------- GE $ 697 $ 527 $ 1,011 $ 28 $ 276 GECS 15,719 14,012 11,517 5,480 4,494 - -------------------------------------------------------------------------
Additional information about GE and GECS borrowings, as well as associated swaps, is provided in note 29. CONFIRMED CREDIT LINES of approximately $3.1 billion had been extended to GE by 32 banks at year-end 1995. Substantially all of GE's credit lines are available to GECS and its affiliates in addition to their own credit lines. At year-end 1995, GECS and its affiliates had committed lines of credit aggregating $20.4 billion with 128 banks, including $9.5 billion of revolving credit agreements pursuant to which it has the right to borrow funds for periods exceeding one year. A total of $1.5 billion of GE Capital's credit lines is available for use by GE. During 1995, neither GE nor GECS borrowed under any of these credit lines. Both GE and GECS compensate banks for credit facilities in the form of fees, which were insignificant in each of the past three years. F-32 Annual Report Page No. 56 19. INSURANCE LIABILITIES, RESERVES AND ANNUITY BENEFITS Insurance liabilities, reserves and annuity benefits comprises policyholders' benefits, unearned premiums and reserves for policy losses in GECS' insurance and annuity businesses. The estimated liability for insurance losses and loss expenses consists of both case and incurred-but- not-reported reserves. Where GECS' experience is not sufficient to determine reserves, industry averages are used. Estimated amounts of salvage and subrogation recoverable on paid and unpaid losses are deducted from outstanding losses. The insurance subsidiaries of GECS have no significant permitted statutory accounting practices that differ from either statutorially prescribed or generally accepted accounting principles. Activity in the liability for unpaid claims and claims adjustment expenses is summarized below.
- ------------------------------------------------------------------------- (In millions) 1995 1994 1993 - ------------------------------------------------------------------------- Balance at January 1 - gross $ 7,032 $ 6,405 $ 5,484 Less reinsurance recoverables (1,084) (1,142) (1,191) ------- ------- ------- Balance at January 1 - net 5,948 5,263 4,293 Claims and expenses incurred Current year 3,268 2,016 2,051 Prior years 492 558 359 Claims and expenses paid Current year (706) (543) (378) Prior years (1,908) (1,432) (1,048) Claim reserves related to acquired companies 3,696 49 - Other 19 37 (14) ------- ------- ------- Balance at December 31 - net 10,809 5,948 5,263 Add reinsurance recoverables 1,853 1,084 1,142 ------- ------- ------- Balance at December 31 - gross $12,662 $ 7,032 $ 6,405 ======= ======= ======= - -------------------------------------------------------------------------
The liability for future policy benefits of the life insurance affiliates has been computed mainly by a net-level-premium method based on assumptions for investment yields, mortality and terminations that were appropriate at date of purchase or at the time the policies were developed, including provisions for adverse deviations. Average yields used in these computations ranged from 2.0% to 9.0% in 1995 and 4.0% to 9.1% in 1994. Financial guaranties and credit life risk of insurance affiliates are summarized below.
- ------------------------------------------------------------------------- December 31 (In millions) 1995 1994 - ------------------------------------------------------------------------- Guaranties, principally on municipal bonds and structured finance issues $119,406 $106,726 Mortgage insurance risk in force 32,599 31,463 Credit life insurance risk in force 13,670 13,713 Other 110 147 Less reinsurance (21,749) (19,426) -------- -------- $144,036 $132,623 ======== ======== - -------------------------------------------------------------------------
20. GE ALL OTHER LIABILITIES This account includes noncurrent compensation and benefit accruals at year- end 1995 and 1994 of $4,858 million and $4,632 million, respectively. Also included are amounts for deferred incentive compensation, deferred income, product warranties and a variety of sundry items. SFAS No. 112, Employers' Accounting for Postemployment Benefits, was adopted as of January 1, 1993. This Statement requires that employers recognize over the service lives of employees the costs of postemployment benefits if certain conditions are met. The principal effect for GE was to change the method of accounting for severance benefits. Under the previous accounting policy, the total cost of severance benefits was expensed when the severance event occurred. The cumulative effect of the accounting change as of January 1, 1993, amounted to $1,306 million before taxes ($862 million, or $0.51 per share, after taxes). 21. RESTRICTED NET ASSETS OF AFFILIATES Certain GECS consolidated affiliates are restricted from remitting funds to GECS in the form of dividends or loans by a variety of regulations, the purpose of which is to protect affected insurance policyholders, depositors or investors. At year-end 1995, net assets of GECS' regulated affiliates amounted to $14.7 billion, of which $12.5 billion was restricted. F-33 Annual Report Page No. 57 22. DEFERRED INCOME TAXES Aggregate deferred tax amounts are summarized below.
- ------------------------------------------------------------------------- December 31 (In millions) 1995 1994 - ------------------------------------------------------------------------- ASSETS GE $3,851 $ 3,720 GECS 2,183 2,642 ------ ------- 6,034 6,362 ------ ------- LIABILITIES GE 4,359 3,988 GECS 9,055 7,579 ------ ------- 13,414 11,567 ------ ------- NET DEFERRED TAX LIABILITY $7,380 $5,205 ====== ======= - -------------------------------------------------------------------------
Principal components of the net deferred tax liability balances for GE and GECS are as follows:
- ------------------------------------------------------------------------- December 31 (In millions) 1995 1994 - ------------------------------------------------------------------------- GE Provisions for expenses $(2,539) $(2,422) Retiree insurance plans (818) (835) Prepaid pension asset 1,845 1,571 Depreciation 928 860 Other - net 1,092 1,094 ------- ------- 508 268 ------- ------- GECS Financing leases 5,746 5,075 Operating leases 1,367 1,234 Net unrealized gains (losses) on securities 608 (468) Allowance for losses (852) (876) Insurance reserves (497) (460) Other - net 500 432 ------- ------- 6,872 4,937 ------- ------- NET DEFERRED TAX LIABILITY $ 7,380 $ 5,205 ======= ======= - -------------------------------------------------------------------------
23. MINORITY INTEREST IN EQUITY OF CONSOLIDATED AFFILIATES Minority interest in equity of consolidated GECS affiliates includes preferred stock issued by GE Capital and by a subsidiary of GE Capital. The preferred stock pays cumulative dividends at variable rates. The liquidation preference of the preferred shares is summarized below.
