10-Q 1 f3q2000.htm FORM 10-Q Form 10-Q

Securities and Exchange Commission

Washington, D.C. 20549

Form 10-Q


                (Mark One)
 
[x]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2000

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 9,908,802,000 shares with a par value of $0.06 per share outstanding at September 30, 2000.


General Electric Company

Part I. Financial Information   Page
      
    Item 1. Financial Statements    
             Statement of Earnings    
                          Third Quarter Ended September 30, 2000 3
                          Nine Months Ended September 30, 2000 4
             Statement of Financial Position   5
             Statement of Cash Flows   6
             Summary of Operating Segments   7
             Notes to Financial Statements   8
 
    Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition   10
     
Part II. Other Information    
     
    Item 6. Exhibits and Reports on Form 8-K   15
    Signature   16

Part I. Financial Information

Item 1. Financial Statements

Condensed Statement of Earnings
General Electric Company and consolidated affiliates

Third quarter ended September 30 (Unaudited)
(Dollars, except per-share amounts, in millions) Consolidated
GE
GECS
2000  1999  2000  1999  2000  1999 

 
 
 
 
 
Sales of goods $13,311  $11,846   $10,919  $9,495   $2,392  $2,352 
Sales of services 4,609  3,669   4,659  3,733  –  – 
Earnings of GECS –  –   1,478  1,262  –  – 
GECS revenues from services 13,981  11,597   –  –   14,052  11,650 
Other income 113  88   133  95  –   – 

 
 
 
 
 
   Total revenues 32,014  27,200   17,189  14,585   16,444  14,002 

 
 
 
 
 
Cost of goods sold 9,663  8,536   7,456  6,412  2,207  2,124 
Cost of services sold 3,396  2,661  3,447  2,725   –  – 
Interest and other financial charges 2,859  2,455  148  191  2,765  2,291 
Insurance losses and policyholder 
   and annuity benefits 3,731  2,764  –  –  3,731  2,764 
Provision for losses on financing receivables 463  227  –  –  463  227 
Other costs and expenses 7,262  6,647  2,096  1,879   5,202  4,802 
Minority interest in net earnings of             
   consolidated affiliates 110  92  54  43  56  49 

 
 
 
 
 
   Total costs and expenses 27,484  23,382  13,201  11,250  14,424  12,257 

 
 
 
 
 
Earnings before income taxes 4,530  3,818   3,988  3,335   2,020  1,745 
Provision for income taxes (1,350) (1,165)  (808) (682) (542)  (483)

 
 
 
 
 
Net earnings $3,180  $2,653   ;$3,180  $2,653  $1,478  $1,262 






Net earnings per share (a)             
   Diluted $0.32  $0.27          
   Basic $0.32  $0.27          
  
Dividends declared per share (a)$0.13 2/3 $0.11 2/3        
 
(a) Adjusted to reflect the three-for-one stock split effective on April 27, 2000. 

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

Nine months ended September 30 (Unaudited)
(Dollars, except per-share amounts, in millions) Consolidated
GE
GECS
2000  1999  2000  1999  2000  1999 

 
 
 
 
 
Sales of goods $39,852  $33,335   $32,829  $27,382  $7,030  $5,953 
Sales of services 13,356  11,400   13,533  11,608  –  – 
Earnings of GECS –  –   3,965  3,386  –  – 
GECS revenues from services 41,345  33,644   –  –   41,565  33,810 
Other income 319  396   371  438  –   – 

 
 
 
 
 
   Total revenues 94,872  78,775   50,698  42,814   48,595  39,763 

 
 
 
 
 
Cost of goods sold 28,800  23,916   22,292  18,474  6,515  5,441 
Cost of services sold 9,326  8,005  9,503  8,213   –  – 
Interest and other financial charges 8,655  7,122  660  595  8,146  6,641 
Insurance losses and policyholder 
   and annuity benefits 10,513  8,088  –  –  10,513  8,088 
Provision for losses on financing receivables 1,405  1,048  –  –  1,405  1,048 
Other costs and expenses 22,430  19,180  6,157  5,468   16,394  13,807 
Minority interest in net earnings of             
   consolidated affiliates 305  254  146  122  159  132 

