-----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, Dc6qwbS/qsjbPLMC7AqvV13fNnAjY1BUJbOCNMdbulM1NuMjz5+UFOXVaZslgJqQ sHE1fdvTl+OSscTnepl8hw== 0000040545-98-000025.txt : 19980803 0000040545-98-000025.hdr.sgml : 19980803 ACCESSION NUMBER: 0000040545-98-000025 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980731 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-Q SEC ACT: SEC FILE NUMBER: 001-00035 FILM NUMBER: 98675385 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-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended JUNE 30, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____ to ____ Commission file number 1-35 GENERAL ELECTRIC COMPANY (Exact name of registrant as specified in its charter) NEW YORK 14-0689340 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 3135 EASTON TURNPIKE, FAIRFIELD, CT 06431-0001 (Address of principal executive offices) (Zip Code) (Registrant's telephone number, including area code) (203) 373-2211 --------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No There were 3,253,684,802 shares with a par value of $0.16 per share outstanding at June 30, 1998. PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CONDENSED STATEMENT OF EARNINGS GENERAL ELECTRIC COMPANY AND CONSOLIDATED AFFILIATES (DOLLARS, EXCEPT PER-SHARE AMOUNTS, IN MILLIONS)
SECOND QUARTER ENDED JUNE 30 (UNAUDITED) -------------------------------------------------------------------------------- CONSOLIDATED GE GECS ------------------------- ------------------------ ------------------------- 1998 1997 1998 1997 1998 1997 ----------- ----------- ----------- ---------- ----------- ----------- Sales of goods $ 11,022 $ 10,318 $ 9,129 $ 9,258 $ 1,893 $ 1,061 Sales of services 4,043 3,323 4,088 3,362 - - Earnings of GECS - - 933 798 - - GECS revenues from services 9,863 8,219 - - 9,908 8,256 Other income 142 137 153 136 - - ----------- ----------- ----------- ---------- ----------- ----------- Total revenues 25,070 21,997 14,303 13,554 11,801 9,317 ----------- ----------- ----------- ---------- ----------- ----------- Cost of goods sold 7,919 7,488 6,191 6,559 1,728 930 Cost of services sold 2,765 2,136 2,810 2,175 - - Interest and other financial charges 2,366 2,021 204 165 2,187 1,862 Insurance losses and policyholder and annuity benefits 2,400 2,012 - - 2,400 2,012 Provision for losses on financing receivables 409 337 - - 409 337 Other costs and expenses 5,616 4,720 1,822 1,733 3,825 3,017 Minority interest in net earnings of consolidated affiliates 61 52 28 31 33 21 ----------- ----------- ----------- ---------- ----------- ----------- Total costs and expenses 21,536 18,766 11,055 10,663 10,582 8,179 ----------- ----------- ----------- ---------- ----------- ----------- Earnings before income taxes 3,534 3,231 3,248 2,891 1,219 1,138 Provision for income taxes (1,084) (1,069) (798) (729) (286) (340) ----------- ----------- ----------- ---------- ----------- ----------- Net earnings $ 2,450 $ 2,162 $ 2,450 $ 2,162 $ 933 $ 798 =========== =========== =========== ========== =========== =========== Net earnings per share Basic $ 0.75 $ 0.66 Diluted $ 0.74 $ 0.65 Dividends declared per share $ 0.30 $ 0.26 See notes to condensed consolidated financial statements. Consolidating data are shown for "GE" and "GECS." Transactions between GE and GECS have been eliminated from the "consolidated" columns.
CONDENSED STATEMENT OF EARNINGS GENERAL ELECTRIC COMPANY AND CONSOLIDATED AFFILIATES (DOLLARS, EXCEPT PER-SHARE AMOUNTS, IN MILLIONS)
SIX MONTHS ENDED JUNE 30 (UNAUDITED) -------------------------------------------------------------------------------- CONSOLIDATED GE GECS ------------------------- ------------------------ ------------------------- 1998 1997 1998 1997 1998 1997 ----------- ----------- ----------- ---------- ----------- ----------- Sales of goods $ 20,638 $ 18,938 $ 17,120 $ 16,963 $ 3,519 $ 1,977 Sales of services 7,402 6,108 7,505 6,179 - - Earnings of GECS - - 1,814 1,552 - - GECS revenues from services 19,347 16,812 - - 19,433 16,884 Other income 309 296 328 294 - - ----------- ----------- ----------- ---------- ----------- ----------- Total revenues 47,696 42,154 26,767 24,988 22,952 18,861 ----------- ----------- ----------- ---------- ----------- ----------- Cost of goods sold 14,982 13,830 11,773 12,094 3,210 1,738 Cost of services sold 5,167 4,121 5,270 4,192 - - Interest and other financial charges 4,578 3,952 411 323 4,212 3,645 Insurance losses and policyholder and annuity benefits 4,613 4,256 - - 4,613 4,256 Provision for losses on financing receivables 741 649 - - 741 649 Other costs and expenses 11,049 9,449 3,470 3,200 7,639 6,303 Minority interest in net earnings of consolidated affiliates 117 107 51 56 66 51 ----------- ----------- ----------- ---------- ----------- ----------- Total costs and expenses 41,247 36,364 20,975 19,865 20,481 16,642 ----------- ----------- ----------- ---------- ----------- ----------- Earnings before income taxes 6,449 5,790 5,792 5,123 2,471 2,219 Provision for income taxes (2,108) (1,951) (1,451) (1,284) (657) (667) ----------- ----------- ----------- ---------- ----------- ----------- Net earnings $ 4,341 $ 3,839 $ 4,341 $ 3,839 $ 1,814 $ 1,552 =========== =========== =========== ========== =========== =========== Net earnings per share Basic $ 1.33 $ 1.17 Diluted $ 1.31 $ 1.15 Dividends declared per share $ 0.60 $ 0.52 See notes to condensed consolidated financial statements. Consolidating data are shown for "GE" and "GECS." Transactions between GE and GECS have been eliminated from the "consolidated" columns.