- ------------------------------------------------------------------------- December 31 (In millions) 1995 1994 - ------------------------------------------------------------------------- GE Capital $1,800 $875 GE Capital subsidiary 360 240 - -------------------------------------------------------------------------
Dividend rates on the preferred stock ranged from 4.2% to 5.2% during 1995, from 2.3% to 4.9% during 1994 and from 2.3% to 2.8% during 1993. 24. SHARE OWNERS' EQUITY
- ------------------------------------------------------------------------------------------ (In millions) 1995 1994 1993 - ------------------------------------------------------------------------------------------ COMMON STOCK ISSUED Balance at January 1 $ 594 $ 584 $ 584 Adjustment for stock split - 9 - Newly issued stock - 1 - ------- ------- ------- Balance at December 31 $ 594 $ 594 $ 584 ======= ======= ======= UNREALIZED GAINS (LOSSES) ON INVESTMENT SECURITIES $ 1,000 $ (810) $ 848 ======= ======= ======= OTHER CAPITAL Balance at January 1 $ 1,122 $ 550 $ 719 Currency translation adjustments 127 180 (279) Gains on treasury stock dispositions 414 215 110 Newly issued stock - 186 - Adjustment for stock split - (9) - ------- ------- ------- Balance at December 31 $ 1,663 $ 1,122 $ 550 ======= ======= ======= RETAINED EARNINGS Balance at January 1 $30,793 $28,613 $26,527 Net earnings 6,573 4,726 4,315 Dividends declared (2,838) (2,546) (2,229) ------- ------- ------- Balance at December 31 $34,528 $30,793 $28,613 ======= ======= ======= COMMON STOCK HELD IN TREASURY Balance at January 1 $ 5,312 $ 4,771 $ 4,407 Purchases 4,016 1,124 770 Dispositions (1,152) (583) (406) ------- ------- ------- Balance at December 31 $ 8,176 $ 5,312 $ 4,771 ======= ======= ======= - ------------------------------------------------------------------------------------------
In December 1994, GE's Board of Directors authorized the repurchase of up to $5 billion of Company common stock over a two-year period with funds generated largely from free cash flow. In December 1995, the Board increased the authorized amount of the repurchase to $9 billion, which will allow the program to continue through 1997. A total of 54.7 million shares having an aggregate cost of $3.2 billion had been repurchased under this program and placed into treasury as of December 31, 1995. Common shares issued and outstanding are summarized in the table below.
- ------------------------------------------------------------------------- SHARES OF GE COMMON STOCK December 31 (In thousands) 1995 1994 1993 - ------------------------------------------------------------------------- Issued 1,857,013 1,857,013 1,853,128 In treasury (190,501) (151,046) (145,826) --------- --------- --------- Outstanding 1,666,512 1,705,967 1,707,302 ========= ========= ========= - -------------------------------------------------------------------------
GE has 50 million authorized shares of preferred stock ($1.00 par value), but no such shares have been issued. The effects of translating to U.S. dollars the financial statements of non-U.S. affiliates whose functional currency is the local currency are included in other capital. Asset and liability accounts are translated at year- end exchange rates, while revenues and expenses are translated at average rates for the period. The cumulative currency translation adjustment was an addition to other capital of $61 million at year-end 1995 and a reduction of other capital of $66 million and $246 million at December 31, 1994 and 1993, respectively. F-34 Annual Report Page No. 58 25. OTHER STOCK-RELATED INFORMATION Stock option plans, stock appreciation rights (SARs), restricted stock and restricted stock units are described in GE's current Proxy Statement. More than 20,000 individuals, nearly one third of all exempt professionals at GE and GECS, hold stock options. With certain restrictions, requirements for stock option shares can be met from either unissued or treasury shares.
- ------------------------------------------------------------------------- STOCK OPTION ACTIVITY Average per share Shares subject Exercise Market (Shares in thousands) to option price price - ------------------------------------------------------------------------- Balance at January 1, 1993 48,164 $32.19 $42.75 Options granted 17,580 45.90 45.90 Replacement options 882 28.60 28.60 Options exercised (6,072) 28.33 47.57 Options terminated (1,200) 36.84 - ------ Balance at December 31, 1993 59,354 36.50 52.44 Options granted 15,134 50.66 50.66 Replacement options 340 36.44 36.44 Options exercised (4,163) 30.35 50.58 Options terminated (1,167) 44.04 - ------ Balance at December 31, 1994 69,498 39.82 51.00 Options granted 12,089 55.88 55.88 Replacement options 753 41.82 41.82 Options exercised (7,784) 31.44 59.21 Options terminated (2,119) 47.33 - ------ Balance at December 31, 1995 72,437 43.20 72.00 ====== - -------------------------------------------------------------------------
Options granted have been adjusted for the April 1994 2-for-1 stock split. Without giving effect to that adjustment, options granted (in thousands) were 12,089 in 1995; 10,117 in 1994; and 8,790 in 1993. The replacement options replaced canceled SARs and have identical terms thereto. At year-end 1995, there were 8.3 million SARs outstanding at an average exercise price of $45.55. There were 4.4 million restricted stock shares and restricted stock units outstanding at year-end 1995. There were 20.8 million and 16.1 million shares available for grants of options, SARs, restricted stock and restricted stock units at December 31, 1995 and 1994, respectively. Under the 1990 Long-Term Incentive Plan, 0.95% of the Company's issued common stock (including treasury shares) as of the first day of each calendar year during which the Plan is in effect becomes available for granting awards in such year. Any unused portion, in addition to shares allocated to awards that are canceled or forfeited, is available for later years. Outstanding options and SARs expire on various dates through December 14, 2005. Restricted stock grants vest on various dates up to normal retirement of grantees. GE adopted the disclosure-only option under SFAS No. 123, Accounting for Stock-Based Compensation, as of December 31, 1995. If the accounting provisions of the new Statement had been adopted as of the beginning of 1995, the effect on 1995 net earnings would have been immaterial. Further, based on current and anticipated use of stock options, it is not envisioned that the impact of the Statement's accounting provisions would be material in any future period. The following table summarizes information about stock options outstanding at December 31, 1995.
- ----------------------------------------------------------------------------------------- STOCK OPTIONS OUTSTANDING (Shares in thousands) Outstanding Exercisable ------------------------------------- ------------------- Average Average Exercise Average exercise exercise price range Shares life price Shares price - ----------------------------------------------------------------------------------------- $19 3/4-$33 15/16 14,705 4.2 $29.25 14,705 $29.25 $34 5/16-$43 1/16 16,539 6.1 37.39 15,644 37.23 $43 1/4-$51 20,087 7.8 47.02 6,383 43.94 $51 1/16-$72 3/8 21,106 8.8 53.84 55 51.69 ------ ------ Total 72,437 7.0 43.20 36,787 35.23 ====== ====== - ----------------------------------------------------------------------------------------- Average contractual life remaining in years. At December 31, 1994, there were approximately 38 million options exercisable at an average exercise price of $33.43. - -----------------------------------------------------------------------------------------
Stock options expire in 10 years from the date they are granted; options vest over service periods that range from one to five years. F-35 Annual Report Page No. 59 26. SUPPLEMENTAL CASH FLOWS INFORMATION Changes in operating assets and liabilities are net of acquisitions and dispositions of businesses. "Payments for principal businesses purchased" in the Statement of Cash Flows is net of cash acquired and includes debt assumed and immediately repaid in acquisitions. "All other operating activities" in the Statement of Cash Flows consists principally of adjustments to current and noncurrent accruals of costs and expenses, amortization of premium and discount on debt, and adjustments to assets such as amortization of goodwill and intangibles. The Statement of Cash Flows excludes certain noncash transactions that had no significant effects on the investing or financing activities of GE or GECS. Certain supplemental information related to GE and GECS cash flows is shown below.