 
 
 
 
 
Total costs and expenses 81,434  67,613  38,758  32,872   43,132  35,157 

 
 
 
 
 
Earnings before income taxes 13,438  11,162   11,940  9,942   5,463  4,606 
Provision for income taxes (4,288) (3,534)  (2,790) (2,314) (1,498 ) (1,220)

 
 
 
 
 
Net earnings $9,150  $7,628   ;$9,150  $7,628  $3,965  $3,386 

 
 
 
 
 
Net earnings per share (a)             
   Diluted $0.91  $0.76          
   Basic $0.93  $0.78          
   
Dividends declared per share (a)$0.41  $0.35          
 
(a) Adjusted to reflect the three-for-one stock split effective on April 27, 2000. 

See notes to condensed consolidated financial statements. Consolidating data are shown for "GE" and "GECS." Transactions between GE and GECS have been eliminated from the "consolidated" columns.

 


Condensed Statement of Financial Position
General Electric Company and consolidated affiliates

(Dollars in millions) Consolidated
GE
GECS
9/30/00  12/31/99   9/30/00   12/31/99  9/30/00  12/31/99 

 
 
 
 
 
Cash and equivalents $8,781  $8,554  $4,377  $2,000  $7,132  $6,931 
Investment securities 89,241   81,758  1,084  1,273  ; 88,157   80,485 
Current receivables 9,494  8,531   9,664  8,743   –  – 
Inventories 8,466  7,007   6,824  5,798   1,642  1,209 
Financing receivables – net 134,111   134,215  –  –  134,111  134,215 
Other GECS receivables 38,079   33,122  –  –   39,468   34,095 
Property, plant and equipment (including             
   equipment leased to others) – net 40,907  41,022  12,520  12,381  28,387  28,641 
Investment in GECS –  –   22,361   20,321  –  –  
Intangible assets – net 27,136  26,010  11,938  11,262  15,198  14,748 
All other assets 74,926  64,981   23,515  20,805   51,904  44,694 

 
 
 
 
 
Total assets $431,141  $405,200   $92,283  $82,583   $365,999  $345,018 

 
 
 
 
 
Short-term borrowings $121,897   $130,346  $1,210   $2,245  $124,071   $129,259 
Accounts payable, principally trade accounts 14,610   13,676  5,177  5,068  10,875  9,749 
Other GE current liabilities 21,295   17,194  21,295   17,013  –  –  
Long-term borrowings 75,813   71,427  750  722   75,076  70,766 
Insurance liabilities, reserves 
   and annuity benefits 107,183   86,776  –  –  107,183  86,776 
All other liabilities 28,802   28,772  14,725   13,872  14,018   14,801 
Deferred income taxes 8,918   9,238  459  283   8,459  8,955 

 
 
 
 
 
Total liabilities 378,518   357,429  43,616   39,203  339,682   320,306 

 
 
 
 
 
Minority interest in equity of     ;         
   consolidated affiliates 4,878   5,214  922   823  3,956  4,391  ;

 
 
 
 
 
Accumulated unrealized gains (losses) 
   on investment securities – net (a)144  626  144   626  (104)  170 
Accumulated currency translation 
   adjustments (a)(2,428) (1,370)  (2,428) (1,370)  (713) (384)
Common stock (9,908,802,000 and 
   9,854,528,000 shares outstanding              
   at September 30, 2000 and 
   December 31, 1999, respectively) (b)669   594  669   594   
Other capital 14,230  10,790   14,230  10,790   2,752  2,682 
Retained earnings 59,575  54,484   59,575  54,484   20,425  17,852 
Less common stock held in treasury (24,445)  (22,567) (24,445) (22,567)  –  – 

 
 
 
 
 
Total share owners' equity 47,745   42,557  47,745   42,557  22,361   20,321 

 
 
 
 
 
Total liabilities and equity $431,141   $405,200  $92,283   $82,583  $365,999   $345,018 

 
 
 
 
 

 
(a) The sum of accumulated unrealized gains (losses) on investment securities-net and accumulated currency translation adjustments constitutes "Accumulated nonowner changes other than earnings," and was $(2,284) million and $(744) million at September 30, 2000 and December 31, 1999, respectively.
 