CONDENSED STATEMENT OF FINANCIAL POSITION GENERAL ELECTRIC COMPANY AND CONSOLIDATED AFFILIATES (DOLLARS IN MILLIONS)
CONSOLIDATED GE GECS ------------------------- ------------------------ ------------------------- 6/30/98 12/31/97 6/30/98 12/31/97 6/30/98 12/31/97 ----------- ----------- ----------- ---------- ----------- ----------- Cash and equivalents $ 3,862 $ 5,861 $ 839 $ 1,157 $ 3,023 $ 4,904 Investment securities 74,094 70,621 236 265 73,858 70,356 Current receivables 8,400 8,924 8,503 9,054 - - Inventories 5,564 5,895 4,800 5,109 764 786 GECS financing receivables - net 106,734 103,799 - - 106,734 103,799 Other GECS receivables 20,451 17,655 - - 21,244 18,332 Property, plant and equipment (including equipment leased to others) - net 33,308 32,316 10,930 11,118 22,378 21,198 Investment in GECS - - 18,714 17,239 - - Intangible assets 19,939 19,121 8,843 8,755 11,096 10,366 Other assets 46,530 39,820 16,891 14,729 30,107 25,667 ----------- ----------- ----------- ---------- ----------- ----------- Total assets $ 318,882 $ 304,012 $ 69,756 $ 67,426 $ 269,204 $ 255,408 =========== =========== =========== ========== =========== =========== Short-term borrowings $ 106,322 $ 98,075 $ 5,162 $ 3,629 $ 101,786 $ 95,274 Accounts payable 10,865 10,407 4,414 4,779 7,399 6,490 Other GE current liabilities 12,317 12,186 12,211 12,058 - - Long-term borrowings 48,764 46,603 631 729 48,125 45,989 Insurance liabilities, reserves and annuity benefits 69,849 67,270 - - 69,849 67,270 All other liabilities 22,000 22,700 11,356 11,539 10,548 11,067 Deferred income taxes 9,220 8,651 (191) (315) 9,411 8,966 ----------- ----------- ----------- ---------- ----------- ----------- Total liabilities 279,337 265,892 33,583 32,419 247,118 235,056 ----------- ----------- ----------- ---------- ----------- ----------- Minority interest in equity of consolidated affiliates 3,960 3,682 588 569 3,372 3,113 ----------- ----------- ----------- ---------- ----------- ----------- Unrealized gains on investment securities 2,590 2,138 2,590 2,138 2,559 2,135 Foreign currency translation adjustments (1,010) (798) (1,010) (798) (222) (185) ----------- ----------- ----------- ---------- ----------- ----------- Accumulated non-owner changes in equity 1,580 1,340 1,580 1,340 2,337 1,950 Common stock (3,714,026,000 shares issued) 594 594 594 594 1 1 Other capital 5,222 4,434 5,222 4,434 2,490 2,337 Retained earnings 45,726 43,338 45,726 43,338 13,886 12,951 Less common stock held in treasury (17,537) (15,268) (17,537) (15,268) - - ----------- ----------- ----------- ---------- ----------- ----------- Total share owners' equity 35,585 34,438 35,585 34,438 18,714 17,239 ----------- ----------- ----------- ---------- ----------- ----------- Total liabilities and equity $ 318,882 $ 304,012 $ 69,756 $ 67,426 $ 269,204 $ 255,408 =========== =========== =========== ========== =========== =========== See notes to condensed consolidated financial statements. Consolidating data are shown for "GE" and"GECS." June data are unaudited. Transactions between GE and GECS have been eliminated from the "consolidated" columns.