- ----------------------------------------------------------------------------------------------------------------------- For the years ended December 31 (In millions) 1995 1994 1993 - ----------------------------------------------------------------------------------------------------------------------- GE NET PURCHASE OF GE SHARES FOR TREASURY Open market purchases under share repurchase programs $ (3,101) $ (69) $ (217) Other purchases (915) (1,055) (553) Dispositions (mainly to employee and dividend reinvestment plans) 1,493 771 406 -------- -------- -------- $ (2,523) $ (353) $ (364) ======== ======== ======== GECS FINANCING RECEIVABLES Increase in loans to customers $(46,154) $(37,059) $(30,002) Principal collections from customers 44,840 31,264 27,571 Investment in equipment for financing leases (17,182) (10,528) (7,204) Principal collections on financing leases 8,821 8,461 6,011 Net change in credit card receivables (3,773) (2,902) (1,645) Sales of financing receivables with recourse 2,139 1,239 1,105 -------- -------- -------- $(11,309) $ (9,525) $ (4,164) ======== ======== ======== ALL OTHER INVESTING ACTIVITIES Purchases of securities by insurance and annuity businesses $(14,452) $(8,663) $(10,488) Dispositions and maturities of securities by insurance and annuity businesses 12,460 6,338 7,698 Proceeds from principal business dispositions 575 - - Other (2,496) 2,501 (4,003) -------- -------- -------- $ (3,913) $ 176 $ (6,793) ======== ======== ======== NEWLY ISSUED DEBT HAVING MATURITIES LONGER THAN 90 DAYS Short-term (91 to 365 days) $2,545 $3,214 $4,315 Long-term (longer than one year) 32,507 19,228 10,885 Long-term subordinated 298 - - Proceeds - nonrecourse, leveraged lease debt 1,428 31 53 -------- -------- -------- $ 36,778 $ 22,473 $ 15,253 ======== ======== ======== REPAYMENTS AND OTHER REDUCTIONS OF DEBT HAVING MATURITIES LONGER THAN 90 DAYS Short-term (91 to 365 days) $(16,075) $(10,460) $(9,008) Long-term (longer than one year) (678) (930) (206) Principal payments - nonrecourse, leveraged lease debt (292) (309) (312) -------- -------- -------- $(17,045) $(11,699) $ (9,526) ======== ======== ======== ALL OTHER FINANCING ACTIVITIES Proceeds from sales of investment and annuity contracts $ 1,754 $ 1,207 $ 509 Preferred stock issued by GE Capital 1,045 240 - Redemption of investment and annuity contracts (2,540) (1,264) (578) -------- -------- -------- $ 259 $ 183 $ (69) ======== ======== ======== OTHER CASH FROM (USED FOR) DISCONTINUED OPERATIONS Cash from GE Aerospace operating activities $ - $ - $ 76 Cash from GE Aerospace investing activities - - 886 Cash from (used for) GECS securities broker-dealer operating activities 1,414 1,635 (1,910) Cash from (used for) GECS securities broker-dealer investing activities 92 334 (107) Cash from (used for) GECS securities broker-dealer financing activities (1,506) (2,169) 2,017 -------- -------- -------- $ - $ (200) $ 962 ======== ======== ======== - -----------------------------------------------------------------------------------------------------------------------
F-36 Annual Report Page No. 60 27. INDUSTRY SEGMENTS
- --------------------------------------------------------------------------------------------------------------------------------- REVENUES (In millions) For the years ended December 31 - --------------------------------------------------------------------------------------------------------------------------------- Total revenues Intersegment revenues External revenues --------------------------- -------------------------- ---------------------------- 1995 1994 1993 1995 1994 1993 1995 1994 1993 - --------------------------------------------------------------------------------------------------------------------------------- GE Aircraft Engines $ 6,098 $ 5,714 $ 6,580 $ 115 $ 43 $ 59 $ 5,983 $ 5,671 $ 6,521 Appliances 5,933 5,965 5,555 4 3 3 5,929 5,962 5,552 Broadcasting 3,919 3,361 3,102 - - - 3,919 3,361 3,102 Industrial Products and Systems 10,194 9,406 8,575 436 368 409 9,758 9,038 8,166 Materials 6,647 5,681 5,042 19 43 50 6,628 5,638 4,992 Power Generation 6,545 5,933 5,530 57 44 135 6,488 5,889 5,395 Technical Products and Services 4,424 4,285 4,174 19 18 18 4,405 4,267 4,156 All Other 2,707 2,348 1,803 - - - 2,707 2,348 1,803 Corporate items and eliminations (286) (195) (242) (650) (519) (674) 364 324 432 ------- ------- ------- ----- ----- ----- ------- ------- ------- Total GE 46,181 42,498 40,119 - - - 46,181 42,498 40,119 ------- ------- ------- ----- ----- ----- ------- ------- ------- GECS Financing 19,042 14,932 12,399 - - - 19,042 14,932 12,399 Specialty Insurance 7,444 4,926 4,862 - - - 7,444 4,926 4,862 All Other 6 17 15 - - - 6 17 15 ------- ------- ------- ----- ----- ----- ------- ------- ------- Total GECS 26,492 19,875 17,276 - - - 26,492 19,875 17,276 ------- ------- ------- ----- ----- ----- ------- ------- ------- Eliminations (2,645) (2,264) (1,694) - - - (2,645) (2,264) (1,694) ------- ------- ------- ----- ----- ----- ------- ------- ------- CONSOLIDATED REVENUES $70,028 $60,109 $55,701 $ - $ - $ - $70,028 $60,109 $55,701 ======= ======= ======= ===== ===== ===== ======= ======= ======= - --------------------------------------------------------------------------------------------------------------------------------- GE revenues include income from sales of goods and services to customers and other income. Sales from one Company component to another generally are priced at equivalent commercial selling prices. "All Other" GE revenues consists primarily of GECS' earnings. - ---------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------- ASSETS PROPERTY, PLANT AND EQUIPMENT (INCLUDING EQUIPMENT LEASED TO OTHERS) (In millions) At December 31 For the years ended December 31 - --------------------------------------------------------------------------------------------------------------------------------- Depreciation, depletion Additions and amortization --------------------------- -------------------------- ---------------------------- 1995 1994 1993 1995 1994 1993 1995 1994 1993 - --------------------------------------------------------------------------------------------------------------------------------- GE Aircraft Engines $ 4,890 $ 4,751 $ 5,329 $ 266 $ 254 $ 207 $ 273 $ 261 $ 333 Appliances 2,304 2,309 2,193 143 159 129 93 84 125 Broadcasting 3,915 3,881 3,742 97 86 56 64 67 98 Industrial Products and Systems 6,117 5,862 5,442 425 400 397 308 363 332 Materials 9,095 8,628 8,181 521 417 374 478 443 413 Power Generation 5,679 4,887 3,875 155 176 212 166 143 143 Technical Products and Services 2,200 2,362 2,179 110 154 124 109 95 88 All Other 13,113 9,768 11,604 1 - 1 1 2 3 Corporate items and eliminations 8,403 8,365 8,589 113 97 88 89 87 96 -------- -------- -------- ------ ------ ------ ------ ------ ------ Total GE 55,716 50,813 51,134 1,831 1,743 1,588 1,581 1,545 1,631 -------- -------- -------- ------ ------ ------ ------ ------ ------ GECS Financing 150,062 121,966 106,854 5,144 5,889 3,352 1,962 1,607 1,545 Specialty Insurance 34,795 22,058 18,915 132 62 15 24 16 9 All Other 872 943 868 36 44 59 27 39 38 -------- -------- -------- ------ ------ ------ ------ ------ ------ Total GECS 185,729 144,967 126,637 5,312 5,995 3,426 2,013 1,662 1,592 -------- -------- -------- ------ ------ ------ ------ ------ ------ Eliminations (13,410) (9,909) (11,358) - - - - - - -------- -------- -------- ------ ------ ------ ------ ------ ------ CONSOLIDATED TOTALS $228,035 $185,871 $166,413 $7,143 $7,738 $5,014 $3,594 $3,207 $3,223 ======== ======== ======== ====== ====== ====== ====== ====== ====== - --------------------------------------------------------------------------------------------------------------------------------- "All Other" GE assets consists primarily of investment in GECS. - ---------------------------------------------------------------------------------------------------------------------------------