(b) Adjusted to reflect the three-for-one stock split effective on April 27, 2000. 
 
See notes to condensed consolidated financial statements. Consolidating data are shown for "GE" and"GECS." September data are unaudited. Transactions between GE and GECS have been eliminated from the "consolidated" columns.

 


Condensed Statement of Cash Flows
General Electric Company and consolidated affiliates

Nine months ended September 30 (Unaudited)
(Dollars in millions) Consolidated
GE
GECS
2000  1999   2000  1999   2000  1999 

 
 
 
 
 
Cash flows – operating activities             
Net earnings $9,150  $7,628   ;$9,150  $7,628  $3,965  $3,386 
Adjustments to reconcile net earnings to cash              
   provided from operating activities             
   Depreciation and amortization of 
      property, plant and equipment 3,846  3,602  ; 1,365  1,302  2,481  2,300 
   Amortization of goodwill and other intangibles 1,913  1,255   366  408   1,547  847 
   Earnings retained by GECS –  –  (2,573) (2,118)  –  – 
   Deferred income taxes 493  96   469  538  24  (442)
   Decrease (increase) in GE current receivables (698) 301   (656) 403   –  – 
   Decrease (increase) in inventories (962) (355) (529) (518)  (433) 163 
   Increase (decrease) in accounts payable 2,242  (500)  (38) (49)  2,581  602 
   Increase (decrease) in insurance liabilities, 
      reserves and annuity benefits (1,892) 2,830   –  –   (1,892) 2,830 
   Provision for losses on financing receivables 1,405  1,048   –  –   1,405  1,048 
   All other operating activities (4,236) 225  2,389  (170) (6,673) (188)

 
 
 
 
 
Cash from operating activities 11,261  16,130   9,943  7,424   3,005  10,546 

 
 
 
 
 
Cash flows - investing activities              
Additions to property, plant and equipment              
   (including equipment leased to others)(9,748) (8,629) (1,865) (1,070)  (7,883) (7,559)
Net increase in GECS financing receivables (3,175) (6,356)  –  –   (3,175) (6,356)
Payments for principal businesses purchased (1,085) (7,845)  (682) (1,171)  (403) (6,674)
All other investing activities (9,798) 601  56  106  (9,978) 394 

 
 
 
 
 
Cash used for investing activities (23,806) (22,229)  (2,491) (2,135)  (21,439) (20,195)

 
 
 
 
 
Cash flows - financing activities             
Net change in borrowings (maturities 
   90 days or less)3,650  (5,889) (941) (774)  6,819  (5,339)
Newly issued debt (maturities 
   longer than 90 days)27,655  27,677   546  459  27,061  27,147 
Repayments and other reductions (maturities              
   longer than 90 days)(27,426) (10,343) (727) (588)  (26,699) (9,755)
Net dispositions (purchases) of GE shares 93  (742)  93  (742)  –  – 
Dividends paid to share owners (4,046) (3,440) (4,046) (3,440)  (1,392) (1,268)
Cash received upon assumption of 
   Toho Mutual Life Insurance Company             
   insurance liabilities 13,177  –  –  –  13,177  – 
All other financing activities (331) 631  –  –   (331) 631 

 
 
 
 
 
Cash from (used for) financing activities 12,772  7,894  (5,075) (5,085)  18,635  11,416 

 
 
 
 
 
Increase in cash and equivalents 227  1,795   2,377  204  201  1,767 
Cash and equivalents at beginning of year 8,554  4,317  2,000  1,175  6,931  3,342 

 
 
 
 
 
Cash and equivalents at September 30 $8,781  $6,112  $4,377  $1,379  $7,132  $5,109 

 
 
 
 
 
 
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.