CONDENSED STATEMENT OF CASH FLOWS GENERAL ELECTRIC COMPANY AND CONSOLIDATED AFFILIATES (DOLLARS IN MILLIONS) SIX MONTHS ENDED JUNE 30 (UNAUDITED) -------------------------------------------------------------------------------- CONSOLIDATED GE GECS ------------------------- ------------------------ ------------------------- 1998 1997 1998 1997 1998 1997 ----------- ----------- ----------- ---------- ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES Net earnings $ 4,341 $ 3,839 $ 4,341 $ 3,839 $ 1,814 $ 1,552 Adjustments to reconcile net earnings to cash provided from (used for) operating activities Depreciation and amortization 2,083 1,931 823 794 1,260 1,137 Earnings retained by GECS - - (935) (932) - - Deferred income taxes 383 418 234 204 149 214 Decrease in GE current receivables 347 272 374 310 - - Decrease (increase) in inventories 298 (813) 237 (813) 61 - Increase (decrease) in accounts payable (424) 116 (190) 85 (148) (19) Increase in insurance reserves 1,594 1,596 - - 1,594 1,596 Provision for losses on financing receivables 741 649 - - 741 649 All other operating activities (2,039) (552) (1,340) (2) (582) (373) ----------- ----------- ----------- ---------- ----------- ----------- Cash from operating activities 7,324 7,456 3,544 3,485 4,889 4,756 ----------- ----------- ----------- ---------- ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES Property, plant and equipment (including equipment leased to others) - additions (4,731) (3,807) (780) (878) (3,951) (2,929) Net decrease (increase) in GECS financing receivables (3,742) 489 - - (3,742) 489 Payments for principal businesses purchased (1,982) (684) (989) (103) (993) (581) All other investing activities (2,812) (2,393) 150 134 (3,067) (2,659) ----------- ----------- ----------- ---------- ----------- ----------- Cash used for investing activities (13,267) (6,395) (1,619) (847) (11,753) (5,680) ----------- ----------- ----------- ---------- ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Net change in borrowings (maturities 90 days or less) 7,773 7,468 2,154 1,232 5,294 6,203 Newly issued debt (maturities more than 90 days) 18,070 9,378 282 243 17,788 9,135 Repayments and other reductions (maturities more than 90 days) (17,993) (14,914) (994) (779) (16,999) (14,135) Net purchase of GE shares for treasury (1,728) (1,786) (1,728) (1,786) - - Dividends paid to share owners (1,957) (1,710) (1,957) (1,710) (879) (620) All other financing activities (221) 118 - - (221) 118 ----------- ----------- ----------- ---------- ----------- ----------- Cash from (used for) financing activities 3,944 (1,446) (2,243) (2,800) 4,983 701 ----------- ----------- ----------- ---------- ----------- ----------- Decrease in cash and equivalents (1,999) (385) (318) (162) (1,881) (223) Cash and equivalents at beginning of year 5,861 4,191 1,157 957 4,904 3,234 ----------- ----------- ----------- ---------- ----------- ----------- Cash and equivalents at June 30 $ 3,862 $ 3,806 $ 839 $ 795 $ 3,023 $ 3,011 =========== =========== =========== ========== =========== =========== See notes to condensed consolidated financial statements. Consolidating data are shown for "GE" and "GECS." Transactions between GE and GECS have been eliminated from the "consolidated" columns.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. The accompanying condensed quarterly financial statements represent the consolidation of General Electric Company and all companies which it directly or indirectly controls, either through majority ownership or otherwise. Reference is made to note 1 to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 1997. That note discusses consolidation and financial statement presentation. As used in this Report and in the Report on Form 10-K, "GE" represents the adding together of all affiliated companies except General Electric Capital Services, Inc. ("GECS"), which is presented on a one-line basis; GECS consists of General Electric Capital Services, Inc. and all of its affiliates; and "consolidated" represents the adding together of GE and GECS with the effects of transactions between the two eliminated. 2. The condensed consolidated quarterly financial statements are unaudited. These statements include all adjustments (consisting of normal recurring accruals) considered necessary by management to present a fair statement of the results of operations, financial position and cash flows. The results reported in these condensed consolidated financial statements should not be regarded as necessarily indicative of results that may be expected for the entire year. 3. Statement of Financial Accounting Standards (SFAS) No. 130, REPORTING COMPREHENSIVE INCOME, was adopted as of January 1, 1998. This Statement requires reporting of changes in share owners' equity that do not result directly from transactions with share owners. An analysis of these changes follows: THREE MONTHS ENDED ------------------ (DOLLARS IN MILLIONS) 6/30/98 6/30/97 ------- ------- Net earnings $ 2,450 $ 2,162 Unrealized gains on investment securities - net 130 847 Foreign currency translation adjustments - net (59) 16 ------- ------- Total $ 2,521 $ 3,025 ======= ======= SIX MONTHS ENDED ------------------ 6/30/98 6/30/97 ------- ------- Net earnings $ 4,341 $ 3,839 Unrealized gains on investment securities - net 452 359 Foreign currency translation adjustments - net (212) (388) ------- ------- Total $ 4,581 $ 3,810 ======= ======= 4. In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities (the "Statement"). The Statement requires that, upon adoption, all derivative instruments (including certain derivative instruments embedded in other contracts) be recognized in the balance sheet at fair value, and that changes in such fair values be recognized in earnings unless specific hedging criteria are met. Changes in the values of derivatives that meet these hedging criteria will ultimately offset related earnings effects of the hedged items; effects of certain changes in fair value are recorded in Other Comprehensive Income pending recognition in earnings. GE will not adopt the Statement until required to do so on January 1, 2000. 