F-37 Annual Report Page No. 61 Details of operating profit by industry segment can be found on page 35 of this report. A description of industry segments for General Electric Company and consolidated affiliates follows. * AIRCRAFT ENGINES. Jet engines and replacement parts and repair services for all categories of commercial aircraft (short/medium, intermediate and long-range); for a wide variety of military aircraft, including fighters, bombers, tankers and helicopters; and for executive and commuter aircraft. Sold worldwide to airframe manufacturers, airlines and government agencies. Also, aircraft engine derivatives used as marine propulsion and industrial power sources. * APPLIANCES. Major appliances and related services for products such as refrigerators, freezers, electric and gas ranges, dishwashers, clothes washers and dryers, microwave ovens and room air conditioning equipment. Sold in North America and in global markets under various GE and private-label brands. Distributed to retail outlets, mainly for the replacement market, and to building contractors and distributors for new installations. * BROADCASTING. Primarily the National Broadcasting Company (NBC). Principal businesses are the furnishing of U.S. network television services to more than 200 affiliated stations, production of television programs, operation of six VHF television broadcasting stations, operation of five cable/satellite networks around the world, and investment and programming activities in multimedia and cable television. * INDUSTRIAL PRODUCTS AND SYSTEMS. Lighting products (including a wide variety of lamps, lighting fixtures, wiring devices and quartz products); electrical distribution and control equipment (including power delivery and control products such as transformers, meters, relays, capacitors and arresters); transportation systems products (including diesel-electric locomotives, transit propulsion equipment and motorized wheels for off-highway vehicles); electric motors and related products; a broad range of electrical and electronic industrial automation products, including drive systems; installation, engineering and repair services, which includes management and technical expertise for large projects such as process control systems; and GE Supply, a network of electrical supply houses. Markets are extremely diverse. Products are sold to commercial and industrial end users, including utilities, to original equipment manufacturers, to electrical distributors, to retail outlets, to railways and to transit authorities. Increasingly, products are developed for and sold in global markets. * MATERIALS. High-performance engineered plastics used in applications such as automobiles and housings for computers and other business equipment; ABS resins; silicones; superabrasives such as man-made diamonds; and laminates. Sold worldwide to a diverse customer base consisting mainly of manufacturers. * POWER GENERATION. Products and related maintenance services, mainly for the generation of electricity. Markets and competition are global. Gas turbines are sold principally as packaged power plants for electric utilities and for industrial cogeneration and mechanical drive applications. Steam turbine-generators are sold to electric utilities, to the U.S. Navy and, for cogeneration, to industrial and other power customers. Marine steam turbines are sold to the U.S. Navy. Power Generation also includes nuclear reactors and fuel and support services for GE's installed boiling water reactors. * TECHNICAL PRODUCTS AND SERVICES. Medical systems such as magnetic resonance (MR) and computed tomography (CT) scanners, x-ray, nuclear imaging, ultrasound, other diagnostic equipment and related services sold worldwide to hospitals and medical facilities. This segment also includes a full range of computer-based information and data interchange services for internal use and external commercial and industrial customers. * GECS FINANCING. Operations of GE Capital, as follows: Consumer services - private-label and bank credit card loans, time sales and revolving credit and inventory financing for retail merchants, auto leasing and inventory financing, mortgage servicing, and annuity and mutual fund sales. Specialized financing - loans and financing leases for major capital assets, including industrial facilities and equipment, and energy-related facilities; commercial and residential real estate loans and investments; and loans to and investments in management buyouts, including those with high leverage, and corporate recapitalizations. Equipment management - leases, loans and asset management services for portfolios of commercial and transportation equipment, including aircraft, trailers, auto fleets, modular space units, railroad rolling stock, data processing equipment, oceangoing containers and satellites. Mid-market financing - loans and financing and operating leases for middle-market customers, including manufacturers, distributors and end users, for a variety of equipment that includes data processing equipment, medical and diagnostic equipment, and equipment used in construction, manufacturing, office applications and telecommunications activities. Very few of the products financed by GE Capital are manufactured by other GE segments. * GECS SPECIALTY INSURANCE. U.S. and international multiple-line property and casualty reinsurance, certain directly written specialty insurance and life reinsurance; financial guaranty insurance, principally on municipal bonds and structured finance issues; private mortgage insurance; and creditor insurance covering international customer loan repayments. F-38 Annual Report Page No. 62 28. GEOGRAPHIC SEGMENT INFORMATION (CONSOLIDATED) Revenues and operating profit shown below are classified according to their country of origin (including exports from such areas). Revenues and operating profit classified under the caption "United States" include royalty and licensing income from non-U.S. sources. U.S. exports to international customers by major areas of the world are shown on page 38. At year-end 1995, net assets of operations classified under the captions "Europe" and "Other areas of the world" were $20,793 million and $6,942 million, respectively.