Summary of Operating Segments
General Electric Company and consolidated affiliates

 
Third quarter ended
September 30
(Unaudited)

Nine months ended
September 30 
(Unaudited)

(Dollars in millions) 2000    1999    2000    1999 




Revenues         
   GE         
      Aircraft Engines $2,580  $2,659   $7,770  $7,727 
      Appliances 1,495  1,449  4,451  4,126 
      Industrial Products and Systems 2,777   2,802  8,599  8,226 
      NBC 1,895  1,076  5,244  4,038 
      Plastics 1,970  1,690  5,845  5,046 
      Power Systems 3,521  2,464   10,469  6,507 
      Technical Products and Services 1,902   1,601  5,556  4,721 
      Eliminations (522) (477) (1,547) (1,248)




         Total GE segment revenues 15,618  13,264  46,387  39,143 
   Corporate items 93  59  346  285 
   GECS net earnings 1,478  1,262   3,965  3,386 




      Total GE revenues 17,189  14,585   50,698  42,814 
   GECS segment revenues 16,444  14,002  48,595  39,763 
   Eliminations -a)(1,619) (1,387)  (4,421) (3,802)




Consolidated revenues $32,014  $27,200   $94,872  $78,775 




Segment profit         
   GE         
      Aircraft Engines $614  $536   $1,781  $1,527 
      Appliances 159  137  503  475 
      Industrial Products and Systems 497  491   1,614  1,424 
      NBC 292  265   1,321  1,143 
      Plastics 487  390  1,443  1,255 
      Power Systems 670  397  1,875  1,104 
      Technical Products and Services 439  316   1,192  912 




         Total GE operating profit 3,158  2,532  9,729  7,840 
   GECS net earnings 1,478  1,262   3,965  3,386 




      Total segment profit 4,636  3,794   13,694  11,226 
   GE interest and other financial charges (148) (191) (660) (595)
   GE provision for income taxes (808) (682)  (2,790) (2,314)
   Corporate items and eliminations (500) (268) (1,094) (689)




Consolidated net earnings $3,180  $2,653   $9,150  $7,628 




(a- Principally the elimination of GECS net earnings.

Notes to Condensed Consolidated Financial Statements (Unaudited)

     1. The accompanying condensed quarterly financial statements represent the consolidation of General Electric Company and all companies which it directly or indirectly controls, either through majority ownership or otherwise. Reference is made to note 1 to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 1999. 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. Certain prior year amounts have been reclassified to conform to the current year's presentation.

     3. A summary of changes in share owners' equity that do not result directly from transactions with share owners is provided below.

 

   Third quarter ended
(Dollars in millions) 9/30/00    9/30/99 


Net earnings $3,180  $2,653 
Unrealized gains (losses) on investment securities – net 434  (563)
Foreign currency translation adjustment losses – net (509) 54 


Total $3,105  $2,144 


 
   Nine months ended
  9/30/00    9/30/99 


Net earnings $9,150  $7,628 
Unrealized losses on investment securities – net (482) (2,320)
Foreign currency translation adjustment losses – net (1,058) (480)


Total $7,610  $4,828 


     4. The Financial Accounting Standards Board ("FASB") has issued, then subsequently amended, Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative Instruments and Hedging Activities, effective for GE on January 1, 2001. Upon adoption, all derivative instruments (including certain derivative instruments embedded in other contracts) will be recognized in the balance sheet at their fair values; changes in such fair values must be recognized immediately in earnings unless specific hedging criteria are met. Effects of qualifying changes in fair value will be recorded in equity pending recognition in earnings as offsets to the related earnings effects of the hedged items. Management estimates that, at September 30, 2000, the effects on its financial statements of adopting SFAS No. 133, as amended, would have been to reduce net earnings and share owner's equity by less than $100 million and $500 million, respectively. However, the transition effect as of January 1, 2001, cannot be estimated at this time because it is subject to the following unknown variables as of that date: (1) actual derivatives and related hedged positions, (2) market values of derivatives and hedged positions, and (3) further interpretation of SFAS No. 133 by the FASB.

     5. Inventories consisted of the following: 

  

   At
(Dollars in millions) 9/30/00    12/31/99 


GE    
Raw materials and work in process $4,170  $3,438 
Finished goods 3,319  3,054 
Unbilled shipments 223  233 
Revaluation to LIFO (888) (927)


 6,824  5,798 


GECS    
Finished goods 1,642  1,209 


Total $8,466  $7,007 


     6. Property, plant and equipment (including equipment leased to others) consisted of the following: 

 

   At
(Dollars in millions) 9/30/00    12/31/99 


Original cost    
   GE $30,950  $30,199 
   GECS 38,663  38,160 


      Total 69,613  68,359 


Accumulated depreciation and amortization    
   GE 18,430  17,818 
   GECS 10,276  9,519 


      Total 28,706  27,337 


Property, plant and equipment – net    
   GE 12,520  12,381 
   GECS 28,387  28,641 


      Total $40,907  $41,022 


     7. GE's authorized common stock consisted of 13,200,000,000 shares, having a par value of $0.06 each. Information related to the calculation of earnings per share follows.