5. GE's inventories consisted of the following: AT ------------------------ (DOLLARS IN MILLIONS) 6/30/98 12/31/97 ------- -------- GE Raw materials and work in process $ 2,988 $ 3,070 Finished goods 2,690 2,895 Unbilled shipments 197 242 Revaluation to LIFO (1,075) (1,098) ------- ------- 4,800 5,109 ------- ------- GECS Finished goods 764 786 ------- ------- Total $ 5,564 $ 5,895 ======= ======= 6. Property, plant and equipment (including equipment leased to others) consisted of the following: AT --------------------- (DOLLARS IN MILLIONS) 6/30/98 12/31/97 ------- -------- ORIGINAL COST - - GE $27,101 $26,855 - - GECS 30,360 28,802 ------- ------- Total 57,461 55,657 ------- ------- ACCUMULATED DEPRECIATION AND AMORTIZATION - - GE 16,171 15,737 - - GECS 7,982 7,604 ------- ------- Total 24,153 23,341 ------- ------- PROPERTY, PLANT AND EQUIPMENT -- NET - - GE 10,930 11,118 - - GECS 22,378 21,198 ------- ------- Total $33,308 $32,316 ======= ======= 7. GE's authorized common stock consisted of 4,400,000,000 shares having a par value of $0.16 each. Information related to the calculation of earnings per share follows.
THREE MONTHS ENDED ---------------------------------- (DOLLAR AMOUNTS AND SHARES IN MILLIONS; 6/30/98 6/30/97 ---------------- --------------- PER-SHARE AMOUNTS IN DOLLARS) BASIC DILUTED BASIC DILUTED ------- ------- ----- ------- CONSOLIDATED OPERATIONS Net earnings available to common share owners $2,450 $2,450 $2,162 $2,162 Dividend equivalents-- net of tax -- 6 -- 2 ------ ------ ------ ------ Net earnings available for per-share calculation $2,450 $2,456 $2,162 $2,164 ------ ------ ------ ------ AVERAGE EQUIVALENT SHARES Shares of GE common stock 3,270 3,270 3,274 3,274 Employee compensation-related shares, including stock options -- 59 -- 69 ------ ------ ------ ------ Total average equivalent shares 3,270 3,329 3,274 3,343 ------ ------ ------ ------ Net earnings per share $ 0.75 $ 0.74 $ 0.66 $ 0.65 ====== ====== ====== ====== SIX MONTHS ENDED ---------------------------------- 6/30/98 6/30/97 ---------------- --------------- BASIC DILUTED BASIC DILUTED ------- ------- ----- ------- CONSOLIDATED OPERATIONS Net earnings available to common share owners $4,341 $4,341 $3,839 $3,839 Dividend equivalents-- net of tax -- 9 -- 5 ------ ------ ------ ------ Net earnings available for per-share calculation $4,341 $4,350 $3,839 $3,844 ------ ------ ------ ------ AVERAGE EQUIVALENT SHARES Shares of GE common stock 3,268 3,268 3,279 3,279 Employee compensation-related shares, including stock options -- 64 -- 69 ------ ------ ------ ------ Total average equivalent shares 3,268 3,332 3,279 3,348 ------ ------ ------ ------ Net earnings per share $ 1.33 $ 1.31 $ 1.17 $ 1.15 ====== ====== ====== ======
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION A. RESULTS OF OPERATIONS -- SECOND QUARTER OF 1998 COMPARED WITH SECOND QUARTER OF 1997 General Electric Company's earnings for the second quarter of 1998 were $2.450 billion, the highest for any quarter in the Company's history, an increase of 13% over the same period in 1997. Earnings per share increased 14% to $0.74, up from last year's $0.65. Earnings per share grew faster than earnings, reflecting the impact of shares repurchased under a five-year, $17 billion share repurchase program initiated in December 1994. Revenues, including acquisitions, rose to a record $25.1 billion, 14% higher than last year, reflecting growth from globalization and product services initiatives. GE's second-quarter operating margin was 18.1% of sales, up from last year's 17.1%, and was a record for any quarter in the Company's history. The second-quarter margin growth reflects the increasing benefits from GE's focus on product services and Six Sigma quality initiatives. Eight of GE's twelve businesses reported higher operating profit for the second-quarter, with six -- led by GE Capital Services, Aircraft Engines and NBC -- achieving double-digit increases. GE Capital Services' earnings for the second quarter were $933 million, 17% more than last year's $798 million, reflecting the globalization and diversity of GE Capital's 28 businesses. Twenty-two of twenty-eight businesses grew earnings at double-digit rates, led by Specialized Financing and Specialty Insurance activities. Cash generated from GE's operating activities during the first half was a strong $3.5 billion. As part of the five-year, $17 billion share repurchase program, GE purchased $923 million of its stock during the second quarter to reach $11.7 billion - 266 million shares - purchased since December 1994. SEGMENT ANALYSIS: The comments that follow compare revenues and operating profit by industry segment for the second quarters of 1998 and 1997. o AIRCRAFT ENGINES revenues and operating profit increased sharply over last year's second quarter. The revenue and operating profit increases both resulted from strong growth in product services, including the contribution from the acquisition of Greenwich Air Services/UNC, as