- -------------------------------------------------------------------------------------------------------------------------------- REVENUES (In millions) For the years ended December 31 - -------------------------------------------------------------------------------------------------------------------------------- Total revenues Intersegment revenues External revenues ---------------------------- --------------------------- ----------------------------- 1995 1994 1993 1995 1994 1993 1995 1994 1993 - -------------------------------------------------------------------------------------------------------------------------------- United States $54,319 $49,920 $47,495 $ 2,123 $ 1,683 $ 1,513 $52,196 $48,237 $45,982 Europe 12,417 7,797 6,722 656 579 525 11,761 7,218 6,197 Other areas of the world 6,967 5,493 4,171 896 839 649 6,071 4,654 3,522 Intercompany eliminations (3,675) (3,101) (2,687) (3,675) (3,101) (2,687) - - - ------- ------- ------- ------- ------- ------- ------- ------- ------- Total $70,028 $60,109 $55,701 $ - $ - $ - $70,028 $60,109 $55,701 ======= ======= ======= ======= ======= ======= ======= ======= ======= - --------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------- OPERATING PROFIT ASSETS (In millions) For the years ended December 31 At December 31 - ------------------------------------------------------------------------------------------------------- 1995 1994 1993 1995 1994 1993 - ------------------------------------------------------------------------------------------------------- United States $ 9,175 $8,351 $6,635 $168,878 $152,151 $145,390 Europe 1,063 673 360 45,167 22,464 14,257 Other areas of the world 725 595 307 14,164 11,439 6,954 Intercompany eliminations 9 5 (23) (174) (183) (188) ------- ------ ------ -------- -------- -------- Total $10,972 $9,624 $7,279 $228,035 $185,871 $166,413 ======= ====== ====== ======== ======== ======== - -------------------------------------------------------------------------------------------------------
29. ADDITIONAL INFORMATION ABOUT FINANCIAL INSTRUMENTS This note contains estimated fair values of certain financial instruments to which GE and GECS are parties. Apart from GE's and GECS' own borrowings and certain marketable securities, relatively few of these instruments are actively traded. Thus, fair values must often be determined by using one or more models that indicate value based on estimates of quantifiable characteristics as of a particular date. Because this undertaking is, by its nature, difficult and highly judgmental, for a limited number of instruments, alternative valuation techniques may have produced disclosed values different from those that could have been realized at December 31, 1995 or 1994. Moreover, the disclosed values are representative of fair values only as of the dates indicated. Assets that, as a matter of accounting policy, are reflected in the accompanying financial statements at fair value are not included in the following disclosures; such assets include cash and equivalents and investment securities. Values are estimated as follows: BORROWINGS. Based on quoted market prices or market comparables. Fair values of interest rate and currency swaps on borrowings are based on quoted market prices and include the effects of counterparty creditworthiness. TIME SALES AND LOANS. Based on quoted market prices, recent transactions and/or discounted future cash flows, using rates at which similar loans would have been made to similar borrowers. ANNUITY BENEFITS. Based on expected future cash flows, discounted at currently offered discount rates for immediate annuity contracts or cash surrender values for single premium deferred annuities. FINANCIAL GUARANTIES. Based on future cash flows, considering expected renewal premiums, claims, refunds and servicing costs, discounted at a market rate. ALL OTHER INSTRUMENTS. Based on comparable transactions, market comparables, discounted future cash flows, quoted market prices, and/or estimates of the cost to terminate or otherwise settle obligations to counterparties. F-39 Annual Report Page No. 63
- ------------------------------------------------------------------------------------------------------------------------------- FINANCIAL INSTRUMENTS 1995 1994 --------------------------------------- ----------------------------------------- Assets (liabilities) Assets (liabilities) ----------------------------- ---------------------- Estimated Estimated Carrying fair value Carrying fair value Notional amount ------------------ Notional amount --------------------- At December 31 (In millions) amount (net) High Low amount (net) High Low - ------------------------------------------------------------------------------------------------------------------------------- GE Investments $ $ 1,796 $ 2,886 $ 2,886 $ $ 2,128 $ 2,289 $ 2,269 Borrowings and related instruments Borrowings (3,943) (3,981) (3,981) (3,605) (3,530) (3,530) Interest rate swaps 89 - (16) (16) 89 - 2 2 Currency swaps 180 - 50 50 393 - 26 26 Financial guaranties 1,722 - - - 1,520 - - - Other firm commitments Currency forwards and options 3,774 - 131 131 3,195 - - - Financing commitments 1,505 - - - 1,153 - - - GECS Assets Time sales and loans 57,817 59,188 58,299 48,529 49,496 48,840 Integrated interest rate swaps 1,703 - (93) (93) 1,183 - 64 64 Purchased options 1,213 24 11 11 103 2 2 2 Mortgage-related positions Mortgage purchase commitments 1,360 - 17 17 205 - (2) (2) Mortgage sale commitments 1,334 - (11) (11) 1,792 - 2 2 Memo: mortgages held for sale 1,663 1,663 1,663 1,764 1,764 1,764 Options, including "floors" 18,522 67 144 144 - - - - Interest rate swaps 1,990 - 31 31 950 - (127) (127) Other cash financial instruments 1,514 1,967 1,705 1,897 2,026 1,924 Liabilities Borrowings and related instruments Borrowings (111,598) (113,105) (113,105) (91,399) (89,797) (89,797) Interest rate swaps 43,681 - (630) (630) 21,996 - 198 195 Currency swaps 22,342 - 937 937 11,695 - 86 86 Purchased options 2,751 26 12 11 130 12 11 12 Other 515 - (65) (65) - - - - Annuity benefits (11,994) (11,728) (11,728) (13,186) (12,788) (12,788) Insurance - financial guaranties and credit life 144,036 (1,570) (832) (922) 132,623 (1,562) (663) (806) Credit and liquidity support - securitizations 7,035 (58) (65) (65) 5,808 (22) (22) (22) Performance guaranties - principally letters of credit 2,920 (48) (78) (78) 2,227 (18) (98) (101) Other - principally liquidity commitments 3,556 1 (36) (45) 3,166 - 42 38 Other firm commitments Currency forwards and options 7,657 - 69 69 3,372 - 12 12 Currency swaps 280 - (22) (22) 488 - (3) (3) Ordinary course of business lending commitments 6,929 - (60) (60) 6,687 - (50) (50) Unused revolving credit lines Commercial 3,223 - - - 2,580 - - - Consumer - principally credit cards 118,710 - - - 101,582 - - - - ------------------------------------------------------------------------------------------------------------------------------- Not applicable. Includes interest rate and currency swaps. See note 18. Included in other cash financial instruments. - -------------------------------------------------------------------------------------------------------------------------------
Additional information about certain financial instruments in the above table follows. CURRENCY FORWARDS AND OPTIONS are employed by GE and GECS to manage exposures to changes in currency exchange rates associated with commercial purchase and sale transactions. These financial instruments generally are used to fix the local currency cost of purchased goods or services or selling prices denominated in currencies other than the functional currency. Currency exposures that result from net investments in affiliates are managed principally by funding assets denominated in local currency with debt denominated in those same currencies. In certain circumstances, net investment exposures are managed using currency forwards and currency swaps. OPTIONS OTHER THAN CURRENCY OPTIONS. GECS is exposed to prepayment risk in certain of its business activities, such as in its mortgage servicing and F-40 Annual Report Page No. 64 annuities activities. In order to hedge those exposures, GECS uses one-sided financial instruments containing option features. These instruments generally behave based on limits ("caps," "floors" or "collars") on interest rate movement. INTEREST RATE AND CURRENCY SWAPS are used by both GE and GECS to optimize borrowing costs for a particular funding strategy (see note 18) and by GECS to establish specific hedges of mortgage-related assets and to manage net investment exposures. Such swaps are evaluated by management under the credit criteria set forth below. In addition, as part of its ongoing customer activities, GECS may enter into swaps that are integrated with investments in or loans to particular customers and do not involve assumption of third-party credit risk. Such integrated swaps are evaluated and monitored like their associated investments or loans, and are not therefore subject to the same credit criteria that would apply to a stand- alone swap. COUNTERPARTY CREDIT RISK. Given the ways in which GE and GECS each use swaps, purchased options and forwards, the principal risk is credit risk - risk that counterparties will be financially unable to make payments in accordance with the agreements. Associated market risk is meaningful only as it relates to how changes in market value affect credit exposure to individual counterparties. Except as noted above for positions that are integrated into financings, all swaps, purchased options and forwards are carried out within the following credit policy constraints: * Once a counterparty exceeds credit exposure limits (see table below), no additional transactions are permitted until the exposure with that counterparty is reduced to an amount that is within the established limit. Open contracts remain in force.