Third quarter ended
(Dollar amounts and shares in millions; 9/30/00
9/30/99
per-share amounts in dollars) Diluted Basic Diluted Basic




Consolidated operations

Net earnings available to common share owners

$3,180

$3,180

$2,653

$2,653

Dividend equivalents – net of tax

3

– 

2

– 





Net earnings available for per-share calculation

$3,183

$3,180

$2,655

$2,653





Average equivalent shares

Shares of GE common stock

9,906

9,906

9,839

9,839

Employee compensation-related shares,

     including stock options

162

– 

160

– 





Total average equivalent shares

10,068

9,906

9,999

9,839





Net earnings per share

$0.32

$0.32

$0.27

$0.27





  

Nine months ended
9/30/00
9/30/99
Diluted Basic Diluted Basic




Consolidated operations

Net earnings available to common share owners

$9,150

$9,150

$7,628

$7,628

Dividend equivalents – net of tax

8

– 

6

– 





Net earnings available for per-share calculation

$9,158

$9,150

$7,634

$7,628





Average equivalent shares

Shares of GE common stock

9,888

9,888

9,828

9,828

Employee compensation-related shares,

     including stock options

162

– 

162

– 





Total average equivalent shares

10,050

9,888

9,990

9,828





Net earnings per share

$0.91

$0.93

$0.76

$0.78





Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition 

A. Results of Operations -- Third Quarter of 2000 Compared with Third Quarter of 1999

     General Electric Company earnings per share increased 19% to $.32, up from last year's $.27, and net earnings increased 20% to $3.180 billion. Both earnings per share and earnings were records for the quarter.

     Revenues for the third quarter increased to a record $32.0 billion, 18% above last year's quarter, reflecting continued growth from globalization and product services.

     Excluding the effects of a third-quarter retirement benefit provision associated with the new labor agreement, GE's third-quarter operating margin was 17.6% of sales, up from last year's 16.7%, reflecting increasing benefits from GE's focus on product services, Six Sigma quality and e-Business initiatives. GE's reported third-quarter operating margin was 16.6%.

     GE's industrial businesses achieved revenue growth of 18% above third quarter 1999. Operating profit for six of seven operating segments increased by double digits -- led by Power Systems, Medical Systems, Plastics and Aircraft Engines.

     GE Capital Services' third-quarter earnings rose to $1.478 billion, 17% above last year's $1.262 billion. These record results reflect the globalization and diversity of GE Capital's businesses, with strong double-digit increases in its Specialized Financing, Consumer Services, Equipment Management and Mid-Market Financing segments.

     Cash generated from GE's operating activities during the first nine months was a record $9.9 billion, up 34% from last year's $7.4 billion. As part of the $22 billion share repurchase program, GE purchased $495 million of its stock during the third quarter to reach $17.0 billion -- 943 million shares -- purchased since December 1994.

Segment Analysis:

     The comments that follow compare revenues and operating profit by operating segment for the third quarters of 2000 and 1999.

     • Aircraft Engines reported a 15% increase in operating profit despite revenues that were 3% lower compared with the third quarter of 1999. The decrease in revenues primarily reflected a higher proportion of small engines compared with last year, as well as lower product service revenues. The improvement in operating profit was primarily attributable to strong productivity and higher selling prices.

     • Appliances revenues increased 3% over the third quarter of 1999, as higher volume more than offset lower selling prices. Operating profit increased 16% largely as a result of productivity and higher volume from new products which more than offset lower selling prices.