well as good volume growth in commercial engines. o APPLIANCES reported much lower revenues in the second quarter compared with a year ago, largely as a result of the first-quarter 1998 deconsolidation of a European distribution affiliate. Operating profit was slightly lower as lower selling prices more than offset beneficial effects of productivity and lower material costs. o BROADCASTING operating profit was considerably higher on a good increase in revenues over last year's second quarter. The revenue increase was primarily attributable to improved pricing and growth in owned-and-operated stations, including acquisitions. The improvement in operating profit was attributable to improved pricing at both network and owned-and-operated stations, as well as double-digit growth in NBC's cable programming services, the combination of which more than offset higher license fees for certain prime-time programs that were renewed. o GE CAPITAL SERVICES net earnings for the second quarter were $933 million, 17% more than last year's $798 million, reflecting the globalization and diversity of its 28 businesses. Twenty-two of twenty-eight businesses grew earnings at double-digit rates, led by Specialized Financing and Specialty Insurance activities. Overall, the increase in net earnings for the lending, leasing, and equipment management businesses of GECS was primarily attributable to a higher average level of invested assets as well as the effects of a lower effective tax rate. The growth in earnings from specialty insurance activities primarily reflected growth in origination volume and higher investment income, the result of continued growth in the investment portfolios and higher gains on investment securities, as well as improved earnings in the mortgage insurance business, the result of strengthened market conditions. o INDUSTRIAL PRODUCTS AND SYSTEMS reported revenues and operating profit that were about the same as last year's second quarter. The operating profit performance reflected productivity, lower material costs and higher volume, which were largely offset by lower selling prices. o MATERIALS second quarter operating profit was slightly higher on revenues that were about the same as a year ago. The operating profit increase primarily resulted from lower material costs and productivity which more than offset the effects of lower selling prices. o POWER GENERATION revenues increased slightly compared with the second quarter of 1997, primarily as a result of higher volume and growth in product services, which were partially offset by lower selling prices. Operating profit was also slightly higher, reflecting productivity and growth in product services, which more than offset the effects of lower selling prices. o TECHNICAL PRODUCTS & SERVICES revenues were somewhat higher than in the second quarter of 1997, reflecting higher volume across the segment which more than offset lower selling prices. Operating profit was substantially higher, primarily as a result of productivity across the segment and the absence of a current year counterpart to a 1997 provision for patent litigation at Medical Systems. o ALL OTHER operating profit decreased considerably on revenues that were substantially lower than the second quarter of 1997, as a result of lower levels of licensing income. B. RESULTS OF OPERATIONS -- FIRST HALF OF 1998 COMPARED WITH FIRST HALF OF 1997 Earnings for the six months ended June 30, 1998, were $4.341 billion, up 13% from $3.839 billion in 1997's first half. Earnings per share increased 14% to $1.31 from $1.15. Earnings per share grew faster than earnings, reflecting the impact of shares repurchased under a five-year, $17 billion share repurchase program initiated in December 1994. Consolidated revenues for the first six months of 1998 aggregated $47.7 billion, up 13% from the comparable $42.2 billion in 1997's first half. GE's sales of goods and services were 6% higher, with improvements led by Aircraft Engines, NBC and Transportation. Eight of GE's twelve businesses reported higher operating profit for the first half, with six -- led by GE Capital Services, Aircraft Engines and Medical Systems -- achieving double-digit increases. Operating margin in the first half of 1998 was 16.7% of sales, compared with last year's 15.8%. The improvement in operating margin was led by Aircraft Engines, NBC and Plastics. SEGMENT ANALYSIS: The following comments compare revenues and operating profit by industry segment for the first half of 1998 with the same period of 1997. o AIRCRAFT ENGINES revenues and operating profit increased sharply over last year's first half. The revenue and operating profit increases both resulted from strong growth in product services, including the contribution from the acquisition of Greenwich Air Services/UNC, as well as good volume growth in commercial engines. o APPLIANCES had much lower revenues in the first half, largely as a result of the first-quarter 1998 deconsolidation of a European distribution affiliate. Operating profit was about even with the first half of 1997 as lower selling prices offset productivity. o BROADCASTING reported a good increase in revenues over last year's first half, reflecting primarily pricing and NBC's broadcast of the January 1998 Superbowl. Operating profit was well ahead of last year's first half, reflecting stronger prime-time pricing and growth in NBC's cable programming services, which more than offset higher license fees for certain prime-time programs that were renewed. o GE CAPITAL SERVICES net earnings increased by 17% to $1,814 million, led by double digit increases in Specialized Financing, Specialty Insurance and Mid-Market Financing activities. Overall, the increase in net earnings for the lending, leasing, and equipment management businesses of GECS was primarily attributable to a higher average level of invested assets as well as the effects of a lower effective tax rate. The growth in earnings from specialty insurance activities primarily reflected growth in origination volume and higher investment income, the result of continued growth in the investment portfolios and higher gains on investment securities, as well as improved earnings in the mortgage insurance business, the result of strengthened market conditions. o INDUSTRIAL PRODUCTS AND SYSTEMS reported somewhat higher operating profit on revenues that were slightly higher than last year's first half. The increase in revenues reflected higher volume across all businesses in the segment, particularly at Transportation Systems, partially offset by generally lower prices. The improvement in operating profit was attributable to productivity which more than offset the effects of lower selling prices. o MATERIALS operating profit was somewhat higher on revenues that were about the same as the first six months of 1997. The improvement in operating profit reflected productivity, lower material costs and higher volume which more than offset the effects of lower selling prices. o POWER GENERATION reported slightly higher operating profit on revenues that were about the same as last year's first half. The increase in operating profit was primarily attributable to strong productivity which was partially offset by the effects of lower selling prices. o TECHNICAL PRODUCTS & SERVICES revenues were slightly higher than in the first half of 1997, reflecting volume growth in both Medical Systems and Information Services, partially offset by the effects of lower selling prices. Operating profit was sharply higher, primarily as a result of strong productivity across the segment and the absence of a current year counterpart to a 1997 provision for patent litigation at Medical Systems. o ALL OTHER operating profit decreased considerably on much lower revenues than the first half of 1997, as a result of lower levels of licensing income. C. FINANCIAL CONDITION With respect to the Condensed Statement of Financial Position, consolidated assets of $318.9 billion at June 30, 1998, were $14.9 billion higher than at December 31, 1997. GE assets were $69.8 billion at June 30, 1998, an increase of $2.3 billion from December 31, 1997. The increase was primarily attributable to greater investment in GECS ($1.5 billion), and increases in all other assets ($2.2 billion), reflecting primarily acquisitions which were not yet consolidated, and an increase in the prepaid pension asset. These increases were partially offset by reductions in current receivables ($0.6 billion) and inventories ($0.3 billion), reflecting improved asset utilization. GECS assets increased by $13.8 billion from the end of 1997. Other assets increased $4.4 billion, principally as a result of increases in advances to and investments in non-consolidated affiliates, growth in investor-directed fund accounts ("separate accounts"), and real estate acquired. GECS investment securities increased by $3.5 billion, reflecting the addition of securities held by insurance companies acquired and new investments by various GECS businesses, as well as increases in fair value of investment securities during the period. GE Capital financing receivables at June 30, 1998, which aggregated $106.7 billion, net of the allowance for doubtful accounts, were $2.9 billion higher than at year-end 1997, principally as a result of acquisition-related growth. Management believes that GE Capital's allowance for doubtful accounts of $2.9 billion (2.63% of the receivables balance at June 30, 1998 -- the same as year-end 1997) are appropriate given the strength and diversity of the portfolio and current economic circumstances. Other receivables increased $2.9 billion, reflecting principally the effect of acquisitions as well core growth in insurance-related receivables. Property, plant and equipment, principally equipment leased to others, increased by $1.2 billion primarily as a result of acquisition-related volume and new aircraft volume. Consolidated liabilities of $279.3 billion at June 30, 1998, were $13.4 billion higher than the year-end 1997 balance of $265.9 billion. GE liabilities were up $1.2 billion; GECS liabilities increased $12.1 billion. GE total borrowings were $5.8 billion ($5.2 billion short-term and $0.6 billion long-term) at June 30, 1998, an increase of $1.4 billion from December 31, 1997. GE's ratio of debt to total capital at the end of June 1998 was 13.8% compared with 11.1% at the end of last year and 13.0% at June 30, 1997. GECS liabilities increased to $247.1 billion, compared with $235.1 billion at the end of 1997. The increase was principally attributable higher borrowings ($8.6 billion) and an increase of $2.6 billion in insurance liabilities, reserves and annuity benefits, reflecting primarily additions to reserves related to core growth and increases in separate accounts. Short-term borrowings increased by $6.5 billion to $101.8 billion and long-term borrowings increased by $2.1 billion to $48.1 billion. With respect to cash flows, consolidated cash and equivalents were $3.9 billion at June 30, 1998, a decrease of $2.0 billion during the first half. Cash and equivalents were $3.8 billion at June 30, 1997, a