- -------------------------------------------------------------------------- COUNTERPARTY CREDIT CRITERIA Credit rating -------------------------------- Moody's Standard & Poor's - -------------------------------------------------------------------------- Term of transaction Between one and five years Aa3 AA- Greater than five years Aaa AAA Credit exposure limits Up to $50 million Aa3 AA- Up to $75 million Aaa AAA - --------------------------------------------------------------------------
* All swaps are executed under master swap agreements containing mutual credit downgrade provisions that provide the ability to require assignment or termination in the event either party is downgraded below A3 or A-. More credit latitude is permitted for transactions having original maturities shorter than one year because of their lower risk. 30. QUARTERLY INFORMATION (UNAUDITED)
- --------------------------------------------------------------------------------------------------------------------------------- First quarter Second quarter Third quarter Fourth quarter (Dollar amounts in millions; ----------------- ------------------ ----------------- ----------------- per-share amounts in dollars) 1995 1994 1995 1994 1995 1994 1995 1994 - --------------------------------------------------------------------------------------------------------------------------------- CONSOLIDATED OPERATIONS Earnings from continuing operations $1,372 $1,219 $ 1,726 $1,554 $1,610 $1,457 $ 1,865 $ 1,685 Losses from discontinued operations - (151) - (32) - (89) - (49) Provision for loss on discontinued securities broker-dealer operations - - - - - - - (868) ------ ------ ------- ------ ------ ------ ------- ------- Net earnings $1,372 $1,068 $ 1,726 $1,522 $1,610 $1,368 $ 1,865 $ 768 ====== ====== ======= ====== ====== ====== ======= ======= Per share Earnings from continuing operations $ 0.81 $ 0.71 $ 1.02 $ 0.91 $ 0.96 $ 0.85 $ 1.12 $ 0.99 Losses from discontinued operations - (0.09) - (0.02) - (0.05) - (0.54) ------ ------ ------- ------ ------ ------ ------- ------- Net earnings $ 0.81 $ 0.62 $ 1.02 $ 0.89 $ 0.96 $ 0.80 $ 1.12 $ 0.45 ====== ====== ======= ====== ====== ====== ======= ======= SELECTED DATA GE Sales of goods and services $9,278 $8,264 $11,237 $10,038 $10,106 $9,384 $12,392 $11,944 Gross profit from sales 2,567 2,282 3,219 2,743 2,794 2,441 3,340 3,115 GECS Revenues from operations 5,754 4,393 6,415 4,730 7,099 5,097 7,224 5,655 Operating profit 826 668 818 684 1,048 857 828 740 - --------------------------------------------------------------------------------------------------------------------------------- For GE, gross profit from sales is sales of goods and services less costs of goods and services sold. For GECS, operating profit is income before taxes. First-quarter 1994 discontinued operations included a $210 million ($350 million before tax) charge resulting from the discovery of false trading profits created by the then head U.S. government securities trader in the discontinued securities broker-dealer. Approximately $143 million ($238 million before tax) of the charge related to periods prior to 1994. Earnings-per-share amounts for each quarter are required to be computed independently and, as a result, their sums do not equal the total year earnings-per-share amounts. F-41 GENERAL ELECTRIC COMPANY AND CONSOLIDATED AFFILIATES SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS
(Amounts in millions) GE allowance for losses deducted from assets ----------------------- Accounts and notes receivable Investments ---------- ----------- Balance, January 1, 1993 $196 $ 57 Provisions charged to operations 51 57 Write-offs (49) (5) ---- ---- Balance, December 31, 1993 198 109 Provisions charged to operations 55 11 Write-offs (10) (56) ---- ---- Balance, December 31, 1994 $243 $64 Provisions charged to operations 57 27 Write-offs (39) (3) ---- ---- Balance, December 31, 1995 $261 $ 88 ==== ==== _____________________________________ The year-end balance is segregated on the Statement of Financial Position as follows:
1995 1994 1993 ---- ---- ---- Current receivables $231 $205 $170 All other assets (long-term receivables, customer financing, etc.) 30 38 28 ---- ---- ---- $261 $243 $198 ==== ==== ==== Reference is made to note 8 in Notes to Consolidated Financial Statements appearing in the 1995 Annual Report to Share Owners, which contains information with respect to GECS allowance for losses on financing receivables for 1995, 1994 and 1993.
F-42 Appendix Differences between the Circulated Material and the Material in Electronic Format The financial information included on pages F-0 through F-00 represents the financial information that appears in the 1995 General Electric Annual Report to Share Owners. That information was prepared on typesetting software for purposes of printing the Annual Report. The typesetting format was then converted electronically into a word processing format that can be accepted by the EDGAR system. Certain minor differences of graphics, layout and appearance, as set forth below, exist between the information as it is presented here and as it is presented in the Annual Report to Share Owners. 1. The Annual Report is printed on cream-colored colored recycled paper in a two column per page layout. 2. For ease of reference, Annual Report page numbers have been retained and are indicated in the upper left hand corner of the pages in electronic format as "Annual Report page ---." The designation does not appear in the circulated Annual Report where page numbers are indicated by arabic numerals at the bottom of each page. 3. On page F-1 (Annual Report page 00) the parenthetical "(Annual Report Pages)" was added to the electronic format for the sake of clarity, and these words do not appear in the circulated Annual Report. 4. Pages 26-27, 28-29, and 30-31 of the Annual Report are "spreads," with the page on the left representing line-by-line account descriptions and numbered columns for General Electric Company and consolidated affiliates, and with the page on the right continuing with numbered columns for GE and GECS. For ease of reading in this electronic filing, line-by- line descriptions have been repeated on the equivalent right side pages, i.e., F-3, F-5 and F-7. 5. On pages F-1, F-9, F-13, F-14, F-15, F-16, F-17 and F-18 (Annual Report pages 25, 32, 33, 37, 38, 39, 40, 41 and 42) of the electronic format the word "Chart:" appears in a number of instances toward the left hand margin next to a description of the chart. This formulation indicates that in the circulated Annual Report there appears a colored bar graph at these locations. The numbers that are presented at these places in the electronic format represent the plot points that were used to construct the bar graphs. 6. Many headings in the circulated Annual Report are in bold face or in enlarged type or type of a special style. These have been converted to block capitals in the electronic format. The numbers of the Notes to Consolidated Financial Statements appear as large contrasting red numerals on grey tint blocks in the circulated Annual Report. 7. The solid black bullet character that is used in the circulated Annual Report has been replaced by an asterisk in the electronic format. 8. On Annual Report page 44 (F-20) there are facsimile signatures of Messrs. Welch and Dammerman of GE in the circulated version. 