     • GE Capital Services third-quarter earnings rose to $1.478 billion, up 17% from last year's $1.262 billion, with strong double-digit increases in its Specialized Financing, Consumer Services, Equipment Management and Mid-Market Financing activities. The overall improvement in earnings was largely attributable to the effects of continued asset growth, principally from acquisitions of businesses and portfolios, higher origination volume, and the inclusion of an after tax gain of $226 million on the portion of the investment in PaineWebber common stock, which is classified as trading securities. These increases were partially offset by unusual after-tax charges of $239 million for asset writedowns, employee severance and other facilities costs in connection with third quarter decisions to rationalize certain information technology and mortgage servicing operations.

     • Industrial Products and Systems reported a 1% increase in operating profit on revenues that were 1% lower than a year ago. The decrease in revenues primarily reflected lower volume at Transportation Systems, which had a very strong 1999 quarter. The improvement in segment operating profit was primarily attributable to productivity and higher volume at Lighting and Industrial Systems, partially offset by the effects of lower selling prices across most businesses in the segment.

     • NBC reported a 76% increase in revenues largely as a result of its coverage of the 2000 Summer Olympic Games, as well as continued growth in cable operations, particularly at CNBC. Operating profit increased 10% reflecting a strong marketplace, improved results in network operations, cable, and stations, which more than offset higher license fees associated with renewal of certain sports and prime-time programs.

     • Plastics operating profit increased 25% on revenues that were 17% higher than a year ago. The increase in both revenues and earnings were primarily attributable to higher volume and improved selling prices.

     • Power Systems revenues increased 43%, primarily as a result of sharply higher volume in gas turbines and continued growth in product services, including acquisitions. Operating profit rose 69%, reflecting the increase in volume as well as productivity.

     • Technical Products & Services revenues increased 19% from the third quarter of 1999, principally as a result of sharply higher volume at Medical Systems, including acquired businesses. Operating profit grew 39%, reflecting volume growth at Medical Systems and productivity, which more than offset lower selling prices across the segment.

B. Results of Operations -- First Nine Months of 2000 Compared With First Nine Months of 1999

     Net earnings were $9.150 billion in the first nine months of 2000, up 20% from $7.628 billion in the first nine months of 1999. Earnings per share increased 20% to $0.91 from $0.76. Management indicated that it is comfortable with the First Call analysts' consensus estimate of $1.27 per share for the full year 2000.

     Consolidated revenues for the first nine months of 2000 aggregated $94.9 billion, up 20% from $78.8 billion in the first nine months of 1999. GE's sales of goods and services were 19% higher, led by Power Systems, NBC and Medical Systems. The improvement in sales was largely attributable to increases in the volume of goods and services sold,  partially offset by the effects of lower selling prices overall.

     Excluding the effects of a third-quarter retirement benefit provision associated with the new labor agreement, operating margin in the first nine months of 2000 was 18.5% of sales, an improvement over last year's 17.5%. The growth reflects increasing benefits from GE's focus on product services, Six Sigma quality and e-Business initiatives. GE's reported operating margin was 18.1%.

Segment Analysis:

     The following comments compare revenues and operating profit by industry segment for the first nine months of 2000 with the same period of 1999.

     • Aircraft Engines reported revenues that were 1% higher than a year ago, primarily as a result of higher military engine sales and slightly higher volume in product services. Operating profit increased 17%, reflecting productivity and growth in product services, which more than offset higher costs.

     • Appliances revenues were up 8% compared with the first nine months of 1999, as volume increases more than offset lower selling prices. Operating profit increased 6% as productivity and higher volume more than offset the decrease in selling prices and increased spending on new products.

     • GE Capital Services year-to-date earnings rose to $3.965 billion, up 17% from last year's $3.386 billion, reflecting strong double-digit increases in Consumer Services, Mid-Market Financing and Specialized Financing activities. The overall improvement in earnings was largely attributable to the effects of continued asset growth, principally from acquisitions of businesses and portfolios, higher origination volume, a higher level of asset gains, and the inclusion of an after-tax gain of $226 million on the portion of the investment in PaineWebber common stock classified as trading securities. These increases were partially offset by unusual after-tax charges of $239 million for asset writedowns, employee severance and other facilities costs in connection with third quarter decisions to rationalize information technology and mortgage servicing operations.