decrease of $0.4 billion during last year's first half. GE's cash and equivalents decreased $0.3 billion during the first half of 1998 to $0.8 billion at June 30, 1998. Cash provided from operating activities was $3.5 billion during the first six months of 1998, about the same as in the first half of 1997. Cash used for investing activities ($1.6 billion) principally represented acquisitions and investments in new plant and equipment for a diverse number of projects to lower costs and improve efficiencies. Cash used for financing activities ($2.2 billion) included $1.7 billion for repurchases of the Company's common stock under the share repurchase program and $2.0 billion for dividends paid to share owners, a 15% increase in the per-share dividend rate compared with the first half of last year. The effects of dividends and share repurchases on cash used for financing activities were partially offset by cash provided from higher net borrowings ($1.4 billion). GE's cash and equivalents were $0.8 billion at June 30, 1997, compared with $1.0 billion at December 31, 1996. During the first six months of 1997, cash provided from operating activities was $3.5 billion, equaling the previous year's record level. The first half performance reflected continued improvements in earnings, partially offset by lower cash flows from working capital, which were more than attributable to the absence of current year counterparts to certain 1996 receipts, primarily substantial progress collections related to power generation contracts and collection of a large sundry receivable. Cash used for investing activities ($0.8 billion) represented principally investments in new plant and equipment for a wide variety of projects to reduce costs and improve efficiencies. Cash used for financing activities ($2.8 billion) included $1.7 billion for repurchases of the Company's common stock under the share repurchase program and $1.7 billion for dividends paid to share owners, a 13% increase in the per-share dividend rate compared with the first half of 1996. The effects of dividends and share repurchases on cash used for financing activities were partially offset by cash provided from higher net borrowings ($0.7 billion). GECS cash and equivalents decreased $1.9 billion during the first half of 1998. Cash was used primarily to fund additions to property, plant and equipment ($4.0 billion), principally equipment that is provided to third parties on operating leases; to fund additions to financing receivables ($3.7 billion); to purchase investment securities ($2.7 billion); and to fund acquisitions of businesses ($1.0 billion). Cash provided from operating activities totaled $4.9 billion. Cash provided from financing activities resulted primarily from increased net borrowings ($6.1 billion) during the first six months of 1998. GECS cash and equivalents decreased $0.2 billion during the first half of 1997. Cash was used primarily to fund additions to property, plant and equipment ($2.9 billion), principally equipment that is provided to third parties on operating leases, and for acquisitions of businesses ($0.6 billion). Cash provided from operating activities totaled $4.8 billion. Cash provided from financing activities resulted primarily from increased net borrowings ($1.2 billion) during the first six months of 1997. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS GENERAL The directors, other than Messrs. Cash, Murphy and Nunn, were defendants in a civil suit purportedly brought on behalf of the Company as a share owner derivative and class action (the Cohen action) in New York State Supreme Court, New York County, on September 18, 1996. The suit was based upon the Company's solicitation, in the 1996 proxy statement, of share owner approval of the 1996 Non-Employee Director Stock Option Plan. Under the Plan, which the share owners approved, 6,000 stock options will be granted annually to each of the Company's non-employee directors through 2003. Each annual grant entitles the director, for a period of 10 years from the date of the grant, to purchase 6,000 shares of GE stock from the Company at the market price of GE stock on the date of grant. The suit claimed that the options would have an estimated value to the directors on the annual date of grant which should have been disclosed. The suit also claimed that the directors breached their fiduciary duties because the 1996 proxy statement did not state that the options would have such an alleged, estimated value to the directors when granted. The suit sought compensatory damages and invalidation of the Plan and all options granted under the Plan. The Company believes that the options have no value to the directors on the date of grant, that the options will have no value to the directors unless the GE stock price increases above the grant price, and that the 1996 proxy statement contained full and adequate disclosure because, among other things, any reasonable share owner would understand that the value of the options to the non-employee directors would only occur when and if the stock price rises above the grant price. On May 14, 1997, the court granted the Company's motion to dismiss the suit for failure to state a cause of action, and on January 27, 1998, a four-judge panel of the New York Supreme Court, Appellate Division, First Department, unanimously affirmed the dismissal of the suit. On April 16, 1998, the same four-judge panel denied plaintiff's motion for reargument of, or leave to appeal from, its January 27, 1998 order, and on May 7, 1998, plaintiff filed a motion with the New York Court of Appeals for leave to appeal the January 27, 1998 order, which motion was denied on June 30, 1998. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (a) The annual meeting of Share Owners of General Electric Company was held on April 22, 1998. (b) All director nominees were elected. (c) Certain matters voted upon at the meeting and the votes cast with respect to such matters are as follows: PROPOSALS AND VOTE TABULATIONS