9. The Accountants' Report (KPMG Peat Marwick LLP) on page F-20 of this 10-K Report refers specifically to this Report on Form 10-K, including one financial statement schedule included herein. KPMG Peat Marwick LLP's Report appearing in the circulated Annual Report to Share Owners on page 44, signed by facsimile, does not refer to the schedule identified solely with the 10-K. EX-10.T 2 Exhibit 10(t) GENERAL ELECTRIC COMPANY 1995 EXECUTIVE OFFICER DEFERRED SALARY PLAN I. ELIGIBILITY ----------- To maximize the ability of General Electric Company ("Company") to obtain a federal tax deduction for compensation to be paid to its Executive Officers in 1995, each Executive Officer of the Company who is expected to be paid more than $1 million in base salary compensation in 1995 shall be eligible to participate in this Plan. II. DEFERRAL OF SALARY ------------------ 1. Each Executive Officer eligible to participate in this Plan ("Participant") shall be given an opportunity to irrevocably elect, prior to any deferral hereunder: (a) the portion (minimum of 10%, maximum of 100%) of the Participant's 1995 base salary to be deferred, and (b) the form of payout alternative as set forth in Section V. 2. Commencing with base salary earned for January 1995, the Participant's total base salary elected to be deferred under this Plan will be deferred in ratable installments through the month of December 1995, and will be credited to the Participant's deferred salary cash account ("Deferred Account") as of the end of the month of deferral ("Deferral Date"). III. SPECIAL ONE-TIME MATCHING MAKE-UP CREDIT ---------------------------------------- As of December 31, 1995, a special one-time credit shall be made to the Deferred Account of each Participant who is actively employed by the Company on such date to make up for the matching Company payment that would otherwise have been available under the Company's Savings and Security Program. The amount of such credit shall equal 3.5% of the total 1995 base salary deferred under this Plan by the Participant (excluding interest). Such credit shall not be provided for any Participant who has terminated employment with the Company for any reason prior to December 31, 1995, or is not actively employed on such date. IV. MANNER OF ACCOUNTING -------------------- 1. Each Deferred Account shall be unfunded, unsecured and nonassignable, and shall not be a trust for the benefit of any Participant. 2. Except as may be otherwise provided in Section V or VIII, the Participant's Deferred Account will be credited with (a) the amount of base salary deferred on each Deferral Date as set forth in Section II. 2., the special one-time matching make-up credit as set forth in Section III, and (c) interest at the annual rate of 14% compounded annually on each December 31. V. PAYMENT OF DEFERRED ACCOUNT --------------------------- 1. Payment of a Participant's Deferred Account will be made only after termination of employment of the Participant. 2. If no manner of payment election is made, the Deferred Account will be paid in 10 annual installments commencing on March 1 (or as soon thereafter as practical) following the year of termination of employment. 3. At the time of election to defer base salary, a Participant may irrevocably elect: (a) the number of annual payout installments (minimum of 10, maximum of 20) of the Deferred Account commencing on March 1 (or as soon thereafter as practical) following the year of termination of employment, unless (b) a lump sum payment of the Deferred Account is elected in which case the lump sum payment will be made on March 1 (or as soon thereafter as practical) following the year of termination of employment. 4. Participants who terminate their employment on or after December 31, 1995 because of retirement, death or disability, or Participants who terminate their employment on or after December 31, 1999 for any reason, will receive payouts based on Deferred Account accumulations at the 14% interest rate. Payments will be made pursuant to Section V.2 or V.3 above beginning on March 1 (or as soon thereafter as practical) following the year of termination of employment. 5. Unless waived by the Management Development and Compensation Committee of the Board of Directors ("MDCC"), if the Participant terminates employment prior to December 31, 1995 for any reason, or prior to December 31, 1999 for any reason other than retirement, death, or disability, the Participant's Deferred Account will be paid in a lump sum as soon as practical following the date of termination, along with simple interest credited at an annual rate of 3% rather than the rate specified in Section IV. VI. DEATH BENEFITS -------------- In the event of a Participant's death prior to receiving any or all payments to which the Participant is entitled, the remaining Deferred Account shall be paid at the time and in the manner provided in Section V to the beneficiary or beneficiaries designated by the Participant on a beneficiary designation form properly file by the Participant with the Company in accordance with established administrative procedures. If no such designated beneficiary survives the Participant, such remaining benefits shall be paid as set forth above to the Participant's estate. VII. ADMINISTRATION AND INTERPRETATION --------------------------------- This Plan shall be administered by the MDCC, which shall have full power and authority on behalf of the Company to administer and interpret the Plan in its sole discretion. All MDCC decisions with respect to the administration and interpretation of the Plan shall be final and binding upon all persons. VIII. AMENDMENT OF THE PLAN --------------------- This Plan may be amended, suspended or terminated at any time by the MDCC. In addition, the MDCC may alter or amend the payout schedule of any or all of the accrued benefits of a Participant at any time. IX. EFFECTIVE DATE -------------- The effective date of this Plan shall be January 1, 1995. EX-11 3 1 Exhibit 11 STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
(Dollars in millions, shares in thousands, Fully earnings per share in dollars) Earnings Primary diluted per common earnings earnings share per share per share ---------- --------- --------- 1995 ---- Net earnings applicable to common stock $ 6,573 $ 6,573 $ 6,573 Dividend equivalents (net of tax) applicable to deferred incentive compensation shares - 9 9 ------- ------- ------- Earnings for per-share calculations $ 6,573 $ 6,582 $ 6,582 ------- ------- ------- Average number of shares outstanding 1,683,812 1,683,812 1,683,812 Average number of deferred incentive compensation shares - 8,188 8,188 Average stock option shares - 13,572 19,759 Average number of restricted stock units - 1,303 1,574 ------- ------- ------- Shares for earnings calculation 1,683,812 1,706,875 1,713,333 ------- ------- ------- Earnings per share $3.90 $3.86 $3.84 - ------------------ ===== ===== ===== 1994 ---- Net earnings applicable to common stock $ 4,726 $ 4,726 $ 4,726 Dividend equivalents (net of tax) applicable to deferred incentive compensation shares - 8 8 ------- ------- ------- Earnings for per-share calculations $ 4,726 $ 4,734 $ 4,734 ------- ------- ------- Average number of shares outstanding 1,708,738 1,708,738 1,708,738 Average number of deferred incentive compensation shares - 8,555 8,555 Average stock option shares - 9,605 10,452 Average number of restricted stock units - 1,126 1,163 ------- ------- ------- Shares for earnings calculation 1,708,738 1,728,024 1,728,908 ------- ------- ------- Earnings per share $2.77 $2.74 $2.74 - ------------------ ===== ===== ===== Data have been adjusted to reflect 2-for-1 stock split in April 1994.
2
(Dollars in millions, shares in thousands, Fully earnings per share in dollars) Earnings Primary diluted per common earnings earnings share per share per share ---------- --------- --------- 1993 ---- Net earnings applicable to common stock $ 4,315 $ 4,315 $ 4,315 Dividend equivalents (net of tax) applicable to deferred incentive compensation shares - 7 7 ------- ------- ------- Earnings for per-share calculations $ 4,315 $ 4,322 $ 4,322 ------- ------- ------- Average number of shares outstanding 1,707,979 1,707,979 1,707,979 Average number of deferred incentive compensation shares - 8,507 8,507 Average stock option shares - 9,234 12,048 ------- ------- ------- Shares for earnings calculation 1,707,979 1,725,720 1,728,534 ------- ------- ------- Earnings per share $2.52 $2.50 $2.50 - ------------------ ===== ===== ===== Data have been adjusted to reflect 2-for-1 stock split in April 1994. Rounded to $2.52 as a result of the 2-for-1 stock split in April 1994.