     • Industrial Products and Systems reported a 13% increase in operating profit on revenues that were 5% higher than a year ago. The increase in revenues primarily reflected volume increases at Lighting and Industrial Systems. The improvement in operating profit was primarily attributable to productivity across the segment, which was partially offset by the effects of lower selling prices.

     • NBC revenues increased 30%, primarily as a result of its coverage of the 2000 Summer Olympic Games, as well as continuing growth in cable operations, particularly at CNBC. Operating profit increased 16% reflecting growth in network, cable operations, and owned and operated stations, somewhat reduced by higher license fees associated with renewal of certain sports and prime-time programs.

     • Plastics operating profit increased 15% on revenues that were 16% higher than a year ago. The increase in both revenues and earnings were primarily attributable to higher volume and improved selling prices.

     • Power Systems revenues increased 61%, primarily as a result of sharply higher volume in gas turbines and continued growth in product services, including acquisitions. Operating profit rose 70%, reflecting productivity and the increase in volume.

     • Technical Products & Services revenues increased 18% over last year, reflecting sharply higher volume at Medical Systems, including acquired businesses. Operating profit grew 31%, largely as a result of volume growth at Medical Systems which more than offset lower selling prices across the segment.

C. Financial Condition

     With respect to the Condensed Statement of Financial Position, consolidated assets of $431.1 billion at September 30, 2000, were $25.9 billion higher than at December 31, 1999.

     GE assets were $92.3 billion at September 30, 2000, an increase of $9.7 billion from December 31, 1999. The increase was primarily attributable to increases in cash ($2.4 billion), normal seasonal increases in inventory ($1.0 billion), earnings retained by GECS ($2.6 billion) and all other assets ($2.7 billion). The change in all other assets resulted primarily from an increase in the prepaid pension asset as well as increases in miscellaneous investments.

     GECS assets increased by $21.0 billion from the end of 1999. The increase in assets was largely attributable to the acquisition of certain assets and the assumption of liabilities of Toho Mutual Life Insurance of Japan (Toho), an entity that was insolvent when acquired. Under the terms of the acquisition, which was consummated in the first quarter, GECS acquired approximately $13.2 billion in cash, as well as investment securities and other receivables in exchange for assuming Toho's existing insurance policyholder liabilities. The significant cash position of Toho at the date of acquisition reflected the liquidity needs of the business including significant policyholder redemptions that occurred through September 30, 2000.

     GECS investment securities increased by $7.7 billion from year-end 1999, largely as a result of the acquisition of Toho. Other assets increased $7.2 billion, primarily reflecting growth in "separate accounts," which are investments controlled by policyholders, as well as acquired real estate ventures of Toho. GE Capital's financing receivables, which, net of the allowance for losses, aggregated $134.1 billion at the end of the third quarter, decreased $0.1 billion from year-end 1999. Management believes that GE Capital's allowance for losses of $3.7 billion at September 30, 2000, is the best estimate of probable losses inherent in the portfolio given its strength and diversity and current economic circumstances.

     Consolidated liabilities of $378.5 billion at September 30, 2000, were $21.1 billion higher than the year-end 1999 balance of $357.4 billion.

     GE liabilities increased $4.4 billion to $43.6 billion. Total borrowings were $2.0 billion ($1.2 billion short term and $0.8 billion long term) at September 30, 2000, a decrease of $1.0 billion from December 31, 1999. The ratio of debt to total capital for GE at the end of the third quarter was 3.9% compared with 6.4% at the end of last year and 7.6% at September 30, 1999.

     GECS liabilities increased $19.4 billion to $339.7 billion, compared with $320.3 billion at the end of 1999. The increase was principally attributable to additions to insurance liabilities of $20.4 billion from year-end 1999, primarily the assumption of policyholder liabilities of Toho, as well as increases in separate accounts and additions to reserves related to core growth. Short-term borrowings decreased $5.2 billion from year-end 1999, while long-term borrowings increased by $4.3 billion.

     With respect to cash flows, consolidated cash and equivalents were $8.8 billion at September 30, 2000, an increase of $0.2 billion during the first nine months of 2000. Cash and equivalents were $6.1 billion at September 30, 1999, an increase of $1.8 billion since the beginning of the year.