VOTES CAST ------------------------------ BROKER FOR AGAINST ABSTAIN NON-VOTES --- ------- ------- --------- MANAGEMENT PROPOSALS Approval of the appointment of independent auditors for 1998 2,688,217,681 10,358,829 10,974,146 0 SHARE OWNER PROPOSALS (1) Relating to term limits for outside directors 124,142,431 2,123,531,713 48,456,507 413,420,005 (2) Relating GE's nuclear energy business 90,795,748 2,031,173,705 174,161,199 413,420,004 (3) Relating to an environmental report 172,958,411 2,045,226,626 77,945,616 413,420,003 (4) Relating to an environmental education report 167,671,461 2,025,819,651 102,639,540 413,420,004 (5) Relating to military contracts standards 86,084,626 2,075,541,687 134,504,341 413,420,002 (6) Relating to outside director retirement benefits 642,397,168 1,602,236,094 51,497,390 413,420,004 (7) Relating to CEO compensation 133,738,818 2,107,932,884 54,458,950 413,420,004 (8) Relating to political contributions 119,086,760 2,051,806,241 125,237,651 413,420,004
ELECTION OF DIRECTORS DIRECTOR VOTES RECEIVED VOTES WITHHELD - -------- -------------- -------------- D. Wayne Calloway* 2,622,275,225 87,275,432 James I. Cash, Jr. 2,636,982,872 72,567,785 Silas S. Cathcart 2,631,384,016 78,166,641 Dennis D. Dammerman 2,633,883,584 75,667,073 Paolo Fresco 2,633,249,687 76,300,970 Claudio X. Gonzalez 2,634,991,450 74,559,207 Gertrude G. Michelson 2,632,608,068 76,942,589 Eugene F. Murphy 2,634,515,633 75,035,024 Sam Nunn 2,613,187,556 96,363,101 John D. Opie 2,633,627,428 75,923,229 Roger S. Penske 2,633,321,780 76,228,877 Frank H. T. Rhodes 2,635,555,043 73,995,614 Andrew C. Sigler 2,636,935,448 72,615,209 Douglas A. Warner III 2,618,071,799 91,478,858 John F. Welch, Jr. 2,635,601,490 73,949,167 *Mr. Calloway died on July 8, 1998. ITEM 2. CHANGES IN SECURITIES On June 2, 1998, GE issued to former shareholders of The Terra Financial Companies, Ltd. ("Terra"), or their agent, 66,361 shares of GE common stock held in GE's treasury. The issuance was in connection with the acquisition of Terra, a private corporation. The transaction was a private transaction exempt from registration under the Securities Act of 1933 (the "Act") pursuant to Section 4(2) of the Act. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a. Exhibits Exhibit 11. Computation of Per Share Earnings* Exhibit 12. Computation of Ratio of Earnings to Fixed Charges. Exhibit 27. Financial Data Schedule * Data required by Statement of Financial Accounting Standards No. 128, EARNINGS PER SHARE, is provided in note 7 to the condensed consolidated financial statements in this report. b. Reports on Form 8-K during the quarter ended June 30, 1998. No reports on Form 8-K were filed during the quarter ended June 30, 1998. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. General Electric Company (Registrant) July 31, 1998 Philip D. Ameen - ------------- -------------------------------------------------------- Date Vice President and Comptroller Duly Authorized Officer and Principal Accounting Officer EX-12 2 EXHIBIT 12 GENERAL ELECTRIC COMPANY RATIO OF EARNINGS TO FIXED CHARGES (DOLLARS IN MILLIONS) SIX MONTHS ENDED JUNE 30, 1998 ---------------- GE EXCEPT GECS Earnings (a) $ 5,843 Less: Equity in undistributed earnings of General Electric Capital Services, Inc. (b) (935) Plus: Interest and other financial charges included in expense 411 One-third of rental expense (c) 89 ------- Adjusted "earnings" $ 5,408 ======= Fixed Charges: Interest and other financial charges $ 411 Interest capitalized 18 One-third of rental expense (c) 89 ------- Total fixed charges $ 518 ======= Ratio of earnings to fixed charges 10.44 ======= GENERAL ELECTRIC COMPANY AND CONSOLIDATED AFFILIATES Earnings (a) $ 6,566 Plus: Interest and other financial charges included in expense 4,607 One-third of rental expense (c) 223 ------- Adjusted "earnings" $ 11,396 ======== Fixed Charges: Interest and other financial charges $ 4,607 Interest capitalized 58 One-third of rental expense (c) 223 ------- Total fixed charges $ 4,888 ======= Ratio of earnings to fixed charges 2.33 ======= (a) Earnings before income taxes and minority interest. (b) Earnings after income taxes, net of dividends. (c) Considered to be representative of interest factor in rental expense. EX-27 3
5 This schedule contains summary financial information extracted from the consolidated financial statements for the period ended June 30, 1998 and is qualified in its entirety by reference to such financial statements. 0000040545 GENERAL ELECTRIC COMPANY 1,000,000 6-MOS DEC-31-1998 JUN-30-1998 3,862 74,094 0 0 5,564 0 57,461 24,153 318,882 0 48,764 0 0 594 34,991 318,882 20,638 28,040 14,982 20,149 0 0 4,578 6,449 2,108 4,341 0 0 0 4,341 1.33 1.31 Not disclosed in interim periods. Not applicable to consolidated GE. Sales of goods ($20,638) and services ($7,402). Cost of goods ($14,982) and services ($5,167) sold. Represents basic earnings per share in accordance with SFAS No. 128, Earnings Per Share. Represents diluted earnings per share in accordance with SFAS No. 128, Earnings Per Share.
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