EX-12 4 Exhibit 12 GENERAL ELECTRIC COMPANY RATIO OF EARNINGS TO FIXED CHARGES
Year ended December 31 (Dollars in millions) ----------------------------------------------- 1991 1992 1993 1994 1995 ---- ---- ---- ---- ---- GE except GECS - -------------- "Earnings" $ 5,329 $ 5,582 $ 5,511 $ 7,828 $ 8,696 Less: Equity in undistributed earnings of General Electric Capital Services, Inc. (871) (831) (957) (1,181) (1,324) Plus: Interest and other financial charges included in expense 893 768 525 410 649 One-third of rental expense 225 228 212 171 174 ------- ------- ------- ------- ------- Adjusted "earnings" $ 5,576 $ 5,747 $ 5,291 $ 7,228 $8,195 ======= ======= ======= ======= ======= Fixed Charges: Interest and other financial charges $ 893 $ 768 $ 525 $ 410 $ 649 Interest capitalized 33 29 21 21 13 One-third of rental expense 225 228 212 171 174 ------- ------- ------- ------- ------- Total fixed charges $ 1,151 $ 1,025 $ 758 $ 602 $ 836 ======= ======= ======= ======= ======= Ratio of earnings to fixed charges 4.84 5.61 6.98 12.01 9.80 ======= ======= ======= ======= ======= General Electric Company and consolidated affiliates - ----------------------------------------- "Earnings" $ 5,679 $ 6,026 $ 6,287 $ 8,831 $ 9,941 Plus: Interest and other financial charges included in expense 5,270 4,512 4,096 4,994 7,336 One-third of rental expense 261 320 349 327 349 ------- ------- ------- ------- ------- Adjusted "earnings" $11,210 $10,858 $10,732 $14,152 $17,626 ======= ======= ======= ======= ======= Fixed Charges: Interest and other financial charges $ 5,270 $ 4,512 $ 4,096 $ 4,994 $ 7,336 Interest capitalized 41 35 26 30 34 One-third of rental expense 261 320 349 327 349 ------- ------- ------- ------- ------- Total fixed charges $ 5,572 $ 4,867 $ 4,471 $ 5,351 $ 7,719 ======= ======= ======= ======= ======= Ratio of earnings to fixed charges 2.01 2.23 2.40 2.64 2.28 ======= ======= ======= ======= ======= Earnings for all years consist of earnings from continuing operations before income taxes and minority interest. For 1991 and 1993, earnings are before cumulative effects of changes in accounting principle. Earnings for all years consist of earnings from continuing operations after income taxes, net of dividends. For 1991, earnings are before cumulative effect of change in accounting principle. Considered to be representative of interest factor in rental expense.
EX-21 5 Exhibit 21 Subsidiaries of Registrant General Electric's principal affiliates as of December 31, 1995, are listed below. All other affiliates, if considered in the aggregate as a single affiliate, would not constitute a significant affiliate. Affiliates of Registrant included in Registrant's Financial Statements. - -----------------------------------------------------------------------
Percentage of voting securities State or owned by the country of immediate incorporation or parent (1) organization ----------------- ---------------- Caribe General Electric Products, Inc. 100 Delaware General Electric Canadian Holdings Limited 100 Canada General Electric Capital Services, Inc. 100 Delaware General Electric Capital Corporation 100 New York Global Insurance Holding Corporation 100 Missouri General Electric Plastics B.V. 100 Netherlands General Electric International, Inc. 100 Delaware GE Petrochemicals Inc. 100 Delaware National Broadcasting Company, Inc. 100 Delaware Nuovo Pignone SpA 81 Italy GE Yokogawa Medical Systems, Ltd. 75 Japan Notes (1) With respect to certain companies, shares in names of nominees and qualifying shares in names of directors are included in above percentages.
EX-23 6 Exhibit 23 CONSENT OF INDEPENDENT AUDITORS The Board of Directors General Electric Company: We consent to incorporation by reference in the registration statements Nos. 33-29024, 33-3908, 2-82072, 33-37106, 33-35922, 33-44593, 33-39596, 33- 39596-01, 33-47181, 33-47085, 33-50639, 33-61029 and 33-61029-01 on Form S- 3 and Nos. 33-4239, 33-23441, 33-24679, 2-84145, 33-47500 and 33-49053 on Form S-8 of General Electric Company of our report dated February 9, 1996, relating to the consolidated statement of financial position of General Electric Company and consolidated affiliates as of December 31, 1995 and 1994, and the related consolidated statements of earnings, and cash flows for each of the years in the three-year period ended December 31, 1995, and the related schedule, which report appears in the December 31, 1995, annual report on Form 10-K of General Electric Company. Our report refers to changes in 1993 in the Company's method of accounting for postemployment benefits. KPMG Peat Marwick LLP Stamford, Connecticut March 20, 1996 EX-24 7 1 Exhibit 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned, being a director or officer of General Electric Company, a New York corporation (the "Company"), hereby constitutes and appoints John F. Welch, Jr., Benjamin W. Heineman, Jr., Dennis D. Dammerman, and Philip D. Ameen and each of them, his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead in any and all capacities, to sign one or more Annual Reports for the Company's fiscal year ended December 31, 1995, on Form 10-K under the Securities Exchange Act of 1934, as amended, or such other form as any such attorney-in-fact may deem necessary or desirable, any amendments thereto, and all additional amendments thereto, each in such form as they or any one of them may approve, and to file the same with all exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done so that such Annual Report shall comply with the Securities Exchange Act of 1934, as amended, and the applicable Rules and Regulations adopted or issued pursuant thereto, as fully and to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in- fact and agents, or any of them or their substitute or resubstitute, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, each of the undersigned has hereunto set his or her hand this 15th day of March, 1996. /s/ John F. Welch, Jr. /s/ Dennis D. Dammerman Chairman of the Board Senior Vice President - (Principal Executive Finance (Principal Officer and Director) Financial Officer and Director) /s/ Philip D. Ameen Vice President and Comptroller (Principal Accounting Officer) 2 /s/ D. Wayne Calloway /s/ John D. Opie Director Director /s/ Silas S. Cathcart /s/ Barbara S. Preiskel Director Director /s/ Paolo Fresco /s/ Andrew C. Sigler Director Director /s/ Claudio X. Gonzalez /s/ Douglas A. Warner III Director Director /s/ Robert E. Mercer Director /s/ Gertrude G. Michelson Director A MAJORITY OF THE BOARD OF DIRECTORS EX-27 8
5 This schedule contains summary financial information extracted from the consolidated financial statements for the period ended December 31, 1995, and is qualified in its entirety by reference to such financial statements. 0000040545 GENERAL ELECTRIC COMPANY 1,000,000 YEAR DEC-31-1995 DEC-31-1995 2,823 41,067 6,582 231 4,395 0 45,946 20,267 228,035 0 51,027 0 0 594 29,015 228,035 33,157 42,890 24,288 30,970 15,429 57 7,286 9,737 3,164 6,573 0 0 0 6,573 3.86 3.84 Not applicable to consolidated GE. GE sales of goods ($33,157) and services ($9,733). GE costs of goods ($24,288) and services ($6,682) sold.
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