     GE cash and equivalents increased $2.4 billion during the first nine months of 2000 to $4.4 billion at September 30, 2000. Cash provided from 2000 operating activities was $9.9 billion, an increase of 34% over the $7.4 billion reported for the first nine months of 1999, reflecting continuing improvements in earnings and higher progress collections during the period. Cash used for investing activities ($2.5 billion) principally represented investments in new plant and equipment for a wide variety of projects to lower costs and improve efficiencies. Cash used for financing activities ($5.1 billion) included $1.6 billion for repurchases of common stock under the share repurchase program and $4.0 billion for dividends paid to share owners, a 17% increase in the per-share dividend rate compared with the first nine months of last year.

     GE cash and equivalents increased $0.2 billion during the first nine months of 1999 to $1.4 billion at September 30, 1999. Cash provided from 1999 operating activities was $7.4 billion, an increase of 25% over the $5.9 billion reported for the first nine months of 1998, reflecting continuing improvements in earnings and higher progress collections during the period. Cash used for investing activities ($2.1 billion) principally represented acquisition of businesses and investments in new plant and equipment for a wide variety of projects to lower costs and improve efficiencies. Cash used for financing activities ($5.1 billion) included $1.4 billion for repurchases of common stock under the share repurchase program and $3.4 billion for dividends paid to share owners, a 17% increase in the per-share dividend rate compared with the first nine months of 1998.

     GECS cash and equivalents increased $0.2 billion during the first nine months of 2000. Cash provided from operating activities totaled $3.0 billion, compared with $10.5 billion for the first nine months of 1999. The decrease in cash from operating activities compared with last year was largely attributable to insurance policyholder redemptions associated with the Toho acquisition and a smaller decrease in mortgages held for resale. Cash from financing activities totaled $18.6 billion, primarily as a result of insurance policyholder liabilities assumed in the Toho acquisition. The principal use of GECS cash during the period was for investing activities ($21.4 billion), a majority of which was attributable to growth in financing receivables, property, plant and equipment and higher net purchases of investment securities, which are included in "all other" investing activities.

     GECS cash and equivalents increased $1.8 billion during the first nine months of 1999. Cash provided from operating activities totaled $10.5 billion, compared with $8.0 billion for the first nine months of 1998. Cash was used to fund business acquisitions ($6.7 billion), the largest of which were the acquisitions of Japan Leasing, the financial services business of AVCO and Pheonixcor; for additions to property, plant and equipment ($7.6 billion), principally equipment that is provided to third parties on operating leases; and for additions to financing receivables ($6.8 billion). Cash provided from financing activities resulted primarily from increased borrowings ($12.1 billion) during the first nine months of 1999.

D. Pending Transaction

     On July 12, 2000, Union Bank of Switzerland (UBS) and PaineWebber announced they had entered into a definitive merger agreement (the UBS merger agreement). Through GE Capital Services, GE holds 31,523,600 shares of PaineWebber common stock and has voted in favor of the merger. Fifty percent of the holdings of PaineWebber securities are classified as trading securities; the increase in the share price of those securities through September 30, 2000, has thus been recognized as a pre-tax gain of $369 million. If the merger is completed under the terms of the UBS merger agreement, an additional pre-tax gain of approximately $1.0 billion would be realized. The UBS merger agreement is subject to a number of conditions that are not within the control of GE, resolution of which will affect the amount and timing of proceeds realized from the transaction.

E. Subsequent Event

     On October 22, 2000, General Electric and Honeywell announced that GE agreed to acquire Honeywell in a tax-free merger. The details of this transaction are discussed in the Company's 8-K filing dated October 23, 2000.

F. Forward Looking Statement

     This quarterly report includes certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these expectations due to changes in global economic, business, competitive, market and regulatory factors. More detailed information about those factors is contained in GE's 1999 Annual Report on Form 10-K.

Part II. Other Information

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 September 30, 2000.
 
  Report on Form 8-K (Item 5) filed on October 23, 2000, regarding merger agreement between General Electric and Honeywell.

Signatures

          Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
General Electric Company
            (Registrant)

 

October 26, 2000
 /s/ Philip D. Ameen 
Date Philip D. Ameen
Vice President and Comptroller
Duly Authorized Officer and Principal Accounting Officer